November 16, 2017 Performance-Based Regulation
Transcript of November 16, 2017 Performance-Based Regulation
![Page 1: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/1.jpg)
David Littell
Principal
The Regulatory Assistance Project (RAP)®
550 Forest Avenue, Suite 203
Portland, Maine
United States
+1 207 592 1188
raponline.org
Bermuda Energy Summit 2017: Building Bermuda’s Energy Future
Performance-Based Regulation
November 16, 2017
![Page 2: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/2.jpg)
1 What is Traditional Regulation and What is PBR Ratemaking?
![Page 3: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/3.jpg)
Regulatory Assistance Project (RAP)®
• Incentives of traditional regulation
• Build and own to grow rate base
• Increase volume of sales and electricity usage
to enhance profits
• Decrease expenses (OPEX)
• Avoid disallowances
3
“All regulation is incentive regulation”
![Page 4: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/4.jpg)
Regulatory Assistance Project (RAP)®
• Good things that are not profitable for the utility?
(EE, solar PV)
• Bad things that are profitable to the utility? (Non-
beneficial electrification)
• Good things not getting done for lack of interest or
motivation? (Smart meters)
• Bad incentives but easily seen or less easily
seen? (Free incandescent holiday lights)
4
Questions: Are there . . .
![Page 5: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/5.jpg)
Directional Incentives
Photo: Shirley Niv Marton
![Page 6: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/6.jpg)
Measurable Performance Criteria Measurable Performance Criteria
Photo: Braden Collum
Measurable Performance Criteria
![Page 7: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/7.jpg)
2 Why is Alternative Regulation Important?
![Page 8: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/8.jpg)
Regulatory Assistance Project (RAP)® 8
PBR enables reform of 100-year old regulatory paradigm
Source: US-Canada Power System Outage Task Force final report, April 2004.
![Page 9: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/9.jpg)
Regulatory Assistance Project (RAP)® 9
PBR and smart transformation of power sector
Source: Farrell, J. (2011). The Challenge of Reconciling a Centralized v. Decentralized Electricity System. Institute for Local Self-Reliance.
![Page 10: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/10.jpg)
Regulatory Assistance Project (RAP)® 15
2006
Only three states were saving
0.8% of sales or better
15
![Page 11: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/11.jpg)
Regulatory Assistance Project (RAP)®
2014
18 states were saving
0.8% of sales or better
16
![Page 12: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/12.jpg)
Regulatory Assistance Project (RAP)®
• Solar distributed generation
• Higher ramping rate for integration of renewables
• Peak load reduction via demand response
• Increase customers enrolled in time-varying rates
• Use advanced metering infrastructure?
• EV rate education and charging control to
minimize system and ratepayer costs
12
PBR can identify and target positive incentives and outcomes
![Page 13: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/13.jpg)
Regulatory Assistance Project (RAP)® 13
Recent history is full of transformative technology
changes that were not foreseen by experts.
PBR can harness disruption
![Page 14: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/14.jpg)
Regulatory Assistance Project (RAP)®
• Innovative rate design aligns interests of utilities,
regulators, customers
• Innovative rate design can provide cost
containment incentives to utilities
• Poorly designed mechanisms exist, and provide
debatable benefits
• Innovative rate design could help reform
regulation for the “next generation” utility
14
Takeaways
![Page 15: November 16, 2017 Performance-Based Regulation](https://reader034.fdocuments.us/reader034/viewer/2022042410/625eca30590932115043a449/html5/thumbnails/15.jpg)
David Littell
Principal
The Regulatory Assistance Project (RAP)®
+1 207 592 1188
raponline.org
550 Forest Avenue, Suite 203
Portland, Maine
United States
About RAP The Regulatory Assistance Project (RAP)® is an
independent, non-partisan, non-governmental
organization dedicated to accelerating the transition
to a clean, reliable, and efficient energy future.
Learn more about our work at raponline.org