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Utilities, advocates clash at PSC over design of performance incentives and penalties for Empower program
Summary
Investor-owned utilities argued penalties should not take the form of fines that reduce cost recovery; advocates and OPC urged that penalties be meaningful and that incentives not be paid for underperformance. The work group reported nonconsensus and will continue drafting a PIM structure for commissioner guidance.
A central, contested issue at the Public Service Commission working-group meeting was the design of performance-incentive mechanisms (PIMs) and the meaning of "penalties" under the statute that restructured Empower cost recovery.
Representatives of investor-owned utilities (the Exelon utilities and Potomac Edison) argued a penalty that takes the form of a fine would conflict with full-cost recovery and basic ratemaking and due-process principles. Counsel for the Exelon utilities said jurisdictions with PIMs typically do not impose fines for failing to meet greenhouse-gas or energy-efficiency targets; instead, they structure sliding scales that permit shareable rewards once utilities surpass a threshold. "Assessing a utility a fine for failure to reach a GHG reduction target would be contrary to the utility's due process rights and basic rate-making principles," counsel said.
Utility witnesses said PIM design commonly permits a partial reward for partial achievement after a minimum threshold (Massachusetts, Colorado and Connecticut were cited) and warned that a requirement to exceed 100% of a target before any reward is paid would encourage unnecessary additional spending.
The Office of People—s Counsel (OPC) and some advocates pushed the opposite view: because the statute explicitly authorizes "reasonable financial performance incentives and penalties," the commission has discretion to adopt penalties and ensure accountability for ratepayer funds. Nicole Zeiger (OPC) said the commission can assess penalties through existing enforcement tools and that the statute contemplates meaningful penalties for underperformance.
Maryland Energy Administration staff, utilities and other stakeholders said the work group reached consensus on some items but remained split on the definition of "penalty." The work group filed a report noting near consensus on many PIM topics and requesting commission guidance on outstanding design issues, such as thresholds, measurement of net benefits, and how earnings would be calculated and disbursed.
Commissioners asked clarifying questions about statutory language requiring full-cost recovery and the meaning of "as appropriate" in the performance-incentives clause. No final policy decision was taken at the meeting; staff and the work group will continue to develop a PIM proposal for commission review.
