Regulatory Wonderland

Alice finds herself in a land where the powerful beg for more benefits, and she recognizes the Public Utility Commission of Ohio. In this Carrollian wonderland, words have different meanings and debate reigns about who gets to come to tea.

Consider the term “sustainable.” While most people think about not destroying natural resources, Ohio public officials seem to think it means keeping electric utility companies from destroying themselves with bad business decisions.

Dwell on the word “stability.” In the context of electricity prices, most people think it means their rates would not rise. But Buckeye State regulators seem to believe those stable-minded Ohioans can handle an extra $130 per year, as long as the utility monopolies enjoy solid earnings and their executives receive unwavering bonuses.

Then there’s always “balance.” Before she descended into this hole, Alice used to study history and recalled that regulatory commissions were established about a century ago to protect customers from monopolists, to do what competition does in real markets. In wonderland, however, the monopolists seemed to need the protecting.

Finally, let’s consider “economic development.” Alice, who also used to enjoy English class, remembered the phrase referred to growth and the adoption of new technology in order to improve everyone’s quality of life. In wonderland, however, it seems to mean spending billions of dollars on waning, old technologies that can no longer compete.

As Alice descended further into this regulatory wonderland, she realized you get to pick your facts. The utilities that want bailouts declared the subsidies will end up saving consumers $256 million. The independent state agency representing consumers, however, calculated the giveaways would cost $6 billion. Alice assumed regulators went with the utility estimate because they like positive rather than negative numbers.

When it came time for a tea party, one prince of the regulatory court — all members of which are proud conservatives appointed by a Republican governor — showed his open-mindedness and welcomed environmentalists to sit at the table. While puzzling over the riddle of what it meant to invite only “reasonable” environmentalists, Alice checked her calendar to find she was well into the 21st century and she smiled, pleased regulators of the state’s largest polluters now were willing to consider the impacts of pollution.

In this sphere of uncommon nonsense, another hatless regulatory prince declared his devotion to markets and competition. In regulatory wonderland, approving a bailout for a monopoly doesn’t seem to contradict those values.

Alice wondered if she had gone mad. No, said felinesque observers, everyone in regulatory wonderland seemed to rely on imagination as a weapon against reality.

The reality is FirstEnergy and AEP made bad business decisions that caused several of their power plants to be unprofitable, to not be able to compete in regional electric markets. The utility giants want Ohioans to bail them out, and “public servants” last week obliged, showing their loyalties lie with politically powerful polluters rather than the people they are supposed to serve. Instead of encouraging investment in modern solutions, these bailouts hurt customers and subsidize old power plants that are dirtying our air — a terrible deal for Ohioans’ wallets and health.

The madness within Ohio’s regulatory wonderland may become curiouser and curiouser as regulators deal with similar bailout requests from other utilities. The only escape for Alice — and Ohioans — seems to be the federal judiciary, which has demonstrated the realistic conclusion that such subsidies illegally disrupt competitive power markets. At the state and national level, the saga continues through the looking glass.

For more on Environmental Defense Fund’s take on the Ohio bailouts, please visit the Energy Exchange blog.