By Loretta Smolenski, Newton-Evans
Newton-Evans Research Co. recently completed a study of officials from all 50 state and D.C. public service commissions regarding the development of performance-based rates (PBR) and related incentives for America’s electric utilities.
Across the United States, only 11 states indicated that they have developed any PBR that are currently in effect. States with PBR guidelines include: California, Colorado, Florida, Maine, Massachusetts, Mississippi, Missouri, New York, Oklahoma, Oregon, and Rhode Island. Two other states, Louisiana and Pennsylvania, are currently developing guidelines.
Among the group of 38 commissions that had reported no PBR activity at present, only two indicated that they might consider performance-based rate development in the future.
Some officials reported that they did not make use of PBRs because “”the state was not deregulated.” However, several other officials from states that are not deregulated do, in fact, provide PBRs on a case-by-case basis, or upon request of a utility for a performance-based rate structure.
Commissions were requested to indicate which (if any) of the following groups were involved with their PBR decision-making efforts: neighboring states, National Association of Regulatory Utility Commissioners (NARUC), other states, utilities under the jurisdiction of the commission, other groups, and none.
Fourteen of the 15 commissions responding to the question indicated that they do coordinate their PBR development efforts with the utilities under the commission’s jurisdiction. Three work with neighboring states and only two work with any NARUC committees in their efforts. One works with non-neighboring states and one works with the industrial energy consumer group within the state.
In some states, utilities have been the driving force in the development of PBR. Several utilities within these states have made formal requests of the public service commissions to develop PBR or incentives for benchmarking quality of service.
A few state commission staff members indicated use of the term penalty-based rates as their interpretation of PBRs. The survey found five states acknowledging use of such penalty-based rate structures, and three others developing guidelines. One state indicated possible consideration in the future.
Indiana’s commission staff indicated that penalty-based rate guidelines were being established for use on a case-by-case basis. Colorado’s commission reported that while not penalty-based, they do have a bill credit for quality of service issues that come into effect. Oregon indicated use of penalty-based rates implemented as part of performance based package. Both New York and Illinois cautioned that performance-rate structures, if well conceived, already include “poor performance,” and, therefore, you could use the term penalty-based rates.
Smolenski is manager of operations with Newton-Evans Research Co. She can be reached directly via telephone (410-465-7316) or e-mail (email@example.com).
Study also looks into performance
Newton-Evans also researched the criteria used by the commissions for measuring electric utility performance. Forty-six commission staff members replied to the question. The five criteria listed on the survey were quantitative measures such as SAIDI (system average interruption duration index), quantitative measures such as SAIFI (system average interruption frequency index), other uniform or standard guidelines, qualitative measures and other measures.
Twenty-three commissions were using either or both SAIDI or SAIFI to measure electric utility performance. Nineteen are using qualitative measures. Eleven are making use of standard guidelines other than SAIDI and SAIFI. Twenty-five commissions are using other criteria in measuring electric utility performance.
Other uniform guidelines being used by state commissions include: customer complaints, MAIFI (momentary average interruption frequency index) measures, and others.
Qualitative measures being used at 18 commissions include the broad category of “customer complaints” which almost every one of the respondents indicated as the basis for the “qualitative” measure they were using.
Other criteria being used by the commissions across the country included customer outage call response times, customer guarantees, energy cost adjustments, storm outage measures, and combinations of quantitative measures such as SAIDI and SAIFI.