Research Note: Public service commission touches on all our lives

Editor’s Note: This is the first in a series of research notes compiled by Platte’s second summer intern this year, Alexander Endorf, exploring the history and jurisdiction of the Public Service Commission in Nebraska. 

What are Public Service Commissions? 

Public service commissions, also called public utilities commissions or corporation commissions, are quasi-judicial agencies that regulate utilities and other business areas on the state level. Areas of regulation may include electricity, gas, telecommunications, water/wastewater, transportation, and housing, though some commissions also have broader jurisdiction over sectors like grain storage, financial securities, or mining. While a single agency regulates many of these sectors in most states, some states (like Nebraska and Texas) split functions between more than one agency. Texas, for example, gives jurisdiction over electricity, water, and telecommunications to the Public Utility Commission of Texas and jurisdiction over natural gas, coal mining, and uranium mining to the Railroad Commission of Texas. 

Commissions were first developed in the United States in the late 1800s to regulate railroads, telegraphs, water utilities, and electricity. This was due to the economic principle of natural monopolies, where one firm can supply an entire market more efficiently than multiple competing firms because of high entry costs and significant economies of scale. Electricity is an excellent example of this: it takes a lot of capital to create an electric grid, but servicing many consumers is relatively inexpensive once the infrastructure exists. An unregulated natural monopoly might charge excessive prices, underproduce services to earn extra profit, or provide sub-par service because consumers have no other alternatives for service. 

 To address these issues, Public Service Commissions have the responsibility of assuring that utilities in their state will “provide reasonable, adequate, and efficient service to customers at just and reasonable prices” ¹, which means that they must balance the needs of both ratepayers and utilities. These agencies have multiple regulatory actions for enforcement, including price setting or rate design, resource planning, rulemaking, investigations, hearings, and civil penalties. 

Like many regulatory agencies, commissions generally follow a “rule and enforcement” or “command and control” model of regulation, where rules or regulations are adopted through a rule-making process, commented on by interested stakeholders, and enforced. However, utility regulators also engage in quasi-judicial proceedings, which are generally open to all interested parties. These involve taking evidence from witnesses and adjudicating results based on the record, though they aren’t as formal as court proceedings. Informal mechanisms are also used in the regulatory process to allow commissioners to engage with stakeholders, including informal negotiations, workshops, and other discussion-based settings. 

 Facts About Public Service Commissions Across the US² 

• There are 53 state-level regulatory bodies in the United States. This number is more than 50 because it includes the District of Columbia and states with 2 bodies performing the functions (Nebraska and Texas). 

• 30 regulatory agencies have 3 commissioners, 19 have 5 commissioners, and 4 have 7 commissioners. 

• The median highest-paid³ commissioner’s salary in 2023 was $148,523.00, which matched the South Carolina Public Service Commission. The California Public Utilities Commission president had the highest compensation at $234,688.68, while the lowest pay of $35,000 was at the Delaware Public Service Commission. 

• Of the states immediately surrounding Nebraska, the median pay was $134,655.30. Nebraska’s Public Service Commission was the least at $75,000, which is 4th lowest nationally. 

• In 38 commissions, commissioners are appointed by the governor and are subject to confirmation from the legislature; 6 of these states utilize some sort of screening mechanism, like an independent review board or nominating committee. Commissioners in 11 regulatory agencies are chosen through elections, with 6 using statewide elections and 5 (including Nebraska) using district elections. 2 bodies (Virginia and South Carolina) have their leaders chosen through voting by the state legislature, while the last 2 (Massachusetts and Tennessee) appoint commissioners by individuals other than the governor. 

• Of the 53 agencies across the US, 16 bodies have 4-year terms, 5 have 5-year terms, and 32 have 6-year terms. 

• To prevent all positions on a commission from coming up for selection at one time and prevent political pressures, states stagger terms (a small-scale version of what happens with the United States Senate). 

• Only 5 bodies are subject to some sort of term limits for commissioners; these range from limits on more than 2 consecutive terms to a 2-term hard cap on service. 

¹https://www.epa.gov/sites/default/files/2016-03/documents/background_paper.pdf

²Information for this section taken from NARUC’s Desk Reference Manual, https://ballotpedia.org/, and https://www.openthebooks.com/

³Note that in some agencies the chair of the commission is paid more than other commissioners. In these cases, the chair’s salary was used.