RMI on regulatory process reform, Hawaii’s PUC led process

Utility Dive, March 19, 2019, excerpt, also RMI paper on regulatory process reform

A new effort to bring out the more collaborative part of the regulatory process was recently introduced in workshops as part of Hawaii’s ongoing proceeding to develop a new business model for the state’s regulated utilities. Led by facilitators from think tank Rocky Mountain Institute (RMI), the workshops stressed stakeholder interactions as a way build to consensus without compromising the legalistic underpinnings of the process.

Driven by customer demand, climate change and reliability needs, utilities and others are finding that rapid changes in today’s power sector require something beyond traditional regulation. “Existing regulatory processes were designed for the different purposes of the 20th century system and won’t work in the rapidly transforming 21st century.” David Littell- Principal, Regulatory Assistance Project

“Existing regulatory processes were designed for the different purposes of the 20th century system and won’t work in the rapidly transforming 21st century,” Regulatory Assistance Project (RAP) Principal David Littell, a former commissioner with the Maine Public Utilities Commission, told Utility Dive.

“Utilities used to be the initiators of new ratepayer costs and were protected by formal and intimidating legalistic regulatory processes that made it hard for the public to engage,” he added. Companies who sell DER, their customers and DER advocates “are beginning to participate and it is opening up the old processes.”

The need for reform of the regulatory process was echoed in the February 2019 launch of the Renovate initiative, which is being convened by the Smart Electric Power Alliance and launched in partnership with the National Association of Regulatory Utility Commissioners and 10 other groups. The initiative aims to evolve state regulatory processes and open opportunities for “innovative technologies and business operating models that support the transition to a clean and modern energy grid,” the organizations said in a statement

Opening up the regulatory process

But while new stakeholders are intervening in regulatory proceedings on rates and technology, commission processes often do not make it easy for their voices to be heard, according to a new paper from RMI on leveling the playing field for advocates of the new power sector.

The RMI paper proposes a commission-initiated reform when interaction with stakeholders reveals the need and opportunity for a new process.  The commission should then make clear its “vision” of what that new process should achieve and open a docket to bring stakeholders further into the process. Reform would culminate with the implementation of a new regulatory process.

The RMI-led workshops on Hawaii’s performance-based regulation proceeding were a major test of the RMI ideas, effective in part because “the [public utility] commission set the agenda, and the utility was just one of many parties participating,” Earthjustice Attorney Isaac Moriwake, who represented environmental advocacy group Blue Planet Foundation in the proceeding, told Utility Dive.

The Hawaiian Electric Company (HECO) d​eclined to comment on its participation in the RMI workshops.

Moriwake and other participants saw the workshop as evidence that a regulatory process can help level the playing field between the utility and other stakeholders. But some participants identified critical weaknesses in the RMI process that could give utilities too much leverage.

The three goals and four stages of regulatory reform

Regulatory processes “are a critical, often overlooked, determinant of the outcomes and relative success of utility reform efforts,” the paper reports. In current, formal processes, “back-and-forth filings” frequently result in “contested decision-making.” Better-designed processes “can enable collaboration and coalescence toward a coherent reform.”

Regulatory reform should improve the process by which regulated utilities improve their efficiency, reliability and resilience as well as support utilities in reducing rates or increasing customer choice, according to RMI.

A third goal is to help utilities achieve policy objectives such as reducing greenhouse gas emissions, reallocating system risk or “preserving the long-term viability of utilities’ business.

There are four stages of reform to acheive these goals.

The first is launching a commission-guided vision of how a new regulatory process could serve stakeholders. Directives from the legislature or governor are valuable in setting time and scope parameters and sustaining momentum, but regulators’ expertise should guide the process.

“There is no one-size-fits-all proceeding, but participants must work from the beginning to understand the subject and technical issues in a similar way or they can end up talking past each other,” RMI Electricity Practice Manager and paper co-author Dan Cross-Call told Utility Dive. Cross-Call helped facilitate the Hawaii workshops.

The second stage is anchoring the proceeding in “a guiding vision” that articulates opportunities that could result from a better regulatory process for all stakeholders, RMI reported. Regulators are critical to this stage because they are responsible for the vision being well-defined and effectively implemented.

In the third step, regulators and stakeholders take part in the formal docket, but with new, more collaborative approaches.

There are non-docketed “investigatory” proceedings that allow exploration of problems and solutions, typically on challenging new ideas or technologies, and docketed “decisional” proceedings that deliver final rulings, RMI reported.

A non-docketed process is built on collaborative, flexible stakeholder discussions. A docket provides the formal legal framework for a binding ruling, with “a reliable record” and “greater transparency and accountability.”

Docketed proceedings too often lack “in-the-present, back-and-forth dialogue between participants that allows arguing but also allows reaching consensus by working through details,” RMI Electricity Practice Senior Associate and paper co-author Cara Goldenberg told Utility Dive. Goldenberg was also a facilitator in Hawaii’s workshops.

In either proceeding, stakeholder engagement is important so that “commissions do not establish new rules or programs in a black box,” RMI reported.

“Many new players can be brought into these complex dynamic processes,” Cross-Call said. “Ideas and proposals can emerge from any of the participants and filter through the vision in different ways.”

The final stage is implementation of new policies, programs or rules to guide utilities. Allowing for pilot programs to test new policies or rules is an important potential outcome, RMI reported. Any implementation should include “performance tracking” and “mechanisms for review and adaptation” so that “lessons are captured.” 

Two key shortcomings

Hawaii’s RMI-led workshops were “open, equitable, inclusive and relaxed,” which “bodes well for harder work yet to come,” according to Pace Energy and Climate Center Executive Director Karl Rabago, who participated in the Hawaii process.

But they were also “time and resource intensive, which privileges the utilities, and invites gaming, such as legislative end-runs,” Rabago, a former Texas utility commissioner, added. The workshops were sometimes “vague and unfocused” and such processes can be “a cover for hidden staff agendas” if the guiding vision is inadequate.

“If [a proceeding] is only a cover for doing what [a commission] wants to do, or for doing nothing, then it’s worse than doing nothing because it wastes resources, creates unfulfilled expectations, and erodes stakeholders’ confidence in regulation.” Karl Rabago, Director, Pace Energy Center

A non-confrontational stakeholder dialogue “partially levels the field,” he said. “But ratepayers will not pay stakeholders’ workshop expenses, while utilities are indifferent to the costs and can participate in workshop after workshop.”

A commission could do this type of process “just to say it had a collaborative stakeholder process with working groups,” he said. “If it is only a cover for doing what it wants to do, or for doing nothing, then it’s worse than doing nothing because it wastes resources, creates unfulfilled expectations and erodes stakeholders’ confidence in regulation.”

Most regulatory systems offer the option of informal, non-docketed proceedings, but there are aspects of a formal proceeding that protect both utilities and stakeholders, he said. “You have a right to discovery, to a timetable and to protest a party being out of order.”

Formal adjudicatory proceedings can resolve “contested disputes,” Earthjustice’s Moriwake agreed. “But the RMI paper doesn’t suggest a one-size-fit-all approach.”

A February ruling in New Hampshire’s Grid Modernization proceeding showed why formal adjudicated proceedings must be available as “the resolution mechanism of last resort,” New Hampshire Office of the Consumer Advocate head Donald Kreis emailed Utility Dive.

When commissioners delayed the four-year-long proceeding for further stakeholder input, Kreis raised “statutory and due process concerns” in his appeal to Commission Chair Debra Howland. The remedy he is seeking from Howland is a clearly scheduled, evidence-based adjudicative proceeding that will deliver a definitive commission ruling on grid modernization.

Intermittent feedback to stakeholders through commissioner decisions can also be absent from workshop-based regulatory processes, Rabago said. That feedback is needed because “earnings from traditional investments are falling and investors will pressure utilities to make transformation-enabling investments if regulators signal they will approve them.”

Veterans of regulatory debates in the Southeast told Utility Dive that regulatory reform is likely not possible until political reform limits the influence of regulated utilities.

“Regulatory reform is more necessary in the Southeast than anywhere else,” Southern Alliance for Clean Energy (SACE) Executive Director Stephen Smith told Utility Dive. “Recent regulatory approvals of nuclear and fossil fuel power plants in South Carolina, Mississippi and Georgia have cost customers tens of billions of dollars.”

“If a regulatory decision will impact utility profits, it can bring direct political and indirect financial pressure on the decision-makers that eliminate the level playing field.”

But RMI’s proposal requires “a reform-minded commission or legislature and the region’s lawmakers and regulators are not moving in that direction,” he said. “If a regulatory decision will impact utility profits, it can bring direct political and indirect financial pressure on the decision-makers that eliminate the level playing field.”

A significant step toward regulatory reform would be banning financial contributions from utilities or utility affiliates to political campaigns, Smith suggested. “If we take the money out of the equation, it would allow reforms to begin.”

A second step would be disallowing commissioners and staff moving from the commission to jobs with utilities or utility affiliates “for at least some time after they serve,” he added. “The concern is people making decisions who are aware that they could foreclose future opportunities.”

These potentially valuable proposals would likely open the possibility of innovations in regulatory reform. In Hawaii, lessons about the effectiveness of new regulatory processes are already being learned.

Lessons from Hawaii

Hawaii’s “historic transition” from fossil fuels to a “renewable, distributed system” can link clean energy goals, customer choice and reduced electricity costs “by updating regulation of the electricity industry for the modern age,” public utility commission staff concluded from the RMI-led workshop process.

In early sessions of the proceeding, stakeholders informally workshopped and briefed the PUC’s concept paper on performance-based regulation, RMI’s Cross-Call said. This resulted in a staff “framing document” that is more coherent and addresses concerns “that may not have otherwise been addressed.”

The workshops also improved the non-docketed proceeding concept, RAP’s Littell said. “Stakeholder processes are common, but utilities maintain leverage in regulatory proceedings by keeping the debate complicated and legalistic. The RMI facilitator made sure participants understood and were heard and understood by decision-makers.”

Pace Energy Center’s Rabago applauded the process, but not the results.

The workshops did not lead to “recriminations and battling briefs,” he said. There was “general consensus” on issues, Rabago acknowledged, “but nobody ever defined the vision.” And in the metrics workshop, participants “stated their preferred metrics and practiced working together, but we didn’t solve any problems or reach any agreements on metrics.”

The workshops allowed participants to “swiftly, yet thoughtfully, move through complicated regulatory territory … Given the stark realities of climate change, we don’t have the luxury of waiting for years on end.”

The workshop’s “vision” was based on the Hawaii PUC’s 2014 “Inclinations” white paper on goals for a new regulatory process and a new utility business model and has been refined by clean energy legislation, Earthjustice’s Moriwake said. But the most important of RMI’s insights is that commission vision and leadership are “the key ingredients for realizing comprehensive regulatory reform.”

The workshops methodically built and advanced the group discussion leading to “a shared basis of understanding” about “what needs to be changed” and “how to implement the necessary reforms,” he added.

“The utility is essentially on the examining table in this proceeding, and with that exposure can come controversy and contention,” Blue Planet Foundation Chief of Staff Melissa Miyashiro emailed Utility Dive. A traditional regulatory proceeding might be stuck in “endless back-and-forth disagreements,” but this process has narrowed “29 potential outcomes” to “12 priority outcomes” in only six months.

The workshops allowed participants to “swiftly, yet thoughtfully, move through complicated regulatory territory,” she added. “Given the stark realities of climate change, we don’t have the luxury of waiting for years on end.”

The first phase of Hawaii’s performance-based rate proceeding will be completed early this year when the commission concludes its consideration of the questions raised in these workshops and issues a decision on when and how to move into phase two.

A previous version of this article incorrectly said the Renovate initiative was launched on March 18. It was launched in February.

Jordan Nachbar at jnachbar@sepapower.org. “Renovate” seeks to enable the evolution of state regulatory processes

WASHINGTON, D.C. — A diverse group of national nonprofit organizations and industry thought leaders announced a new initiative to help evolve state regulatory processes for the power sector to keep pace with the dynamic energy needs of customers and develop more effective ways of working together to identify and deliver new solutions to those needs.

Renovate is convened by the Smart Electric Power Alliance (SEPA) and launched in partnership with other leading electric industry and stakeholder groups (see the full list below).

The initiative’s vision is to enable the evolution of state regulatory processes and practices in order to address the scalable deployment of innovative technologies and business operating models that support the transition to a clean and modern energy grid.

To begin Renovate, a task force including commissioners, consumer and environmental advocates, legislators, and leaders from utilities, solution providers and state energy offices alongside initiative partners identified problem statements to guide the initiative’s focus. The problem statements include issues on the steep learning curve for all industry participants, managing system risk and uncertainty, managing increased rate of change and the balancing and cross-coordination of multiple priority sets.

The Renovate initiative will be led by Janet Gail Besser, who recently joined SEPA as a Managing Director. Besser brings nationally recognized expertise and broad industry experience as a regulator, utility executive, developer, consultant, and consumer advocate to the role.

“I am thrilled to be joining SEPA at this pivotal moment in the organization’s focus on regulatory innovation. This groundbreaking initiative will help address the challenges in meeting customer needs and increased expectations for a modern grid enabled by new technologies, while continuing to provide clean, affordable, safe, and reliable electric service,” said Besser.

SEPA, as a non-advocating convening group, seeks through this initiative to unlock a collaborative, transparent and more coordinated, productive path to scale solutions more quickly without sacrificing consumer protections.

“State commissions are focused on balancing the needs of many stakeholders and have constrained resources for developing processes to better understand emerging innovations and issues,” said NARUC President Nick Wagner. “That is why we are pleased, and find it important, to have partnerships such as we have with the Renovate Initiative and its wide range of stakeholders.”

“Through Renovate, we have a great opportunity to come together as an industry to resolve regulatory challenges in order to better serve our customers and the communities we serve,” said Adam Benshoff, executive director of regulatory affairs at the Edison Electric Institute. “The key is finding solutions that keep energy reliable, affordable, secure, and increasingly clean for everyone in a rapidly changing world.”

“We are a partner of the Renovate Initiative because electricity system innovation must be accelerated in order to meet the many states’ policy objectives of bringing cost efficient, resilient and clean energy technologies to scale,” said National Association of State Energy Officials’ senior program director, Rodney Sobin. “We are excited to contribute to this important effort with our partners.”

“The electricity system is rapidly changing, and states must advance forward-looking policies to achieve the public benefits,” said Howard Learner, Executive Director of the Environmental Law & Policy Center. “States can lead with policies to accelerate renewable energy and energy efficiency technologies that are good for consumers, good for economic development, and good for the environment.”

“As policymakers consider proposals that will continue to reshape the electric utility industry, promoting candid and thoughtful discussions will be vital to protecting the interests of energy consumers during the transition,” said NRECA CEO Jim Matheson. “Electric co-ops look forward to bringing our community and consumer-first focus to this dialogue.”

“Our nation’s clean energy transition will go faster and more smoothly if we can change how utilities are regulated, so that rather than relying so heavily on trial-type procedures, final decisions reflect more flexible and collaborative approaches,” said Ralph Cavanagh, Energy co-director of the Climate and Clean Energy Program at the Natural Resources Defense Council. “Otherwise costs and delays will remain excessive, and public involvement will suffer.”

“Governors are leading on energy innovation and deploying new technologies that can help lower costs and improve outcomes,” said Scott D. Pattison, CEO and executive director of the National Governors Association. “This initiative will help support governors’ goals by improving regulatory processes through better information, coordination and market development.”

“Successfully shaping and accelerating the evolution of the energy system to best meet the needs of customers—while driving improved environmental performance, strengthening resilience, and keeping user costs stable—requires close collaboration and a spirit of innovation, partnership, and shared mission,” Leia Guccione, a principal at Rocky Mountain Institute, said. “Renovate is an important effort to reflect on the innovations that can make current regulatory processes more ambitious and collaborative while building and supporting the coalition of leaders we will need to implement and engage in these new evolved regulatory processes. We look forward to sharing the insights we’ve discovered and contributing to the success of this important endeavor.”

Working with a task force of stakeholder representatives and partners, the next phase of the initiative entails identifying a set of solutions to designated problem statements, and identifying, assessing and bench marking existing regulatory innovations—both domestically and globally—which will include the development and publication of key illustrative case studies.

For more information on the Renovate Initiative and to view the full list of partners and task force members, click here.

Renovate Partner Organizations:

American Public Power Association (APPA)

Edison Electric Institute (EEI)

Environmental Law & Policy Center (ELPC)

National Association of Regulatory Utility Commissions (NARUC)

National Association of State Energy Offices (NASEO)

National Conference of State Legislatures (NCSL)

National Governors Association (NGA)

Natural Resources Defense Council (NRDC)  

National Rural Electric Cooperative Association (NRECA)

Regulatory Assistance Project (RAP)

Rocky Mountain Institute (RMI)

Smart Electric Power Alliance (SEPA)

About American Public Power Association (APPA)

APPA is the voice of not-for-profit, community-owned utilities that power 2,000 towns and cities nationwide. The Association advocates and advises on electricity policy, technology, trends, training, and operations.

About Edison Electric Institute (EEI)
EEI is the association that represents all U.S. investor-owned electric companies. Their members provide electricity for about 220 million Americans, and operate in all 50 states and the District of Columbia. EEI provides public policy leadership, strategic business intelligence, and essential conferences and forums.

About Environmental Law & Policy Center (ELPC)
ELPC is the Midwest’s leading public interest environmental legal advocacy and eco-business innovation organization, and among the nation’s leaders. The organization develops and leads successful strategic advocacy campaigns to improve environmental quality and protect our natural resources.

About National Association of Regulatory Utility Commissioners (NARUC)

NARUC is a non-profit organization dedicated to representing the state public service commissions who regulate the utilities that provide essential services such as energy, telecommunications, power, water, and transportation.

About National Association of State Energy Offices (NASEO)

NASEO is the only national non-profit association for the governor-designated energy officials from each of the 56 states and territories. Formed by the states in 1986, NASEO facilitates peer learning among state energy officials, serves as a resource for and about state energy offices, and advocates the interests of the state energy offices to Congress and federal agencies.

About National Conference of State Legislatures (NCSL)
NCSL is a bipartisan non-governmental organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.

About Natural Resources Defense Council (NRDC)
NRDC is an international nonprofit environmental organization with more than 3 million members and online activists. Since 1970, NRDC’s lawyers, scientists, and other environmental specialists have worked to protect the world’s natural resources, public health, and the environment.

About National Rural Electric Cooperative Association (NRECA)
NRECA is the national trade association representing more than 900 local electric cooperatives, public power districts, and public utility districts in the United States. The organization oversees cooperative employee benefits plans; carries out federal government relations activities like lobbying; conducts management and director training; and spearheads communications, advocacy, and public relations initiatives.

About National Governors Association (NGA)

Founded in 1908, NGA is the nonpartisan organization of the nation’s 55 governors. Through NGA, governors share best practices, address issues of national and state interest and share innovative solutions that improve state government and support the principles of federalism.

About Regulatory Assistance Project (RAP)
RAP is an independent, non-partisan, non-governmental organization dedicated to accelerating the transition to a clean, reliable, and efficient energy future. The organization helps energy and air quality regulators and NGOs navigate the complexities of power sector policy, regulation, and markets and develop innovative and practical solutions designed to meet local conditions.

About Rocky Mountain Institute (RMI)
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. RMI has offices in Basalt and Boulder, Colorado; New York City; Washington, D.C.; and Beijing.

About SEPA

The Smart Electric Power Alliance (SEPA) is an educational nonprofit working to facilitate the electric power industry’s smart transition to a clean and modern energy future through education, research, standards and collaboration. SEPA offers a range of research initiatives and resources, as well as conferences, educational events, advisory services, and professional networking opportunities. SEPA is founder and co-sponsor of North American Smart Energy Week (a trade show which includes Solar Power International and Energy Storage International among other smart energy topics) and winner of the Keystone Policy Center’s 2016 Leadership in Energy Award.

Process for Purpose: Reimagining Regulatory Approaches for Power Sector Transformation

  |  By Dan Cross-Call,  Cara Goldenber, Claire Wang

Significant changes in grid technology, customer demands, and public policy priorities have prompted efforts across the country to update utility business models and their associated regulations. Ensuring the processes used to advance these reforms are properly designed is a crucial element of achieving reform outcomes and success. Yet process approach and design decisions frequently receive less attention than the technical and economic details of the regulatory reforms themselves. As a result, those technical and economic decisions tend to get mired in adversarial debates and processes, risking a loss of focus on intended objectives and delivering suboptimal outcomes.

In response, regulators, utilities, and related stakeholders are increasingly employing broader, more participatory processes to address this increasingly complex nature of electricity reforms and consider investment decisions and rule changes that go to the core of the utility business.

This paper reviews regulatory reform efforts undertaken by 10 states, describes the processes by which reform can proceed, and identifies the most significant factors that impact reform efforts’ effectiveness. The report examines four distinct stages of successful reform processes: initiating the reform process, communicating the vision for reform, conducting the reform process, and delivering reform outcomes.

Who launches the process can shape utilities’ and other stakeholders’ initial acceptance of reform efforts and can impact the extent of regulatory overhaul achieved in the state. While commissions, state policymakers, utilities, and other stakeholders can all initiate reform processes, utility regulators have particular importance as, in most cases, regulators are ultimately responsible for carrying reform efforts toward policy outcomes.


Every regulatory undertaking should be anchored to a guiding vision for what the process seeks to achieve and what the ultimate outcomes it is in service of. The guiding vision should articulate what opportunity the state or utility is facing; how the opportunity benefits customers, the grid, and public policy; what the outputs of the effort should be; and how outputs will be utilized by regulators going forward.

Regulatory processes can be either investigatory or decisional in intent. Investigatory processes engage stakeholders to explore grid needs or potential reform options, whereas decisional processes set out to adopt new rules or programs. States should explore using either or both types of processes depending on their underlying objectives.