Connecticut Utility Regulator Under Fire for Doing Her Job — Episode 232 of Local Energy Rules

Podcast: Local Energy Rules
Source: whisper-base
Language: en
Duration: 3802s
URL: https://media.blubrry.com/localenergyrules/content.blubrry.com/localenergyrules/2025-03-ler232-Gillett-Volts-rebroadcast.mp3
Fetched: 2026-03-03 04:01:17

What happens when a utility commissioner advocates for innovation in electricity service, paying only for performance, and trying to reduce utility influence over employees at the State Regulatory Commission? They might find themselves in a tough fight to return to office. In this podcast interview, the three broadcasts from Volts in January 2024, David Roberts interviews the chair of the Utility Regulatory Commission in Connecticut, Marissa Gillette, about several ways it was she has shaken up utility regulation to address high electricity rates in that state. But her consumer-focused strategies, including steep fines for poor performance, haven't endeared Gillette to the state's powerful utility corporations, who have lobbied heavily against her re-nomination to the commission. In addition to describing Gillette as creating a quote, hostile regulatory environment, these utilities have taken the unusual step of filing a lawsuit to stop some of the commission's actions. The debate over renewing Gillette's term, covered extensively in the Connecticut Mirror, has provided an interesting look under the hood of monopoly utility regulation. We're re-broadcasting this episode because it highlights the challenges of introducing reform into utility regulation amidst the incredible influence wielded by the four profit companies that provide most Americans with electricity. I'm John Farrell, Director of the Energy Democracy Initiative at the Institute for Local Self-Reliance, and this is Local Energy Rules, a podcast about monopoly power, energy democracy, and how communities can take charge to transform the energy system. Hello everyone, welcome to Volts for January 10th, 2024, which I'm still getting used to saying. A Connecticut reformer is shaking up utility regulation. I'm your host, David Roberts. In Connecticut, as in many other states, regulated monopoly utilities have traditionally enjoyed a comfortable, you might even say, cozy regulatory environment. They have longstanding social, political, and financial relationships with regulators and legislators. They frequently employ former legislative and regulatory staff. For instance, the former chair of the House Energy Committee is now the VP of government relations at Avangrid, one of Connecticut's two big investor owned utilities. Utilities get the rate hikes and the high guaranteed rates of return they ask for in exchange, regulators and legislators and their staffs can look forward to financial support and cushy lobbying jobs. As I said, it's cozy and works pretty well for everyone involved. Everyone that is except the citizens of Connecticut who receive mediocre service and pay the highest electricity rates of any state in the nation. In the last few years, public-minded legislators and consumer advocates have gotten fed up with this situation. Rising pressure led Democratic Governor Ned Lamont to appoint Marissa Gillette as head of the state's Public Utilities Regulatory Authority or Pura in 2019. Unlike most utility regulators, Gillette is not a lawyer, a former legislator, or a former utility employee. Her experience is on the regulatory side. She worked for seven years on Maryland's Public Utility Commission. She was hired as a reformer and wasted no time. She has tightened and actually enforced rules meant to shield Pura employees from utility influence and most unforgivable from the utility's perspective. She has denied or scaled back utility requests for extravagant rate increases. Ever source and avant-grid, seeing their gravy train under threat, are predictably furious. Gilliamont's office and the legislature are both under intense pressure from utility lobbyists and the investment class to range Gillette in. Utilities claim she's creating an adverse investment climate in the state, which is their way of grousing that their bloated returns might get trimmed a bit. Utilities are launching astroturf campaigns in support of rate increases in part by threatening to cut off philanthropic donations to various churches and nonprofits. It's pretty ugly amidst this storm, Gillette is focusing on Connecticut ratepayers. Pura has launched an equitable modern grid initiative and within it dockets on everything from distributed energy to energy storage to advanced metering alongside a kind of regulatory sandbox in which innovative concepts and technologies can be proven out at small scale before expanding. I am extremely excited to talk with her about all of this, so with no further ado, let's get to it. Chairman, Marissa Gillette, welcome to Volts, thank you so much for coming. Thank you so much for the invitation. There are three big things I want to talk to you about and I'm going to try to rein in my normal ramblinus so we can hit them all. First, I want to talk about this innovative energy solutions program you've launched. Second, I want to talk a little bit about performance-based ratemaking and then third, I want to talk more generally about the relationship between regulators and utilities and how you think about that. So let's start first with the program and I have a little bit of a wind up to this. So last year, as I'm sure you are aware, the Lawrence Berkeley National Lab put out a report basically saying that the US cannot hit its goals for the electricity sector just by continuing to dump subsidies on clean energy. There needs to be some regulatory innovation. Our rules and procedures by which we govern the electricity sector are old, outmoded, created for a different sort of grid, not necessarily well suited to the rapid change that we now need to be engaged in. Also, laid out a bunch of reasons why it is difficult for state utility regulators to innovate. So maybe let's just start there. Why is innovation so difficult in the regulatory space for state regulators? I think the answer predictably is a little different depending on your jurisdiction, but in my experience, there are some common threads between what I saw in Maryland and what I see in Connecticut. And I think a lot of it gets back to how the regulator themselves view their own role. And I know you want to get into that later in the show in terms of my regulatory philosophy, but I think it really, we could pull it up here and say, I think that's front and center. And of course, there are innovations that you can do to the underlying authorizing statutes for everyone's utility commission, but the type of regulator that you need that is going to not just allow innovation, but encourage it really requires a regulator to think about their own role differently than I think utility commissioners might have thought of their roles historically. Okay. And how would you briefly characterize how they think of their roles? When I started in this industry in Maryland, I worked under Doug Nazarian first who was a chair there as now in a pellet judge. And I'd say I was really brought up with the idea that we were economic regulators first and that we were reacting to what was put in front of us. And I saw Doug Nazarian start to challenge that a little bit. And there are some really good commissioners in Maryland that I worked under during my time at that commission. And I started to embrace this idea. I think it's most notably spelled out in a Scott Hempling book about preside or lead. And I think there's a real distinction between a regulator viewing themselves as someone who's simply calling balls and strikes versus a regulator who's like, wait a second, I need to be not just the umpire, but the first base coach. And you know, it's just like a very different way of thinking about your role in the whole construct. And you know, clearly that's inspired some Agita elsewhere. But I think that's one of the drivers. Yeah. Well, I mean, I think one thing that's worth saying for background is, you know, in case listeners are not sort of familiar with the general setup here, regulated utilities, they come tell regulators, we want to raise rates and we want X amount of return. And regulators say, yes. And at that point, they just make money by spending money. They get guaranteed returns by law, just for spending money. That is a cushy situation that no other business in any of this, you know, capitalist society enjoys. And so almost by definition, anything that's going to disrupt that cushy situation is going to be opposed by utilities, right? Because I mean, they just, they've got it pretty good the way things are. You know, that's certainly how I see it. I mean, that was really kind of the crux of what the equitable modern grid was about, which, you know, I really view as a predecessor to our performance based regulation efforts now, but the equitable modern grid, it wasn't just about creating innovative programs like the regulatory sandbox that you want to talk about. But it was also about innovating the procedures and like the kind of the archaic nuances of how you interact with a regulatory commission. And it was designed to really get away from the model where we're just reacting to proposals that the utilities are putting in front of us. And instead opening up that much broader, like in the equitable modern grid and each of the 11 tracks we did, we actually put out a document that my staff wrote in each case that was like, here's what we want. Utilities, you can respond to this request for program design, but we're looking for half-baked ideas from, you know, anyone out there. And that's how we ended up with the program designs that we've, we've now completed 10 of the 11 original tracks, including the innovative energy solutions program. Yeah, well, let's talk about that a little bit. So, you know, partially in response, I think, to this difficulty innovating. I mean, part of the difficulty innovating it for PUCs for state regulars is just that it takes so long and you have to, you know, and because reliability is the, you know, sort of the number one thing, there's just a caution built into the whole system. So, so you've launched this, what's called the Intervative Energy Solutions, IES program. It's called which you refer to as a regulatory sandbox. What does that mean exactly? Actually, some of my staff are responsible for designing this with, they cringe when I refer to it as a sandbox because it's so much more than that, but it's this idea that there is a place in the regulatory construct that we can borrow lessons learned from Silicon Valley, the fail-fast mentality, which I think is really applicable here because we're dealing with rate-payer dollars. And we don't want to have an open-ended, you know, blank check here. So, the program's really designed to bring pilots to scale or to find out if they can scale quickly. And I think, you know, we're talking about 12 to 18 months here, which in the regulatory world is lightning fast. So, that's kind of the genesis is that we're trying to figure out if something is going to work. And if it's not, it exits the program. If it is going to work, then we have a path forward for scaling it up. Right. So, just try it out and kind of a confined, this is where the sandbox analogy comes from. You're trying it out and kind of a confined area first to give it a whirl. Absolutely. And this thing has, it's going to have four cycles. So, there's going to be four sort of rounds of these concepts and programs and technologies sort of applying, trying for this. There's going to be four rounds. The theme for round one for cycle one is grid edge flexibility, which is just my, that is my love language. I'm extremely excited to find it here. So, so cycle one is the only one you have gotten through. And so, you have some winners. I don't know, are you, are we referring to them as winners? Like, I guess this is kind of a little bit like a contest. Yeah. We started with a pitch fest. So, why not? Yeah. So, you've actually picked a few to move forward from cycle one. Can you maybe tell us about a few of them? What are the, like, what should people think about when you're talking about innovative programs and technologies? Like, what, what kinds of things? I love to build on lessons learned from other jurisdictions. So, we're not saying that if something's been tried elsewhere, that it's not necessarily right for our program, because everybody knows, you know, different grid, different regional operators. Like, there, so there can be different types of innovation we're talking about here. But we ultimately selected a suite of seven projects. Two of them are focused on, like, electric vehicles. So, there's a company innovator known as grid edge networks who's going to demonstrate the integration of EV school bus fleets with the grid to enable vehicle to grid. Capabilities. There are a couple of innovators, I think, three or four that are going to focus more on terms and demonstrating grid edge capabilities. That's a distributed energy resource management for those who don't know all the acronyms. I apologize. That's the first thing that I always try to remember. Yeah. And then there's one who's looking at building optimization. So, looking at demonstrating low cost, easy to install optimal control systems that solutions that enable, I think it's like two dozen commercial customers to use behind the meter DERs distributed energy resources to optimize efficiency and load flexibility. So, we've got kind of a range of developers, seven in total. And right now, they should be in knee deep and completing the contracting phase with the electric utilities. And then they're expected to launch their pilots and meet some of the milestones and their plans within 12 to 18 months. You know, I think maybe to some listeners, this just sound like startups on a private market. What is in what sense is this regulatory? Like, what does it mean for the PUC to be involved in this exactly? Yeah. You know, one of the things that was striking to me going to Connecticut from Maryland is in the smaller jurisdiction. I should say, I'm not sure if it's the smaller jurisdiction or being further from Washington DC or have you, but there is just like a lack of diverse viewpoints or even information that is put into our proceedings. And I think one of the problems that this solves for is introducing some of those concepts to not just our utilities, but our stakeholders. Everyone's got a consumer council. Everyone has a state environmental office. And so we're trying to bring awareness not just to the utilities, our stakeholders, customers, like really across the board. And it also is serving a very vital role in my mind of bringing the electric utilities to the table. And there are three pathways that these projects can come about. And I think the more that the utilities embrace the third pathway, which is a collaborative project between the utility and the startup, the more we're actually going to see some innovation that scales because utilities get in their own way a lot, right? Like they they know what vendors they like. They know what vendors they've used elsewhere. You know, they're creatures of habit. And so kind of forcing their hand into making new connections with innovators who are fitting into a theme that we've identified. I think kind of has that collateral benefit as well. Yeah, this is a theme I return to here on volts over and over again is that these electricity system, the players and the procedures have just been around a long time. And there's a lot of sort of momentum and habit built up and just so so just breaking people out of their habits, I think is super difficult in this space. Oh, yeah, even though as we're saying, like this is the space where the most rapid innovation is needed. So it's a real mismatch. And also, I think it's worth saying part of your job as the public regulator is to judge whether the utilities rates that they're charging are just and reasonable, right? And so if you demonstrate in a limited way that they could theoretically lower rates if they did XYZ say with terms or EV management or whatever, then you've established that it's unreasonable for them not to do it, right? Yeah, are you sure you're not a lawyer? This is the this is the line of thinking that like we're constantly you know talking through at pura is, you know, historically and I won't restrict this to just the Connecticut utilities, but because I think it's definitely more broad than that, but they're used to coming and telling the regulator that this is what they've done and you're left with this ambiguous standard of trying to judge, um, whether the actions that a utility took were prudent as compared to what another similarly situated utility manager would have done in those circumstances. I mean like that is right. What? Yeah, like there's decades of case law around that, but like performing space regulation and the equitable modern grid, like what that's all really about is trying to get into like I don't need to be in the driver's seat necessarily, but I need to be in the car, like telling the utilities what it is we're looking for. Right, right, right. What is reasonable to a new definition for what's reasonable? So the second cycle of this innovative energy solutions program, the theme is empowering electrification, which is my other love language. It's my favorite regulatory docket. Everybody's, you know, I'm sure everybody's got a favorite. So you haven't, as I understand it, chosen the winners yet in that round of things, but I'm curious what sorts of electrification, empowering innovations are you seeing sort of like what types of things are you are you choosing from here? Oh, so the application window is open now and it opened on January 1st and it closes on February 1st. So I think it's too early to say what folks are submitting in this cycle, but the state of Connecticut has very clear policy goals in place where we're driving towards electrification of transportation of heating and cooling. So I imagine that there's is going to be even more applicants this time around than there was in cycle one. I think it's cycle one. We received over four dozen applications. So I'm looking forward to even more robust pool in cycle two. So you get seven companies or ideas moving forward from cycle one, something comparable from cycle two is going to be four cycles that's you end up with close to 30 innovative programs here are all of them going to become statewide policy or how are you going to decide which ones become statewide policy and secondarily when would you anticipate that one of these or some of these actually make that transition and become statewide? Yeah, so the best way to think about this program I think is more like a funnel than a sandbox like you're starting within the parameters, but we're funneling them down like each cycle has four phases. So phase one is where we accept applications. They're coming in just the first screen. Did they just meet basic eligibility criteria? And that's what we're in right now for cycle two. After phase one, they go into phase two where they're required to provide a little bit more information about cost effectiveness, economic benefit, equity parameters. And in both phase one and phase two, the projects are screened by what we call an innovation advisory council. And this was our way of kind of forcing the issue of exposing our stakeholders to innovation. So that council has our green bank. It has our innovations, connect innovations, Yale, our consumer council, our energy office, and they're as a council kind of looking at the projects submitted in phase one and two. And then deciding whether they want to recommend some suite of projects to Pira for approval in phase three. Now not to get too complicated here because I know I'm using cycles and faces and tracks. But phase three is what we just completed for cycle one. And that's the suite of seven projects that we approved there. And phase three lasts 12 to 18 months where we collect data on their performance. So those seven are out there doing their thing now and you're and you're tracking their performance. Correct. They're in phase three. And at the end of that 12 to 18 months, we enter phase four. And that's the point where the decisions made and there's kind of three ways they can go. They're either going to be ripe to scale up or they could maybe not be ripe, but they're displaying promise. In that case, we might send them back to step one and cycle back through. Or they're just not displaying the potential that we were hopeful about. And at that point, they exit the program. So that's the funnel. You're kind of getting further and further restricted. The more you progress. So you're winnowing down. And then at the end of phase four, one or a few are chosen and then they become like official dockets before pura or is phase four when they're chosen is that tantamount to approval? Yeah, that's a tantamount to approval. So they'll get through like that phase four will be akin to a proceeding or a docket. And at the conclusion of that phase, the ones that we want to see fully implemented will get the green light. And when is that? It is 12 to 18 months after the pilot starts. So 12 to 18 months from now for those seven projects. And that's enough to you think 12 to 18 months is enough data like you're confident you can you'll know enough from these that sort of confined sandbox experiments to make the call. To push them into one of those three funnels. I think here is where the inherent conflict comes with regulators and like the urgency that I felt when taking this role. Before we came up with this program, I have said very publicly to my staff Shagrin that I hate pilots. They're like, they are the opposite of my leveling, which the reason is I saw like as staff in Maryland, I saw so many pilots die on the vine for no other reason than the commissioner who was championing them moved on, right? Right. And like that's a terrible way of doing business. So my answer to the question of like the 12 to 18 months, I think that's why we created the pathway there where they could cycle back through the program. Like if we get to the end of that 12 to 18 months and they're not ready for prime time, but we think that they are showing promise. We can put them back through and they can get another 12 to 18 months, but I don't want to throw rate like good rate payer dollars after bad. And I think you just have to make that call. Yeah, at least at the end of this process, there is a definitive call like there is a call made. Exactly. So, okay, that's the innovative energy solutions program, a regulatory sandbox. Are you aware of anything like that in any other state like this problem of regulatory innovation? I know you can't be the only regulator in the country that is gripped by this problem. Are you seeing similar efforts anywhere else? I assume other state regulators are watching this. I hope so because one of my favorite things to do as a regulator is to look at what other states are doing and to borrow lessons learned. And in fact, the idea for this program was borrowed heavily from the New York Rev Connect program. It's a little bit of a different take. I mean, you know, like any good innovation, you want to iterate on what's out there. So it has reflections of that program. And I hope others are looking. Yeah, I wonder if another state PUC could look at your program and the four phases and say, hey, if that made it through the four phases of Connecticut's program, it's probably like it's been vetted. And we can take Connecticut's word for it. Or do you think that's a bridge too far? I would love for that to happen, but I feel like regulators are notorious for being like, well, wait a second. My state's a little bit different for this reason. So we'll see. Okay. So let's move on then to performance-based regulation, which is a nerdy sounding topic that is nonetheless extremely important that I feel like everybody should know about. But this also, I have a little bit of a run-up too. So I've been reading, you know, around about your tenure and the programs you've launched and a lot of the pushback against it. And it is just as a comment on the media coverage, it is sort of bizarre how much the media adopts the perspective of the investment class when approaching this, this whole idea that like, oh no, you're scaring like investors are going to make slightly lower returns. This is an emergency like state lawmakers have to do something about this. And I just keep waiting for the paragraph where someone comes and says, well, who cares? Like ratepayers are the, like the regulatory body is supposed to defend the interests of ratepayers. The fact that investors are upset is like, neither here nor there. It doesn't seem like it should be defining the story. But anyway, that's just a little editorializing on my part. But so let's talk about why does Connecticut have the highest electricity rates in the lower 48 states? I know that the utilities say, because this is a deregulated state. So these utilities are just distribution utilities. They're not generating the energy. They're just buying the energy on energy markets. So what they say is, you know, we don't control the cost of energy. Most of the cost that ratepayers are paying has to do with the cost of energy. We don't control that picking on us about costs is not fair. You're just being a big meanie. So how, why are the rates so high? And it was what are the sort of portions that make up those high costs? Yeah, I, this clearly that one of the number one questions that I get, I do this thing called a pure 101 road show where I go into the communities and explain how to interact with pura and then tackle frequently asked questions and far and away. But that's the number one. It is. You wouldn't, I mean, you wouldn't need a second guest there. But it's one of the things that we tackled early on in terms of redesigning our electric bills. In fact, ever sources, our larger utility is just now launching its redesign bill to try to provide more insight into this question because historically, ratepayers would get a bill and it was split between supply and delivery. And then the delivery component was everything. It was the distribution cost, the public policy cost, the transmission cost. And also, can I just insert here also the costs that ratepayers are paying for utilities to hire lobbyists to go lobby against ratepayer interests in front of legislators, which is, you know, we did a pot about this a few months ago. Yeah, well, in Connecticut, that practice is now outlawed because of legislation that passed last session. Right. Yeah, that's another cause of but yeah, so why are costs are so high? You know, it's, in my opinion, it's easy to sit back and say there's a portion of it that is out of the control of the utilities, the supply costs. We're at the end of pipelines. We don't have the easy access to the natural gas that the PGM region in the Mid-Atlantic has. So like if you're looking at the supply portion of the bill, we're apples to apples with other New England states with the exception of Vermont, which is still fully vertically integrated. But we're apples to apples with other New England states. Because you're all buying from the same big wholesale market. Exactly. We're also apples to apples with other New England states on the transmission front because we're all paying the very same high prices for the non-competitive transmission buildouts in New England. But those two buckets are obviously not apples to apples with other areas of the country because other areas of the country have different supply, different transmission where it starts to kind of break down in terms of being apples to apples is in the public policy costs and the distribution costs. And the distribution costs is obviously where I have the most statutory authority. And I think one thing that really got under my skin recently was a suggestion printed in a local news article that the utilities think I should back off and that my job is futile because I'm attacking a small portion of the bill. And is your job? I mean, is my job? And also we're all looking to the utilities to play a larger role. We want electrification. Right. And that's going to give them an outsized role compared to what they have currently. And I think the suggestion that it's futile to do your job because it's a smaller portion of the bill is really quite tone deaf. But at this, I'm rambling. So I don't know if I can answer your first question. No, no, that's good. So this brings us to performance-based regulation. So for listeners benefit, you know, utilities basically get paid called volumetric rates. Basically, you get paid, they pay based on how much electricity you use. And as we said earlier, they charge certain rates and get certain guaranteed state guaranteed returns. And traditionally, once the rate case has been approved, that's it. There's no. This is something I struggle to convey to people because I think people are very used to thinking in sort of capitalist terms of like businesses compete. And if they don't perform well, customers go elsewhere and they lose money, right? This is a very basic capital of stuff. With utilities, the only competition is, can I get my regulator to approve this? That's their skill. That's the only skill that's being selected for you. Once the regulator approves it, there's no further pressure of any kind for them to do a good job and consequently, like just as like literally any economist would predict, they just don't, they don't try that hard to do a good job because why would they, you know, trying harder is just more effort and more expenditure for literally nothing. They get nothing for it. They get nothing for doing a better job. So they don't try pretty hard. All of which brings us to performance-based regulation. So maybe just sort of give us a capsule summary of like what regulators mean when they talk about performance-based regulation of utilities? Yeah. Well, and I think one of the interesting things here is that regulators mean different things when they talk about PBR. And I'm very careful to describe it as performance-based regulation as opposed to performance-based ratemaking because I'm intentionally using regulation to convey to you that I intend to regulate the utilities differently from a holistic point of view. As opposed to, you know, we get at the start of our proceeding, which has been split into phases, we got a lot of input from our utilities saying, well, we already do PBR and other jurisdictions that we operate in. And come to find out, they might have elements of PBR. They might have revenue decoupling, which has been around since the 70s for energy efficiency. They might have some performance incentives typically only upside, not symmetrical. And what I mean when I say performance-based regulation is a completely different lens through which we're viewing these utilities. I think that we as regulators collectively need to get off of our hands and say, look, the public policies of this state are x, y, and z. And the state has said that they're using the utility infrastructure to achieve some of these. Maybe your goal is affordability for all. Maybe your goal is GHG reductions. Whatever it is, there are goals that we should be designing around. We should be telling the utility if you have a choice between spending $2 million on a new poll and wire or $2 million on battery storage and energy efficiency. We should be telling them which of those solutions that they should be deploying, not in individual instances, but rather by our philosophical approach and encouraging them to operate their business around the outcomes that we're trying to achieve. So it's so simple. It's almost so simple. It's difficult to explain to people, like I said, I think people first have to understand that that's not already. That's not already the case. Yeah. And it's been amazing in Connecticut because our governor is a business guy. So we had a really bad tropical storm in 2020 that ended up in two weeks of outages. We find ever source close to $30 million afterward. And I remember distinctly meeting with him in the middle of the outages. And he was like, well, why? What's going on? Aren't there profits determined by how they're performing? And I was like, oh, oh, man. If only. If only. So he's been a huge champion of performance-based regulation since 2020 when I first was explaining it to him. So you're right. It's almost so simple that it's hard to convey to that rich person. So when we talk about judging utilities based on their performance and in some way tying their profits to performance, what does that mean exactly? So like, what's a performance metric and how would you measure it and how would that translate into sort of affecting their profits? So right now, we're in the second phase of our PBR proceeding, which has three tracks. And if you're picking up a theme by now about my organization of... Well, the tracks and phases. They all have defined starts and stops. So right now, we have split the work into three buckets. The first bucket is looking at aspects that you need for PBR, like a multi-year rate plan, decoupling mechanisms, like things like that. The second bucket is looking at the question you just asked, which is, what are the metrics, scorecards, and performance incentive mechanisms that we're going to use? And the third bucket is integrated distribution system planning, trying to pull everything together with the equitable modern grid. So in that second track, that's what we're knee deep in with our stakeholders right now is like what portfolio of PIMS, performance incentive mechanisms, would you stakeholder recommend to us? Because in phase one, we reached a conclusion about what the policy objectives are. So now we're kind of backing into it and saying, we all agreed or came close to agreeing what those objectives should be. And now tell us what PIMS you think help get there. So no, I'm not directly answering your question. We're right smack in the middle of determining that portfolio right now. Well, just to help maybe listeners make it a little more concrete. What are some examples from other places that have done performance based regulations? What are the types of things? I assume reliability obviously is an obvious one, right? It can be, although that's an interesting question, getting into the core obligations of the utility because one of my big bugaboo is that I don't think we should be incentivizing utilities to achieve to do their job. Well, if it is a core obligation of the utility, safety, reliability, et cetera. Anyway, but a concrete example would be like interconnections. So maybe it's a state goal that you want to deploy 200 megawatts of solar a year. What gets us there? Well, certainly what gets us there is speedier interconnection timelines. So maybe you set a target and evaluate the utility based on if they're achieving a certain baseline of interconnections each year. Interesting. Yeah, that's an extremely relevant one. And you have in mind, you mentioned the asymmetry before. There's lots of this, like lots of this in other areas I've noticed are just, you know, basically telling utilities, you can keep doing things the way you normally do. But if you go and be above and beyond, we'll shower you with extra subsidies, right? But never like if you fall short of these, if you fall short of these performance goals, you're actually going to be finite, you're going to financially suffer for doing that. That is something that I think is rare in this world. So is that what you have in mind for these like real teeth? Yes, is the short answer. And I think this gets to your earlier question about how do I define PBR? Because I think of PBR as a spectrum. You have cost of service, traditional regulation on one end, and you have what I'm envisioning on the far end, which is, you know, where Hawaii is. And somewhere in the middle, you have states who have elements of PBR. But I'm talking about moving to the other end of the spectrum, where the revenue requirement that a utility is seeking, where there are we, which is their profits for the best way to describe it here, like where you're actually looking at that return on equity and saying, okay, I understand that you're going to have a baseline for what your cost of debt is. But there's a differential between your weighted average cost of capital and your return on equity. And that differential can be made up by a lot of things. And instead of looking at what other states are giving their utilities for ROE, why aren't we looking at like that differential and figuring out like maybe they get 50 basis points if they're excelling at interconnection one year. Maybe they lose 50 basis points if they don't. So I think that's what we're talking about here. And that's definitely what the fight is in our dockets right now is whether the PBR incentive mechanisms are layered on top of an authorized ROE or whether they're a component of the ROE. Technical, but interesting, and I reiterate here that if you are a business that has just been rewarded for showing up literally anything else is going to be from your perspective a step down from that, right? Like, although I will say in their defense, lots of the things they're not doing, they're not doing because, you know, they make money by spending money. And so there are lots of things as I reiterate over and over and over again on this pod. There are lots of things that we would like them to be doing like energy efficiency, germs, etc. That, you know, all things being equal reduce the amount of money they need to spend and therefore reduce the profits they get, right? So, exactly. So of course they don't do those things. I mean, it's rational for them not to do those things. So they do need to be incentivized somehow to do those things. Completely agree. And this is some of the exchanges that the utilities have really bristled at when I've said things, actually very similar to how you just posed it. I gave that as a testimony on a piece of legislation in one of the previous sessions. And there was a resulting news article where the utility executives took extreme offense to my statements saying that they care about their customers, etc., etc. And I think they misunderstood me because I wasn't making a statement about that one way or the other, but for folks that are lawyers like me or trained in law, you understand that an investor owned utility has a fiduciary duty to its shareholders. And to pretend otherwise is just simply rejecting like a fact. I know. It's weird to me. This is the fundamental way we've structured the utility sector. That's what an investor owned utility that literally is the structure of the business model that they make money by spending money and thus have no incentive to do things that cause them to spend less money. That's not an insult or anything. It's just the way we set it up. So of course it has obvious. It's weird to me that they're so invested in denying or obfuscating. Yeah. I guess once people understand it, they understand the obvious problem. No, it is weird to me. It's caused me to be perceived as having put my foot in my mouth a couple of times when I just thought I was making a rational observation. And when the investors come in to play, I find them impossible to communicate with. In fact, I think it's inappropriate for commissioners to communicate with investors, frankly, but I'm told repeatedly that investors want protectability and certainty. And here I am coming along in PBR telling you exactly what I'm looking for and how to get it. And yet that's caused you to say that I'm disrupting in a way that is going to be problematic. I have a hard time rational. This is a good, this is a perfect segue to the third thing I wanted to talk about. This is so interesting to me. The way they try to personalize us as though you're insulting their hearts. No, no, no, we have care in our hearts for customers. I'm like, it's not about whether you're good people or not. It's just about these structural incentives that have been set up. And so a lot of the pushback you're getting is from investors. And as you say, the way they're characterizing this is you're disrupting utilities, thus creating uncertainty, which makes for an inclement climate, investment climate, because investors want certainty. And this is the sort of character of the pushback that's coming at you. And much like you, it breaks my brain because A, like welcome to capitalism, guys, like this idea that there should be a whole sector of the economy where you just plow money in and the state guarantees you get a certain amount of returns back. That's not written in the heavens that you deserve that, that that's some sort of like, you know, something that God granted you and you're coming along and taking it away from them. Like, like, why should that be, you know, why shouldn't there be a little bit of dynamism and risk even in the utility sector? Like the idea that there should be none is just, I don't know where they're getting that premise. Yeah, I don't either, obviously. And I also really, really get upset by the implication that I'm creating an environment that's bad for business, because I think the failure of our media to push back on business as being equated to the utility is silly. These are not, they are businesses, but they're monopolies. So when I see headlines that say that pure as actions have been bad for business in the state, I really take offense to that because businesses in the state are the folks paying these rates. They're not the utilities who are getting a guaranteed profit. And when you talk to folks and they say that their cost of living or the cost of doing business is too high and can I take it, they're talking about the rates. And these are businesses mind you that face actual risk of failure. Yeah, in competition for their customers. Exactly. And I think that's fundamentally where folks don't understand my regulatory philosophy. Like I see a lot of quotes from utility executives who think that my job is to balance what is fair for the utility and for the rate pair. And I reject that characterization. I think what pure as role is is to serve in place of the free market. And I get a lot of feedback suggesting that I'm being mean to them. Like you made a joke earlier about me being a meanie. I have literally been told I'm too mean to them, which I don't know what to do with. But that just reflects a history of, you know, of their cushy treatment. Like it's insane to me that this idea that there should be a public agency and arm of government whose job it is to protect the interests of big investors. Yeah. Just why would there be such a thing in a capitalist democracy? Like why would you have such a thing? I don't know. So I think what you know, so A, when they say you're creating an unpredictability or a bad business environment, I think what they mean is just it's not going to be as easy and thoughtless for us to make money here as it was before. But that's a different thing, right? Like you're, like as you say, you're creating very specific metrics, a very specific framework. Like it's very clear what they need to do to prosper in this new situation. So that seems clear, right? It's not murky. It's the type of clarity that I've been told investors are seeking in the utilities. No, no, not that kind of clear. No, not that kind of clear. The other big criticism that they levied at me is that they didn't know the rules in advance. So like we had two really contentious rate cases last year. And those two rate cases, we actually did not apply performance-based regulation. That's still underway. What I applied in those two rate cases was tried and true cost of service regulatory principles that have been around for 150 years. And what they're saying and what I have tried to convey to the administration, elected officials, the media, others, what I think they're objecting to is the fact that Pura has decided we are going to do our job. And by law, they are required to demonstrate they have the burden of proving that what they're asking for is adjustment reasonable rate, etc. And for decades, I mean, I wouldn't hazard to guess how long they have succeeded and getting that request either through settlements or something else. And they have gotten used to not having to meet that burden. And so what I've tried to say to folks is, no, listen, I haven't put different rules of the road. I'm much more acting like an umpire. I'm calling balls and strikes in the fact that a different umpire called different balls and strikes doesn't mean that I have new rules. It means that I'm applying discretion that is as a regulator and power dexercise. Yeah, that's the nice way of saying it. The more blunt way of saying it might be, I'm finally applying rules that have just sat unapplied for years. I mean, you know, I think people following US politics over the last however many years are familiar with the idea that a privileged class of people views fairness and equality as oppression, right? This is a dynamic you see all over the place in the US now. And you really get that vibe when you read these news stories about you saying to these utilities, well, no, you can't have that massive rate increase. You don't, you haven't justified it. Just the absolute stunned umbridge on their part just reeks of that like, excuse me, sir, I've been getting this cushy deal for years and years. How dare you? Well, and I'm frankly really tired of the overt sexism that they're layering in things. And it's something that our local media has chosen not to cover. But if you go look up, I'm just tired of it. If you go look up the appeals that they've filed and particularly ever sources appeal of the water rate case, they single me out. They refer to me as emotional, unpredictable hysterical even one might say. Yeah. And I just was looking around like, look, you couldn't possibly suggest that I have a vendetta. I'm not from this state. I'm trained in this area. I had more experience than either of my colleagues when I took this role. Uh, it's mind boggling. And you have written and expressed the justifications for your actions in extensive detail like it's nobody has to guess nobody has to guess why you're doing what you're doing. Yeah, I noticed that even in some of the of the news covers, sort of like the good old boys who just do what the investors want are the rational actors. That's rational. Right. And when you try to stand up for ratepayers or ask these businesses to actually like tighten up and compete and like try all of a sudden, you're emotional. And you know, it's just it's pretty I noticed that leaking through in the news coverage as well. Yeah. And I confronted one of their executives about it when she questioned my leadership. And I said, you know, I appreciate that you're expressing respect for me as being a fellow woman in the industry. But I can't believe that you would stand for this then. And her response was that I started it. I'm not kidding. That I started it. And that they had a right to defend themselves. So that's, you know, what we're working with here. Yes. Well, like I keep saying, if you've been getting the cushy deal for years and years and years and you've built up all your habits and all your ways of thinking around that, taking those privileges away and asking you to compete feels like an attack on people. This is, you know, in large part explains political dynamics in this country. And I think explains the utility sector well as well. So we're getting to the end of our time. And I wanted to wrap up by sort of asking, you know, I follow this area pretty closely and have been, you know, sort of pounding the table trying to get people to pay more attention to PUC's these state regulatory bodies because they have their hands on a huge portion of the country's emissions. They have jurisdiction over and control over a huge portion of the country's emissions and come in for almost no public scrutiny. Just because, you know, as I'm fond of saying, there's surrounded by a force field of tedium acronyms and, you know, in phases and things like that. So it's difficult for people to wrap their heads around what's going on. So, you know, a lot of this goes on sort of outside public view, which I think explains a lot of why it's gotten so comfy and cozy and cushy in states. But now, you know, we need to shake that up. So why are there so few? It seems to me people on PUC's commissioners on these bodies that think like you do because the way you're thinking seems very common sense to me. And yet, as we're here discussing, it is greeted with absolute flummoxed outrage among all parties involved when someone actually comes in and tries to shake this up. So why are there so few of you and what sorts of rules and procedures could be put in place to create more distance between utilities and regulators? I love this question because I think that, you know, looking at a lot of states who have commissioners that are appointed by their chief executive, their governor, a lot of the statutes, including Connecticut's, will have language in there that loosely refers to commissioners needing to have experience with consumer protection or this or that. And I think that's a good start. But I think it's critical that you actually have like a defined skill set that is applicable to what we're doing, whether you're an engineer or a lawyer, which on both or an accountant or there's any number of disciplines that could be relevant. But I think you have to start with the recognition that you need a variety of those disciplines represented on your commission. You can't have three lawyers. You can't have so many lawyers in this area. Lawyers are thick on the ground in this area. Yeah, you can't have three legislators. Like you've got to have a complement of skill sets. And I think you also have to have a really strong code of ethics. And whether that's a statewide code of ethics or one that your commission creates, like we have supplemented our processes internally where our general counsel has drafted, you know, guidance for us that says, you know, back to my issue of speaking to investors, he has advised us that it is legally and appropriate to speak to investors if you have an open rate proceeding, for example, which again, common sense. Yeah, seems obvious. But you have to have a code of ethics in place. You have to stop the notion that that commissioners can go on these junkets that are paid for by industry associations. Like you can go on that if you're going to pay your own way. But like that's what we need to do. And ultimately, what we really, really need is for groups to focus on communicating to the governors and the state how critical these types of appointments are. Yeah, it's a really terrible place for a patronage job. Like if I could just say that this is a terrible place to put like the cousin of your chief of staff or whatever. Like these are important jobs, especially today, especially going forward, especially. And I love that folks are starting to wake up to utility commissions having an outsized role in, you know, realizing some of our ambitious clean energy transition goals. And I think that we need to embrace that. But that really starts with lobbying your government to let them know that this is a critical position moving forward. So to wrap up then, what's next for you? How long do you envision like are you in this for the for as long as they'll let you do it? Like how, how quickly do you, I mean, you're trying to kind of turn this entire very old, you know, very inertia bound system around. And I know that's like that way lies in sanity. How long, how long? Yeah. You know, no one told me before I moved to Connecticut for this job, that Connecticut's motto was the land of steady habits, which you did. It takes a sinister air. It sure does. My first term is up this March. And I am seeking reappointment. I don't know that I would go so far to say that I do the job as long as they'll have me because I do think that regulators, you need fresh ideas. And do you support term limits, by the way, because there's a couple of legislative proposals that would impose term limits on on PUC commissioners in Connecticut. He said, how do you feel about that? Oh, that's a dangerous question that you know, the average term of a commissioner nationwide is three to four years. Your two colleagues have been what 10 and 30 years on the commission? 11 and 27 or 26. Yeah, there's a there's a real risk of becoming too cozy or not having fresh ideas, the longer you stay in any position. And I think it's important whether it's voluntary or imposed that we have fresh faces at the helm of an incredibly important agency more than once every turn of the century. That was probably too far, but I've said it. No, that was relatively circumspect. Okay, well, this has been an absolute treat. I'm so glad that you are out there doing what you're doing, shaking up this sleepy corner of things. I wish people would pay more attention to it and follow it more closely. And Connecticut's a great place to tune in now. Things are actually happening. We're trying to make it happen. I appreciate the platform. Thank you for listening to the Voltz podcast. It is ad-free powered entirely by listeners like you. If you value conversations like this, please consider becoming a paid Voltz subscriber at Voltz.wtf. Yes, that's Voltz.wtf so that I can continue doing this work. Thank you so much, and I'll see you next time. Thank you so much for listening to this episode of Local Energy Rules, a rebroadcast of the Voltz podcast hosted by David Roberts and featuring a January 2024 interview with the chair of the Connecticut Utility Regulator, Maressa Gillette. On the show page, look for links to several stories from the Connecticut mirror about the debate over Gillette's renomination and some of the history of her challenging relationship with the state's utility companies. We'll also have links to ILSR resources related to utility regulation, including our landmark report upcharge that explains how utilities use their monopoly power to their advantage, and the community power scorecard, an annual assessment of how states create policies to hold utility monopolies accountable. Local Energy Rules is produced by myself and Ingrid Bersen, with editing provided by Audio Engineer Drew Berschbach. Tune back into Local Energy Rules every two weeks to hear how we can take on concentrated power to transform the energy system. Until next time, keep your energy local, and thanks for listening.