A Decoupling Foundation
Many state regulators are implementing revenue regulation policies to break the link between sales of electricity and utility revenues. At a workshop conducted for the Missouri Public Service Commission, Richard Sedano provided an overview of decoupling mechanisms, explored barriers to implementation, and outlined the key choices commissions make when considering decoupling plans.
A well-designed decoupling mechanism provides utilities with a reasonable opportunity to collect approximately the same revenues that they would under conventional regulation—regardless of sales volume—while continuing to send customers economic price signals. Decoupling can help align utility incentives as closely as possible with the public interest in reliable, clean, cost-effective energy.