The panel that oversees Vermont’s utilities says alternative forms of regulation could help spur investment in renewable energy or additional energy conservation.
Electric rates are traditionally set by examining a utility’s costs, deciding what’s justified and allowing a return on investment. Now the Public Utility Commission has invited utilities to think beyond that model.
Tom Knauer, the commission's policy director, pointed out that alternative regulation is voluntary.
“But for those utilities who do seek alternative regulation, the commission is encouraging them to be creative in how those utilities and their regulation plans would help advance Vermont’s energy policies and energy goals,” Knauer said.
A recent PUC order notes that a utility’s profits are usually tied to sales. But if the state wants utility customers to conserve, that can impact how much electricity a company sells. So in its order, the commission said alternative regulation could be used to break the connection between sales and profits.
"But for those utilities who do seek alternative regulation, the commission is encouraging them to be creative in how those utilities and their regulation plans would help advance Vermont's energy policies and energy goals." — Tom Knauer, Public Utility Commission policy director
Some consumer groups and outside consultants have criticizedalternative regulation for failing to subject monopoly utilities to rigorous review, such as can take place in a fully litigated rate case.
The commission set out several principles for new alternative regulations plans. It said plans should balance providing flexibility to power companies, while also protecting ratepayers.
“This may be accomplished through a variety of mechanisms – for example, by aligning utility incentives with customer interests and specified policy goals,” the commission said in its order.
For example, the commission said that under a previous alternative regulation plan, Green Mountain Power was allowed to offer new products and services in a pilot program.
“Absent this mechanism for implementation, GMP may not have pursued these pilots,” the PUC stated in its order. “All revenues from these pilot programs have flowed to GMP customers to the benefit of both pilot participants and non-participants.”
