Energy Costs: Who’s Really Responsible?

March 13, 2014

Inside Insight

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PUBLIC “SERVICE” INDEED 
How does South Carolina’s energy market work? In a nutshell, it doesn’t. While other states are moving toward more open markets, South Carolina remains stubbornly lacking in competition. And as usual in our state, oversight of the utilities is controlled by legislators who appoint the board that controls utility rates.
I must say, the legislature has really outdone itself in creating the structure that controls the utilities in this state. The system pretty much ensures there will never be real energy competition and thus the public will have no real control over utility costs.
Here’s how it works: The Public Service Commission (PSC) was created to oversee utilities. The PSC has to approve rate increases. According to its definition in the legislative manual, the PSC “has jurisdiction over intrastate railroads, telephone, electric, natural gas, investor-owned waste water and water utilities, and motor vehicles used in transporting persons, household goods, or hazardous waste for disposal for compensation over public highways of the State. Approves allowable costs for low-level nuclear waste facility.”
And lest we worry that we the people have no control over the costs of our electricity because of this legislatively controlled commission, have no fear — the legislature has thoughtfully created the Office of Regulatory Staff (ORS) and charged it with “representing the public interest in utility regulation. Act 175 defines public interest as a balance among three essential components: the concerns of the using and consuming public; the financial integrity of public utilities; and the economic development of S.C.”
Notice that the public interest involves a “balance” of concerns that include not only how much our electricity costs but also the “financial integrity” of utilities and, of course, the “economic development” of South Carolina. But we have our very own advocate in the ORS!
But who hires the staff of the ORS, and who picks the board of the PSC? Enter the third leg of the energy stool: the State Regulation of Public Utilities Review Committee (PURC). The PURC “has the power and duty to nominate no more than three candidates for each seat on the Public Service Commission to be elected by the General Assembly.” Of course the candidates are ultimately elected by the legislature! And as for the ORS — our advocate — the PURC has the power and duty to nominate “no more than one qualified candidate for the Governor to consider in appointing the Executive Director of the Office of Regulatory Staff.”
Wow. The PURC gives the governor one candidate to consider. Guess that answers the question of who controls the ORS. And by the way, the PURC also sets the salary of the director of the ORS, and oversees and reviews the performance of the ORS director and the PSC members.
Who is on the PURC? That should matter, given the extraordinary power it wields over energy costs in our state. Not surprisingly, six legislators – three from each body – and four others appointed by the Senate Judiciary Chairman and the Speaker of the House.
The PURC chooses both the commission that oversees energy prices and the entity that is supposed to advocate for we the people. Sort of like playing chess with yourself – you don’t have to guess who will win.
Like most activities of state government, oversight of utilities is deliberately complex and designed to keep the public at bay. Commissioners for the PSC are chosen through a screening process that’s supposed to ensure the most qualified candidates are making these complex decisions on our behalf. But how do PURC members decide who oversees our utilities? Nerve reporter Rick Brundrett gave us a glimpse of the process in his story on Monday about a candidate before the screening committee. If you missed that story, you definitely want to read it now. Brundrett found this exchange between PURC member Representative Bill Sandifer, who chairs the powerful House Labor, Commerce and Industry Committee and a female candidate applying for a position on the commission:
Sandifer: “You’re a mother of three underage children. How will their lives be impacted if you were elected to the Commission and required to attend hearings, sometimes three or four days a week in Columbia or elsewhere, as well as going to conferences all over the United States?”
Campbell: “I am blessed with a very supportive set of parents and a very supportive set of in-laws who really enjoy being with their grandchildren. They relish getting more involved.”
Sandifer: “I’m going back to my own experience when I started in politics. Have you discussed this with your children?”
Campbell: “Yes.”
Sandifer: “Are they endorsing what you’re doing?”
Campbell: “Yes. I haven’t described all the nature of the work, but the concept of going to Columbia today, they knew where I was. Yes. They’re delighted.”
Apparently Rep. Sandifer thinks it’s critical that Ms. Campbell have the input and approval of her children to consider service on the PSC. There are many things I could say about this exchange (Sandifer didn’t extend this line of questioning to any other candidates), but at the very least these questions are not reasonable ones when determining whether a candidate is qualified to serve on the board that oversees our utility rates.
This system needs serious reforming – we’ll never move toward competition and open energy markets as long as the system is run by a handful of people who exercise such tight control over the energy market. The first monopoly that needs to go is the one the legislature has on power.