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Forbes (Opinion): America's Utility of The Future Forms Around Performance-Based Regulation

Posted by Sonia Aggarwal on May 7, 2018

Sonia Aggarwal is the Vice President of Energy Innovation, and Director of America’s Power Plan.

"The utility business model is evolving in response to a fundamental shift in our power system economics.  Traditional utility models were built on the engine of inexorable electricity demand growth, which became less certain as America’s power system was built out and energy efficiency programs succeeded – electricity demand growth has been flat for 10 years, and it’s expected to stay that way.

"Electrifying transportation and buildings promise to provide future growth for utilities, but just how much growth and when it will happen is uncertain.  At the same time, customers are demanding more control over how they consume and produce their own energy, and energy economics have reached a critical cost crossover – renewable energy is now cheaper than many fossil power sources, even without counting health or climate benefits.

"In response, utilities – and their regulators – are increasingly embracing a new revenue model that rewards performance against goals to meet evolving customer demands and avoid unwanted consequences: performance-based regulation (PBR).

"PBR transforms the traditional utility revenue model where profit is driven by returns on capital investments (like power plants) or the volume of electricity sold into one where profit is driven by meeting goals to deliver an affordable, reliable, and clean power system..."

The author notes that 13 states are actively looking at or already moving forward on PBR, summarizes activity in several states, and references AEE's PowerSuite tool for tracking, and includes an AEE graphic depicting all the states' PBR activity.

See the complete Forbes opinion piece here.

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