Repairing the S.C. Public Service Commission
REFORM IS MEANINGLESS WHEN LEGISLATORS DOMINATE AND NO ONE IS ACCOUNTABLE
In our legislatively dominated state, there’s practically no aspect of state government that the General Assembly doesn’t either dominate or influence. South Carolina and Virginia are the only states where legislators nominate and elect judges, and South Carolina legislators appoint more than 420 members to executive branch boards and commissions. Unfortunately for South Carolina citizens, energy market regulation is not exempt from legislative control.
South Carolina utilities are regulated by a seven-member board called the Public Service Commission (PSC). Since South Carolina, like many other states, has a fully regulated energy market, this means the members of the PSC effectively help to determine the size of South Carolinians’ energy bills by setting power rates. Leaving aside for now the argument about whether such an entity should exist at all, any entity that does have the power of the PSC should have clear lines of accountability both for its members and for those who sit above them. As is typical of South Carolina politics, this kind of political wisdom is ignored in favor of increasing legislative power.
Rather than using the common sense approach of gubernatorial appointments, PSC members are nominated by a ten-member committee known as the State Regulation of Public Utilities Review Committee (PURC).
This committee is made up of:
- Three House members, one of whom must be the Chairman of the Labor, Commerce and Industry (LCI) Committee or his designee, and two of whom are appointed by the Speaker of the House.
- Three members of the Senate, one of whom must be the Chairman of the Judiciary Committee or his designee, and two of whom are appointed by the Chairman of the Judiciary Committee.
- Two members of the general public appointed by the Speaker of the House.
- Two members of the general public appointed by the Senate Judiciary Chairman.
What’s notable about this committee is that half of the members (four directly and one indirectly) owe their positions to Speaker of the House – arguably the most powerful politician in South Carolina. While the Speaker only directly appoints four members to the PURC, he also assigns committee membership to the House members, so the LCI chairman indirectly owes both his position and eligibility for PURC membership to the Speaker. When you combine this appointment power with the fact that the Speaker can exercise great power (as he can with any bill) over the budget bill containing funding for the PSC, it’s safe to say that if the Speaker wants something done or prevented by the PSC, he has all the leverage to make it happen.
Current members of the PURC are: Senators Thomas Alexander, Brad Hutto, and Luke A. Rankin; House members Mike Forrester, Jackie Hayes, and William Sandifer; and general public members Elizabeth Atwater, Eric Ebersole, John Steven Simmons, and Helen Zeigler.
Although the PURC is tasked with judging the competence of potential members of the PSC, there are no explicit qualifications laid out for PURC members. The lone legal guidelines available regarding the selection of members to the PURC states only that appointments should consider demographic factors to insure non-discrimination and that all segments of the population are represented to the greatest extent possible. In short you don’t have to be an expert to judge one, and appointments to the PURC can essentially be made at the whim of the chairmen.
The committee is given the power to nominate up to three candidates for any seat on the PSC after which the nominees are voted on by the entire General Assembly.
The obvious problem to the nomination-by-committee approach is that if one of the PSC members fails to adequately perform his or her duties, there is no one person to hold accountable for improperly vetting the member. Each member of the PURC can easily cite the approval of the candidate by other members to avoid fault. Members can also use the nomination-by-committee arrangement as cover when they wish to nix impeding the nominations for political or otherwise improper reasons. The Nerve recently reported on just such an incident. Rep. Sandifer seems to have sunk the candidacy of a woman (deemed qualified in 2008) on the grounds that she is a mother of young children. If the governor were to nominate members, it’s hard to imagine a similar attempt to sink a qualified candidate’s nomination.
The nomination process is hardly the biggest problem with the commission. A scandal in 2002 revealed improper communications between utilities and the PSC – communications that hinted at undue influence from the same utilities. Legislators have subsequently attempted to fix these problems in 2004 by creating the Office of Regulatory Staff to take on some of the PSC’s previous responsibilities. The responsibilities transferred to the Office of Regulatory Staff include inspection, auditing, and examination of public utilities, and representing the public interest in utility regulation in South Carolina.
Some research suggests that the creation of the Office of Regulatory Staff has increased communication between utilities and customers, but the impact on utility rates is unclear. While increased communication is a positive development, the chief reason for the existence of the PSC is regulating utility rates. The 2004 reforms had little effect for this simple reasons: they did little to either solve the problem of accountability or reign in the powers of the PSC. As long as members of the PSC (which has ultimate authority in regulation of utilities) are appointed by a legislative committee, they aren’t likely to receive a rigorous and proper level of vetting for their positions. By contrast, the governor would have every incentive to nominate the proper candidate lest they reflect poorly on the administration; a legislative committee of ten individuals can always deflect accountability.
Recent rate hikes approved by the PSC citing the corporate welfare-friendly Base Load Review Act indicate that the problems with the PSC are far from solved. Any time we give broad powers to a government entity to regulate industry, the only thing that can prevent abuses and collusion is strict accountability. Currently, we don’t have it.