Broader implications of PSC firings

Friday, July 14, 2006

The Baltimore Gas and Electric rate hike of 72 percent has, for the past several months, created a politically charged environment. Now, Gov. Robert L. Ehrlich Jr.’s veto of the rate relief plan passed by the Maryland General Assembly — and the legislature’s hasty veto override — is all but certain to be a hot campaign issue in this fall’s elections.

Both Governor Ehrlich and the Democratic-controlled legislature claim to be acting in the best interests of Maryland’s consumers. In truth, whether various aspects of the legislature’s bill, such as the provision preventing consumers from opting out of the rate stabilization plan, are more or less consumer-friendly can be debated in good faith.

But Governor Ehrlich has the better argument on one very important point he identified in his veto message: The wholesale dismissal of the five-member Public Service Commission to be replaced by new commissioners from a short list presented by the General Assembly’s legislative leaders is wrong-headed. Apart from any other aspect of the electricity relief bill, the governor is right that ousting all the commissioners does not serve the long-term interests of consumers. Moreover, the dismissal is contrary to upholding fundamental principles of sound constitutional governance.

Make injunction permanent

Maryland’s highest court has temporarily enjoined the firing of the PSC. The court should make the injunction permanent. Here’s why.

The legislature’s action is virtually unprecedented in the annals of American regulatory law because it signals that if the legislature, in the political passions of the moment, is dissatisfied with a particular PSC action, it may simply dismiss the commissioners and install a new group more to its liking. As Governor Ehrlich declared in his veto message, ‘‘it is unsettling to the state’s regulatory climate for the General Assembly to eliminate the members of a quasi-judicial agency with nearly a century of independence when the General Assembly disagrees with an opinion of the agency.”

Recall the brouhaha that occurred when PSC Chairman Kenneth Schisler terminated five top staff PSC employees two years ago. There was a loud outcry that this action compromised the PSC’s independence. In my opinion, there is nothing untoward about replacing senior staff in policymaking positions. But isn’t it ironic that the same legislative leaders who claimed the PSC staffers’ firing compromised the PSC’s independence don’t believe sacking the entire contingent of commissioners compromises the agency’s independence?

My own view is that the PSC should not be a truly independent agency. It does not comport with our notions of democratic accountability to have a so-called ‘‘headless fourth branch” of government consisting of agencies immune from influence by elected officials. But the legislature’s plan to replace the commissioners with its own picks subverts the usual way we divide functions and disperse government powers. The legislature makes the laws and the chief executive, within the confines of the legislative mandates, is responsible for implementing them. And, typically, in our system of separated powers, the governor has broad discretion to choose the officials in his administration who will implement the laws.

The legislature’s peculiar plan upsets the usual checks and balances that ensure that one branch of government (here the legislature), does not unduly weaken another branch (here the executive branch). Effective government depends on each branch maintaining the wherewithal to carry out its constitutional responsibilities in a vigorous manner.

Increasing accountability

If we want to increase the PSC’s political accountability, a better way would be to change the law to allow the governor to remove a commissioner over pure policy differences. Now commissioners may be removed only for ‘‘incompetence or misconduct.” It is this type of tenure-protection provision that generally is viewed as giving the PSC its presumed independence.

Another reform in this direction would be to allow the governor to designate one of the sitting commissioners the agency’s chair whenever he chooses. These changes would make the governor more politically accountable for the PSC’s policymaking actions.

It is unfortunate that Maryland’s consumers face significant rate increases. One way or another, however, after a six-year legislatively imposed rate freeze, consumers ultimately are going to have to pay increased rates to cover BGE’s higher wholesale energy costs. But by encouraging the view that Maryland’s legal and regulatory regime is unstable and unpredictable, the long-term harm inflicted on the state’s consumers may be greater than the impact from this one rate increase. Investment in new facilities and improvements in service quality will be discouraged.

And, more fundamentally, by acting rashly to aggrandize its own power at the expense of the power of a co-equal branch, the legislature may have done far more lasting damage to the interest in preserving separation of powers principles that are at the heart of our democratic system of governance.

Randolph J. May is president of The Free State Foundation, a nonprofit, Maryland-based, free market-oriented think tank. During Governor Ehrlich’s veto hearing in June, he testified against the portion of the legislature’s bill that dismissed the PSC.