Several public utility commissions and stakeholders are exploring performance-based regulation, a regulatory framework to connect achievement of specified objectives to utility financial performance and executive compensation. PBR can include a collection of performance incentive mechanisms (PIMs) and supporting metrics or formulas that determine the levels of financial rewards or penalties (i.e., adjustments to allowed revenues) to achieve a specified objective or goals. NARUC facilitates the PBR State Working Group (details below) to support commissioners and commission staff in exploring the degree to which PBR can be a useful tool for balancing the interests of customers and financial requirements for utilities. Resources, activities, and partnerships that support these efforts are available below.
PBR State Tracker, April 2023
The PBR State Tracker is maintained by NARUC staff as a tool to present information summarizing developments for states currently implementing a performance-based regulatory framework. This tracker is updated on a quarterly basis with input and review by members of the PBR State Working Group. Please contact NARUC staff with any questions, feedback, or additions.
MegaModel Utility Business Models Game
NARUC has developed an interactive, discussion-based game to teach regulators, legislators, advocates, and other decision-makers about utility business models and regulatory regimes. As a new utility manager, your team can explore performance-based and cost-of-service regulation in vertically integrated and restructured environments.
During the game, each utility manager team runs a utility for five, two-year planning periods (10 years total). In each period, players can choose to build or contract for generation; build transmission, distribution, and flexibility resources; and institute or respond to new policies. The MegaModel Excel-based platform shows how these decisions impact customer bills, reliability (minutes of outages), earnings per share, and air emissions (carbon dioxide).
NARUC has routinely provided the MegaModel training to attendees of the Legislative Energy Horizon Institute and Wisconsin Public Utility Institute Basics course.
Watch the 7-minute demonstration video and contact us if you are interested in being trained to deliver the MegaModel game
Demand Flexibility within a Performance-Based Regulatory Framework, January 2023
The jointly formed National Association of State Energy Officials (NASEO)-National Association of Regulatory Utility Commissioners (NARUC) Grid-Interactive Efficient Buildings (GEBs) Working Group released the report Roadmapping: A Tool for States to Advance Load Flexibility and Grid-Interactive Efficient Buildings in 2021. The 2021 report explored various tools available for states to advance load flexibility and GEBs, aimed at State Energy Offices, Public Utility Commissions (PUCs), and other state and local agencies. This paper builds on past insights with a closer examination of demand flexibility (DF) barriers and implementation within a performance-based regulatory framework. As more complex forms of DF are introduced, regulatory frameworks can capture the impacts and potential benefits of new demand-side technologies. Specifically, this paper examines regulatory strategies that may be useful for state regulators seeking to advance DF and GEB policies.
Webinar: RMI Presentation on Performance Incentive Mechanisms (PIMs) Database February 1, 2024
Performance incentive mechanisms (PIMs) are rising in prominence as a tool to help align utility incentives with affordable, reliable, and equitable decarbonization. Whereas PIMs for energy efficiency or service quality have been in in place for several decades, policymakers, advocates, and utilities have more recently begun adopting PIMs to help realign utility incentives with emergent outcomes, such as greenhouse peak load reduction, resilience, and demand flexibility. However, information on PIM design and efficacy is sparse, making it difficult to develop and implement PIMs that are informed by other jurisdictions’ approaches. As such, RMI has developed the PIMs Database, a convenient of more than 130+ PIMs on emergent topics across the country. This webinar featured a presentation of the database, including examples of PIM designs from across the country with detail on how these frameworks can support utility business model reform efforts.
Speakers: Gennelle Wilson, RMI; Carina Rosenbach, RMI
Webinar: Leveraging Cloud Technologies Through Efficient Regulation November 2, 2023
This webinar explored how PBR approaches can impact utility IT investments and procurement decisions. Experts discussed how a performance-based and “Totex” ratemaking approach – which treats Capex and Opex equivalently for ratemaking purposes – has influenced the United Kingdom’s energy and water utility procurement decisions. Rachel and Rajiv further examined to what extent these “Totex” principles may translate in different U.S. market contexts with the potential to bring parity for utility investment in modern cloud-based products and services versus traditional on-premises IT systems.
Moderator: Hon Abigail Anthony, Rhode Island
Speakers:Rajiv Shah, Head of North American Policy and Markets, Octopus Energy Group; Rachel Fletcher, Global Director of Regulation and Economics, Octopus Energy Group
Webinar: Alternative Regulation and Incentives for Capital Efficiency September 9, 2023
Incentivization of capital efficiency should be a key issue for regulators today. Capital expenditures are needed to replace aging infrastructure, boost grid resilience, increase reliance on clean generation, and bolster the capacity to accommodate beneficial electrification. Due in part to cost pressures resulting from capex needs, modern ratemaking typically involves one or more alternatives to traditional cost of service ratemaking that are collectively called “Altreg”. These alternatives yield varied capex containment incentives. This presentation discussed which Altreg approaches can encourage capital efficiency and bend the cost growth curve. Cost trackers and formula rates were discussed, along with performance-based ratemaking (“PBR”) approaches such as multiyear rate plans, cost benchmarking, and targeted incentives for underused practices.
Moderator: Hon Abigail Anthony, Rhode Island
Speaker: Mark Newton Lowry, PhD, President of Pacific Economics Group (“PEG”) Research LLC
Webinar: Modernizing Regulatory Frameworks for the Future of Gas in an Era of Decarbonization May 5, 2023
This webinar explored how cities and states are setting ambitious decarbonization goals that are presenting unprecedented challenges for gas distribution utilities. While many gas utilities are optimistic that alternative fuels (hydrogen and RNG) can meet climate goals, there is a need to anticipate and acknowledge the potential for declining gas consumption resulting from efficiency and electrification that could impact the nature of a future gas delivery system. This presentation explores how regulatory frameworks governing gas distribution utilities need to be modernized to enable better alignment of financial incentives and deliver outcomes in the public interest during a period of uncertainty.
Moderator: Hon Abigail Anthony, Rhode Island
Speaker: Matt McDonnell, Strategen
Webinar: Can New Forms of PBR Advance the Clean Energy Transition? March 23, 2023
This webinar explored a totex ratemaking approach, which represents a broad-based strategy to address the potential bias toward capital expenditure (“capex”) by altering how regulators establish a utility’s revenue allowance. Cara Goldenberg and Kaja Rebane with the Rocky Mountain Institute, presented highlights from their recent paper exploring possible applications of totex ratemaking. This presentation was followed by Jacob Van Reen’s overview of utility accounting that included several examples to demonstrate how totex compares with traditional approaches.
Moderator: Hon Abigail Anthony, Rhode Island
Speakers: Cara Goldenberg, Rocky Mountain Institute; Kaja Rebane, Rocky Mountain Institute; Jacob Van Reen, CPA, Van Reen Accounting
Webinar: Strategies for Developing Effective Performance Incentive Mechanisms – Part 2 (Vermont) December 1, 2022
This webinar examined the Vermont Commission’s latest approaches for establishing metrics and creating effective Performance Incentive Mechanisms (PIMS). This included an explanation of the statutory basis for PBR implementation, an overview of the state’s energy efficiency programs, as well as a description of the PBR process (metrics, compensation, and utilities). The webinar concludes with lessons learned as the Vermont Commission continues to implement a performance-based regulatory framework.
Moderator: Hon Abigail Anthony, Rhode Island
Speaker: Joan White, Vermont Public Utility Commission
Webinar: Strategies for Developing Effective Performance Incentive Mechanisms – Part 1 (Hawaii) October 6, 2022
This webinar examined strategies for developing effective Performance Incentive Mechanisms (PIMS) and explored incentive and penalty frameworks in Hawaii. This included an overview of Hawaii’s PBR framework, with information on how the state developed their PIMS and corresponding targets. Additionally, the speaker explained how performance incentives are tied to various policies, including the state’s Renewable Portfolio Standard, deployment of advanced metering infrastructure (AMI), and cost savings sharing mechanisms. The upcoming Part 2 of this two-part expert webinar series will focus on PIMs-related developments in Vermont.
Moderator: Hon Abigail Anthony, Rhode Island
Speaker: Grace Relf, Hawaii Public Utilities Commission
Webinar: Beyond the Metrics: Tracking Performance Targets September 1, 2022
As the second part of a three-part webinar series exploring explore various subtopics of PBR implementation, experts will discuss some of approaches and frameworks for tracking performance targets. Participants will present information that can help regulators better understand how to establish performance criteria to facility the effective tracking of utility progress as various initiatives are advanced through the PBR framework.
Moderator: Hon Abigail Anthony, Rhode Island
Speakers: Jessica Shipley, Regulatory Assistance Project; Gennelle Wilson, Rocky Mountain Institute
Webinar: Establishing Metrics April 14, 2022
This the first of a three-part webinar series exploring explore various subtopics of PBR implementation. This first session examined performance considerations for establishing jurisdiction-specific metrics, including peak load reduction, third-party resource deployment, interconnection, data access, reliability and resilience, energy efficiency.
Moderator: Hon. CJ Manthe, Nevada
Speakers: Ryan Katofsky, Advanced Energy Economy; Rachel Gold, Rocky Mountain Institute; Doug Scott, Great Plains Institute
Webinar: Performance Incentive Mechanisms (PIMs) for Resilience June 24, 2021
Ultimately, for distribution company regulators, the desired outcomes for increased resiliency is avoided loss of load while simultaneously lowering infrastructure costs. A modern, efficient system will provide a high quality of service without overpaying for it. Additionally, regulators must consider who ultimately gains from resilience benefits and who ultimately pays for those benefits. How may a regulator incentive a utility to maximize the value of resiliency gains via a PIM? In March, the group met for a webinar on PIMs 101 and in April, a webinar on Resilience Metrics. This webinar will apply what we heard in the previous sessions to PIMs for resilience.
Moderator: Commissioner Michael T. Richard, Maryland Public Service Commission
Speakers: Mark Lowry, Pacific Economics; David Littell, Regulator Assistance Project; Commissioner Lillian Mateo Santos, Puerto Rico Energy Board
Webinar: Resilience Metrics April 16, 2021
This webinar oriented participants with resilience metrics in preparation for a meeting on PIMs for resilience. This webinar will discuss what metrics are in use today, but will and also explore how to think about constructing metrics adequate for your state and utility, and social, economic, and national security dynamics. Background materials include the IEEE Resilience Framework, Methods, and Metrics for the Electricity Sector white paper.
Moderator: Hon. Charlotte Mitchell, North Carolina Utilities Commission
Speakers: Joe Eto, Lawrence Berkeley National Laboratory;, Bill Chiu, SCE/Chair of IEEE Task Force on Resilience Framework, Methods, and Metrics for the Electricity Sector;, and Bobby Jeffers, Sandia National Laboratory
Webinar: Performance Incentive Mechanisms 101 March 12, 2021.
The NARUC CPI PBR State Working Group met to discuss the foundational components of performance incentive mechanisms (PIMs). This regulatory approach offers financial upsides or downsides to utilities for performance against targeted outcomes via cash payments or incentive rates of return.
Moderator: Dan Scripps, Michigan
Speakers: Mike O’Boyle, Energy Innovation, Grace Relf, Hawaii Commission, Ian Dobson, Minnesota Assistant Attorney General; and Pete Cappers, Lawrence Berkeley National Laboratory.
Webinar: Earnings Sharing Mechanisms August 13, 2020
Earnings sharing mechanisms are one way that a commission can manage a utility's actual rate of return and share efficiency gains with customers, although it may reduce the incentive to be efficient. In this state session, working group members heard from public utility commission staff from Hawaii, Nevada, and Vermont on how they have approached earnings sharing/adjustment mechanisms.
Speakers: Daniel Park, Hawaii Public Utilities Commission; Kim Lighthart, Public Utilities Commission of Nevada; Joan White, Vermont Public Utility Commission
Webinar: Multi-Year Rate Plan Considerations and Examples June 3, 2020
Multi-year rate plans are one way that commissions can reduce the frequency of rate cases by leveraging sophisticated forecasting and design to apply a rate for longer that a 12-month period. In this state working group session, members heard perspectives from Maine, Georgia, and Washington.
Speakers: David Littell, Former Maine Commissioner, Senior Regulatory Advisor at the Regulatory Assistance Project and Attorney at BernsteinShur; Jamie Barber, Georgia PSC Staff; Amy Andrews, Washington UTC Staff
Webinar: Performance-Based Regulation Foundations April 13, 2020
On this webinar, speakers discussed the principals of PBR, including key similarities and differences of cost-of-service and performance-based-regulation and the available tools to implement it.
Speakers: Michael O’Boyle, Energy Innovation; Matt McDonnell, Strategen
Chair: Commissioner Abigail Anthony, Rhode Island Public Utilities Commission
Vice Chair: Commissioner Jeff Hughes, North Carolina Utilities Commission
Membership: Over 30 jurisdictions in North America are members of the PBR state working group, including: Arizona, British Columbia, Canada, Colorado, Connecticut, District of Columbia , Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Kentucky, Massachusetts, Maryland, Maine, Michigan, Minnesota, Missouri, North Carolina, Nevada, Ohio, Oregon, Oklahoma, Puerto Rico, Rhode Island, Texas, Utah, Vermont, Washington, Wisconsin.
NARUC is grateful to the U.S. Department of Energy, Office of Electricity and Grid Deployment Office, which enables most of the resources and activities described on this webpage.
NARUC staff experts who support these activities: