Next-generation performance-based regulation: emphasizing utility performance to unleash power sector innovation


Performance-based regulation (PBR) has established a pathway for reforming hundred-year-old regulatory structures to unleash innovations within 21st century power systems. The old regulatory paradigm, built to ensure safe and reliable electricity at reasonable prices from capital-intensive electricity monopolies, is adjusting to disruptive technological advances that are transforming the way electricity is generated, delivered, and consumed. PBR enables regulators to recognize the value electric utilities bring to customers by enabling advanced energy technologies and integrating smart solutions into the utility grid and utility operations. These changes in the electric energy system and customer capacities have catalyzed increased interest in motivating regulated entities to move beyond traditional cost-of-service performance regulation. This report addresses best practices and lessons gleaned from more than two decades of PBR in practice, and analyzes how those can be applied to design innovative PBR programs.

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