How Politics Influences the Energy Pricing Decisions of Elected Public Utilities Commissioners

Abstract

An argument of those supporting the direct election of regulators is that election allows voter preferences to be translated easily into policy outcomes. However, a danger of this approach is that the low salience of regulatory issues among the median voter could allow for regulatory capture, where regulated firms use their influence to extract favorable outcomes. Although the role that institutional design plays in influencing capture has been evaluated by comparing appointed and elected regulators, evidence of the capture of elected regulators remains scant, and we know little about the conditions that may mitigate such capture. Here, we study electricity rate-making by Arizona's elected public utilities commission to determine how the economy, citizen complaints, and industry and interest group lobbying affect rate decisions. Leveraging original quantitative and interview data, we find that commissioners respond to voters and set pro-consumer electricity prices when inflation rises and when citizen complaints increase. We do not find that industry and interest group lobbying influence rate-making. We argue that commissioners are pro-behavior because prices are salient, and commissioners desire reelection. The result suggests that the electoral mechanism reduces chances of regulatory capture, although the matter of electoral pandering remains unresolved.