A better path forward for utility regulation in Connecticut

To achieve a resilient, equitable energy system that works for everybody, we need collective action and cooperation from ratepayers, regulators, and providers. But what happens when utility business models are at odds with a clean and equitable future? And what could an alternative look like?

For decades, investor-owned utilities have operated on a financial framework called cost-of-service regulation (COSR). This model focuses on inputs. Utilities are able to collect money from customers when they sell electricity or gas, but they turn a profit when they build or repair infrastructure. COSR made sense historically, when the goal was to expand affordable electricity to all citizens. But after the oil crises of the 1970s, society’s views of energy consumption began to shift. Energy conservation and efficiency became much more mainstream goals — and over time, the public’s goals and the utilities’ financial incentives became less aligned.

Performance-based regulation (PBR) is a set of tools with the potential to put utilities and the public back on the same path. In contrast to COSR, which compensates utilities based on their investments, PBR is all about outcomes. How well did the utility perform in a specific area, like reliability? In other words, PBR rewards utilities for taking actions that benefit society.

Of course, as with any regulatory issue, equity must be at the forefront. There is an incredible opportunity to make equity and energy justice central tenets of PBR, but only if we’re deliberate in our planning and implementation to ensure that historically overburdened communities aren’t left behind.

We and our partners at Acadia Foundation, Save the Sound, and Conservation Law Foundation recently had the opportunity to host an information webinar outlining the benefits of performance-based regulation and the opportunities it presents in Connecticut and beyond. Check out (and share!) the full recording below:

If you’re ready for a deeper dive into utility regulation, we’ll be hosting the first in a series of workshops on Wednesday, July 28 from 1:00-3:00 ET. You can register here. Hope to see you!