Yankee Gas urges PURA to adopt multiyear performance‑based rate plan with metrics, penalties and incentives

Yankee Gas asked the Public Utilities Regulatory Authority (PURA) to approve a four‑year, formula‑driven performance‑based rate making framework that the company said would link rates to measured service outcomes and reduce the frequency of traditional rate cases.

Doug Horton, vice president of distribution rates and regulatory requirements for Eversource Energy Service Company, told the PURA panel that "First and foremost, there's statutory and policy policy support here in Connecticut to implement PBR," and described a package the company says combines a revenue formula with performance metrics, an earnings‑sharing mechanism and capital trackers.

The company described five primary elements of its plan: a formula‑based revenue cap (an "I minus X" approach) coupled with a multiyear stay‑out commitment; a set of performance metrics and scorecards; an earnings‑sharing mechanism that would split excess earnings with customers; capital funding mechanisms (including a KBAR concept and a DIMP tracker for specific programs); and a consumer dividend the company says would trigger in certain market conditions. Julia Freire, managing director at London Economics International LLC, said the PBR proposal builds on decades of experience elsewhere and cautioned that rejecting PBR would "defer[] those benefits."

Yankee provided specifics on the metrics and the potential financial scope. Seth Krueger, vice president of gas engineering, summarized that the company proposes two scorecard metrics (including damages per 1,000 tickets and justified complaints per 10,000 customers) and five performance incentive metrics tied to safety, reliability, customer service and methane reductions. The company said the PIMs include emergency response rates (normal hours and after hours), leak response times, digital engagement, average speed of answer for gas emergency calls, and methane emission reductions. Under the proposal the company could face up to $3,000,000 in penalties and could earn up to $2,000,000 in incentives over the plan term.

On several metrics the company provided numerical baselines and proposed targets in testimony. For example, the methane‑reduction PIM (focused on grade‑3 leaks with significant environmental impact) used a baseline near 1,449 metric tons with a proposed target of about 725 metric tons and a design that would trigger penalties if emissions exceeded the baseline and incentives if the company reduced emissions further (the company noted the incentive threshold was illustrated as reaching zero in testimony). For customer contact the company proposes a digital‑engagement PIM that would pay $500,000 a year to the company for meeting or exceeding a roughly 93% adoption target; company witnesses confirmed the digital investments behind that measure are funded through the revenue requirement and that PIM payouts would accrue to shareholders. John Lawrence, senior vice president of customer operations and digital strategy, summarized the funding structure: "That's correct. Dollars in equal services out." The company also proposed an average‑speed‑of‑answer target for gas emergency calls of 23 seconds.

Office of Consumer Counsel (OCC) attorneys pressed the panel on whether Yankee would accept discrete metrics or scorecards if PURA did not adopt the full PBR framework. Company witnesses said they seek a harmonized, comprehensive framework: the company does not support adopting financial PIMs or a stay‑out commitment without the companion rate design elements that fund investment and align revenues with expected costs. As Doug Horton put it, metrics alone "can't work" without rate measures that allow the utility to invest in people, processes and technology.

Company witnesses also described the intended governance and verification for scorecard items that do not carry direct financial consequences. For the proposed justified‑complaints scorecard, the company said it would report complaints that meet two filters — that the customer contacted Yankee first and that the company objectively made an error — and proposes a collaborative process with PURA staff, the Department and intervenors to agree which recorded items qualify as "justified" before they appear on a PBR scorecard.

Several intervenors asked whether PIMs duplicate employee variable‑pay incentives or ask customers to pay for improvements and then also provide shareholder rewards. The company responded that employee incentives and compensation pools operate separately but that delivering system‑level improvements often requires capital and operating funding that rate design must supply. The company said some PIMs are penalty‑only and others are symmetric (penalty and incentive) and that achieving and maintaining high performance typically requires ongoing operational investments.

No formal vote or Commission decision was taken at the hearing. PURA staff and intervenors requested late‑filed exhibits documenting comparable metrics used by Eversource affiliates in Massachusetts, the company's digital adoption research, and examples of employee variable‑pay ties to emergency response times. Company witnesses said they would provide those exhibits where available.

Why it matters: PURA's decision on Yankee's proposal would affect how rates change year‑to‑year, how the company is held financially accountable for service outcomes, and how funding for pipeline safety, leak remediation and customer‑facing investments is allocated between ratepayers and shareholders. Company witnesses said the plan is intended to provide greater rate stability and transparent accountability; intervenors asked for clearer links between proposed targets, baseline assumptions and the revenue effects of different outcomes.

The docket remains pending; the hearing record will include the late‑filed exhibits and follow‑up data requested by intervenors and PURA staff.