How to Restructure Utility Incentives

This report by RMI provides guidance on using Performance-Based Regulation (PBR) as an alternative to traditional cost-of-service regulation (COSR) to better align utility incentives with customer and societal interests, specifically regarding decarbonization, affordability, resilience, and social equity.

• Performance-based regulation (PBR) is presented as an alternative to traditional cost-of-service regulation (COSR) to address the increasing mismatch between traditional regulatory models and modern policy goals, aiming to align utility incentives with the interests of society and customers.
• The report defines comprehensive PBR as resting on four specific pillars designed to address the shortcomings of traditional COSR: incentivizing targeted outcomes, removing the throughput incentive, equalizing incentives between operating expenses and capital expenditures, and incentivizing cost efficiency.
• The report utilizes the comprehensive PBR framework implemented in Hawaii as a case study to illustrate the model.

APA

RMI (2024). How to Restructure Utility Incentives. https://rmi.org/resources/how-to-restructure-utility-incentives-four-pillars-of-comprehensive-performance-based-regulation/

Chicago

RMI. How to Restructure Utility Incentives. 2024. https://rmi.org/resources/how-to-restructure-utility-incentives-four-pillars-of-comprehensive-performance-based-regulation/.

Wikipedia

{{cite report |author=RMI |title=How to Restructure Utility Incentives |date=12 July 2024 |url=https://rmi.org/resources/how-to-restructure-utility-incentives-four-pillars-of-comprehensive-performance-based-regulation/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024how, author = {{RMI}}, title = {{How to Restructure Utility Incentives}}, institution = {RMI}, year = {2024}, month = jul, url = {https://rmi.org/resources/how-to-restructure-utility-incentives-four-pillars-of-comprehensive-performance-based-regulation/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }