Strategies for Encouraging Good Fuel Cost Management

The report identifies a systemic failure in how US utilities handle fuel costs, noting that fuel adjustment clauses pass 100% of costs to customers, removing any incentive for utilities to be efficient. To address this, the author proposes six regulatory interventions: fuel-cost sharing, removal of fuel-cost true-ups, fuel-risk reduction tariffs, improved planning and procurement, increased information access for regulators, and the implementation of efficiency ratios to reward performance.

• Current utility policies typically use fuel adjustment clauses that pass 100 percent of fuel costs to customers, meaning utilities are not rewarded for efficiency nor penalized for burning more fuel than necessary.
• The existing fuel cost structure creates two primary issues: a lack of financial incentive for utilities to manage costs carefully and limited visibility for regulators regarding utility efficiency.
• The report proposes six specific regulatory strategies to reduce fuel-cost burdens: fuel-cost sharing, fuel-cost true-up removal, fuel-risk reduction tariffs, planning and procurement changes, strategies to increase information access, and the use of efficiency ratios as performance incentives.

APA

RMI (2023). Strategies for Encouraging Good Fuel Cost Management. https://rmi.org/resources/strategies-for-encouraging-good-fuel-cost-management/

Chicago

RMI. Strategies for Encouraging Good Fuel Cost Management. 2023. https://rmi.org/resources/strategies-for-encouraging-good-fuel-cost-management/.

Wikipedia

{{cite report |author=RMI |title=Strategies for Encouraging Good Fuel Cost Management |date=11 July 2023 |url=https://rmi.org/resources/strategies-for-encouraging-good-fuel-cost-management/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2023strategies, author = {{RMI}}, title = {{Strategies for Encouraging Good Fuel Cost Management}}, institution = {RMI}, year = {2023}, month = jul, url = {https://rmi.org/resources/strategies-for-encouraging-good-fuel-cost-management/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }