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Utility Dive: How Much–and How Fast–Will Colorado Change Utility Business Model

Posted by Matthew Bandyk on Jan 16, 2020

Utility Dive highlighted Colorado's efforts to change its utility business model through a proceeding underway on performance-based regulation (PBR), quoting AEE's Coley Girouard. Read excerpts below and the entire UD piece here. 

Colorado's current utility regulatory model is already leading the state toward clean, reliable energy, and does not need an overhaul, according to the state's largest investor-owned utility (IOU). Xcel Energy's Colorado subsidiary filed comments with state regulators Jan. 10 in response to the state's proceeding examining the potential benefits of performance-based regulation (PBR), in which utilities are rewarded based on their ability to deliver on preset goals and metrics.

PBR would be a major shift from the traditional cost-of-service model, which some critics say makes utilities biased toward large-scale capital infrastructure rather than new distributed energy technologies.

Colorado Gov. Jared Polis, D, has named PBR among the policies the state needs to pursue in order to achieve his declared goal of 100% renewable energy for Colorado by 2040.

In 2019, the Colorado legislature passed a bill directing the Public Utilities Commission (PUC) to open the proceeding and report on PBR and performance incentive mechanisms for the state's IOUs by November of 2020...

Rather than driving improvements in specific metrics like reliability, PBR should be about "aligning utility expectations with a 21st-century grid," Advanced Energy Economy (AEE) Principal Coley Girouard told Utility Dive. AEE has advocated for PBR reforms in several states and is also participating in the Colorado proceeding.

In their comments, the AEE urged that the PUC "use PBR to drive outcomes related to system-wide metrics such as peak demand reduction, increased energy efficiency, and greenhouse gas reductions" because "the existing regulatory framework is unlikely to sufficiently motivate utilities to actively seek out the best means for achieving these goals."

For example, the PUC could give the utility additional compensation if it is able to reduce its peak demand, but financially penalize the utility if its peak demand increases. In its comments, AEE supports an "outcome-based" approach based on broad goals like reducing peak demand, rather than dictating exactly what programs the utility should enact.

Girouard said the hope is that through these outcomes and incentives, utility strategies like integrating rooftop solar or other distributed energy resources can compete on a level playing field with infrastructure-heavy options like building power plants or distribution lines. PBR "doesn't predetermine that the traditional infrastructure way is the only way to do it" like the current system does, he said...

Read the entire UD piece here. 

Topics: AEE In The News