skip to main content
OSTI.GOV title logo U.S. Department of Energy
Office of Scientific and Technical Information

Title: Performance-Based Regulation In A High Distributed Energy Resources Future

Abstract

Performance-based regulation (PBR) of utilities has emerged as an important ratemaking option in the last 25 years. It has been implemented in numerous jurisdictions across the United States and is common in many other advanced industrialized countries. PBR’s appeal lies chiefly in its ability to strengthen utility performance incentives relative to traditional cost-of-service regulation (COSR). Some forms of PBR can streamline regulation and provide utilities with greater operating flexibility. Ideally, the benefits of better performance are shared by the utility and its customers. The shortcomings of traditional COSR in providing electric utilities with incentives that are aligned with certain regulatory goals are becoming increasingly clear. In particular, COSR can provide strong incentives to increase electricity sales and utility rate base. Further, some parties express concern that traditional COSR does not provide utilities with appropriate financial incentives to address evolving industry challenges such as changing customer demands for electricity services, increased levels of distributed energy resources (DERs), and growing pressure to mitigate carbon dioxide emissions. In addition, attention to potential new regulatory models to support the “utility of the future” has renewed interest in PBR. This report describes key elements of PBR and explains some of the advantages and disadvantages ofmore » various PBR options. We present pertinent issues from the perspectives of utilities and customers. In practice, these different perspectives are not diametrically opposed. Nonetheless, this framework is useful for illustrating how various aspects of PBR may be viewed by those key groups. Regulators have a unique perspective, in that they must balance consumer, utility, and other interests with the goal of achieving a result that is in the overall public interest.« less

Authors:
 [1];  [2];  [3]
  1. Pacific Economics Group Research LLC, Madison, WI (United States)
  2. Synapse Energy Economics, Cambridge, MA (United States)
  3. Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
Publication Date:
Research Org.:
Lawrence Berkeley National Lab. (LBNL), Berkeley, CA (United States)
Sponsoring Org.:
USDOE Office of Electricity Delivery and Energy Reliability (OE)
OSTI Identifier:
1424222
Report Number(s):
LBNL-1004130
ir:1004130
DOE Contract Number:  
AC02-05CH11231
Resource Type:
Technical Report
Country of Publication:
United States
Language:
English
Subject:
29 ENERGY PLANNING, POLICY, AND ECONOMY; 32 ENERGY CONSERVATION, CONSUMPTION, AND UTILIZATION

Citation Formats

Newton Lowry, Mark, Woolf, Tim, and Schwartz, Lisa C. Performance-Based Regulation In A High Distributed Energy Resources Future. United States: N. p., 2018. Web. doi:10.2172/1424222.
Newton Lowry, Mark, Woolf, Tim, & Schwartz, Lisa C. Performance-Based Regulation In A High Distributed Energy Resources Future. United States. doi:10.2172/1424222.
Newton Lowry, Mark, Woolf, Tim, and Schwartz, Lisa C. Wed . "Performance-Based Regulation In A High Distributed Energy Resources Future". United States. doi:10.2172/1424222. https://www.osti.gov/servlets/purl/1424222.
@article{osti_1424222,
title = {Performance-Based Regulation In A High Distributed Energy Resources Future},
author = {Newton Lowry, Mark and Woolf, Tim and Schwartz, Lisa C.},
abstractNote = {Performance-based regulation (PBR) of utilities has emerged as an important ratemaking option in the last 25 years. It has been implemented in numerous jurisdictions across the United States and is common in many other advanced industrialized countries. PBR’s appeal lies chiefly in its ability to strengthen utility performance incentives relative to traditional cost-of-service regulation (COSR). Some forms of PBR can streamline regulation and provide utilities with greater operating flexibility. Ideally, the benefits of better performance are shared by the utility and its customers. The shortcomings of traditional COSR in providing electric utilities with incentives that are aligned with certain regulatory goals are becoming increasingly clear. In particular, COSR can provide strong incentives to increase electricity sales and utility rate base. Further, some parties express concern that traditional COSR does not provide utilities with appropriate financial incentives to address evolving industry challenges such as changing customer demands for electricity services, increased levels of distributed energy resources (DERs), and growing pressure to mitigate carbon dioxide emissions. In addition, attention to potential new regulatory models to support the “utility of the future” has renewed interest in PBR. This report describes key elements of PBR and explains some of the advantages and disadvantages of various PBR options. We present pertinent issues from the perspectives of utilities and customers. In practice, these different perspectives are not diametrically opposed. Nonetheless, this framework is useful for illustrating how various aspects of PBR may be viewed by those key groups. Regulators have a unique perspective, in that they must balance consumer, utility, and other interests with the goal of achieving a result that is in the overall public interest.},
doi = {10.2172/1424222},
journal = {},
number = ,
volume = ,
place = {United States},
year = {Wed Mar 07 00:00:00 EST 2018},
month = {Wed Mar 07 00:00:00 EST 2018}
}

Technical Report:

Save / Share: