Dive Brief:

• The Colorado Public Utilities Commission launched a proceeding this month on financial performance-based incentives for utilities. 
• In a Dec. 16 order regulators set the first round comment deadline for Jan. 10 and suggested nine areas for discussion. The move aligns Colorado with several other states in working to tie utility financial results to metrics such as customer satisfaction, reliability and rates.
• Among the issues for comment, Colorado regulators have asked parties to consider what lessons can be learned from other states' efforts with performance based regulation (PBR).

Dive Insight:

Colorado regulators already have some experience with utility performance incentive mechanisms enacted in individual proceedings, but they still expect other states' efforts to be instructive.

Under Senate Bill 19-236, passed earlier this year, the PUC must submit the report to lawmakers by Nov. 30, 2020. "We anticipate an expedited schedule," the commission said in the Dec. 4 decision initiating the investigation. 

In launching the proceeding, regulators noted that Hawaii, Oregon, Minnesota, California and others have launched PBR reviews, while multi-year rate plans and formulaic rate setting have been ordered in Maryland, Massachusetts, New York and North Carolina.

Hawaii regulators in May adopted a portfolio of PBR tools for the state's investor-owned utilities, aimed at bringing down high energy costs.

"The lessons learned from other states will be an important part of our review of new performance-based incentives," Commissioner John Gavan wrote in the Dec. 4 order.

Gavan is taking lead on the first stages of implementing the initial requirements of SB 19-236 with regard to PBRs. Similarly, Chairman Jeffrey Ackermann has taken responsibility for the law's requirements related to distribution resource planning, and Commissioner Frances Koncilja for the Colorado Transmission Coordination Act's review of energy imbalance markets, regional transmission organizations, power pools and joint tariffs.

The first round of comments in the PBR proceeding will address how the PUC could utilize PBR and performance incentive mechanisms (PIM) "to improve electric and gas utility performance on the topics of safety, reliability, and customer service."

The commission noted that neither PBR nor PIMs are new to the state, "as performance-based incentive measures have been investigated in two proceedings and included in a number of proceedings for at least 15 years."

Those include demand side management performance incentives, revenue decoupling, earnings sharing, cost sharing, renewable energy standard and others.

In the first round of comments, regulators have asked stakeholders to address a range of questions, including:

• What are the likely effects of a PBR mechanism on different customer classes?
• What regulatory options should the commission consider in order to improve utility performance?
• How can the PUC ensure that PBR metrics properly align with goals? 

After the first round of comments in early January, replies will be due on January 31, 2020. The PUC has also scheduled a workshop on safety, reliability and customer service performance-based metrics for Feb. 12, 2020.