The electric grid will require significant investments in the coming years to address a variety of system needs, including replacing aging assets, modernizing the grid and strengthening its resilience, and preparing for projected load growth. Meeting these needs while ensuring utility costs increase no more than necessary will be critical to maintaining affordability for customers.

This report examines the major drivers behind increasing utility costs in recent years. These have included increased spending on T&D infrastructure, reliance on natural gas for electricity generation, extreme weather and wildfires, and the slow adoption of new technologies. Exacerbating these challenges is the traditional electric utility regulatory framework, which creates incentives that run counter to cost control. Without thoughtful reforms, these perverse incentives will likely result in customer bills that are higher than necessary.

To address this challenge, RMI developed a strategic framework for utility cost control to clarify the range of regulatory options available to strengthen utility cost containment. The framework provides a comprehensive set of 7 strategies and 16 regulatory levers designed to help regulators, consumer advocates, and other stakeholders support utility cost-efficiency while meeting future energy demands.

Each strategy represents a different approach PUCs and other stakeholders can use to ensure ratepayers get the most bang for their bucks.

The Seven Strategies:

• Anticipate future needs by improving planning processes to ensure necessary investments are made at lowest cost and to avoid unnecessary spending.
• Coordinate electric and gas regulation to prevent redundant infrastructure spending and support cost-effective electrification.
• Lower financing costs to reduce the total cost of investments funded by ratepayers.
• Incentivize reduced spending by rewarding utilities for achieving cost-efficiencies.
• Leverage competition to unveil the best solutions at the lowest price.
• Avoid inefficient system expansion by prioritizing least-cost solutions to meet grid needs and by mitigating risks of imprudent spending.
• Encourage better fuel management to reduce the impact of volatile fossil fuel prices on ratepayer bills.

This report can help regulators, consumer advocates, and other stakeholders understand which cost-control strategies may be most appropriate in their jurisdictions, identify complementary cost control reforms and possible interactions, and explore if levers already in use are working as intended or require design changes in order to achieve desired outcomes. Though not every lever will be appropriate for all states, consideration of whether there are mechanisms in place to support each of the seven strategies for cost control may be of value. By leveraging this framework, regulatory stakeholders can better ensure ratepayer dollars are spent wisely, supporting both reliability and affordability during these times of rapid development.