Performance-Based Regulation (PBR)
Performance-based regulation links utility revenues to achieving specified metrics such as reliability, DER integration, emissions reduction, or customer satisfaction. Instead of relying solely on cost-of-service recovery, PBR frameworks award incentives or penalties based on measured outcomes.
Regulators define performance incentive mechanisms, scorecards, and shared savings formulas that encourage utilities to adopt grid modernization, non-wires alternatives, and advanced planning tools. Metrics often include SAIDI/SAIFI, hosting capacity expansion, interconnection timelines, and demand response deployment.
PBR requires robust data systems and independent auditing so stakeholders trust reported performance. Utilities align capital plans, DER partnerships, and workforce training with the incentives to maximize earnings under the new regulatory model.
Investors monitor PBR implementations because they influence allowed returns, risk profiles, and the speed at which utilities adopt flexibility markets or DERMS platforms.
Technical Details
- •Includes performance metrics, deadbands, and incentive rates
- •May incorporate multi-year rate plans and earnings sharing
- •Requires transparent data reporting and third-party audits
- •Aligns with grid modernization, DER integration, and ESG goals
- •Adopted in jurisdictions seeking innovation beyond cost-of-service
Why It Matters
PBR determines how quickly utilities embrace DERs and grid-enhancing technologies. Tera tracks PBR dockets, metrics, and earnings outcomes so companies can tailor proposals to each regulator's priorities.
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