In the July 2025 issue of Climate and Energy, NERA Senior Managing Director Jeff D. Makholm reflects on a decade of insights regarding economic regulation in the energy sector that were published in Climate and Energy. He identifies recurring themes, including the concept of “path dependence,” which highlights the resistance to change within regulatory agencies. This resistance can hinder the industries they oversee, as seen in the ongoing challenges faced by renewable energy projects waiting for grid access in the US.
Dr. Makholm also discusses the fragility of established US regulatory norms, particularly concerning the concepts of “prudence” and federal eminent domain. He notes that recent legal developments have put these norms at risk, impacting the natural gas market. Additionally, he addresses the difficulties regulators face in implementing greenhouse gas (GHG) regulations, pointing out that FERC’s attempts to act as a GHG regulator conflict with its existing role in the natural gas pipeline industry.
The article also examines pressing issues surrounding electricity transmission and the costly regulatory failures highlighted by recent energy disasters, such as Winter Storm Uri and the European gas crisis. Dr. Makholm argues these events underscore the vulnerabilities within the regulatory framework, suggesting state and federal efforts to integrate GHG considerations into energy policy may exacerbate existing challenges. Ultimately, he concludes that path dependence poses a significant obstacle for regulatory institutions worldwide.
As we look back on Dr. Makholm’s influential work over the years, here’s a brief overview of the key articles referenced:
- International Regulation and “Path Dependence”
Private and public regulatory systems in energy utility capital formation exhibit a strong resistance to change, which can hinder industry progress, as evidenced by the backlog of renewable energy projects awaiting grid access in the US.
2. Surprising Fragility in Bedrock US Regulatory Norms
The US regulatory model’s established norms, particularly regarding “prudence” and federal eminent domain, have become precarious in recent years due to evolving legal interpretations.
3. Difficulties with Greenhouse Gas (GHG) Regulation
Dr. Makholm discusses the challenges FERC faces in regulating greenhouse gas emissions, emphasizing the inconsistency of its role as a GHG regulator within the natural gas pipeline industry and the economic hurdles faced by state-level net zero GHG plans.
4. FERC’s Problems with Electricity Transmission
The US is grappling with a significant renewable electricity supply chain issue, as the best generation sites are distant from population centers, leading to a costly backlog attributed to FERC and regional transmission organizations.
5. Costly Energy Regulatory Disasters
Dr. Makholm reflects on recent energy regulatory disasters, such as Winter Storm Uri and the European gas crisis, which reveal significant regulatory failures that have resulted in massive financial losses for consumers.
