Transcript Document

The National
Regulatory
Research Institute
Alternative Dispute Resolution
for Utility Regulators
Robert E. Burns, Esq.
The National Regulatory Research
Institute
University of Buenos Aires
Buenos Aires, Argentina
November 2003
History – One Hundred Years
In 1986, NARUC celebrated being one
hundred years old
In other words, in 1986, there had been
over one hundred years of state public
utility regulation in the United States
The traditional regulatory process
during the first hundred years of
regulation was based on adjudicatory
procedure
History – continued
The adjudicatory process was used for
ratemaking and other regulatory
decision-making
The traditional adjudicatory processes
are particularly good in the context of
retrospective, fact-driven decisionmaking
The traditional adjudicatory process is
also good for determining the outcome
of zero-sum games
History – continued
The Standard Administrative Procedures
Act / Model State Administrative
Procedures’ Notice-and-Comment
Rulemaking does not solicit the type or
quality of information needed by
regulators to properly balance competing
interests
polycentric disputes are highlighted by
the process, but not resolved
History – continued
But, other than in water cases, how
many of us are doing rate cases any
more?
Regulatory lag currently favors the
utilities financially because of the
decline in the cost of capital and the
lack of new investment
The Problem
Increasingly, state public utility
commission are faced with prospective
policy issues
These prospective policy issues require
them to make decisions that are more
legislative in nature
The Problem - continued
For example, they may be called upon
to be progressive planning bodies that
are called upon to balance economic
development and environmental
concerns with the likelihood of future
rate impacts
This is true, not just in the United
States, but also internationally; new
established public utility commissions all
face similar forward-looking problems.
The Problem - continued
Traditional adjudicatory procedures are
long and tortuous and make it difficult to
bring progressive policy issues into
focus
Traditional adjudicatory procedures
were never meant to bring prospective
policy issues to resolution
The Need
What is needed is a process that allows
agency decision-makers to:




Become more involved in forming
prospective policy
Consider Policy Option in a More
Complete, Thorough, and Coherent
Fashion
To Cut Through the Chaff
To Allow the Parties to Find Win-Win
Solutions So Long As They Are In the
Public Interest
The Need - continued
Procedures are needed that can
improve the quality of regulation,
particularly progressive regulation that
make prospective policy
Procedures are needed that can help
decision-makers gather, organize, and
consider pertinent and complete
information necessary for proactive
policy-making
The Evolution of ADR in
Administrative Procedures
Some elements of alternative dispute
resolution have been in the legal
process for some time.
Mediation and arbitration in labor
disputes
The use of pre-trial settlement
conferences
Fisher and Ury, Getting to Yes


win-win solutions
the principles of principled negotiation
The Evolution - continued
Several state agencies and federal
agencies were using Alternative Dispute
Resolution techniques (ADR) very early
on
New York Public Service Commission,
the Federal Energy Regulatory
Commission, and both state and federal
environmental protection agencies were
using ADR in the 1980s.
The Evolution - continued
Example #1: Negotiated Rulemaking


Differs from the typical notice-andcomment rulemaking
The agency attempt to convene
representative of the interested parties to
negotiate what “ought” to be in a proposed
rule before a Notice of Proposed
Rulemaking is issued
The Evolution - continued
Negotiated Rulemaking - continued

Uses “Principled Negotiations” to facilitate
a successful negotiation process:
 By focusing on the respective interests of the
parties (not their initial positions)
 By seeking options that allow mutual gain, the
so-called win-win solution
 By defining objective criteria
The Evolution - continued
Negotiated Rulemaking - continued


The ADR process in negotiated rulemaking is
used up-front before the NOPR is ever
issued in the hopes of minimizing areas of
conflict or coming to a win-win resolution
This process has also been successfully
used by the Philippine Energy Regulatory
Commission and the Philippine Department
of Energy
The Evolution - continued
Example #2: Joint Problem-Solving
Workshops or Task Forces




Often called a collaborative process
Requires the use of a facilitator
Often it is best that the facilitator has some
technical background
Otherwise, the Eric Von Loon Problem
The Evolution - continued
Joint Problem-Solving Workshops continued



Like a negotiated rulemaking, but differs in
that the objective is to solve a problem
Works best when technical experts
representing the major interested parties
tackle a problem jointly
Get at the parties real interest, not their
stated positions
The Evolution - continued
Joint Problem-Solving Workshops continued



Frequently used by state commissions in
the context of integrate resource planning
Also used for electric industry restructuring
plans
Requires the use of a common data base
or common knowledge to avoid information
asymmetry
The Evolution - continued
Joint Problem-Solving Workshops continued




Ideally produces a joint solution
If no joint solution is produced, its role is to
clarify and narrow the areas of disagreement
To allow the commission to be presented
with sharper, better designed issues
The Joint Problem-Solving Workshop was
widely used in telecommunications
unbundling proceedings, particularly at the
Oregon Public Utility Commission
The Evolution - continued
Task Forces



Like a joint-problem solving workshop but
more resource intensive
Used to tackle complex or polycentric
(many centered) problems, where there
are many potential solutions that impact
the interested parties and groups
differently
Sometimes problem-solving workshops
used to tackle individual issues
The Evolution - continued
Joint Problem-Solving Task Forces continued



Non-technical representatives of groups of
parties (grouped by common interest) who
have the authority to bind the parties on the
main task force, with technical members on
joint-problem solving workshops working
beneath them
Again, focus on coming up with win-win
solutions that serve the mutual interests of the
parties
The Electric Utility Restructuring Task Force of
the Pennsylvania Public Utilities Commission
The Evolution - continued
Example #3: Technical Conferences




The primary function is to collect and
organize information for the agency or
decision-maker
It is particularly useful when the prospective
policy issues have technical aspects
It is also useful for an agency that wants an
early preview of the parties’ positions
It allows the commission to interact with
technical experts during the early policy
formulation stage
The Evolution - continued
Technical Conferences - continued

It can be organized into panels of technical
witnesses for
 Concise presentation
 Questioning by the decision-makers
 Comments by technical witnesses on each
others’ views

Technical Conferences have been widely
used by the Federal Energy Regulatory
Commission, the California Public Utilities
Commission, and the Ohio Public Utilities
Commission
The Evolution - continued
Advisory Committees



Informal
Used to solicit one constituency’s views
Example: Scientific Advisory Committees,
Consumer Advisory Committees
Three Special Problems
Best alternative to a negotiated agreement
(BATNA)
Single issue true believers
Staff as party cannot be the mediator/
arbitrator/ etc. However, initial decisionmakers, such as hearing examiners or
administrative law judges make ideal
mediators or arbitrator. The special problem
of two parallel tracks, the use of mediation
judges by the New York Public Service
Commission & the Federal Energy
Regulatory Commission
Due Process
There are eight guidelines for
alternative procedures to incorporate
fairness, due process, and avoid
delegation of authority problems
The Eight Guidelines
#1: Have a rational choice of procedure
#2: Issue an initial notice of the process
#3: Provide for representation of all
interested parties
#4 Have or obtain the necessary data or
information
The Eight Guidelines - continued
#5: Have a record of advisory report of
the outcome
#6: Issues a final notice and provide a
final opportunity to be heard
#7: Make the agency the ultimate
decision-maker (but be careful not to
undermine the process)
#8: Announce the policy determination
in a judicially reviewable format
A Few Potential Applications
for Argentina
The development of unfair trade
practices and codes of conduct
consumer complaints
Transmission expansion planning and
siting
Gas pipeline expansion planning and
siting
International coordination – regional
integration in the southern cone
Two NRRI Resources
The model settlement guidelines
contained in the NARUC ALJ Handbook
Administrative Procedures for Proactive
Regulation, NRRI #87-18