PIMs for Progress

Performance incentive mechanisms (PIMs) are receiving increased attention for their ability to better align utility incentives with new social and environmental policy goals. By transitioning to business models where an increasing share of revenues relies on efforts to build a clean, reliable, and affordable energy economy, utilities have the opportunity to better meet evolving customer, policy, and technological demands.

PIMs can motivate utilities with financial rewards and penalties to deploy and utilize distributed energy resources (DERs), improve resilience, better engage customers, and deliver greenhouse gas (GHG) emissions reductions. However, the ability of PIMs to change the way the utility does business depends on their development, design, and implementation.

RMI’s new report, PIMs for Progress, reviews a selection of historical PIM examples and provides a simple taxonomy of the results to identify important lessons for future PIM development. By exploring why some PIM proposals are rejected by regulators and others are accepted, as well as what happens to PIMs after acceptance, we can learn how these regulatory tools can best be leveraged in a shifting electricity landscape.

Based on this research and interviews with stakeholders involved in recent PIM development in various US states, we offer recommendations to regulators, utilities, and other stakeholders looking to integrate PIMs into their regulatory frameworks.