More States Explore Performance-Based Ratemaking, but Few Incentives Are in Place

By [email protected] Performance-based ratemaking (PBR), an emerging regulatory framework that ties utility revenue to performance rather than capital investment, is on the rise in the United States.

According to new data on PBR activity by utility commissions and utilities, 19 states and Washington, D.C. have seen recent legislative and/or regulatory developments related to PBR — six more than a year ago.

Yet analysis of regulatory and legislative activity shows that while PBR is becoming more widespread, linking new performance metrics with financial consequences for utilities remains rare.

Performance-based ratemaking is a utility business-model shift that rewards utilities for performing well on key metrics, such as

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