Dive Brief:
- Colorado House Bill 1250 would require the Colorado Public Utilities Commission (CPUC) to formally “explore alternative utility revenue models” that would better serve emerging opportunities in distributed generation and customer choice and to report findings by October 1, 2016.
- The bill would also require the CPUC to consider performance-based regulation that would drive innovation in economic structures and new technologies, including central-station and distributed solar and wind, demand-side resources like energy efficiency and energy management, and emissions reduction programs.
- This Colorado initiative follows other state initiatives, such as New York’s Reforming the Energy Vision (REV). The REV will transform utilities into providers of a platform for distributed resources. Hawaii and California have regulatory proceedings with similar goals, Massachusetts is working on grid modernization, and Minnesota may soon start its own proceeding.
Dive Insight:
Performance-based rate making would change how investor-owned utilities are paid to do business. Their present “cost-of-service” model allows them to build and maintain electricity delivery infrastructure and be compensated by customers at a guaranteed rate of return.
“…certain factors other than short-term economic costs deserve to be considered in establishing the rates and policies of investor-owned public utilities,” the bill begins. These factors include “long-term economic sustainability; efficiency of generation, delivery, and consumption; the resiliency and diversity of energy generation resources; environmental factors including water consumption and carbon emissions; and customer satisfaction.”
Performance-based rate making allows utilities to be pro-active and partner with private sector partners on the energy generation and electricity delivery that provides the most long-term customer value. It could mitigate the contentious net energy metering debate about the costs and benefits of solar and the shifting of infrastructure costs to non-solar owners. In that instance, it would allow utilities to work with rooftop solar and energy storage providers on solutions that most benefit the grid.
