Public Utility’s Potential

abstract. State public utility commissions are at the forefront of the clean-energy transition. These state agencies, which have jurisdiction over energy-generation resources, distribution systems, and retail energy sales, exercise significant control over the energy systems that are responsible for much of the United States’ greenhouse-gas emissions. But state public utility commissions have been slow to embrace their role in addressing climate change and facilitating a decarbonized energy grid. Some scholars attribute this reluctance to a traditional divide between energy and environmental law: energy law is said to focus on economic regulation, while environmental law focuses on regulating environmental pollutants and public health. This divide, scholars argue, prevents public utility commissioners from considering climate concerns in their energy decisions, thus fundamentally hampering the clean-energy transition.

This Feature challenges the assumed dichotomy between energy and environmental law and argues that state public utility commissions as currently constituted have significant power to address climate change and the clean-energy transition. To do so, this Feature uncovers the forgotten history of a full-scale energy transition that New York City underwent in the 1940s and 1950s. During that period, New York City suffered from a severe smoke-pollution problem due to its reliance on coal-based fuels. Rather than addressing this problem through traditional air-pollution controls, New York’s Public Service Commission spearheaded a transformation of the city’s energy grid from one that relied on coal to one that relied on “smokeless” natural gas. In a ten-year period, the Commission, coordinating with the city’s utilities, used the tools of public utility regulation to obtain previously inaccessible supplies of natural gas, construct new transmission lines, and changeover millions of appliances in homes across New York City to make them compatible with natural gas.

The energy transition orchestrated by New York’s public utility regulator provides a glimpse into the potentially transformative role of public utility regulation. From this history, the Feature makes three contributions. First, it demonstrates that, contrary to conventional scholarly wisdom, achieving environmental goals through energy regulation is perfectly within the wheelhouse of energy law. Second, it argues that public utility commissions could play a significant role in implementing and executing a clean-energy transition using extant tools of public utility regulation. Third, it suggests that modern public utility commissions’ reluctance to engage in the clean-energy transition lies in other factors, such as deeper structural and political dynamics—not doctrinal limitations. The Feature concludes that public utility’s potential within state and local governments is broader than our modern imagination assumes.

authors. The author extends sincere thanks to the archivists at the New York State Archives in Albany. She is also grateful for comments and conversations with Payvand Ahdout, William Boyd, Rory Christian, Danielle Citron, Greg Cui, Dirk Hartog, Sharon Jacobs, Hajin Kim, Alexandra Klass, Josh Macey, Sarah Milov, Cynthia Nicoletti, Heather Payne, Ari Peskoe, Reuel Schiller, Ganesh Sitaraman, Elizabeth Stein, Shelley Welton, and participants of workshops at the University of Virginia, the NYU Environmental and Energy Law Colloquium, the Yale Law School Private Law Center Junior Scholars Workshop, the UCLA-Colorado Environmental Law Workshop, and the Berkeley-Penn Energy Law Scholars Workshop. Finally, she is very grateful for thoughtful substantive feedback and comments from the editors at the Yale Law Journal, particularly Nathan Chael, Evan Lisman, and Christopher D’Urso.

introduction

States are likely to be at the forefront of efforts to address climate change in the United States. That is because the laws and institutions that regulate our energy systems are incredibly fractured.1 State governments—in particular, the state agencies tasked with regulating public utilities like gas and electric companies, known as public utility commissions—historically exercised plenary authority over their energy and electricity systems.2 And although Congress eventually granted the federal government jurisdiction over the interstate aspects of our energy systems, federal law explicitly preserves exclusive state authority over much of the energy sector.3 As a result, states and their public utility commissions will, in large part, determine whether and how we tackle climate change and transition to a clean-energy economy.

Efforts by states to address climate change have drawn attention to a perceived divide between environmental law and energy law. Legal scholars have described these fields as distinct disciplines, with environmental law historically concerned with regulating public health and the environment, and energy law historically concerned with the economics of regulating natural monopolies.4 With climate change becoming the dominant issue in both fields, however, scholars have observed increasing overlap between the two, particularly through state legislative efforts around climate change.5 Despite these legislative efforts, state public utility commissions have been slow to incorporate climate considerations into their energy decision-making—a phenomenon that some scholars have attributed to the traditional energy/environmental law divide.6 As a result, some have argued that resolving this divide is one of the most important steps in instituting a clean-energy transition.7

This Feature challenges the assumed dichotomy between energy law and environmental law. It argues that state public utility commissions, as currently constituted, have significant power to address climate change and the clean-energy transition. The vision of energy law presented in the convergence debate is a narrow one, but historically, energy law was a more capacious field. Much of energy law is a form of public utility regulation, a legal field predating not only contemporary environmental laws but also most modern regulatory regimes. This Feature argues that state energy regulators incorporated environmental issues like air pollution in their decision-making long before the creation of our modern environmental-law regime. Because these state regulators continue to maintain substantial (and sometimes exclusive) authority over our energy systems,8 this history suggests that state public utility commissions could play a vital role in facilitating a clean-energy transition to an extent much greater than is commonly recognized.9

As a prime example, the Feature uncovers the forgotten history of a full-scale energy transition in New York City in the 1940s and 1950s. During that period, New York suffered from severe smoke pollution from coal-based fuels. Rather than addressing this problem through traditional air-pollution controls, New York relied on energy regulation to clear the city’s air. In particular, the New York Public Service Commission (PSC) (the state’s public utility commission) spearheaded a decade-long effort to transition the city’s energy grid from coal to “smokeless” natural gas.10 Using original archival material consisting of the PSC’s annual reports, case files, and utility-company records, the Feature reconstructs how the PSC, in collaboration with the city’s utilities, obtained previously inaccessible supplies of natural gas, constructed new transmission lines to transport that gas into the city, and changed over millions of appliances in homes across the city.11 The result was the first successful effort towards smoke abatement in New York City in the modern era.

The PSC executed this transition using traditional tools of public utility regulation that still exist today.12 Under New York’s Public Service Law, the PSC is given the authority to set utilities’ rates and regulate their quality and conditions of service.13 The PSC wielded those versatile tools as an aggressive advocate for and strategic coordinator of the public interest. For instance, the PSC advocated for the interests of the New York public before federal regulators in charge of managing interstate natural gas infrastructure.14 The PSC used its authority over the utilities’ standards of service to oversee the retrofitting of the city’s distribution infrastructure.15 And it used its authority over the utilities’ rates and accounting practices to allocate the transition’s costs between the ratepayers and the utilities.16 Thus, a full-scale energy transition happened mostly through and within the intricacies of state-level public utility regulation.

This lost history of New York’s energy transition provides several important lessons for the modern day. First, it reveals that, far from being fundamentally divided or antagonistic, energy and environmental law ought to be understood as deeply connected. Both are fields of law that can address environmental problems. In fact, New York’s natural gas transition suggests that energy-law tools may be uniquely well-suited to an energy transition, which is precisely the solution needed to respond to climate change.17

Second, the New York example suggests that state public utility commissions could play a very different role in today’s clean-energy transition than they currently do. They could coordinate and advocate for the public interest in disputes over what our energy systems ought to look like. They could cajole utilities to get them on board with the energy transition and calculate cost-allocation methods to reduce parties’ resistance to the transition. They could adopt bold and creative methods for converting our energy infrastructure. In essence, they could be agents of change rather than symbols of the status quo. The fact that many state public utility commissions are not playing this role is a product not of legal constraints but of underlying structural and political dynamics.

Third, the connection between environmental and energy law that this Feature reveals also illuminates conceptual errors that have occurred in the field of environmental law. A series of environmental-law cases, including Massachusetts v. EPA,18 Utility Air Regulatory Group v. EPA,19 and, most recently, West Virginia v. EPA,20 have involved a line of reasoning that characterizes efforts to regulate greenhouse gases as unbounded uses of agency authority. The Feature demonstrates how this line of reasoning reflects the same erroneous energy/environmental law divide—that is, environmental law stops when energy law starts, and vice versa. The Feature argues that rejecting this way of thinking and instead recognizing that energy and environmental regulators play on the same field will be necessary to address climate change in both the energy and environmental contexts.21

At bottom, this Feature argues that the potential for state public utility commissions to address climate change and facilitate a clean-energy transition is broader than public imagination assumes. These state agencies exercise unique authority over our energy systems—authority that has not diminished over time. Indeed, given states’ exclusive jurisdiction over some aspects of energy regulation, that authority will be essential regardless of federal efforts to address climate change. As such, addressing the most pressing environmental problem of our time—climate change—will require relying on mostly obscure state public utility commissions using mostly obscure tools of public utility regulation.

The Feature proceeds in four Parts. Part I describes the important role that state public utility commissions play in our clean-energy transition; the slow progress to date in that transition; and the conventional wisdom that this delinquency reflects a traditional divide between energy and environmental law. Part II challenges this conventional wisdom by recounting the story of the energy transition New York City underwent in the 1940s and 1950s, highlighting public utility regulators’ use of energy law to address a classic environmental problem. Part III unearths archival material laying out the New York PSC’s comprehensive use of its authority under public utility regulation to oversee and implement the transition. Part IV explains what state public utility commissions today can learn from this history and discusses how those commissions could take on a broader, more proactive role in addressing our most serious environmental problems. Part V concludes that, contrary to conventional wisdom, energy law can respond to climate change—and indeed, energy law’s historical role in facilitating energy transitions suggests that today’s clean-energy transition is not so unprecedented or unbounded as some might believe.