Policy Profile

New Utility Business Model Proceeding

Policy description:

Utility regulation varies to some extent by state Public Utilities Commission (PUC), or their equivalent. Most Commissioners and PUC staff, however, still adhere to the now over fifty year old regulatory principles outlined by James Bonbright in his 700 page text, Principles in Public Utility Rates (1961). At the writing of Bonbright’s text, most utility companies were vertically integrated and were experiencing increases in load and had the ability to capitalize on huge economies of scale for new generation. These “natural monopolies” warranted a state regulatory body that could balance the tradeoff between efficiency (in the form of least cost production) and equity (consumer protection). Historic electric and gas utility regulation could be characterized as somewhat simplistic in its backward accounting, heavily grounded in principles developed in the era of load growth and large central generation – a time before Energy Efficiency Resource Standards (EERS) or Renewable Portfolio Standards (RPS). Many have argued recently that the regulated utility industry needs a new set of principles that are far more sophisticated, more forward planning, and more incentive based. For more information, see the full policy brief.

Download Full Policy Brief View Policy Component Questions

  1. Has a Legislative Task Force or utility commission proceeding examined utility business models?
  2. Was a report issued by the task force or after the proceeding?
  3. Does the report contain recommendations for changing utility business models?
  4. Has the state followed up on those recommendations?