News Stories

Staff’s report includes (1) updated proposals are: (i) “Include 72-hour catastrophic storm response and 24-hour gray sky storm response”; (ii) “Symmetric incentive/penalty mechanism based on Service Quality rule criteria (CEMI-4 < 6%)”; (iii) “Greater share on storm restoration metrics”; (iv) “Reduce limit to $10 million”; and (v) “Utilities must meet all Service Quality rules before earning net incentive; incentives can offset penalties”; (2) proposed implementation steps include: (i) a two-year review cycle for performance metrics; (ii) inclusion of an offramp mechanism “to allow for review of performance metrics during exigent circumstances where waiting for the normal review period is impractical”; and (iii) making decisions on cost allocation of net value in utilities’ rate cases “when the regulatory asset can be reviewed comprehensively with the utility’s revenue requirement and cost-of-service”; and (3) recommended next steps include feedback on potential metrics for: (i) equity; (ii) grid modernization; (iii) DER integration; and (iv) resilience.

As background the purpose of the workgroup is to better align utility financial performance with customer value, specifically to a “reliability-plus” approach to the distribution grid performance. The initial focus is on developing distribution reliability and safety metrics while exploring rate structures by which incentives and disincentives can be applied. 

Future considerations include:

• The utility’s financial PBR system should include both incentives and disincentives based on performance; incentive structures should be holistically considered in terms of impacts on potential earnings;
• The utility should consider the pros and cons of a comprehensive PBR system, which would avoid concurrent regular annual rate cases and separate PBR reconciliations;
• Performance metrics should include outcome measures (e.g., customer average interruption duration index
• (CAIDI)) and not be limited to output metrics such as number of poles replaced;
• Performance metrics should be linked to regional, national, and/or peer utility benchmarks, where possible;
• Data and calculation methodologies should be well defined, transparent, and open for auditing/verification purposes;
• Targets should be utility specific; and
• Potential areas of performance focus are safety, customer service (end-use customers, builders, interconnecting generators, etc.), timeliness and quality, reliability and resiliency, long-term costs, and innovation.

Staff Working Group Report  (05/03/2024)
MIPSC Financial Incentives and Disincentives Workgroup (Opened 04/24/2023)

See also: U-21400 for orders and comments.  (Opened 04/24/2023)
(In the matter, on the Commission’s own motion, to open a docket to establish a workgroup to review and consider issues related to the creation of financial incentives and penalties involving outages and distribution performance.)