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Performance-Based Regulation (PBR)

The UTC is reviewing how it regulates utilities as part of a five-year plan to implement a new law passed in 2021.

Under the law,

  • The UTC must provide guidance on alternatives to traditional cost-of-service ratemaking.
  • Privately owned gas and electric utilities must provide a multi-year rate plan.
  • The UTC must determine a set of performance measures to assess utility performance when approving rates.  

These changes to the UTC’s process will support the state’s transition to clean energy, ensure the UTC can hold companies accountable for measures that matter to their customers, and that low-income communities and communities of color aren’t disproportionately shouldering the state’s energy costs.
 

Definitions:

Rate plans – How utilities recover costs through customer rates (your bill). Costs could include operations, staffing, new equipment, and facilities.

Multi-year rate plan – A rate request that lasts for two to four years to keep costs more consistent for customers.

Cost of service ratemaking – Traditional process of calculating rate plans based on actual utility investments.

Performance based – An alternative process that evaluates utility performance when establishing rates, including incentives and penalties.

 

Phase One (October 2021-March 2023)

The UTC will develop an initial policy statement on performance standards for utilities by March 2023.  Examples of performance standards could include:

  • customer service standards,
  • reliability of utility service for different communities to identify service and equity gaps,
  • how utilities prepare for and respond to major weather events,
  • effectiveness of utility infrastructure investments and maintenance spending, and
  • investments in clean energy in meeting state goals and requirements.

Phase Two (April 2023 – March 2024)

After developing the initial policy statement, in phase two the UTC will establish specific performance measures and reporting processes for utilities.

During phase two the UTC will also develop guidance on how to make cost adjustments after approving a multi-year rate plan, and establish guidance for determining the limit on utility profits under multi-year rate plans.

Phase Three (January 2024 – December 2024)

The UTC will establish specific performance targets designed for each utility and their customer base, infrastructure, and service territory.

Phase Four (January 2025 - December 2025)

The UTC will explore alternatives to traditional ratemaking, cross examine benefits from current mechanisms, and explore hybrid options. 

Phase Five (January 2025 - Ongoing)

The UTC will start evaluation practices on performance based ratemaking to ensure performance measures are responsive to the current environment. 

Get Involved

Throughout the process there will be many opportunities to get involved and provide public comments. 

If you would like to receive updates contact records@utc.wa.gov to subscribe. Reference "Interested party list - Filing 210590" in your inquiry. 

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