Like many two-word phrases (“competitive markets,” “rate relief,” “fiscal integrity,” “light-handed regulation,” “social compact,” “adjustment clause,” any word-pair containing “reform”), “smart grid” has a simple sound but multiple meanings. BGE’s version, costing $835 million, had four main components: (1) replace or upgrade all existing electric and gas meters with “smart” meters; (2) install a two-way communication network linking utility-to-meter-to-customer-appliances; (3) implement mandatory residential time-of-use rates for June through September; and (4) recover all associated costs through a surcharge, prior to completion.

The Maryland Commission rejected the proposal, without prejudice. Climate change proceedings bring out everyone’s passions, but the Commission was dispassionate. Its Order (1) aligns risk with reward, (2) requires facts rather than hopes, (3) reframes the issue as customer service rather than cost recovery, and (4) prevents politics from obscuring objectivity. The Order exemplifies effective regulation. Application of Baltimore Gas and Electric Company for Authorization to Deploy a Smart Grid Initiative and to Establish a Surcharge for the Recovery of Cost, Case No. 9208, Order No. 83410 (June 21, 2010).

The plurality of regulatory proceedings originate with utilities seeking to improve their profitability. Profitability being part of the public interest, these submissions deserve our attention. But what if these filings are “framed” to divert our attention away from our public interest mission?

Robert Frank, a Cornell University economics professor, writes about the difference between false advertising and “promotional puffery.” Our laws ban the former but allow the latter because, he says, we assume the targets are “suitably skeptical.”

Not so fast. Recent behavioral research says we should be skeptical about our skepticism. Frank describes a psychology study conducted in the 1970s. The subjects had to spin a wheel, then guess what percentage of African countries were members of the United Nations. The subjects assumed the wheel was neutral, but it was rigged: For one group of subjects it always stopped on 10, for the other group it always stopped on 65. On average, the first group guessed that the percentage of African countries in the UN was 25 percent; the second group guessed 45 percent. The irrelevant wheel influenced judgment. The psychologists concluded, in a 1981 paper, that “the adoption of a decision frame is an ethically significant act.”

A utility proposal is not necessarily “promotional puffery,” but it is an exercise in framing—framing a private-interest quest (profitability, market share maintenance) as a public-interest question (viability, reliability, “synergies”). Does this framing determine, or at least influence, which problems receive regulatory attention, which solutions win approval? Does framing divert us from our public-interest mission?

For three common utility filings, I’ll describe the frame, the proposal, and the risk of diversion. What comes through is the false conflict between the framer’s private-interest mission and the regulator’s public-interest mission. By locating and eliminating the false conflict, we avoid the diversion. Then the needs of the utility and the public are served simultaneously.

This essay is the last in a five-part series applying principles from Howard Gardner’s 2006 book Five Minds for the Future. Those five minds are disciplined, synthesizing, creative, respectful, and ethical. This essay addresses the ethical regulator.

In regulation, we usually view “ethics” as avoiding wrongdoing—bribe taking, ex parte contacts, favoritism, and conflicts of interest generally. Gardner defines ethics more broadly: To act ethically is “to think beyond our own self-interest and do what is right under the circumstances.” Gardner at xiv. An ethical worker “passes the hypocrisy test: She abides by the principles even when—or especially when—they go against her self-interest.” Gardner at 136.

Paradoxically, we can define broad ethics in terms of self-interest. Gardner asks: “In what kind of a world would we like to live if we knew neither our standing nor our resources in advance?” His answer: “I would like to live in a world characterized by ‘good work’: work that is excellent, ethical, and engaging.” Gardner at 127.

Can these thoughts help us solve regulatory problems? Any number of regulatory challenges involve tensions between narrow self-interest and broad ethics. Self-interest has multiple versions: my company, my union, my state, my technology, my agency, my customers, my generation. Addressing these tensions, we can always behave ethically, in the narrow sense, by avoiding bribes, ex parte contacts, and conflicts of interest. But what would a broader ethical view require? Two common challenges follow.