The Value of Institutions
One of my favorite movies is “A Man for All Seasons,” a 1966 classic dramatizing the struggle between Thomas More and King Henry VIII. It's a multi-layered story. Henry wanted to divorce his wife, Catherine, as she had not borne him a son. To do so at that time, the King needed dispensation from the Pope. When the Pope refused to grant that divorce (probably in deference to the King of Spain who was related to Catherine), Henry broke with Rome and established the Church of England with himself as head of the Church.
More was a devout Catholic and did not agree. He resigned as Lord Chancellor and did not speak out against Henry’s marriage, but instead remained silent when asked to recognize the King as head of the Church. Given More’s prominence as an academic/philosophic “rock star” across Europe, it was important to Henry – who would later execute his new wife and marry four more times – to get More to pledge loyalty. More refused, even when tried for treason for not signing the loyalty pledge. He was beheaded for following his conscience.
My favorite line in the movie is when More argues with his son-in-law who claims that he would “cut down all the laws in England to get at the Devil!” More hotly replies “Oh? What would you do when the Devil turns around? Where would you hide, the laws all being flat? The land is thick with laws! Man’s laws!”
More was claiming that laws provide protection against the whims of humans when they do bad (his “Devil”) things.
Relevance to our industry
I thought of this movie and that scene when I read a story in Politico. A former Commissioner and Chairman of FERC tweeted that he would be willing to help the new presidential administration find deadwood among FERC staff. Such an action by an incoming Administration on an independent agency is so beyond the norm that it would be natural for staff to view this as some kind of effort to influence their actions to hew to certain viewpoints. Having been a political appointee in two administrations, but also having served twice as part of the non-political staff of FERC, I have a deep and abiding appreciation for how the professional staff works seamlessly with the political staff.
The implications of purging professional staff from a non-partisan, independent government agency is hard to completely appreciate. Aside from the loss of knowledge of precedent, process and professionalism, it very likely has implications for the regulatory process and the confidence it provides investors.
The rigor of a professional regulatory review of tariffs, market rules, and contractual agreements helps investments. Clear market rules, transparent review of tariffs and agreements that follow legal precedent allow for courts to extend deference to the regulatory process. This, in turn, gives lenders, banks, and other sources of capital confidence to invest without fear that the whim of a regulator will not later undermine the rules. Confidence is a bedrock of capital formation. Make the process less rigorous, less professional, more prone to rapid change between political regimes, and confidence to invest is undermined.
Regulatory Process Should be Boring
Quite often, when I was senior staff at FERC, I would be frustrated with many of my colleagues for what I viewed as a pedantic approach to cases or complaints. I recall biting my tongue in meetings when someone from the Office of General Counsel would reply to my suggestion for a “better” solution to a market rule, that we (FERC) don’t have to find the most “just and reasonable” solution, just determine whether the solution supported by the record was “just and reasonable.”
As I gained experience, I came to see the wisdom of this very careful, principled, precedent-laden approach. I say this even though I believe the Commission has been slightly less staunch recently in its defense of certain bedrock matters like “open access.” There was a whiff of partisan pressure over the last 7 or 8 years that previously had not existed at the Commission in my view. I can only imagine how the willingness to adhere to precedent and principles when they threaten a political agenda of any administration would be even harder to maintain. If that were the case, I submit our ability to incent investment in our energy sector will be harmed. The harm would likely be imperceptible at first, but over time become profound.
I'm grateful for the time I had with my dedicated and talented colleagues at FERC. Now that I am an advocate and represent parties before FERC, I count on the professionalism of that staff to guide the Commission to make sound decisions based on the record. I may not always agree with these decisions, but I know that our industry is better off when decisions are informed by the careful work of professional, non-partisan staff.
I am tempted to invoke a slogan like “Make FERC Boring Again,” but the issues before the Commission will be complicated, and thus, controversial under normal standards. Issues like co-location of generation with data centers, capacity market reform in the Eastern markets, regional market formation in the West await the Commission. We can all just hope the “five great Americans” (Commissioners) will have the benefit of the professional, non-partisan staff assisting them. A staff that is valued by both the industry and political leadership of any administration.