Dive Brief:

• Regulators need to stop linking utility rates to their electric sales, a move that would help utilities support distributed generation and energy efficiency, the Edison Electric Institute (EEI), a trade group for investor-owned utilities (IOUs), and the Natural Resources Defense Council (NRDC) said.
• If regulators break the link between electric sales and utility revenue, they should provide for “reasonable and predictable annual adjustments in utilities’ authorized non-fuel revenue requirements,” the groups said.
• The owners of distributed generation like rooftop solar “must provide reasonable cost-based compensation for the utility services they use” while being paid fairly for the services they provide, the groups said.
• State regulators should consider expanding IOUs' earnings opportunities to include performance-based incentives increasing energy efficiency efforts, integrating renewable generation and improving the grid, the groups said.

Dive Insight:

With major changes already underway – more solar, more efficiency – EEI and NRDC are saying that the utility business is no longer about selling more electricity, it's about providing services. This is a major change in outlook for some utilities (EEI's members serve about 220 million people).

But under this new paradigm, state regulators need to rethink the way they oversee utilities.

“If properly done, utilities can adapt to the changing needs of customers, modern electricity systems, and technologies, while continuing to deliver safe and reliable service, maintain financial integrity by allocating costs of service fairly among customers, and continuously improve environmental performance,” the groups said in a letter to the National Association of Regulatory Utility Commissioners. “But utility regulatory and business model changes are necessary to accelerate progress and ensure transparent and equitable attainment of these objectives.”