Volts Tying utility profits to actually doing a good job
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Oct 23, 2024 Cara Goldenberg is a performance-based utility regulation expert at the Rocky Mountain Institute, and Laura Gonzalez specializes in PBR strategies with Clean Virginia. They delve into how traditional utility regulation fails to align with modern energy goals. The conversation highlights the shift to performance-based regulation (PBR), emphasizing its potential to enhance efficiency, equity, and decarbonization efforts. They explore successful PBR implementations, like Hawaii’s, and emphasize the need for continued stakeholder engagement and evolving metrics to ensure accountability in utility performance.
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Misaligned Incentives
- Current utility regulations incentivize power sales and infrastructure growth, misaligned with climate goals.
- Utilities profit more by selling more power, discouraging energy efficiency and distributed resources.
Performance-Based Regulation (PBR)
- Performance-based regulation (PBR) ties utility profits to performance metrics like resilience, equity, and decarbonization.
- PBR aims to align utility incentives with modern needs, unlike traditional cost-of-service regulation.
Perverse Incentives of Cost-of-Service
- Cost-of-service regulation incentivizes utilities to maximize capital expenditures, leading to overspending.
- Operational expenses offer no profit, biasing utilities towards costly infrastructure projects.