PBR delivers maximum benefits

摘要

Performance-based regulation (PBR) was introduced as an alternative to cost-of-service regulation in the U.S. electricity sector in the late 1980s and early 1990s. The primary objective of PBR is to inject competitive market incentives into monopoly markets and weaken the link between costs and rates. By the mid- to late-90s, emphasis on PBR diminished as a result of the increasing focus on restructuring issues such as stranded costs. PBR is now experiencing a resurgence for two reasons. First, PBR has produced significant value to both utilities and consumers. Under PBR since 1992, the National Grid Company in England and Wales has reduced its unit cost of transmission by 37 percent, while increasing transmission system availability by a full percentage point to over 99 percent and increasing the capacity of the transmission system in excess of 20 percent. Second, the increasing number of regulated entities in the market following unbundling of the generation, transmission and distribution functions has significantly increased the workload on regulators, dictating a more light-handed form of regulation with more automated pricing mechanisms. For example, the Ontario Energy Board in Canada previously regulated only one vertically-integrated utility, Ontario Hydro, but following restructuring, took on regulation of a transmission company and 250 distribution entities (this number may drop as low as 90 this year as a result of mergers and acquisitions).