Emerging Lessons on Performance-Based Regulation From the United Kingdom

By [email protected] Many U.S. states are considering moving from cost-of-service regulation for utilities toward a regulatory structure that incentivizes efficient fleet turnover, incorporates clean energy and other cost-effective technologies and stimulates smarter build-or-buy decisions.

These conversations are motivated by a number of factors, including aging infrastructure, new customer energy-use patterns, innovative competition from third-party service providers, the need for flexibility to accommodate carbon-free variable generation, a recognition of utilities’ unique role in the electric system, and a commensurate desire to ensure they remain financially viable.

Performance-based regulation has emerged as a promising potential solution to these challenges for many public utility commissions. Some,

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