Business Model Rate Design
Better-Designed Regulatory Processes Crucial to Meeting Evolving Grid Needs, Report Finds
New Rocky Mountain Institute report examines key lessons from utility regulatory reform processes in 10 states; offers recommendations to design more effective initiatives
BOULDER, Colo., Feb. 7, 2019 — Significant changes in grid technology, customer demands and public policy priorities have prompted efforts across the country to update utility business models and their associated regulations. Ensuring the processes used to advance these reforms are properly designed is a crucial element of achieving reform outcomes and success, according to a new report by Rocky Mountain Institute (RMI).
Yet even as legislative and regulatory efforts around the country attempt to manage and shape the scale, speed and complexity of the historic transformation taking place in the energy system, process approach and design decisions tend to receive less attention than the technical and economic details of the regulatory reform efforts themselves, the report, Process for Purpose: Reimagining Regulatory Approaches for Power Sector Transformation, finds.
Well-designed processes can enable collaboration and more transparent reform efforts, whereas poorly designed processes risk a loss of focus on intended objectives and deliver suboptimal outcomes. In light of the increasingly complex nature of electricity reforms spanning technical, economic and policy issues, regulatory proceedings and energy, the report offers updated tools and methods to confront a growing and diversifying portfolio of proceedings.
The report reviews utility regulatory reform efforts undertaken by 10 states, describes key process components to undertake reform and describes the most significant factors that impact the effectiveness of reform efforts. Insights were gleaned from interviews with more than 20 stakeholders involved in these processes, as well as from RMI’s engagement participating in and facilitating regulatory processes across the United States. The report follows the recent Navigating Utility Business Model Reform: A Practical Guide to Regulatory Design, a joint collaboration between RMI, America’s Power Plan, and Advanced Energy Economy Institute that offers a menu of regulatory options for policymakers, utilities and electric customers to best support and manage the maturation of a 21st-century grid.
“The evolution of reform process and design in regulatory settings must react to and keep pace with the growing demands of ratepayers for a cleaner, more resilient and more customer-oriented grid,” Cara Goldenberg, a senior associate at RMI and a report author, said. “We hope this report will serve as a resource for the range of system stakeholders—regulators, policymakers, utilities, customer advocates and others—to work collaboratively to develop meaningful reform efforts and effectively steer the transformation of the energy system.”
The paper examines four distinct stages of successful reform processes: initiating the reform process, communicating the vision for reform, conducting the reform process and delivering reform outcomes.
How each of these stages proceeds depends on the goals of the reform efforts. The most common goals for reform across the 10 states surveyed included: enhancing utility operations, such as improving system efficiency, reliability and resilience; improving customer service by reducing rates and supporting added customer choice and control and supporting societal objectives like integrating renewable energy and reducing carbon emissions, addressing risk allocation and preserving the long-term viability of utilities’ business.
To access a copy of Process for Purpose, see https://rmi.org/insight/process-for-purpose/
Marketing Manager, Rocky Mountain Institute
About Rocky Mountain Institute
Rocky Mountain Institute (RMI)—an independent nonprofit founded in 1982—transforms global energy use to create a clean, prosperous, and secure low-carbon future. It engages businesses, communities, institutions, and entrepreneurs to accelerate the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewables. RMI has offices in Basalt and Boulder, Colorado; New York City; Washington, D.C.; and Beijing.