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NCSL Releases New Report on Performance-Based Regulation

For Immediate Release

April 12, 2023

Denver—The National Conference of State Legislatures (NCSL) today released a new report describing regulatory transformations the U.S. electric utility industry has been undergoing in recent years. The report, Performance-Based Regulation: Harmonizing Electric Utility Priorities and State Policy, explores how state lawmakers are pursuing new approaches to utility regulatory practices to adjust to changing industry dynamics and meet shifting consumer demands and state energy policy goals.

Developed with support from the U.S. Department of Energy’s Office of Electricity, this report is intended to provide state legislators with context around evolving industry dynamics, an overview of the most common performance-based approaches to utility regulation and an introduction to state legislatures’ role in defining the goals and expected outcomes from transitioning to a performance-based regulatory framework.

In addition, this report will highlight:

  • Review of the traditional, cost-of-service approach to electric utility regulation.
  • New regulatory frameworks: An overview of performance-based regulation (PBR).
    • At least 17 states and Washington, D.C. have enacted legislation that either opens the door to PBR or requires utilities to operate under this new regulatory structure.
  • Introduction to the most common approaches to PBR: Performance metrics and incentive mechanisms, revenue decoupling and multiyear rate plans.
  • Examples of various state approaches to implementing PBR.

As the energy sector undergoes a period of significant transformation, states are increasingly looking at how their approach to utility regulation can align state and industry goals while continuing to provide safe, reliable and affordable energy.

This report was written by Dan Shea, program principal in NCSL’s Energy, Environment and Transportation program.

View the full report here.

NCSL is a bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories. It provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.

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