The Regulatory Contract in the Marketplace

77 Pages Posted: 10 Apr 2015 Last revised: 1 Mar 2016

See all articles by Emily Hammond

Emily Hammond

George Washington University - Law School

David B. Spence

University of Texas at Austin – McCombs School of Business – Department of Business, Government & Society; University of Texas at Austin - School of Law; University of Texas at Austin - Kay Bailey Hutchison Center for Energy, Law & Business

Date Written: 2016

Abstract

For decades, energy policy has struggled to reconcile two distinct visions for the future: the first seeks ever-more-competitive, efficient, and dynamic electricity markets; while the second seeks an ever-greener mix of electricity generation sources. Caught within this push-and-pull dynamic is the regulatory contract — a nineteenth-century concept that stands more for ordered regulation than competitive markets. This Article examines how piecemeal pursuit of two energy visions has produced mismatches between rapidly evolving markets and governance institutions that cannot change as quickly. To better evaluate these mismatches, the Article develops a framework that accounts not just for market operation and environmental externalities, but also the technical constraints of grid operation and electricity fuels. Relying on the experience of nuclear power, the Article creates an account of how a fuel source can be priced out of the market despite its apparent advantages in reliability and air emissions. With this understanding, the Article evaluates the political economy and governance challenges associated with diverse policy options aimed at better capturing valuable attributes of electricity. Ultimately, this analysis furthers our understanding of the regulatory contract in the marketplace, suggesting an updated vision for its role in mediating the competing goals for electricity markets.

Keywords: wholesale, electricity markets, grid, green energy, nuclear, regulatory contract, regulatory compact, ISO, RTO, FERC, NRC, EPA, Clean Power Plan

Suggested Citation

Hammond, Emily and Spence, David B. and Spence, David B., The Regulatory Contract in the Marketplace (2016). Vanderbilt Law Review, Forthcoming, GWU Legal Studies Research Paper 2015-11, GWU Law School Public Law Research Paper 2015-11, U of Texas Law, Public Law Research Paper No. UTPUB626, U of Texas Law, Law and Econ Research Paper, KBH Energy Center Research Paper No. 2016-3, Available at SSRN: https://ssrn.com/abstract=2584619

Emily Hammond (Contact Author)

George Washington University - Law School ( email )

2000 H Street, N.W.
Washington, DC 20052
United States

David B. Spence

University of Texas at Austin – McCombs School of Business – Department of Business, Government & Society ( email )

2110 Speedway, B6000
CA 5.202
Austin, TX 78705
United States
512-471-0778 (Phone)
512-343-0535 (Fax)

HOME PAGE: https://law.utexas.edu/faculty/dspence/

University of Texas at Austin - School of Law ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

University of Texas at Austin - Kay Bailey Hutchison Center for Energy, Law & Business ( email )

727 East Dean Keeton Street
Austin, TX 78705
United States

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