Regulation of Public Utilities in Mississippi
Executive Summary
Introduction
The current regulatory structure for public utilities in Mississippi consists of a Public Service Commission (hereafter referred to as the commission), a quasi-judicial and rule-making agency, and the Public Utilities Staff (hereafter referred to as the Public Staff), a separate entity that is responsible for conducting investigations and collecting information pertinent to the regulation of public utilities.
The Public Staff is responsible for making recommendations to the commission for action and, in some cases, becoming a party to assert the broad public interest of the state of Mississippi by balancing the interests of the citizens, consumers, the state and the utilities. The Public Staff includes the technical staff devoted to public utilities regulation, leaving the commission with attorneys as the sole professional staff knowledgeable in regulatory matters.
Problem Statement
During the 2009 legislative session, questions arose regarding the need for additional staffing for the Public Service Commission and the appropriate funding levels for both the commission and the Public Staff. Ultimately, the appropriations for the Public Service Commission and the Public Utilities Staff did not become effective until thirteen days after the beginning of FY 2010. House Bill 1, Third Extraordinary Session 2009, directed the PEER Committee to conduct this review.
Scope and Purpose
To comply with the statutory mandate, the PEER Committee focused on the issues that gave rise to the policy concerns and staffing issues that ultimately delayed the FY 2010 funding of both the Public Service Commission and the Public Utilities Staff. Specifically, this report addresses the following matters:
The Public Service Commission and the Public Utilities Staff: History, Statutory Authority, and Staffing
The Public Service Commission
The Public Service Commission has the legal authority to adopt rules and regulations regulating public utilities and performs quasi-judicial functions relating thereto.
Although the Public Service Commission’s statutory responsibilities have changed since creation in 1884 of its antecedent, the Railroad Commission, at present the commission oversees natural gas, water, sewer, telecommunications, and electric utilities (see MISS. CODE ANN. Section 77-3-1 et seq. [1972]). The commission consists of three elected commissioners, one from each of the state’s three Supreme Court districts.
Chapters 1, 2, and 3 of Title 77, MISSISSIPPI CODE ANNOTATED, empower the commission to adopt rules and regulations, issue certificates of convenience and necessity (which are, in essence, licenses to operate a public utility in a particular geographic area), regulate rates, and establish utilities’ accounting systems. The commission is also responsible for enforcement of the state’s no-call list, pipeline safety, and quality of service of public utilities. As a quasi-judicial body, the commission makes decisions on certificates, rates, and other matters that come before it as tribunal acting on the record.
MISS. CODE ANN. Section 77-3-8 (1972) makes provision for the staff of the Public Service Commission. The commission’s staff is responsible for gathering and analyzing information relating to all matters within the authority of the commission. CODE Section 77-1-29 prohibits the commission from employing personnel whose services would duplicate services provided by any employee of the Public Utilities Staff. As of June 30, 2009, the commission had sixty-nine filled positions, including the three commissioners and counsel to the commission.
The Public Utilities Staff
While originally under the authority of the Public Service Commission, the Public Utilities Staff is now independent of the commission’s supervision and control and is responsible for investigative and advisory functions relative to the regulation of public utilities.
In 1983, the Legislature created the Public Utilities Staff. This staff was to operate as a unit, the personnel of which were to be appointed competitively by the commission and which was to provide the commission with a trained professional staff that was under the direction, management, and control of the commission.
In 1989, a commissioner and a former commissioner were indicted on federal charges arising out of their activities as commissioners. One pleaded guilty to an extortion charge, while the other was ultimately convicted of extortion. Some of the facts that gave rise to the prosecutions were:
As a result, in 1990, the Legislature mandated considerable structural reform in Mississippi’s utilities regulatory agency. Included in the act was language later codified as CODE Section 77-2-1, which established a Public Utilities Staff separate and independent from the Public Service Commission to:
. . .represent the broad interests of the State of Mississippi by balancing the respective concerns of the residential, commercial or industrial ratepayers, and the state and its agencies and departments, and the public utilities.
Consistent with the theme of independence for the staff, the Legislature enacted several other statutory provisions to ensure that the staff would be able to make effective independent investigations and render recommendations that were not influenced by the commission, the most significant of which was codified as MISS. CODE ANN. Section 77-2-3 (1972). This section makes clear that the Public Utilities Staff is the principal investigative arm of the utilities regulatory structure, with the commission functioning as the adjudicator in the regulatory process.
As of June 30, 2009, the Public Staff had twenty-seven filled positions.
Support Provided by the Public Utilities Staff to the Public Service Commission
Records of the Public Utilities Staff show that the staff provides guidance and support to the commission in carrying out its mandated functions.
In reviewing the provisions of law enabling the Public Utilities Staff (generally, MISS. CODE ANN. Section 77-2-1 et seq.), PEER notes that several provisions require the staff to provide advisory services to the commission. In most instances, the law neither prohibits nor impairs the staff from providing the commission with recommendations on matters before the commission or informal support on matters within the commission’s jurisdiction.
Because of the existence of the ex parte rule (MISS. CODE ANN. Section 77-2-13 [1972]), there are instances wherein the Public Utilities Staff takes a role as a party in a contested matter and staff persons involved in the work associated with advocating for the staff’s position cannot be utilized to provide support or other communications to the commissioners or staff. In such cases, the Executive Director of the Public Utilities Staff may designate staff who are not involved in advocating the staff’s position as advisory to the commission. The system appears to meet the requirements of law in that the commission can and does receive support from the Public Utilities Staff when necessary to assist the commission in carrying out its functions.
Additionally, the Public Staff’s Legal Division has represented the Public Service Commission in litigation involving the Federal Energy Regulatory Commission and has, on occasion, represented the commission in other matters in chancery court. The Public Staff has also provided the commission with training programs on the role and function of public utilities regulatory bodies and background on the economic theory of public utility regulation--i. e., the natural monopoly that must be regulated in the public interest.
Other States’ Regulation of Utilities
Four states, including Mississippi, utilize an independent utilities staff, with the remainder of states utilizing a staff that is under the direction and control of the regulatory body.
To comply with the statutory mandate, the PEER Committee reviewed literature regarding the structure and role of regulatory bodies that oversee public utilities in the United States. PEER found that:
States’ utilities regulation takes one of two basic forms:
The majority of states regulate utilities through a single agency that operates with a single staff of expert advisers and ratepayer advocates. Some separation of duties and observation of ex parte communication requirements may be found across the states in various forms. The staffs are led by executive directors who are often appointed by the states’ governors and who must report to the commissions.
Four states, including Mississippi, have independent public staffs with directors who are neither appointed by, nor accountable to, the commission or board they serve.
The Role of Staff in States with Separate Public Utilities Staffs
Three states--North Carolina, South Carolina, and Vermont--have structures similar to the Mississippi structure for regulating utilities.
Each of these three states differs somewhat in the responsibilities it gives to the independent staff. All maintain separation between their commissions and public staffs for purposes of supervision and direction. Additionally, one in particular, South Carolina, maintains a very limited role for commission-directed staff in the regulatory process.
PEER has found no single source that advocates either a separate staff or a combined staff and commission structure. Consequently, it appears that the unique needs and requirements of each state must be given priority in deciding how to structure a regulatory program.
Policy Considerations for the Legislature
PEER sees no need to change the current structure of the Public Utilities Staff and the Public Service Commission. After reviewing the operations of other states that have separate, independent public utilities staffs, PEER sees a limited role in Mississippi for commission-directed professional staff that would not result in impairment to the functions of the independent staff.
Mississippi’s current regulatory structure helps to ensure that the problems experienced in the late 1980s are not repeated. The separation of the Public Utilities Staff from the commission was the product of lessons learned involving corruption in the regulatory process.
States with independent public staffs generally provide some professional staff support to their commissions. Mississippi’s commission does not have the direct professional support staff that the other three states have. This can be attributed to the fact that differing statutory responsibilities for the various public staffs and commissions give rise to different staffing needs in each of these states and also to Mississippi’s strong public policy against duplication of activity.
Under Mississippi’s current law, the Public Service Commission could utilize professional staff to carry out limited support activities in furtherance of the commission’s quasi-judicial activities. The activities conducted should be limited to assisting the commission in carrying out its statutory functions as a quasi-judicial and rulemaking body. The commission’s staff could be prohibited from conducting any type of independent investigative activity that would duplicate the efforts of the Public Staff.
The Legislature by appropriation gave the commission additional funds to reallocate three vacant Public Service Commission positions in 2009 to provide technical and professional support. The PSC has hired an additional attorney and is working with the State Personnel Board to establish two Special Staff Chief positions to provide technical assistance to the commission. PEER suggests that these positions could be beneficial to the commission provided that the commission may:
Recommendation
In the event that the Legislature continues to appropriate funds for professional staff positions under the supervision and control of the Public Service Commission, it should amend MISS. CODE ANN. Section 77-3-8 (1972) to provide that the staff of the commission shall not inspect, audit, or examine public utilities. The inspection, auditing, and examination of public utilities is solely the responsibility of the Public Utilities Staff created by MISS. CODE ANN. Section 77-2-1 et seq. (1972). Such prohibitions should apply to all positions of the commission regardless of their source of funding. Such prohibitions shall not bar the commission’s staff from conducting consumer service complaint investigations, pipeline inspections, or enforcement of no-call laws as conducted on January 1, 2009.
In the event that the Legislature continues to fund professional support staff positions for the Public Service Commission, it should amend MISS. CODE ANN. Section 77-3-8 (1972) to provide that the staff should only function in an advisory role for the commission when it is acting in a quasi-judicial role or when making rules, by assisting the commission in understanding filings made before the commission, and in preparing questions for open meetings.