Navigating Utility Business Model Reform — Case Studies

Five case studies highlight business model reforms being implemented in the United States and abroad

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A successful transition to a 21st Century Electricity System (21CES) requires careful consideration of a range of issues that will ultimately redefine the regulatory framework and utility business model. 

Advanced Energy Economy Institute, America's Power Plan, and Rocky Mountain Institute have collaborated over the past year to identify approaches and curate resources to modernize utility business models in a manner that better aligns utility profit-making incentives with public policy objectives. 

Outputs of this work include a guiding framework report, Navigating Utility Business Model Reform, that offers a menu of regulatory options for policymakers, utilities, and electric customers to best support the maturation of a 21CES and a suite of case studies from the United States and abroad providing current examples of reforms and the regulatory constructs that make them work. The five case studies examine: 

  • Oklahoma’s Energy Efficiency Incentives – How Public Service Co. of Oklahoma and Oklahoma Gas & Electric are responding to shared savings and lost revenue adjustment mechanisms intended to remove the utilities’ financial disincentive to maximize customer energy efficiency opportunities.

  • Maryland’s Behavioral Demand Response Program – How Baltimore Gas & Electric lowered summertime demand driven by air conditioning use through customer rebates for reducing consumption during peak-demand days, with BGE able to sell the energy and peak demand reductions directly into the PJM wholesale market.

  • Regulatory Accounting of Cloud Computing – How Illinois and New York are trying to level the playing field for service-based alternatives to traditional capital investments through the regulatory accounting treatment of Software as a Service.

  • Brooklyn Queens Demand Management Program – How Con Edison is deferring distribution infrastructure upgrades in an area of rising demand by deploying non-traditional methods of customer- and utility-side demand reduction, with the utility rewarded with performance incentives and accelerated depreciation.  

  • UK’s RIIO Performance Based Framework for Driving Innovation and Delivering Value – How the UK’s Office of Gas and Electricity Markets (Ofgem) created RIIO (Revenue = Incentives + Innovation + Outputs), the most comprehensive performance-based regulatory system yet developed to reflect changing market conditions, allowing utilities to take advantage of the growing service economy and rewarding utilities for achieving desired outcomes.

    Please fill out this form to download the case studies and to access a copy of Navigating Utility Business Model Reform. 

Complete this form to download the case studies

Five case studies highlight business model reforms being implemented in the United States and abroad

Screen Shot 2018-10-31 at 12.01.36 PM.png

A successful transition to a 21st Century Electricity System (21CES) requires careful consideration of a range of issues that will ultimately redefine the regulatory framework and utility business model. 

Advanced Energy Economy Institute, America's Power Plan, and Rocky Mountain Institute have collaborated over the past year to identify approaches and curate resources to modernize utility business models in a manner that better aligns utility profit-making incentives with public policy objectives. 

Outputs of this work include a guiding framework report, Navigating Utility Business Model Reform, that offers a menu of regulatory options for policymakers, utilities, and electric customers to best support the maturation of a 21CES and a suite of case studies from the United States and abroad providing current examples of reforms and the regulatory constructs that make them work. The five case studies examine: 

  • Oklahoma’s Energy Efficiency Incentives – How Public Service Co. of Oklahoma and Oklahoma Gas & Electric are responding to shared savings and lost revenue adjustment mechanisms intended to remove the utilities’ financial disincentive to maximize customer energy efficiency opportunities.

  • Maryland’s Behavioral Demand Response Program – How Baltimore Gas & Electric lowered summertime demand driven by air conditioning use through customer rebates for reducing consumption during peak-demand days, with BGE able to sell the energy and peak demand reductions directly into the PJM wholesale market.

  • Regulatory Accounting of Cloud Computing – How Illinois and New York are trying to level the playing field for service-based alternatives to traditional capital investments through the regulatory accounting treatment of Software as a Service.

  • Brooklyn Queens Demand Management Program – How Con Edison is deferring distribution infrastructure upgrades in an area of rising demand by deploying non-traditional methods of customer- and utility-side demand reduction, with the utility rewarded with performance incentives and accelerated depreciation.  

  • UK’s RIIO Performance Based Framework for Driving Innovation and Delivering Value – How the UK’s Office of Gas and Electricity Markets (Ofgem) created RIIO (Revenue = Incentives + Innovation + Outputs), the most comprehensive performance-based regulatory system yet developed to reflect changing market conditions, allowing utilities to take advantage of the growing service economy and rewarding utilities for achieving desired outcomes.

    Please fill out this form to download the case studies and to access a copy of Navigating Utility Business Model Reform.