Connecticut Explores Performance-Based Regulation for the State’s Utilities

In August 2020, Tropical Storm Isaias left more than 1 million customers in Connecticut without power. For many customers, it took nearly a week to restore power.

Partly in response to the storm, state legislators passed the “Take Back Our Grid” Act (PA 20-5). The bill required the state’s investor-owned electric utilities, Eversource and United Illuminating, to provide credits back to customers for the delayed storm response. It also required the Public Utilities Regulatory Authority (PURA) to open a proceeding to explore and implement a new framework for how the state should regulate its investor-owned utilities.

While Tropical Storm Isaias may have been a catalyst, adopting a new approach to utility regulation—specifically Performance-Based Regulation (PBR)—has been a nation-wide conversation for years. Performance-Based Regulation includes a broad set of policy tools that regulators can use to tie utility revenues more directly to improved performance, helping to overcome outdated financial incentives.

PURA’s PBR proceeding is a key opportunity to help make utilities work better for customers.

What would it mean to improve utility performance through PBR? Regulators could, for example, require utilities to track the number of customers enrolled in time-varying rates, which have been shown to help reduce both costs and greenhouse gas emissions. Often, tracking data in scorecards leads to improved performance based simply on the pressure of public comparisons to peer companies. But if regulators felt that there was sufficient data and experience to set specific performance targets for the metric being tracked, here enrollment in time-varying rates, they could then impose either rewards or penalties (or both) according to how performance changed over time.

PURA’s PBR proceeding began in earnest in March 2022. The process is expected to last well into 2023, and possibly 2024. While this is a long proceeding, it is critical to make sure that regulators take the time to consider all potential solutions.

Acadia Center has been working closely with other advocacy groups in Connecticut, including Vote Solar, Conservation Law Foundation, and Save the Sound, to raise awareness about the proceeding and to ensure that the proceeding incorporates a broad set of interests and perspectives.

While PURA and stakeholders will figure out many details over the coming months, PURA’s overarching goals for any PBR framework in Connecticut are to 1) enhance electric distribution company performance; 2) advance public policy; 3) improve customer empowerment and satisfaction; and 4) ensure reasonable, affordable, and equitable rates.

So far, PURA has held three stakeholder workshops, each with an accompanying working paper from PURA staff to gather specific feedback from stakeholders. While later stages of the proceeding will explore performance metrics and potential rewards and penalties in more detail, the process so far has helped stakeholders develop a better sense of which regulatory tools in Connecticut are working and which are not.

As the proceeding continues, Acadia Center will work to ensure that a broad set of voices are heard and to make sure that any new regulatory tools support key public policy goals and prioritize customers.

For more information, including Acadia Center reports and an introductory webinar on PBR that Acadia Center co-hosted with Vote Solar, Conservation Law Foundation, Save the Sound, see: https://votesolar.org/resources-for-performance-based-regulation-of-connecticut-utilities/