Arizona Commissioner: Chair's Proposed Direction On Retail Choice Rules Development Could Result In "Anchoring Bias"

Says Staff Should Not Develop Any Formal Retail Choice Rules Package At This Time, In Favor Of More Workshops

August 22, 2019

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Reporting by Paul Ring • ring@energychoicematters.com

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Proceeding with the consideration of retail electric choice as proposed by Arizona Corporation Commission Chair Bob Burns in a recent memo would, "unnecessarily burden an already overworked and understaffed Utilities Division, as well as threaten our ability to adopt ideal policies by prematurely anchoring our discussions to a defined proposal," ACC Commissioner Lea Márquez Peterson wrote in a memo.

As first reported by EnergyChoiceMatters.com on August 14, Burns has proposed that Staff develop a rules package for "full" retail competition to be docketed by January 10, 2020, to be discussed (not voted) no later than the Commission's February 2020 Open Meeting (see more details in our prior story)

Márquez Peterson wrote that directing Staff to advance just one of many potential outcomes, without first incorporating the input of stakeholders and Commissioner questions, "could close the Commission to other possibilities through the affect of anchoring bias."

"Throughout the workshop on retail electric competition and in additional research I have done on related issues, my primary concern has been to ensure both affordability and equal access to reliable electricity for all customers, especially those in low-income or rural communities," Márquez Peterson wrote

"Repeatedly throughout the workshop we heard statements from presenters that question whether these conditions could be met under a system that opened up full retail electric competition to all customers, including the residential sector," Márquez Peterson wrote

Márquez Peterson quoted the previously reported (story here) statement from Utilities Division Director, Elijah Abinah, who said during a recent workshop: "Based on the information presented to us, based on the information I have today, if you ask me to make a recommendation on retail competition on residential, I don't believe there is enough information that it is in the public interest ... Today, when it comes to residential retail competition, I don't believe there is enough information for me to recommend moving forward to residential. I believe the rule we proposed today is appropriate if you want to move forward."

Márquez Peterson wrote, "As I mentioned during the workshop, I question the process of having our Staff develop a draft rules proposal prior to us having adequate time to examine all of the various issues related to such an important and multi-faceted policy decision."

Márquez Peterson wrote, "Nobel winning psychologist Daniel Kahneman warns of a cognitive bias called the 'anchoring effect.' He explains that, 'People make estimates by starting from an initial value that is adjusted to yield the final answer.' He goes on to warn that, 'The initial value, or starting point, may be suggested by the formulation of the problem, or it may be the result of a partial computation. In either case, adjustments are typically insufficient.' Essentially, people rely too heavily on the first piece of information they encounter when trying to make a decision and tend to only consider a narrow field of alternatives centered around the initial proposal when in reality, the optimal solution may be found in a completely different vane. I would like to avoid this bias if possible, by accumulating as much information as possible before attempting to codify formal rules."

Márquez Peterson wrote, "In this case, you are asking for our 'starting point' to be developed based on a single Commissioners' suggestion after a solitary workshop on this issue. The last attempt at addressing retail competition consisted of over two dozen workshops, and it seems that we will hold many more in this case as well. Accordingly, I would suggest that we avoid having staff develop any formal rule package at this point as it may lock us into a narrow set of policy options and increase the risk that we ultimately adopt less than optimal policy recommendations."

"While I would argue that it is not Staff's job to propose rules packages for our consideration, if that is the approach this Commission chooses to take, the proposals prepared by Staff should at least be informed by the responses of the stakeholders to the questions posed by Commissioners and be directed by a formal vote," Márquez Peterson wrote

"At the workshop it was proposed that, 'perhaps the next step should be that each of us docket questions, and then at that point with as much data as we can provide, we move forward.' This approach was also recommended by our Staff with the understanding that questions would be sent out to stakeholders, and that their responses would be received prior to any further discussion of specific rules proposals," Márquez Peterson wrote

"There seems to be a belief among some Commissioners that gathering information and drafting rules proposals are separate events that can be conducted simultaneously and in parallel. I believe this is the wrong course. The questions we ask as Commissioners should be answered and addressed in detailed workshops first, and then used to inform the production of effective policy proposals," Márquez Peterson wrote

"Accordingly, I would suggest that we pursue a course more closely resembling 'Option 2' offered by Commissioner Olson in his letter dated July 23, 2019. Under such a procedure this Commission would 'establish a deliberate time table for consideration of all the issues that Commissioners feel need to be evaluated prior to voting for retail competition.' Presumably, this would result in the Commission holding multiple additional workshops related to retail electric competition prior to drafting or reviewing any formal rules proposals," Márquez Peterson wrote

Márquez Peterson proposed that at the next Staff Meeting, Commissioners can discuss:

1. A firm deadline for submitting their questions for Staff to distribute to stakeholders

2. A firm deadline for the submission of stakeholder responses

3. Precisely which topics they feel warrant consideration in a future individual workshop and,

4. A "deliberate time table" for these future individual workshops to be held

Márquez Peterson also cited the current strain on Staff's time and resources, writing that Burns' proposal directs Staff to allocate time and resources to a large man-hour project, without establishing a clear majority of the Commission in support

Márquez Peterson also wrote that, "My concern is that asking staff to take significant hours away from ther [sic] existing backlog of cases could delay progress on other major ongoing cases like those involving Johnson Utilities, expansion of renewables investment through PURPA, integrated resource planning, or utility disconnection policies."

"It only seems appropriate that, if we are to commit to such an outlay of limited Staff time and resources, it should be predicated on the policy the Commission adopted last October and come from a unified Commission voicing consensus through a formal vote," Márquez Peterson wrote

RE-00000A-18-0405

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