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The report advocates for a transition from traditional cost-of-service regulation (COSR) to comprehensive performance-based regulation (PBR) to better align utility incentives with modern societal and environmental goals. It proposes a 'Four Pillars Model' consisting of incentivizing cost efficiency, removing throughput incentives, equalizing incentives for capital and operating expenses, and incentivizing targeted outcomes. The document includes an overview of PBR tools and uses Hawaii's framework as a case study for implementation.

The document introduces performance-based regulation (PBR) as a modern alternative to early 20th-century utility regulatory frameworks, which are currently challenged by the rise of renewable energy, distributed energy resources, and electrification. PBR is presented as a mechanism to align utility incentives with policy outcomes such as reduced emissions and improved social equity.

The document argues that traditional cost-of-service regulation (COSR) creates perverse incentives—such as 'gold plating' and 'capex bias'—that hinder the affordable deployment of clean energy and demand-side management. It proposes a transition toward Performance-Based Regulation (PBR), which compensates utilities based on target outcomes rather than costs. The guide details a 'Four Pillars Model' for comprehensive PBR: incentivizing cost-efficiency, removing the throughput incentive, equalizing capex and opex incentives, and incentivizing targeted outcomes. Key tools discussed include revenue decoupling, multi-year rate plans (MYRPs), and performance incentive mechanisms (PIMs). The text contrasts incremental PBR, which layers tools onto COSR, with comprehensive PBR, which fundamentally restructures the regulatory framework, citing Hawaii's 2020 framework as a comprehensive example.

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.

The briefing highlights a severe energy affordability crisis in the US, where high fossil fuel prices and rising electricity rates are increasing household bills, with estimated winter increases of 10 percent for electricity and 28 percent for natural gas. It details how this burden disproportionately affects low-income, Black, and Latinx households, often forcing them to choose between energy payments and basic necessities. The document proposes a suite of regulatory solutions, including shutoff moratoriums, arrearage management programs, expanded outreach for the Low-Income Home Energy Assistance Program (LIHEAP), and the implementation of fuel cost-sharing structures to protect ratepayers from volatile fossil fuel prices. Long-term recommendations include adopting totex ratemaking, performance-based regulation, and leveraging Inflation Reduction Act (IRA) funds to transition toward a clean energy system.

The report examines the shift from traditional energy efficiency programs, which focus on raw energy savings, toward 'climate-forward efficiency' that prioritizes GHG reductions. It identifies two types of performance incentive mechanisms (PIMs): 'explicit GHG' PIMs, which directly reward carbon reductions, and 'policy intent' PIMs, which implicitly encourage GHG reductions through fuel switching or time-based savings. The document highlights early implementations in New York, Vermont, and Washington, D.C., and suggests that tracking metrics and scorecards can serve as a starting point for states not yet ready for full PIMs.

The report argues that traditional US public utilities commission (PUC) processes are too slow and restrictive to meet urgent decarbonization and equity mandates. It recommends four primary reforms: setting clear proceeding objectives, expanding stakeholder roles in solution development, reducing information asymmetry by unlocking utility data, and initiating new inclusive processes such as regulatory sandboxes and updated benefit-cost analysis frameworks.

The document details the Hawaii Public Utilities Commission's (PUC) adoption of a performance-based regulation (PBR) framework featuring nearly 40 metrics and scorecards for Hawaiian Electric. It argues that PBR helps overcome traditional 'cost of service' regulatory incentives that hinder clean energy investments. The brief provides three primary lessons: the value of using non-financial scorecards for emergent outcomes like transportation electrification and customer equity, the necessity of using proxies and iterative analysis when precise data is unavailable (such as for LMI Energy Burden), and the importance of diverse stakeholder engagement to ensure a comprehensive portfolio of performance mechanisms.

The brief outlines a pathway for the U.S. to reach 90 percent zero carbon electricity by 2035, leveraging falling costs of solar, wind, and batteries. It projects that this transition could support 530,000 net new energy jobs annually and reduce economy-wide emissions by 27 percent without increasing customer bills. The document provides a set of policy recommendations for state-level officials, including the adoption of Clean Energy Standards, prohibitions on new natural gas investment, and the creation of ratepayer-backed bonds to securitize uneconomic fossil fuel assets.

The policy brief argues that the U.S. can achieve 90 percent zero-carbon electricity by 2035 through a federal clean energy standard and complementary reforms in tax credits, manufacturing, transmission planning, and wholesale market design. This transition would require significant scaling of solar, wind, and battery storage, while retiring the coal fleet and utilizing existing gas plants only for flexibility. The authors emphasize the need for a 'just transition' for coal-dependent communities and the modernization of utility regulation through performance-based models and all-source procurement to ensure the transition is affordable and equitable.

The guide advises utility regulators to avoid postponing key climate and energy proceedings during the COVID-19 pandemic by adopting virtual engagement tools and prioritizing high-impact projects. It emphasizes that maintaining momentum on emissions reductions and utility business model reforms is critical to limiting global warming to 1.5°C and stimulating economic recovery through the clean energy sector.

The report argues that natural gas is not a viable 'bridge' fuel but rather a risk to climate stability and shareholder value. It highlights that new gas infrastructure is increasingly incompatible with the Paris Agreement's 1.5°C goal and faces significant economic threats from the falling costs of renewables and storage. The document details how utilities face 'stranded asset' risks, regulatory pressure from state and city decarbonization mandates, and customer defection to community choice aggregations and corporate clean energy contracts. It suggests that 'steel for fuel' strategies—replacing fossil fuel generation with capital investment in renewables—offer a more sustainable financial model. The report concludes by urging investors to demand better disclosure on emissions and transition plans and to support policies like performance-based regulation and securitization to facilitate a just and rapid energy transition.

Following 2019 legislation to decarbonize Colorado's electricity sector, the Public Utilities Commission (PUC) must investigate whether transitioning to performance-based regulation (PBR) is 'net beneficial'. The briefing suggests that the PUC should utilize scenario analysis and collaborative stakeholder processes, drawing on examples from Hawaii, Minnesota, and Oregon to align utility incentives with goals such as emissions reductions and cost-efficiency.

The report argues that traditional quasi-judicial regulatory processes are inadequate for the scale of current electricity system transformations and proposes a four-stage framework—initiation, vision communication, conduction, and delivery of outcomes—to achieve more successful reforms.

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.

The document outlines a structured approach to grid modernization, emphasizing integrated distribution planning and the use of outcome-oriented metrics for affordability, resilience, and environmental performance. It suggests tying utility revenue to these performance targets through conditional rates of return or budget caps with shared savings to align utility incentives with public benefits.

The document outlines eight key areas for electricity innovation in 2017, focusing heavily on the integration, valuation, and management of distributed energy resources (DERs). It highlights the shift toward technology-agnostic DER valuation, the potential for electric vehicles to serve as grid assets, and the need for alternative capital planning to displace traditional infrastructure. The text also addresses the necessity of evolving utility business models, establishing distribution system operators (DSOs), improving customer engagement, and expanding DER access to low- and moderate-income customers.

The paper argues that traditional Cost of Service Regulation (COSR) creates a capital bias that motivates utilities to pursue expensive infrastructure projects over more cost-effective, non-utility-owned, or distributed energy resource (DER) alternatives. Through three case studies—distribution circuit upgrades, grid modernization, and regional capacity requirements—the author demonstrates that COSR often misaligns shareholder value with public interest. The analysis finds that multiyear revenue caps, particularly those with 'stretch factors' to encourage efficiency, and Performance Incentive Mechanisms (PIMs) targeting specific outcomes like CO2 reduction or peak demand, are more effective at aligning utility motivation with societal goals. The document recommends a gradual transition toward these PBR tools to manage investor risk while accelerating the energy transition.

The report outlines a three-step approach for improving the performance of publicly-owned utilities (POUs). The first step involves 'no regrets' actions, such as engaging diverse stakeholders to define goals and using Integrated Resource Plans (IRPs) to balance reliability, cost, and environmental targets. The second step focuses on governance evolutions, specifically delineating the roles of boards and management and implementing board self-evaluations. The third step suggests more drastic measures for lagging performance, including revenue decoupling to support energy efficiency, performance-based employee compensation, and the use of third-party non-profit entities for specific utility functions.

The analysis finds that grid-connected solar-plus-battery systems will become the lowest-cost option for many customers within 10-15 years, potentially causing massive revenue losses for utilities. In the Northeast U.S. alone, potential residential and commercial kWh sales erosion by 2030 could reach 58 million MWh and 83 million MWh respectively. The report argues that eliminating net metering or adding fixed charges only delays this outcome. To avoid a future of stranded assets and high costs for non-adopters, the authors advocate for an 'integrated grid' featuring locational and temporal pricing, performance-based regulation, and the monetization of distributed energy resource (DER) values.