SOLUTIONS TO THE UTILITY INFORMATION PROBLEM

This research paper examines the 'utility information problem'—the lack of data regarding the locational value of distributed energy resources (DERs)—which obscures the boundaries of the electric distribution utility's natural monopoly. The author proposes that integrated distribution planning (IDP) is necessary to reveal this information, enabling a transition toward a Distribution System Optimizer (DSO) role. The paper evaluates two pathways to this transition: an information-intensive approach compatible with cost-of-service regulation and an outcome-focused approach utilizing performance-based regulation (PBR).

• The boundaries of the distribution utility's natural monopoly are currently unknown because there is insufficient data on how the system operates with millions of connected devices, two-way power flows, and the locational value of distributed energy resources (DERs).
• Integrated distribution planning (IDP) is presented as the essential tool for utilities to obtain the necessary system visibility. IDP involves analyzing demand-side and distribution-level investments alongside bulk-system resources to identify a cost-effective portfolio of resources and their locational value.
• The author proposes a Distribution System Optimizer (DSO) role to coordinate energy services, which can be achieved through two parallel regulatory paths: an information-intensive approach and an outcome-focused approach.
• The information-intensive approach is compatible with cost-of-service regulation (COSR) and supports the separation of the DSO function from the ownership of physical assets. However, it is a significant undertaking; for example, investor-owned utilities in California indicated they needed over five years to accumulate the data required to compare DER investments against traditional infrastructure.
• The outcome-focused approach utilizes performance-based regulation (PBR) to tie utility returns to achieving specific public policy goals and system optimization rather than capital investment. This approach aims to reduce 'capital bias' by rewarding utilities for choosing cheaper non-wires alternatives.
• Evidence from various jurisdictions suggests that performance incentives can be effective even at low revenue levels. Examples include Illinois (50 basis point adjustment to return on rate-base), Massachusetts (penalties up to 2.5 percent of revenue requirement), and the United Kingdom (250 basis points adjustment on return on equity).
• Performance-based regulation faces risks such as poorly calibrated baselines and the difficulty of setting accurate revenue caps. In the UK, some utilities earned profits due to external economic factors rather than efficiency, though the model generally drove innovation and met performance targets.

APA

O’BOYLE, M. (2017). SOLUTIONS TO THE UTILITY INFORMATION PROBLEM. Energy Innovation. https://energyinnovation.org/wp-content/uploads/APP_51st_State_Solutions_to_the_utility_information_problem.pdf

Chicago

O’BOYLE, MIKE. SOLUTIONS TO THE UTILITY INFORMATION PROBLEM. Energy Innovation, 2017. https://energyinnovation.org/wp-content/uploads/APP_51st_State_Solutions_to_the_utility_information_problem.pdf.

Wikipedia

{{cite report |last1=O’BOYLE |first1=MIKE |title=SOLUTIONS TO THE UTILITY INFORMATION PROBLEM |publisher=Energy Innovation |date=October 2017 |url=https://energyinnovation.org/wp-content/uploads/APP_51st_State_Solutions_to_the_utility_information_problem.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{oboyle2017solutions, author = {O’BOYLE, MIKE}, title = {{SOLUTIONS TO THE UTILITY INFORMATION PROBLEM}}, institution = {Energy Innovation}, year = {2017}, month = oct, url = {https://energyinnovation.org/wp-content/uploads/APP_51st_State_Solutions_to_the_utility_information_problem.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }