the ways states organize

The Ways States Organize William H. Smith Jr.

einventing government is nothing new R to state regulatory agencies. In a bureaucracy, reorganizing is the second oldest profession. (Getting a budget through the legislature is the oldest). In the last few years, state commissions have gone through size reductions, reor- ganizations of state government, addition of responsibilities, and changes of management philosophies.

In a bureaucracy, reorganizing is the second oldest

profession.

Throughout their histories, state commissions and FERC have exchanged organizational ideas. As FERC revamps itself, the experiences of its sister bureaucracies may stimulate some insights, although bureaucratic lessons are rarely fully transferable.

A better understanding of these agencies may also be helpful to those learning how to do business with them. A growing number of natural gas industry players-marketers, pro- ducers, and integrated resource planning specialists, for instance-are finding it useful to make contacts with state utility regulators as LDC customers gain greater access to alternative suppliers. Those contacts will be formed more effectively by people with an awareness of the agency's working pattern.

Functions Administrative agencies with regulatory

duties have a small core of functions they must be able to perform. Beyond these, most commissions have grown a ring of functions that Seems almost indispensable.

Decision makers must be designated. For important decisions, the commission wants to reserve a decision to itself. In a few states, panels of commissioners decide major cases. Many state commissions delegate preliminary and routine decisions to administrative law judges and other staff members.

An important part of the decision-making function is the gatekeeper who sets the commission's agenda and watches its dead- lines. This function is usually performed by an executive secretary or and executive director, but it may be assigned to the general counsel or other senior staff person.

Recordkeeping is a vital function. A state commission receives bags of paper daily, most of it from utilities and others it regulates. It must be able to file and retrieve these documents and distribute them to responsible staff members. It must issue and archive its decisions and the documents supporting those decisions. An agency is usually required by law to provide public reference to its records. As a public agency, it must be responsive to citizen inquir- ies. These functions usually involve a public information manager and often a sepante records manager.

Commission decisions deal with special- ized and technical matters. Commissioners need a ready source of advice from many disciplines. Economics, engineering, law, and accounting are the backbone professions of a commission staff. However, expertise in statistics, media relations, environmental sciences, and other fields is increasingly needed. Most commissions need their staff to able to provide testimony in these fields to support decisions. Despite their professional backgrounds, these staff people are often grouped into job categories such as public utility specialist or tariff analyst.

Commission decisions are routinely ap- pealed to court. A commission needs the legal resources to defend its decisions in a judicial forum. Unless the state attorney general fills this role, a general counsel is needed.

Regulatory commissions are charged with affirmative responsibilities beyond decision making. These commissions need the ca- pability to gather infor-

William H. Smith Jr. Is chief of the Bureau of Rate and Safety Evalua- tion for the Iowa Utillties Board and directs the board's FERC par- ticlpatlon.

JUNE 1994 NATURAL GAS Copyright Q 1994 by Executive Enterprises. Inc

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1 Exhibit 7 . State Commission Size and Organization

State Number of Staff Basis of Oqpnbthn

Alabama Alaska Anzona Arkansas California Colorado

Delaware District of Columbia Florida Georgia Hawaii Idaho Illinois Indiana Iowa Kansas Kentucky

Maine Maryland Massachusetts Michigan Minnesota Mississippi Missouri Montana Nebraska Nevada New Hampshire

New Mexico - PSC New York North Carolina North Dakota Ohio oklahorm Oregon Pennsylvania Rhode Island south Carolina south Dakota

Texas - PUC Utah Vermont Virginia Washington West Virginia Wisconsin Wyoming

COM&CUt

h U i s i a M

New Jersey

TeMesXe

155 36 250 101 1,062 99 127 23 89 398 133 31 55 424 81 71 224 126 85 69 128 134 200 45 145 188 43 51 118 55 430 51 700 133 50 455 433 466 581 38 152 24 281 230 18 20 595 237 235 180 36

Industry Discipline Industry Functional Functional Discipline Functional Discipline Discipline Industry Industry Industry Industry Industry Discipline Functional Industry Discipline Discipline Discipline Discipline Industry Industry Functional Functiod Functional Industry Industry Discipline Discipline Industry Discipline Industry Discipline Indusuy Industry Industry Functional Discipline Industry Industry Indusuy Industry Industry Industry Discipline Industry Industry Industry Industry Discipline

mation, venfy compliance, and enforce rules and orders. Auditors and inspectors fulfill these functions.

Like any government agency, a regulatory commission needs the ability to hire and pay personnel, pay for equipment and expenses, and track its budget and appropriations. These administrative functions must comply with

whatever management controls the state has established. These usually provide for merit protection, state payroll, accounting, personnel, and property management systems, affirmative action, ethics and gift limita- tions, competitive procurement, and public records access.

Size and Scope State regulatory agencies have an

incredible diversity in the size of their staffs, from fewer than two dozen in Utah and Vermont to more than a thousand in California (Exhibit 1).

Several of the numbers seem in- consistent with the size of the state or the number of regulated utilities it has. In many cases, the explanation is the scope of the agency's responsibility. Most public utilities commissions regulate telephone, natural gas, water, and electric utilities. Many also regulate transportation companies. A few have wider coverage, including such industries as cable TV, securi- ties, and insurance. Other reasons for other size anomalies are probably a matter of local political history.

The scope of an agency's juris- diction is sometimes indicative of the division of responsibility between commissioners and staff. Commis- sioners with a broad range of responsibilities may delegate more deci- sional authority to senior staff.

Agency Organization State commissions have followed

three different organizational models. In the industry model (Exhibit 21, a multidisciplinary work group specializes in each regulated industry. The discipline model (Exhibit 3) groups work units by professional

discipline: accountants, lawyers, engineers. More recently, a functional model (Exhibit 4) has been used to build work units based on the nature of the regulatory tasks. As one would expect, these theoretical models are almost al- ways blended in real-world applications.

Most commissions (27) have grouped staff primarily by industry expertise. This model is

18 NATURAL GAS JUNE 1994 Copyright Q 1994 by Executive Enterprises. Inc.

familiar to FERC watchers, where there is a first-level sepmtion between electric and pipeline specialists. This method gives recognition to rhe prac- tical differences between the telephone and energy industries. When the natural gas staff is separate from the electric staff, it avoids regulating one industry with preconceptions and pre- sumptions appropriate to the other.

Next most common (16 states) is the model that groups staff by professional discipline. Given the uneven work flow of rate cases, this may be a more efficient way to use a small staff. It may also help give staff members a sense of overview and variety in their work. On the other hand, this kind of organization may deter cross- disciplinary understanding and may even lead to rivalry between disciplines. When a staff is small, however, these drawbacks are usually surmount- able.

The functional approach is used by the fewest states (eight). It offers the advantage of building cross-disciplinary and cross-industry staff expe- rience. It is probably more demanding of management to ensure policy coor- dination throughout the agency.

Commission

. - . the purpose is to clarify and complete :he

r e c o r d r a t h e r than to s e e k par t i cu lar

OUtCOMeS.

Administration

Among the offices found in public utility commissions are many that fit no mold. Most maintain technical li- braries of publications (like this one) not readily available elsewhere. Many maintain legislative liaisons. However, often that work is combined with other responsibilities and not indi-

1 Exhibit 2. industry M o d e l

Commission

I Executive Director

Electric Section

Telephone Transportation I G z E z ; o n I I Section I 1 Section 1 Rates t

f;gctions

bdministration

1 Exhibit 3. Discipline Model

Counsel Engineer Accountant Information

Consumer I Relations - Reponinp

Cost Analysis - Telephone -

bss and - Natural Gu Legislative L -

1 Exhibit 4, Functional Model

~~

Analysis Services ----- Accounting

Personnel and Pnyroll

Public c Information

cated in the title. Statistical, computer, and research capabilities are also common.

Trial and Advisory A problem common to virtually all regula-

tory agencies is the division of trial and advisory functions. Almost all agencies designate staff

members to participate in agency proceedings to assure that the public interest is adequately represented. Both administrative law and a common sense of fairness require that the staff members not be assigned to both trial and advisory functions, at least in the same case. In a small staff, it is inevitable that staff members

JUNE 1994 NATURAL GAS Copyright 0 1994 by Executive Enterprises, Inc.

19

will be asked to perform both functions in different cases. The potential for conflict and unfairness in the two roles demands high standards of staff conduct.

In several states, the problem has led to a formal separation of those performing advocacy functions. In California, for instance, the commission has a Division of Ratepayer Advo- cates, and the North Carolina Utilities Commission’s Public Staff acts independently. In some states, advocacy has been made the province of separate agencies outside the commission like the Minnesota Department of Public Service Staff, the People’s Counsel in Maryland and the District of Columbia, the Office of Consumer’s Counsel in Ohio and Indiana, the Office of Consumer Advocate in Iowa and Pennsylvania, the Michigan Attorney General, and the New York Consumer Protec- tion Board. When commission staff plays a hearing role in these states, the purpose is to clanfy and complete the record rather than to seek particular outcomes.

Fitting into State Government Centralization has often been used as a tool

of efficiency in state governments. Regulatory commissions go through cycles of gaining and losing specific administrative functions, such as personnel, travel, building maintenance, and purchasing. When these go beyond nuisance level, the political suasion of the commissioners may be needed to assure the agency’s ability to meet its responsibilities.

Regulatory commissions go through cycles of gaining and losing specific administrative

functions.. - In some cases, legal and hearing officer func-

tions have been consolidated. Those situations demand particular assurance that the Office of Administrative Law Judges or the attorney general provides individuals with sufficient knowledge of the regulated industries and the regulatory process for the agency’s work to go f o d . W

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