ORIGINAL REPORTING: Seeking the new utility business model
Performance-based regulation: Seeking the new utility business model; As the push to upend traditional utility business models grows across the country, new leading efforts are showing results where others missed the mark.
Herman K. Trabish, July 23, 2019 (Utility Dive)
Editor’s note: The effort is rising in jurisdictions across the countries to reward utilities for doing what policymakers want done.
There is accelerating work to transform the utility business model through performance-based regulation (PBR).
Traditionally, utilities earn profits through regulator-approved rate increases that recover investment costs and add a margin of return. Many power sector stakeholders have unfulfilled ambitions to instead reward utilities for providing value to customers, for example through integrating more renewable resources and energy efficiency.
Setting multi-year rate plans with incremental rate increases in order to contain costs is "one of the two main components of PBR," Synapse Energy Economics Principal Associate Melissa Whited, who co-authored a 2015 PBR handbook, told Utility Dive. "Performance incentive mechanisms are traditionally, but not necessarily, a second component."
PBR is necessary to replace the traditional utility business model to one that serves policy goals and customer demand, advocates told Utility Dive. But instead of replacing the business model, leading PBR efforts are using regulatory proceedings to layer components of PBR for a more incremental, but nevertheless substantial, shift in objectives… click here for more
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