“... [T]he Commission has claimed to be the representative of the public interest. This role does not permit it to act as an umpire blandly calling balls and strikes for adversaries appearing before it; the right of the public must receive active and affirmative protection at the hands of the Commission.”

Scenic Hudson Preservation Conference v. FPC, 354 F.2d 608, 620 (2d Cir. 1965) (referring to the Federal Power Commission), cert. denied sub nom., Consolidated Edison Co. v. Scenic Hudson Preservation Conference, 384 U.S. 941 (1966).

Effective regulation requires effective regulators. Effective regulators have four attributes: purposefulness, education, independence and decisiveness. This first essay will address purposefulness.

The purposeful regulator articulates her purpose. Regulatory statutes require regulators to make decisions "consistent with the public interest." These statutes presume that private behavior, unregulated, will diverge from the public interest. The purpose of regulation is to align private behavior with the public interest.

The purposeful regulator therefore (1) defines the public interest, (2) identifies the private interests, (3) understands how each private interest might diverge from the public interest, and (4) designs regulatory mechanisms that achieve alignment.

What is "the public interest"? The phrase has multiple possible meanings. Its breadth invites flexibility, but flexibility requires accountability. Accountability comes from articulation. The effective regulator--the purposeful regulator--crafts her own definition, and articulates it publicly.

My definition of "public interest"--hardly the only possible definition--is a composite of economic efficiency, sympathetic gradualism and political accountability:

Economic efficiency means biggest bang for the buck--the best feasible benefit-cost ratio. An inefficient outcome means someone foregoes something attainable. That is not a public interest outcome.

Sympathetic gradualism means smoothing economic efficiency's hard edges. Strict benefit-cost calculation can be unsympathetic to citizens' short-term situations. Sympathetic gradualism means moderating efficiency's short-term pain, to preserve the public acceptability necessary to long-term gain.

Political accountability requires the regulator to create political acceptance of decisions that implement economic efficiency and sympathetic gradualism. Political accountability does not mean caving in to interest groups. It means educating and explaining; adjusting the angle of change without compromising the direction of change.

The public interest is not only a composite of these three components; it is also a compromise: not a compromise among private interests, but a compromise among the components of the public interest. Understanding this difference is a prerequisite for purposefulness.

Note:  The courts have confined "public interest" to the subject matter of utility regulation, as specified by legislative intent.  Compare Gulf States Utilities Company v. FPC 411 U.S. 747 (1973) (the “public interest” requires Commission to take into account antitrust law policies), with NAACP v. Federal Power Commission 425 U.S. 662 (1976) (the “public interest” does not authorize Commission to prohibit racial discrimination by utilities).

Might private interests diverge from the public interest? Each party to a regulatory case has multiple interests. Examples:

The public interest can accommodate these private interests in their legitimate form. But private interests can tend toward the illegitimate--a consumer’s desire for below cost power prices with above average reliability, an investor’s desire for above market returns with below average risks, management desires for market domination. The purposeful regulator must align these interests with the public interest. The private tendency to speed to soccer practice demands the public speed limit.

So how does “public interest” relate to regulatory purpose? The effective regulator does not seek "compromises," "balance" or "consensus" among private interests. The effective regulator establishes a centrifugal force, one that disciplines private expectations and hems in private behavior. That centrifugal force is the public interest.