New Governance of the Electricity Sector: States as Policy Laboratories

Elizabeth Baldwin

 

Baldwin

Credit: Getty/EvLloydphotography

 

At least twenty-six states have adopted policies to reduce greenhouse gas (GHG) emissions by requiring electric utilities to meet ambitious energy savings goals. Under these policies, utilities develop products and programs that help customers save energy, allowing utilities to procure “negawatts” and thus reduce the demand for electricity.

However, these policies also radically upend relationships between regulators, regulated utilities, and customers. Utilities must shift from selling to saving electricity; citizens act as co-producers of energy savings; and regulators must ensure that programs are cost-effective and equitable. To meet the governance challenges presented by these shifting roles, states as diverse as Arkansas and Connecticut have developed innovative multi-actor approaches by bringing a range of public, private, and non-profit actors into electric sector governance. While these multi-actor approaches have emerged as part of states’ GHG mitigation efforts, they also highlight governance trends that are of interest to public management scholars. In this Commentary, I summarize findings from an ongoing study of state energy efficiency (EE) collaboratives, and highlight its relevance to the broader study of public management in the 21st century.

 When do Collaborative Approaches Work?

State EE programs and policies are not new. Since the oil crisis of the 1970s, modest investment in EE programs has helped to reduce consumers’ bills, address air pollution, and manage peak load. As EE has emerged as an important tool for GHG mitigation, however, many state policy makers have required utilities to ramp up their EE programs to meet savings goals.

As savings goals have become more ambitious, states’ approaches to regulation have also become more deliberative and collaborative. A recent report by the Department of Energy identifies multiple approaches that vary in their scope and formality, but that all strive to advise decision makers through consensus-oriented deliberation among diverse stakeholders. Collaborative approaches are widely viewed as crucial for successful implementation of state EE programs.

Of course this raises issues such as whether and why EE collaboratives are effective, why we see multi-actor processes in this particular policy area but not in others, and how policy makers can structure these collaboratives to best achieve policy goals.

EE programs require information such as how to induce consumers to participate, and how to estimate and verify energy savings. This poses governance challenges because utility personnel, program vendors, EE advocates, and energy analysts – not regulators – are most likely to possess this information. Regulators’ roles thus shift from being the technical experts to acting as stewards of the public interest by soliciting policy relevant information.

Second, while a diverse array of actors possesses technical information, their goals are not always directly aligned with the public interest. The best-informed actors tend to have a stake in the outcome of the program or policy decisions: utilities and vendors will want a set of programs that benefit their shareholders, environmental advocates will seek to maximize energy savings, and consumer advocates will focus on programs’ rate impacts. Stakeholders are well aware of this challenge, and many states have adopted ratemaking approaches and other strategies that work to align key actors’ goals. One such strategy is the creation of collaborative, deliberative approaches to governance that allow stakeholders to raise their individual concerns and work toward the creation of EE programs and policies that will maximize benefits across stakeholder groups.  Deliberation does not always resolve all conflicts between stakeholders, but it can reduce the number of issues in conflict.

Third, collaboration functions in the shadow of a strong regulator. Of course the hope is that stakeholders will identify emergent problems, resolve challenges as they emerge, and provide political support for the programs. But what if consensus is not possible?  In many states, there is a strong norm of regulators adopting the “consensus” position; this creates incentives for all actors to work something out and not wait for the regulators to impose their solution on all.

Connecticut’s Experience

Connecticut’s Energy Efficiency Board (EEB) provides an illustration of how energy efficiency collaboratives can help states meet policy objectives. Connecticut’s EEB is created by statute, and brings together a diverse array of stakeholders to help utilities devise EE programs, as well as to provide analysis and advice to policy makers. The EEB members represent utilities, environmental advocates, consumer advocates, industrial consumers, and municipalities, among other interests. Together, the EEB’s members help the state’s utilities develop a suite of EE plans and programs that meet mandated savings goals and that are fair to ratepayers. As a group, the EEB hires an independent consultant to produce policy-relevant analysis about projected savings. And while regulators are not bound by the EEB’s recommendations, regulators normally adopt  policy positions that represent consensus among the EEB members. Since its inception in 1998, the EEB has helped to ensure that utilities meet their savings goals and advocated for the preservation and expansion of funding for new EE programs, and in doing so has helped to make EE programs a centerpiece of Connecticut’s ambitious GHG mitigation plans.

Implications for Public Management Research and Scholarship

State EE collaboratives are just one illustration of a broader phenomenon within public management: the shifting role of public managers from neutral, technical experts to actors who convene other stakeholders and act as stewards of the public interest in decision making. Major events like climate change have a tendency to accelerate this shift in roles by creating new problems that require the development of new solutions and new approaches to public policy. The approaches to governance that emerge as a result – such as EE collaboratives – give public management scholars a new context to learn about governance and a crucial opportunity to synthesize and provide advice to policy makers.


Elizabeth Baldwin is an Assistant Professor at the University of Arizona’s School of Government and Public Policy, and studies multi-actor approaches to energy and environmental governance.