State Policy Description
Policy Components Questions
- 1. Has state passed legislation, created a task force, or opened a docket to investigate business models? Yes
- 2. Did the investigation include input from a diverse set of stakeholders? Yes
- 3. Does the state offer performance incentives for reliability? No
- 4. Does the state offer environmental performance incentives? No
- 5. Does the state offer incentives for investments in innovative technology? No
Policy Component information last updated July 02 2021
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.
For more information on the components of the policy see the full policy brief.