Title: PURC review
Full Citation
Permanent Link: http://ufdc.ufl.edu/UF00091019/00006
 Material Information
Title: PURC review
Series Title: PURC review
Physical Description: Serial
Language: English
Creator: Public Utility Research Center, Warrington College of Business, University of Florida
Publisher: Public Utility Research Center, Warrington College of Business, University of Florida
Place of Publication: Gainesville, Fla.
Publication Date: Spring 2005
 Record Information
Bibliographic ID: UF00091019
Volume ID: VID00006
Source Institution: University of Florida
Holding Location: University of Florida
Rights Management: All rights reserved by the source institution and holding location.


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"Leadership in Infrastructure Policy"

Through the generous support of sponsors and friends, the Public Utility Research Center continues to provide
programs that are mutually beneficial to the energy, water, telecommunications, regulatory and academic sectors.

Emerging Technology and Trends:

Effects on Consumers, Industries and Regulators

Telecommunications speakers
at the PURC Annual
Conference in Gainesville,
February 9 and 10, stressed
technology, customers and
Providing a keynote address, Bob
Crandall of The Brookings Institution,
emphasized what he sees as over-
regulation of the transition to
competition. He notes that the Federal
Communications Commission's
(FCC) unbundling requirements and
pricing requirements for unbundled
network elements have created an
artificial economy for new entrants
and that many of these entrants'
business models will collapse now that
the federal rules are changing.
He supported his point with
analyses of recent patterns in entry
patterns, new entrant investments,
and market valuations, and by
comparing the United States with
other countries.
John Horrigan of the Pew Internet
Project and Bev DeMello of the
Florida Public Service Commission
(FPSC) described changes in

consumers. Horrigan presented the
results of Pew's broadband adoption
survey, which found that broadband
usage continues to grow, that price
does not seem to be a significant
hurdle for most consumers, and that
cities lead rural areas in broadband
availability and usage.
DeMello discussed the results of
several surveys, including those by the
FPSC. Competition is growing
because consumers are becoming
increasingly savvy in their use of
alternatives to the traditional
telephone. The FPSC's work
in consumer protection and in
supporting low-income customers'
access to affordable service has been
important in helping everyone benefit
from competition.
In the final telecommunications
session of the conference, Sylvia
Chan-Olmsted of the University of
Florida and Victor Glass of NECA
discussed how changes in customers
and technology are affecting service
Focusing on the traditional media
companies, Chan-Olmsted described
investments in cable broadband

University of California Energy Institute Director
Dr. Severin Borenstein (left) accepts the 2005
Distinguished ServiceAwardfromPURC Director
Dr. Mark Jamison during the PURC Annual
Conference in February. The award recognizes the
cumulative impact of an individual's research and
policy analyses on the academic community and
i..,Jlato i policymakers.
networks, the development of
interactive television, and other
competition-driven services. These
companies are concerned that
government intervention might slow
their pace of innovation. Glass
explained how traditional telephone
companies are losing calling minutes
and traditional lines to broadband and
Conference continued on page 2




Policy Essentials
Mark A. Jamison, Ph.D., PURC Director

Watching the swirling controversies in
today's regulatory climate, I try to keep
in mind what Peter Drucker tells us in
his book The Daily Drucker "Precisely
because change is a constant, the
foundations have to be extra strong."
What are the foundations in regulatory
policy that we need to keep strong?
One foundation is knowing when
to regulate and when to deregulate. In
the most recent release of his classic
text The Economics of Regulation, Alfred
Kahn reminds us that the original
rationale for regulation in industries
where competition is feasible, such as
telecommunications and cable
television, was a perception that
competition was destructive to quality,
continuity, and reliability. But if
competition promotes these qualities,
then the case for regulation is
considerably weakened.
Kahn also tells us that consumers
are voters, and they expect regulation
to give them economic protection.
This insight reveals not only that
competition must deliver, but
consumers must have more faith in
markets than in regulation before they
will provide deregulation with the
political support it needs.
Another essential is to strike the
right balance among the competing
needs for ongoing investment, price
stability and efficiency. Writing 50
years before Kahn, Martin Glaeser
explains in his book Outlines of Public
Utility Economics that utility regulation
occurs when competition is infeasible
and companies are "affected with the
public interest," which means that the
rest of the economy is dependent on
the utilities' efficiency and adequacy.
Glaeser concludes that regulation
should treat utilities as "going

concerns" with sufficient cash flows
to ensure that new investments are
forthcoming and with incentives for
management efficiency.
In his classic text Principles of Public
Utilty Rates, James Bonbright expands
on Glaeser by emphasizing the
importance of ensuring that prices
cover the "rate base," encourage
efficient investment and service use,
and enable customers to predict their
bills. These principles help us with
issues such as hurricane damage and,
for electricity companies, fuel price
increases, fuel mix, and compliance
with new environmental regulations.
A third foundation is an expert,
independent regulatory agency.
Glaeser explains that utility
commissions are important and must
be knowledgeable because the details
and complexities of regulation make
it impossible for legislatures to make
well-informed decisions in a timely
More recently Nobel Laureate
Douglass North in his book Institutions,
Institutional Change and Economic
Performance, explains that formal
government institutions, such as utility
commissions, are needed to reduce
risk for investors and constrain
political opportunism. Other
economists have shown that well-
informed regulators are better able to
protect customers than are less
knowledgeable regulators.
I could go on, but maybe it is better
to encourage you keep our
foundations strong by reviewing these
classic texts and by making use of the
Body of Knowledge on utility
regulation at www.purc.org. >-

Conference continued from page 1

cellular because of pricing problems
with long-distance access. He
emphasized that regulatory solutions
are needed for these difficulties,
including regulatory help to small and
mid-sized telephone companies in
deploying broadband.

Charles Goodman, Senior VP ofResearch and
Environmental Policyfor Southern Company,
reviews data during an .'i,- :a-i session at the
PURC Annual Conference.

Energy Issues

Speakers and participants addressed
two issues on the frontburners for
both regulators and energy executives.
A number of regulated utilities around
the country are entering into the rate
cases. To help participants prepare for
such, Hethie Parmesano of the
National Economic Research
Associates, Inc., addressed this issue
in her presentation, "Future Rate
Cases & What You Need to Know."
Commission staff and utility
managers are finding that necessary
information may not have been
collected because of the long period
of no filings.
"Heading into rate cases, many
utilities are facing more issues with less
expertise and information than they've
had in 30 years," Parmesano said. She
identified key technical, organizational,
and logistical skills that would be

Energy Issues continued on page 3

2 "Leadership in Infrastructure

Leadership in Infrastructure Policy

Wyne Brunetti, Chairman
and CEO of Xcel Energy,
Inc., shared his thoughts
about leadership issues in energy
utilities during the PURC Annual
Conference luncheon.
After a warm welcome from
University of Florida President Bernie
Machen, Brunetti examined the
numerous challenges energy
companies face, including how to
continue to make improvements in
environmental protection while
waiting for a new national
policy, increase system reliability in the
wake of Florida's hurricanes and the
blackout of 2003, and keep
prices reasonable while investing in
environmental protection and dealing
with fuel cost increases.
He also described the need for
leadership outside the industry,
including the need for a national policy
that provides a vision for the country's

energy use
for flexible
companies to

in the future, and
rules that enable
make economic trade-

Following the luncheon, Brunetti,
a graduate of the UF Warrington
College of Business, returned to the
college with wife Mollie to speak with
students about the keys to business
In the final session of the
conference's first day, Balhoff & Rowe
Senior Partner Bob Rowe discussed
leadership challenges that regulators
face at all levels in regulatory agencies
and between regulatory agencies.
Rowe emphasized forces that are
increasing tensions between regulators
and companies, the changing role of
regulation, and people's personal roles
in hanging on to what is important
from the past while adjusting to new
realities. 9-

Energy Issues continued from page 2

needed by firms and regulators.
Energy sessions at the conference
concluded with presentations by
Dallas Burtraw of Resources for the
Future, and Charles Goodman of
Southern Company. Both empha-
sized how important it is that energy
sector regulators and environmental
regulators recognize the interactions
associated with their rules.
Burtraw examined the Clean Air
Interstate Rule (Clear Skies), mercury
regulations, and regional greenhouse
gas initiatives. He summarized RFF's
integrated assessment of S02 and
NOx emissions and compliance costs.
Goodman provided an overview of

how Southern Company is addressing
these issues.
"We have the coal. Gas prices are
volatile. Nuclear power needs public
support. Renewable options can
supplement, but fall far short of
meeting the worldwide rise in energy
demand," said Goodman. "The
environment will get cleaner as we
make investments to reduce emissions,
but long term, we need policies that
deal with the carbon issue while
keeping multiple options available for
meeting energy demand at an
affordable cost to consumers."
Conference presentations can be
found online at www.purc.org. 0-

Xcel E, .., :-, Inc. Chairman and CEO Wayne
Brunetti discusses challenges in the industry
at the PURC Annual Conference.

Executive Education


he Public Utility Research
Center and Cambridge
Leadership Associates (CLA)
will sponsor the executive education
workshop, "Leadership in Utilities
Policy," Saturday, July 23, 2005,
between 1:30 and 4:30 p.m. at the
Hilton Austin. (This event precedes
the start of the NARUC Summer
Meeting in Austin, Texas.)
The workshop is designed to help
regulators by engaging in a dialogue
about the knowledge and skills that are
necessary for exercising leadership in
regulation. Through a combination of
case studies, discussions and personal
reflection, participants will discover
new tools, resources and paradigms for
facing what many see as
insurmountable challenges.
Workshop faculty includes PURC
Director Dr. Mark A. Jamison and Bob
Rowe, Senior Partner at Balhoff &
Rowe, LLC.
This workshop is funded by PURC
and is offered free of charge to
commissioners. As seating is limited,
advanced registration is required.
Register online at www.purc.org. 9-

www.purc.org 3

Public Utility Research Center
P.O. Box 117142
Gainesville, FL 32611-7142

June 6-17, 2005
18th PURC/World Bank
International Training
Program on Utility
Regulation and Strategy
Hilton University of Florida
Conference Center
Gainesville, FL

For more information, call

July 23, 2005
PURC/CLA Executive
Education Workshop for
Utility Commissioners:
Leadership in Utilities Policy
Hilton Austin
Austin, Texas
see page 3

January 9-20, 2006
19th PURC/World Bank
International Training
Program on Utility
Regulation and Strategy
Hilton University of Florida
Conference Center
Gainesville, FL

Sponsors and Representatives on
the PURC Executive Committee:

BellSouth Telecommunications, Inc.
Florida Municipal Electric Assoc.
Florida Office of Public Counsel
Florida Power & Light Company
Florida Public Service Commission
Gainesville Regional Utilities
Gulf Power Company
Progress Energy Florida
Seminole Electric Cooperative, Inc.
Sprint-Florida, Inc.
University of Florida

Public Utility Research Center
Web site: www.purc.org
E-mail: purcadmin@cba.ufl.edu
Ph: 352/392-6148
FAX: 352/392-7796







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