Performance-Based Ratemaking for Electric Utilities: Review of Plans and Analysis of Economic and Resource- Planning Issues Volume I

Our objective is to review in detail electric utilities' current experience with PBR. The report should be of interest to technical staff of utilities and regulatory commissions that are actively considering or designing PBR mechanisms. To meet our objective, we define the types of comprehensive PBR being considered by electric utilities and review 11 implemented or proposed PBR plans. We summarize each plan, provide a comparative analysis of features, and identify emerging trends. We focus on the PBR plans as filed by utilities or as adopted by regulatory commissions. Ultimately it will be desirable to analyze the performance (results) of PBR mechanisms, but at this time insufficient data exists for us to conduct such an analysis. PBR plans require specification of key elements and we discuss several including term, commitment, indexing methods, and earnings sharing mechanisms. We also discuss the coordination of multiple, separate incentive mechanisms. Finally, we look at the interaction among PBR and utility-sponsored energy efficiency programs and the restructuring of the industry's generation segment.