Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond

The document analyzes the emergence of 'equity PIMs'—regulatory tools that provide financial rewards or penalties to utilities based on their performance regarding equity metrics. It identifies seven US jurisdictions using these tools to address energy poverty and the inequitable distribution of clean energy benefits. The report distinguishes between program-based and outcome-based PIMs, discusses the role of reporting metrics and scorecards as precursors to financial incentives, and argues that PIMs must be part of a broader regulatory strategy including cost-control reforms and low-income assistance to be effective.

• Seven US jurisdictions—Colorado, the District of Columbia, Hawaii, Illinois, Massachusetts, New Jersey, and New York—have adopted equity PIMs to incentivize improved utility service, increased spending for underserved communities, or enhanced affordability.
• The most common application of equity PIMs is in energy efficiency, where five jurisdictions (Hawaii, DC, Massachusetts, New Jersey, and New York) use them to carve out specific proportions of spending or savings for low- and moderate-income (LMI) and underserved communities.
• Equity PIMs are categorized as either program-based, tied to specific initiatives like electric vehicle programs, or outcome-based, which provide utilities flexibility to meet broad targets such as reducing residential service disconnections in New York and Illinois.
• Regulators are using reporting metrics and scorecards as intermediate steps toward PIMs; these provide 'reputational incentives' and the necessary data to set future financial targets without risking the 'gaming' of complex social relationships.
• PIMs alone are insufficient for full regulatory reform and should be paired with complementary policies such as multi-year rate plans with revenue caps, fuel cost pass-through reform, and low-income discount rates.
• Current equity PIMs primarily address recognition equity (mitigating harms like power outage disparities) and distributive equity (delivering clean energy benefits), but have not yet addressed procedural or restorative equity.

APA

RMI (2024). Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond. https://rmi.org/resources/transforming-the-way-we-serve-vulnerable-communities-performance-incentive-mechanisms-and-beyond/

Chicago

RMI. Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond. 2024. https://rmi.org/resources/transforming-the-way-we-serve-vulnerable-communities-performance-incentive-mechanisms-and-beyond/.

Wikipedia

{{cite report |author=RMI |title=Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond |date=26 April 2024 |url=https://rmi.org/resources/transforming-the-way-we-serve-vulnerable-communities-performance-incentive-mechanisms-and-beyond/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024transforming, author = {{RMI}}, title = {{Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond}}, institution = {RMI}, year = {2024}, month = apr, url = {https://rmi.org/resources/transforming-the-way-we-serve-vulnerable-communities-performance-incentive-mechanisms-and-beyond/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }