Making the PSC more accountable

April 25, 2006|By RANDOLPH J. MAY

Recall the brouhaha two years ago when Kenneth D. Schisler, Gov. Robert L Ehrlich Jr.'s new chairman of the Maryland Public Service Commission, fired five of the agency's top managers. There was a huge outcry, largely from General Assembly Democrats, that Mr. Schisler's action compromised the agency's independence.

Fast forward to this month. Confronted with the looming Baltimore Gas and Electric and Pepco rate increases, the legislature passed a bill, vetoed by Mr. Ehrlich, that would have replaced Mr. Schisler and the four other PSC commissioners with the legislature's picks.

Whatever you think about electricity deregulation or the rate increases, you might conclude that neither Mr. Schisler nor the legislature showed much respect for the agency's independence. But there is an argument running counter to the conventional wisdom that the PSC shouldn't be truly independent, at least with respect to some of its activities. The argument has to do with government accountability.

First, let's examine the PSC, created in 1910.

Like the now-defunct federal Interstate Commerce Commission, the first of the so-called independent commissions, the PSC conformed to the Progressive-era vision that specialized experts, employing the new "science of administration," should regulate the generally monopolistic electric, telephone and gas companies without political interference from the elected branches of government.

To secure the agency's independence, the Maryland commissioners, appointed by the governor and confirmed by the Senate, serve staggered fixed terms. Under the law, commissioners may be removed by the governor during their terms only "for incompetence or misconduct."

Despite the surface appeal of "expert" commissioners making nonpolitical decisions regarding utility rates and industry structure without interference from the executive or the legislature, independent agencies such as the PSC might not promote sound governance. Not without reason are they often called the "headless fourth branch" of government.

To the extent the PSC commissioners are truly independent from control by the governor or legislators, they are politically unaccountable. Political unaccountability often leads to unsound decision-making. Perhaps this lack of accountability played a role in exacerbating the electric power crisis, although it was the General Assembly that mandated the fundamentals of electricity deregulation.

So diminishing the PSC's independence is not necessarily bad. The key is understanding that the commission performs two very different kinds of functions.

Much of what the PSC does falls into the policymaking realm. This includes devising industry-wide competition rules, developing generic merger policies or filling in the implementation details of the legislature's electricity deregulation mandate.

But deciding individual cases on specific facts, such as ruling on a company's rate increase request or its merger application, is adjudication. Agency policymaking is akin to what legislatures and executives do. We want policymaking officials to be politically accountable for their actions. Adjudication is akin to what judges do. We do not want adjudicators to be politically accountable.

Back to the two firing episodes.

Mr. Schisler terminated the commission's chief hearing examiner, chief engineer, director of accounting, chief public information officer and manager of external relations. They may have been exemplary employees. But with the exception of the hearing examiner, they all perform important policymaking functions.

Any governor's new chairman should be able to put his own team in place to implement his policy preferences regarding regulatory philosophy. Otherwise, it is difficult to establish accountability.

In contrast, the chief hearing examiner is largely responsible for managing the agency's adjudication caseload. Because the adjudication function should be insulated from politics, sacking the hearing examiner raises a warning flag.

It might be suggested that the legislature's plan to replace the commissioners en masse with its own picks would increase the PSC's accountability because the legislators are elected. True. But this route to increased accountability subverts the usual way we divide functions and disperse government power.

Typically, the legislature makes the laws and the executive is responsible for implementing them. A better way to make the PSC more politically accountable would be to give the governor more, not less, control over the PSC's policymaking. One way to achieve this is to change the law to permit the governor to remove a commissioner even over policy differences.

The legislature might not like the idea of giving the governor more control over the PSC, and the governor might not like the increased accountability that comes with enhanced control. But increased accountability is always a good thing in a democracy.

Sure, the ultimate size of the rate increases seems the most pressing matter now. But if the rate uproar gives reason to ponder the role of "independent" agencies such as the PSC, and to question how the conventional wisdom concerning independence squares with notions of government accountability, the current electroshock at least might accomplish something useful.

Randolph J. May is president of the Free State Foundation, a nonprofit Maryland think tank. His e-mail is rmay@freestatefoundation.org.

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