This report, the first of three volumes of Next-Generation Performance-Based Regulation: Emphasizing Utility Performance to Unleash Power Sector Innovation, examines the concept of performance-based regulation (PBR) and how it can provide a framework to connect goals, targets, and measures to utility performance or executive compensation. It examines leading examples of PBR from around the world, including the United Kingdom’s Revenue = Incentives + Innovation + Outputs (RIIO) program, New York’s Reforming the Energy Vision (REV), and other successful initiatives in Denmark, Mexico, and South Africa. It also examines what regulators have learned from experience with early forms of PBR, finding that incentive measures need to be simply designed, predictable, clearly measurable, and sized in alignment with desired results. Rewards or penalties may be set too high or low initially, so a successful PBR program also needs to be adjustable.
The Next-Generation Performance-Based Regulation full report was published in 2017 as a collaboration between the National Renewable Energy Laboratory and RAP, part of the 21st Century Power Partnership initiative.