NRRI 17-02 Final Report to NM-LCS


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Scope of study

This report focuses on the technical staff of the New Mexico Public Regulation Commission (PRC or Commission). Technical staff includes accountants, economists, engineers, financial analysts and public policy experts. They form an essential role in assisting commissioners to make well-formed decisions that are in the public interest.
Specifically, this report examines the capability of the staff to perform this role. It does this by comparing PRC staffing practices with other state utility commissions and “best practices.” This report applies the authors’ experience and expertise in working for state utility commissions, either as staff personnel or National Regulatory Research Institute (NRRI) employees. A major source for this report comes from NRRI interviews with several stakeholders, along with present and past PRC employees over the period September-November 2016.

Attributes of good public-utility regulation

This report begins by identifying several traits of good (or “best practice”) regulation. These traits represent benchmarks for evaluating those PRC activities that fall within the scope of this report. Most fundamental, good regulation makes well-informed decisions directed at the public interest. This involves, among other things, decisions that reflect justice for all parties. Specifically, good regulation weighs legitimate interests and makes decisions based on facts. Regulators’ decisions do not unduly favor any one interest group over the public interest. They should be supported by law and evidentiary record. Well-informed decisions mean staff and other parties deliver evidence that allows commissioners to evaluate the positions of various stakeholders in terms of the public interest.

Directly pertinent to this report, good regulation requires capable staff personnel, information and financial resources. Their absences can jeopardize a regulatory agency’s ability to fulfill its obligation. A regulatory agency where commissioners are unable to make well-informed decisions will less likely serve the public interest, and are more apt to advance the interest of a narrow group with political clout.

Good regulation also avoids excessive politicization, which weakens regulation as an institution and instrument of public policy. Politically expedient decisions tend to undermine the agency’s commitment to promoting the long-term interest of the state.

The main job of technical staff, which again is the focus of this study, is to assist commissioners in making well-informed decisions. Staff expects commissioners to base decisions on the facts of record and in accordance with the public interest as determined by applicable law. Commissioners in turn expect staff to be technically competent and provide them with balanced information.

There are inherent tensions between staff and commissioners: Commissioners make decisions that may not coincide with staff recommendations; each should not expect captive loyalty from the other. Staff should not have to endure political pressures that commissioners may exercise.

Overall, both staff and commissioners should share the common goal of serving the general public and respect for each other. Staff can either make a recommendation to the commissioners or provide a range of options aligned with facts of record. Commission managers, such as the chief of staff, are crucial for overseeing the day-to-day operations of the agency and for insulating the technical staff from politics. Probably the most daunting challenge for managers is to secure adequate financial resources and employ them effectively. Commission managers also serve the critical function of bolstering staff capability with opportunities for professional development, mentorship, and team building.

Challenges facing the PRC

This report makes several observations and suggested actions. Readers should consider them as tentative, in that a more thorough investigation would heighten the surety of the identified problems and the validity of the suggestions.

By design, this report has a negative tone in identifying problems that seem to obstruct the capability of the PRC to carry out its mission to serve the public interest. The reader should not interpret this report as weighing the positives and negatives of the Commission in determining an overall “rating” of its performance. The specific intent is to find ways for the Commission to best exploit its technical staff in the name of the public interest.

We observe that some of the challenges that the PRC face are common across state utility commissions but others seem beyond the norm. Along with many commissions around the country, the PRC faces increasing demands for example, from the Legislature stakeholders and shrinking resources. This death-spiral-type condition, in our opinion, has seriously jeopardized the capability of the PRC to protect the public interest. The reality is that a reduction in PRC expenditures rarely means a commensurate decline in workload. Frequently, a state utility commission has to undertake more tasks with less money, a situation that can spiral into a situation where the commission is unable to adequately address the issues brought before it.

We discuss a wide array of challenges that the PRC faces. We base our findings on the combination of (1) comments made by interviewees, (2) our observations of the PRC and other state utility commissions, and (3) our experiences working for commissions either as staff personnel or NRRI employees.

We identify a particularly serious situation in the form of an apparent absence of PRC professional staff development and continued education. This problem has become more acute as the utility industries are undergoing dramatic changes because of the confluence of market, technological and public policy developments. In this new environment, it becomes vital for staff to keep abreast of these new developments as they affect the practices and policies of the PRC that are most beneficial to New Mexicans. Just like utilities have to transform when prevailing conditions change, regulatory agencies must also.

Another area of concern is the PRC currently having several unfunded technical positions, some of which are critical, for example, an electrical engineer. A problem recognized by many interviewees was the difficulty of the PRC to hire new staff and retain current staff. Not only are low salaries a problem, many interviewees pointed to the bad reputation of the PRC that magnifies the obstacle to hiring new staff.

This report uncovers other concerns for the PRC that make its duty to serve the public interest challenging. Some of them may require additional monies while others may be addressed through better use of existing staff resources.

Suggested actions

A major suggestion of this report is for the PRC to add technical staff both to advise the commissioners and to act as public-interest advocates. Advisory staff provides education, advice and technical support (legal, engineering, financial, economic and policy) to the commissioners. They can be a group of technical experts assigned to commissioners as a whole; or they may be part of a commissioner’s personal staff. Advocacy staff performs the critical function of representing the general public, for example in docketed proceedings such as rate cases. They serve the commissioners by providing a reference point for judging the positions of interest groups like utilities, consumer advocates, and environmentalists.

A second major suggestion is to have the Legislature demand a comprehensive audit of the PRC. We observe that PRC resources may not be keeping abreast of changing developments in the utility industries. An audit could also investigate, with more surety, whether these problems identified in this report actually exist and pose a serious obstacle for the PRC in carrying out its mission to serve the public interest.

Other suggested actions include:
1. Staff mentoring of new employees;
2. Staggering the work load of technical staff, especially within the Utility Division;
3. Improved regulatory “culture” and teamwork;
4. Consideration of a changing role between chief of staff and commissioners;
5. Better staff allocation; and,
6. PRC retention of utility fees and assessments.

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