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On-Demand Training:
Performance Based Regulation for Utilities and Stakeholders

Recorded: March 3, 2022

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The way we generate, distribute, consume, and pay for power today has been slowly evolving over the past decade. Customers are generating some of their own power, advanced metering structures allow for more sophisticated rate design, and large industrials—and even some residential customers—can actively adjust their demand in reaction to price signals and peak events. Utilities, for their part, continue to look for ways to recover enough revenue to provide a reasonable return for shareholders. Many utilities are looking at alternative ratemaking approaches, including performance-based regulation (PBR), to respond to changing customer needs and decouple cost considerations from load changes.

This course on PBR will examine the principles of sound ratemaking, how regulatory objectives can impact the various alternatives, and elements of successful PBR mechanisms. The course will show the momentum of PBR across North America and where individual states are implementing or pursuing PBR. A regulatory perspective and several utility case studies including success at Hawaiian Electric (HECO) will be shared in this event.

Learning Outcomes

  • Explore the principles of sound rate-making and regulatory objectives
  • Discuss the current environment of accommodating distributed energy
  • Identify why some regulators are looking at new PBR-like mechanisms
  • Discuss the elements of a successful PBR mechanisms
  • Review alternative rate-making mechanisms
  • Discuss the elements of a successful PBR mechanism
  • List the steps and options for implementation
  • Review relevant case studies

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This is a recorded session - no instructor interaction is available. Recordings do not qualify for continuing education credits. Recordings will expire 30 days from date of purchase and sharing, downloading or copying of the recording in any way is strictly prohibited and will result in the termination of your license.

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Recording license(s)$ 895.00 each

Agenda

9:00 AM - 4:30 PM

Course Timing

Opening Address: Regulatory Perspective on PBR

Principles of Sound Ratemaking and Regulatory Objectives

  • Stakeholder interests and perspectives
  • Ratemaking principles and regulatory objectives in the context of a changing paradigm

Overview of Traditional Cost-of-Service (COS) Ratemaking

  • Pros and cons

Current Environment – What is Prompting the Need for Change?

  • Consumer preferences are changing; to incentivize utilities to respond to these changing needs, some regulators are looking at new PBR-like mechanisms
    • These will likely include new metrics, including sustainability, promotion of interconnection, and in some cases inclusion of local labor workforces
    • Increasingly, utilities will need to further demonstrate that capital investments have had a positive impact on customers, beyond traditional reliability measures
  • Policy priorities/directives

Case Studies

  • Examples of PBR in different jurisdictions
    • Hawaii sees early successes with PBR
    • Regulatory process design
    • Priority outcomes and guiding principles
    • What has worked well and what hasn’t

Overview of Alternative Ratemaking Mechanisms

  • Alternative rate-making mechanisms fall along a spectrum from “incremental” to “comprehensive” change
  • Strengths and weaknesses of specific alternative ratemaking mechanisms

What is PBR and in What Ways it is Different from Traditional Ratemaking?

  • History
    • Original concept
    • Modifications over time
    • Lessons learned — what has worked and what hasn’t work
    • States where concept is being evaluated
  • Types
    • Performance incentive mechanisms (PIMs)
      • Effective PIMs
      • Non effective PIMs
    • Price cap
    • Revenue cap
    • Benchmarking
    • “Menu of options”
    • Pros and cons of each
    • Decoupling

Elements of a Successful PBR Mechanism

  • Identify goals & objectives
  • Identify outputs and outcomes
    • Quantifiable and measurable metrics
    • Examples of metrics
  • Aligning stakeholder interests

Steps and Options for Implementation

  • Design considerations
    • Goals and objectives
    • Outputs and outcomes
    • Quantifiable and measurable metrics

Breakout Session

  • Interactive session for participants to co-design PBR mechanisms from the perspective of different stakeholders

Conclusions & Takeaways

Instructors

Katie Sieben has served as a Minnesota Public Utility Commissioner since January of 2017. In April, 2019, she was appointed to serve as Chair of the Minnesota Public Utilities Commission by Governor Tim Walz and Lt. Governor Peggy Flanagan. Commissioner Sieben is a member of the National Association of Regulatory Utility Commissioners (NARUC) where she serves on the Committee on Energy Resources and the Environment, the Subcommittee on Nuclear Issues─ Waste Disposal and the Washington Action Committee. Sieben also serves as the Vice President of the Mid-America Regulatory Conference (MARC) and is the Commission’s representative and serves as Chair on the Executive Committee of the Nuclear Waste Strategy Coalition (NWSC). Commissioner Sieben has taught as a community faculty member and adjunct professor at Metropolitan State University’s master’s in advocacy and Public Leadership Program. She earned her B.A. from Colorado College, was a Policy Fellow at the Hubert H. Humphrey Institute of Public Affairs at the University of Minnesota and earned a master’s degree in public administration from the Harvard Kennedy School.

Katie Sieben

Chair

Minnesota Public Utilities Commission

Rick Starkweather has been a management consultant for over 30 years and is a leader in ScottMadden’s regulatory practice. His areas of expertise include strategic and business planning, budgeting and forecasting, regulatory compliance and rate case support, and organizational and operations improvement. Prior to joining ScottMadden, he was a consultant with Deloitte Consulting. He also has experience in the healthcare and chemical industries and helped lead the start-up of two companies. Mr. Starkweather received a B.S. in mechanical engineering from Northwestern University and an M.B.A. from the University of Chicago Graduate School of Business. He is also a Certified Measurement and Verification Professional (CMVP) and Certified Energy Auditor (CEA) through the Association of Energy Engineers.

Rick Starkweather

Partner

ScottMadden, Inc.

Mark Meitzen, PhD (University of Wisconsin–Madison) is a Senior Consultant at Christensen Associates, where he has been employed since 1990. He is currently serving as principal investigator on NCFRP24, Preserving and Protecting Freight Infrastructure and Routes.  Dr. Meitzen was a principal author of the November 2008 Christensen Associates’ study of the U.S. freight railroad industry commissioned by the Surface Transportation Board. He was also the project manager and one of the principal authors of Christensen Associates’ supplemental report to the STB on railroad capacity and investment issues. Dr. Meitzen has expertise in the economic analysis of network industries including telecommunications, railroad, electricity and postal. In addition to the recent STB study, his work in the railroad industry includes analysis of railroad mergers and application of the STB’s Constrained Market Pricing standards, including its Stand-Alone Cost methodology.    He also serves as an economic expert in regulatory proceedings on incentive regulation, pricing, and economic costing matters. Prior to joining Christensen Associates, Dr. Meitzen was a corporate economist at Southwestern Bell Telephone Company and was an assistant professor of economics at Eastern Michigan University and the University of Wisconsin-Milwaukee.

Mark Meitzen, PhD

Senior Consultant

Christensen Associates

Nicholas Crowley, MS (University of Wisconsin–Madison) is an Economist at Christensen Associates.  His professional work is primarily with natural gas pipeline and electricity regulation, including wholesale and retail markets. For electricity, he has participated in numerous costing and pricing projects, which involve computational analytics and econometrics, performance-based ratemaking, marginal cost estimation, total factor productivity estimates, and load response with respect to efficient time-of-use tariff options within retail markets. Mr. Crowley’s analyses and study results have been summarized in major reports and formal studies filed with regulatory authorities in Canada and the U.S. Prior to joining CA Energy Consulting,  he served as an economist with the Federal Energy Regulatory Commission, where his work experience was concentrated in natural gas pipeline regulation and assessment of electricity markets. Mr. Crowley was also involved in FERC’s performance-based regulation of oil pipeline rates.

Nick Crowley

Economist

Christensen Associates

Cara is a Manager on RMI’s Carbon-Free Electricity Team where she works directly with Public Utilities Commissions and other stakeholders on regulatory reforms and changes to the utility business model needed to support the integration of clean and distributed energy resources. She is the co-author of various RMI reports focused on performance-based regulation, regulatory process design, and demand flexibility. Before joining RMI, Cara received a Master’s in Public Affairs at Princeton University. Prior to Princeton, Cara worked at Dian Grueneich Consulting where her work focused on analyzing state and regional clean energy policies and regulations.

Cara Goldenberg

Manager

Rocky Mountain Institute (RMI)