Clarifying ‘regulatory capture’



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To the editor:

I’m honored to have been the subject of your June 24 Q&A feature in my capacity as the state’s new Con­sumer Advocate (“Q&A: PUC Consumer Advocate Donald Kreis,” June 24-July 7 NH Business Review). The dialogue does a fine job of describing what I bring to the job of representing the interests of residential utility customers before the Public Utilities Commis­sion.

However, my comments as reported in the Q&A about “regulatory capture” have apparently been mis­understood in some quarters, so I would like to clarify them here. Usually traced to the work of Nobel Prize-winning economist George Stigler (1911-1991), “regulatory capture” refers to the phenomenon whereby entities regulated by a government agency cultivate ongoing, positive relationships with the people who work at the agency, thereby gaining a sympathetic ear over time. This can come at the expense of the interests of the general public, which does not have occasion to build such relationships.

In other words, generally speaking, familiarity actually breeds the opposite of contempt. Thus the Legislature wisely created the Office of the Consumer Advocate, whose task is to “capture” the PUC on behalf of resi­dential customers just as utilities work to capture it on behalf of their owners.

Thus – and here is the point I was trying to make in the Q&A – success for the Office of Consumer Advocate is a function of how well I and my staff can collaborate and cooperate with the PUC. I did not intend any criticism of the PUC. Indeed, as a former general counsel of the agency, I know that everyone there goes to work every day sincerely striving to do the public’s business in an honorable and neutral fashion. I’ll let others judge the Office of Consumer Advocate, but New Hampshire can certainly be proud of its utility regulators – and of our Legislature for tak­ing steps to prevent regulators from being captured by the companies they regulate.

Donald Kreis
Office of Consumer Advocate
Concord

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