Bargaining in the Shadow of Administrative Procedure: The Public Interest in Rulemaking Settlement

This article addresses problems associated with settlement of appeals of legislative rules adopted by administrative agencies. Settlement is a common and important tool for avoiding litigation, but it also raises potential problems for administrative law. In particular, to the extent that an appellate litigation posture poses a principal/agent gap, an agency's incentives to settle may lead it to abandon its public interest goals, otherwise protected by statutory mandates as well as administrative procedures. The problem is most salient when an agency agrees to a substantive policy position in a settlement, committing the agency to later implement a policy course. To the extent an agency uses the same administrative procedure to implement a settlement that was used in adopting the regulation that is the subject of an appeal, the public interest may be preserved, but agencies have many ways of avoiding administrative procedure, or affording less procedure than was afforded in the initial adoption of a rule, in implementing settlement concessions. This article discusses these issues in three parts. In part I, settlement is contrasted to negotiated regulation. Settlement, it is argued, raises a more significant principal/agent gap than other consensus approach to regulation, such as negotiated regulation. Part II addresses settlement against the backdrop of presidential transitions, during in which policy shifts are common. In the context of presidential transitions, settlement can be used by an old administration to commit a new President to a policy course, or can be used by a new administration to undo the policy decisions of an old President. While policy shifts are expected during presidential transitions, such shifts have serious consequences for administrative procedure if the new policy is implemented with less procedure than the old, abandoned policy. Part III recommends some ways of narrowing the principal/agent gap in rulemaking settlement. In particular, broad participation in settlement negotiations, as well in judicial proceedings approving settlements, is endorsed. In addition, hard look review of the merits of a settlement ex ante -- at the time of the settlement's initial approval -- is advocated as a way of promoting accountability

Constrained Regulatory Exit in Energy Law

In recent years, the federal government’s efforts to open up competitive electricity markets have transformed how we think about the regulation of energy. In many respects, the Federal Energy Regulatory Commission’s (FERC) broad “deregulatory” efforts, which commenced in the 1990s, might appear to be a case of paradigmatic regulatory exit as defined by J.B. Ruhl and Jim Salzman. But our case study of FERC’s restructuring of wholesale electricity markets reveals some important institutional features that make exit in federalism contexts, and under federal statutory duties, a rich and difficult problem. In the context of energy, exit from one regulatory sphere can create regulatory gaps. This has led FERC, which largely exited the regulation of wholesale electricity rates, to increase regulation in other spheres. It has also invited forms of intergovernmental exchange, as states have emulated or otherwise responded to FERC’s regulatory modifications in the areas in which states have jurisdiction. In this sense, the transition to competitive energy supply markets has involved constrained exit characterized by a hydraulic back-and-forth between regulators and institutions in an effort to ensure that statutory duties are fulfilled and other public needs are met. This assessment of regulatory exchange has a prescriptive implication: a federal regulator seeking to exit specific forms of conventional regulation needs to proactively develop strategies to facilitate regulatory exchange, while simultaneously preserving its authority over important substantive values related to its regulatory mission. Attention to “offsetting” regulations is often necessary to ensure that problematic regulatory gaps will not arise. In the energy context, these strategies might also include the use of mechanisms that give other institutions a voice in implementing exit strategies, as well as better ex ante regulatory planning for market enforcement that will continue after partial exit. We argue that it is not only a good strategy for federal regulators to recognize this hydraulic feature of exit, but that cooperative federalism statutes such as the Federal Power Act often require them to do so

Dynamic Incorporation of Federal Law

This Article provides a comprehensive analysis of state constitutional limits on legislative incorporation of dynamic federal law, as occurs when a state legislature incorporates future federal tax, environmental or health laws. Many state judicial decisions draw on the nondelegation doctrine to endorse an ex ante prohibition on state legislative incorporation of dynamic federal law. However, the analysis in this Article shows how bedrock principles related to separation of powers under state constitutions, such as protecting transparency, reinforcing accountability, and protecting against arbitrariness in lawmaking, are not consistent with this approach. Instead, this Article highlights two practices that can make dynamic incorporation of federal law more compatible with state separation of powers: a) accountable intermediaries, such as administrative agencies, as a was of preserving political accountability with incorporation of dynamic federal sources of law; and b) ex post judicial review, as a mechanism to provide standards and safeguards to protect against arbitrariness in lawmaking. The analysis highlights serious flaws with judicial interpretations of state constitutions that impose an ex ante barrier to the adoption of dynamic federal law. It also advances “hard look federalism†as a novel approach to judicial review by state appellate courts that can allow states to both protect their own separation of powers concerns and improve the operation of federalism, particular by enhancing state participation in adoption, interpretation, and implementation of federal standards

The Electrical Deregulation Fiasco: Looking to Regulatory Federalism to Promote a Balance Between Markets and the Provision of Public Goods

Over the last thirty years, regulators have deregulated just about every regulated industry. In no industry has deregulation raised as much fear and concern as in electric power markets. Even before the Enron debacle, a crisis that is more about the failures of corporate than regulatory law, it was clear that something had gone seriously wrong in the turn towards deregulation of electric power. Recent events in California are illustrative. In early 2000, consumers in California, the first state to deregulate retail power markets on a mass scale, saw repeated months of power interruptions. Many utility customers experienced a risk of service shut off - some even had their service interrupted - forcing changes in daily routines to find access to electric power. Hospitals, nursing homes, and municipal utilities controlling sewage and water treatment facilities were forced to make choices affecting human safety when confronted with the prospect of power interruption. Small businesses, families, and large corporations incurred large costs. The consequences of California\u27s regulatory system were not limited to utility consumers. One of the state\u27s largest utilities, Pacific Gas & Electric ( PG&E ), declared bankruptcy on April 6, 2001, in part the result of the skyrocketing power procurement costs it has incurred in the deregulatory environment. Its reorganization is now before a federal bankruptcy court. Newspaper, television, and radio headlines overwhelmingly attributed the California power crisis to deregulation, or economic restructuring, of power markets to favor competitive markets over government regulation as a means for allocating power supply. Against the backdrop of such events, calls for a return to old-style regulation have abounded, often attributing the root cause of California\u27s energy woes to deregulation itself. Even regulators who are not inclined completely to abandon deregulation continue to struggle with refining the basic path of deregulatory policies, advocating deregulatory models that incorporate state participation in power procurement, price caps, or other regulatory safeguards in designing power markets

Constrained Regulatory Exit in Energy Law

In recent years, the federal government’s efforts to open up competitive electricity markets have transformed how we think about the regulation of energy. In many respects, the Federal Energy Regulatory Commission’s (FERC) broad “deregulatory” efforts, which commenced in the 1990s, might appear to be a case of paradigmatic regulatory exit as defined by J.B. Ruhl and Jim Salzman. But our case study of FERC’s restructuring of wholesale electricity markets reveals some important institutional features that make exit in federalism contexts, and under federal statutory duties, a rich and difficult problem. In the context of energy, exit from one regulatory sphere can create regulatory gaps. This has led FERC, which largely exited the regulation of wholesale electricity rates, to increase regulation in other spheres. It has also invited forms of intergovernmental exchange, as states have emulated or otherwise responded to FERC’s regulatory modifications in the areas in which states have jurisdiction. In this sense, the transition to competitive energy supply markets has involved constrained exit characterized by a hydraulic back-and-forth between regulators and institutions in an effort to ensure that statutory duties are fulfilled and other public needs are met. This assessment of regulatory exchange has a prescriptive implication: a federal regulator seeking to exit specific forms of conventional regulation needs to proactively develop strategies to facilitate regulatory exchange, while simultaneously preserving its authority over important substantive values related to its regulatory mission. Attention to “offsetting” regulations is often necessary to ensure that problematic regulatory gaps will not arise. In the energy context, these strategies might also include the use of mechanisms that give other institutions a voice in implementing exit strategies, as well as better ex ante regulatory planning for market enforcement that will continue after partial exit. We argue that it is not only a good strategy for federal regulators to recognize this hydraulic feature of exit, but that cooperative federalism statutes such as the Federal Power Act often require them to do so

The Limits of a National Renewable Portfolio Standard

In this Commentary Article, Professor Rossi highlights some of the distributional and operational problems presented by a national renewable portfolio standard ( RPS ) in electric power. He also offers several solutions to these problems as a way of advancing a cautionary defense of a national RPS. Ultimately, Professor Rossi concludes that addressing climate change will need to involve more systemic and larger scale modifications to regulation of the electric power industry, including addressing infrastructure issues such as transmission and carbon pricing

Beyond Goldwasser: Ex Post Judicial Enforcement in Deregulated Markets

Regulatory agencies are increasingly adopting ex ante rules to set market access terms and conditions for network industries. At the same time, in industries such as telecommunications and electric power transmission and distribution, antitrust laws play an important role in defining the terms and conditions of market access. Courts may have an important ex post enforcement role to play in the enforcement of the antitrust laws. In this Essay, I address the filed rate doctrine - a legal principle that determines when courts, rather than regulatory agencies, may serve as a standard-setter for or arbiter of market terms, independent of their widely-accepted role as the reviewer of decisions by an agency, such as the Federal Communications Commission (FCC). I begin by discussing the issue in the context of electric power deregulation. Then, I turn to the telecommunications context, in which the points of departure for this issue after the Telecommunications Act of 1996 are the Seventh Circuit\u27s Goldwasser decision and the Second Circuit\u27s Curtis Trinko case, which is currently pending before the U.S. Supreme Court. It is argued that Goldwasser should be read narrowly, to preclude judicial consideration of only to poorly-pled antitrust claims

The Shaky Political Economy Foundation of a National Renewable Electricity Requirement

This Article argues that a national renewable portfolio standard (RPS) for electric power is not likely to advance its purported goals, nor is it likely to be adopted by Congress in its present proposed form. For one, a national RPS would have geographically disproportionate costs - those costs would be focused on a few, mostly natural resource-poor states, whereas the benefits of job growth and technological adoption in infant industries will be elsewhere. Second, the ability of firms to use operational flexibility regarding their nonrenewable fuel mix to substitute other nonrenewable energy sources for traditional fossil fuels undermines the purported climate change benefits of such a requirement, and usually raises costs and increases inefficiency of energy generation as well. Furthermore, a national RPS fails to address preexisting system-level infrastructure siting and cost allocation barriers in the electric power industry. Without broader reforms to the energy industry, significant new investment in renewable power is unlikely

Assessing the State of the State Constitutionalism

Robert Williams\u27s The Law of American State Constitutions is an impressive career accomplishment for one of the leading academic lawyers writing on state constitutions. Given the need for a comprehensive, treatise-like treatment of state constitutions that transcends individual jurisdictions, Williams\u27s book will almost certainly become the go-to treatise for the next generation of state constitutional law practitioners and scholars. The U.S. Constitution has a grip on how the American legal mind approaches issues in American constitutionalism, but an important recurring theme in Williams\u27s work (as well as that of others) is how state constitutions present unique interpretive challenges. More than any other legal academic, Williams has advanced the view-in this book and elsewhere-that the unique nature of state constitutions requires an appreciation of the text, legal community, and interpretive norms of the specific jurisdiction engaging in the interpretation. State constitutions are very important legal documents, but their interpretation is remarkably understudied (and, of course, highly undertheorized) in the academic literature. Williams\u27s descriptive account of state constitutions is very informative and lawyerly; his book fills a notable void to the extent it synthesizes many important features and doctrines of state constitutional law, grounding them in historical context. It is the most significant account of modern state constitutions to date, and his book exhaustively surveys a wide range of the issues state courts have struggled with in interpreting their constitutions

Clean Energy and the Price Preemption Ceiling

Since the New Deal, federal preemption has precluded many state and local regulatory decisions that depart from wholesale electric prices determined under federal standards. Recent decisions treat prices that meet the federal standard as a preemption ceiling, which prohibits states from setting prices that exceed the wholesale price set in a competitive market. Both appellate courts and the Federal Energy Regulatory Commission (“FERCâ€) - the primary federal agency responsible for the electric power sector - have recently applied a price preemption ceiling to clean energy policies. I argue in this Article that this price ceiling preemption approach hobbles the advancement of clean energy policy under both federal and state laws. State and local governments, along with regional institutions, have adopted a number of clean energy innovations, including feed-in tariffs for renewable power, novel approaches to transmission siting and cost allocation, and energy conservation policies. As subnational governments today consider how to encourage clean energy investments, they are increasingly bumping into limitations imposed by FERC and the courts under the Supremacy Clause of the U.S. Constitution. Imposing a legal preemption ceiling on clean energy prices thwarts the ability of subnational governments to adopt policies that advance conservation and renewable energy goals. I argue that reassessing application of wholesale price ceiling preemption to regional, state and local clean energy innovations will allow courts and federal regulators to more effectively imagine the ability of federal energy laws to advance clean energy goals