Excerpted From: Ruhan Nagra, Jeanne Bergman, and Jasmine Graham, Regulatory Theater: How Investor-owned Utilities and Captured Oversight Agencies Perpetuate Environmental Racism, 25 CUNY Law Review 355 (Summer, 2022) (396 Footnotes) (Full Document)


00NoPictureThis Article contends that the structure and processes of energy utility regulation in the United States perpetuate environmental injustice. The inequitable distribution of the benefits and harms of fossil fuel energy generation and infrastructure is widely recognized. However, the only mechanisms currently available to redress environmental injustices in the utility sector are arcane, invisible, and inaccessible to the Black, Brown, and low-income communities who are most affected. Regulatory institutions--which make highly consequential decisions about how gas and electricity are produced and distributed and who bears the costs--claim to be guided in their decision-making by ostensibly neutral principles such as prudence, safety, reasonableness, and reliability. But, as this Article will demonstrate, these bland and purportedly neutral guiding principles conceal a system that is designed to protect and benefit the very industry subject to regulation. By playing this role, the regulatory system works hand-in-glove with the utility sector and the fossil fuel industry to produce outcomes that disproportionately harm communities of color.

This Article explores the role of a key administrative proceeding--the utility “rate case”--in facilitating the siting of fossil fuel infrastructure in Black, Brown, and low-income communities. The Article uses as a case study the efforts of investor-owned utility National Grid to build a massive gas pipeline and associated Liquefied Natural Gas (“LNG”) infrastructure in Brooklyn, New York. For two years, frontline communities have used a range of tactics to prevent completion of the pipeline and LNG infrastructure, including participation in the utility regulation process. Although community groups have successfully delayed--and may entirely block-- construction of some of the infrastructure as a result of their creative, multi-pronged advocacy and organizing strategy, the serious limitations of the regulatory process in advancing their struggle for environmental justice are patent. The Article draws on the National Grid case study to expose the procedural injustice of the utility regulation system in the United States. This procedural injustice facilitates the inequitable distribution of environmental burdens resulting from utility companies' activities. Ultimately, the Article advances the position that the private, profit-driven utility model is fundamentally incompatible with environmental and energy justice and must be replaced with an alternative, publicly owned energy system.

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This Article has used the 2016 and 2019 National Grid rate cases to illustrate the procedural injustice of the utility regulation system in New York, as well as the substantive--and disproportionately adverse--consequences of this procedural injustice for Black, Brown, and low-income communities. As evidenced above, utility rate cases fail to meet the four elements of procedural justice laid out by Sovacool and Dworkin: (1) affected communities lack access to information as a result of steep information asymmetry and the IOU's ability to withhold information that does not align with its financial interests; (2) affected communities cannot access or meaningfully participate in decision-making due to insufficient public notice requirements, the power of the IOU to set the rate case agenda and frame the terms of the decision-making process, communities' lack of resources and technical expertise, and confidentiality rules that shroud settlement negotiations in secrecy; (3) regulators are “captured” by the IOU and therefore biased; and (4) affected communities are generally unable to challenge unfavorable rate case decisions in court because they lack the significant resources required to bring legal proceedings.

The substantive consequences of this procedural injustice are patent and include the disproportionate location of fossil fuel infrastructure--and its attendant health and safety effects--in marginalized communities; adverse impacts on greenhouse gas emissions and the climate; and increases in ratepayers' energy burdens and energy insecurity, which disproportionately affect Black, Brown, and low-income households.

While ostensibly neutral, utility regulation procedures facilitate the inequitable distribution of environmental harms resulting from the activities of the utility sector. Attempts to rectify these procedures, moreover, cannot cure the deeper problem of which procedural injustice is merely a symptom: the private, profit-driven utility model at the heart of our energy system. The perverse financial incentives that drive IOUs are fundamentally incompatible with environmental and energy justice, energy democracy, and energy sovereignty: as long as these incentives exist, regulators--with the assistance of an “investor-oriented” legal standard--will continue to prioritize the financial viability of utility companies over the interests of ratepayers, and utilities will remain unaccountable to the communities directly affected by their operations.

There is, however, a viable path forward: the current regime of investor-owned utilities must be replaced with an alternative, publicly-owned energy system. Public ownership of utilities is neither new in the United States (consumer-owned utilities currently provide electricity services to about 25% of the U.S. population) nor a panacea for systemic racism in our energy system. Nevertheless, transitioning from utilities centered on shareholder profits to utilities centered on the needs of customer-owners is a crucial first step to fully democratizing energy and realizing the goals of environmental and energy justice. Only when communities are no longer dependent on profit-driven monopolies for essential services and have seized control and ownership of energy resources and decision-making can we begin to develop an energy system grounded in racial, economic, and environmental justice.