RMI: Virginia has tools for performance-based regulation but design limits incentives

RMI researchers Oliver Tully and Janelle Wilson told the stakeholder group on the Performance-Based Regulation Study that Virginia already uses several mechanisms relevant to PBR but that elements of how those tools are designed limit their effectiveness.

"Multi year rate plans can be more streamlined," said Oliver Tully, who identified himself as a member of RMI's electricity team. He said states moving toward PBR commonly adopt three- to five-year multi-year rate plans (MRPs) that create a ‘‘stay‑out’’ period between rate cases and cap revenues so utilities keep part of any cost savings achieved during the plan term.

The assessment linked several features of Virginia's existing framework to reduced cost‑containment incentives. RMI highlighted the state's two‑year rate cycle, the prevalence of rate adjustment clauses (trackers) that recover costs quickly, and the current statutory cap on the commission's ability to adjust a utility's authorized return on equity (ROE) based on performance. "The 50 basis…