The consequences of escalated politicization in the US regulatory process

Abstract

To some observers, public utility regulation has expanded its domain far beyond its original mandate and what is socially optimal. Their view is that regulators should stick to setting just and reasonable rates and taking other actions that improve the long-term welfare of utility consumers. After all the raison d’etre for public utility regulation is to protect consumers from “monopoly” utilities. Utilities provide essential services to both individuals and society. When left unregulated, these services would presumably be excessively priced with no guarantee of availability for those who want it and willing to pay for it. Diverting from this focus—driven by escalating politics—risks regulators’ ability to achieve their core objective of protecting consumers. One positive aspect of politicization is that it allows regulators to have access to more diversified information from stakeholders that could result in better decisions. One criticism of regulation is that it tends to stay with its policies and practices too long in spite of changing market and technological conditions. Additional stakeholders in the regulatory process could push regulators toward changes that are in the public interest but would not pursue on their own.