The NYS Public Service Commission (PSC) issued an Order ADOPTING A RATEMAKING AND UTILITY REVENUE MODEL POLICY FRAMEWORK. (Commonly referred to as the REV Track 2 Order).
In the Order, PSC concludes that its “core statutory duties can no longer be met with the utility regulatory model of the previous century.”
The focus of the decision is to create a modern regulatory model that challenges utilities to take actions that better align utility shareholder financial interest with consumer interests. The Order builds from the conventional cost-of-service ratemaking approach to add a combination of market-based platform earnings and outcome-based earnings opportunities.
PSC outlines four ways for utilities to achieve earnings:
1) Traditional cost-of-service earnings;
2) Earnings tied to achievement of alternatives that reduce utility capital spending and provide definitive consumer benefit;
3) Earnings from market-facing platform activities; and
4.) Transitional outcome-based performance measures.
These additional measures are collectively intended to create a regulatory environment where utilities can create shareholder value, comparable to or superior to conventional investments, by integrating third-party solutions and capital that improve the efficiency, resiliency and flexibility of the physical networks, reduce consumer total costs and achieve the State’s policy objectives.
The Order provides directional guidance for long-term reform and a measured set of near-term actions and requirements for utilities.
The Order can be found here: http://documents.dps.ny.gov/public/Common/ViewDoc.aspx?DocRefId=
We will provide additional information following a more thorough review of the Order.
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