As innovation continues to redefine America’s power sector, century-old regulatory models are no longer serving advanced utilities or their customers. Performance-based ratemaking could be a game-changing solution for the utility industry. America’s Power Plan has a terrific new paper that analyzes performance-based ratemaking, showing how it can provide new revenue streams to utilities in a time of changing industry business models. The paper is a valuable new resource for Commissions, utilities, and industry experts.

Facing a need for more resources in their regions, MidAmerican is expanding its wind capacity by 1,050 megawatts (MW) through the end of 2015 (bringing the utility’s total wind capacity to 3,335 MW, or approximately 39 percent of their total generation capacity) and Austin Energy has agreed to buy power from two solar arrays in Texas that total 150 MW; in both cases, this was because the renewable power was the least-cost resource on the wholesale system. And rooftop solar is now cheaper than retail rates in a growing number of states, even without upfront incentives. Meanwhile, grid infrastructure is aging at a time when electricity demand is not expected to grow. Given all of these changes, smart solutions are needed to take advantage of the benefits of new technology while keeping utilities healthy.

To address this need, America’s Power Plan—in partnership with the Utility of the Future Center at Arizona State University and Energy Innovation: Policy & Technology LLC—released this paper on New Regulatory Models today at the Western Interstate Energy Board joint meetings in Tempe, Arizona.

The new paper builds on two pieces of work from America’s Power Plan, Rethinking Policy to Deliver a Clean Energy Future and Utility and Regulatory Models for the Modern Era. It draws on experience with elements of performance-based ratemaking in action, distilling a top ten list of principles for regulators interested in working with their utilities to design and adopt this kind of program.

“At a time when utilities are facing uncertainty in traditional revenue streams, performance-based ratemaking can offer a potential upside for innovative utilities that embrace new technology and more efficient business models,” said APP’s Sonia Aggarwal, one of the two authors of the paper. “Customers also benefit from reduced inefficiency in the system and the ability to take advantage of exciting new technologies.”