SOLUTIONS TO THE UTILITY INFORMATION PROBLEM

The document argues that the traditional cost-of-service regulation (COSR) model creates a capital bias that hinders the integration of distributed energy resources (DERs). To transition utilities into distribution system optimizers (DSOs), the author proposes integrated distribution planning (IDP) to reveal the locational value of DERs. Two regulatory pathways are examined: an information-intensive approach that separates the DSO function from asset ownership to create competitive markets, and an outcome-focused approach using performance-based regulation (PBR) to align utility profits with system optimization and public policy goals.

• Traditional cost-of-service regulation (COSR) creates a conflict of interest because it rewards utilities for increasing their capital asset base, which contradicts the goal of deploying cost-effective distributed energy resources (DERs) that could replace traditional infrastructure.
• Integrated distribution planning (IDP) is identified as the essential first step to obtain the necessary data on the locational value and potential contribution of DERs to the grid, which is required before the scope of the natural monopoly can be redefined.
• The 'information-intensive approach' to creating a DSO involves utilities revealing system needs so a neutral optimizer can create markets where the monopoly infrastructure provider and third-party DER providers compete, though this approach does not resolve the utility's inherent capital bias.
• The 'outcome-focused approach' utilizes performance-based regulation (PBR) to tie utility returns to specific public policy goals and system optimization rather than capital expenditure, potentially reducing capital bias.
• Evidence from the United Kingdom, Massachusetts, and Illinois suggests that performance incentives can be effective motivators for utilities to meet regulatory targets, with the U.K. model using a total expenditures (totex) revenue cap to encourage cheaper DER options over capital expenditures.
• The California Public Utilities Commission's (CPUC) distributed resource planning (DRP) process illustrates the high cost and complexity of the information-intensive approach, with utilities requesting five years to accumulate data and proposing $5-6 billion in grid modernization investments, half of which is for collecting locational data.

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} }