Legislatures in two states—Hawaii, and now Nevada—have determined, if the states impose mandates for utilities to increase their use of renewable energy sources, the states should also allow utilities to implement alternative methods for setting rates.
Last month, Nevada enacted Senate Bill 300 by State Sen. Chris Brooks. Brooks also sponsored the recently enacted bill, which requires Nevada to generate 50 percent of its electricity from renewable resources by 2030 and 100 percent by 2050.
Senate Bill 300, signed into law by Gov. Steve Sisolak, allows utilities to file applications for the establishment of an alternative rate-making plan and requires the Public Utilities Commission of Nevada to adopt regulations governing the filing of such applications.
While the new law doesn’t proscribe specific mechanisms that utilities must adopt when developing an alternative rate-making plan, it does state that a plan could include performance-based rates, formula rates, multi-year rate plans, subscription pricing, an earnings-sharing mechanism (sharing earnings with customers), a decoupling mechanism (disassociating an utility’s financial performance from the sales of electricity) or any other rate-making mechanism authorized by the Commission in subsequent regulations.
Hawaii became the first state to allow for alternative rate-making plans, according to the Hawaii Solar Energy Association, after lawmakers there last year established a 100 percent “renewable portfolio standard by 2045.”
Last month, the Hawaii Public Utilities Commission identified a portfolio of specific performance-based regulation mechanisms. The new framework is intended to save customers money, while rewarding Hawaii’s public utility companies for meeting specific outcomes in renewable energy adoption and improved customer service, according to the Commission's summary.
The framework includes multi-year rate plans, earnings-sharing mechanisms, decoupling mechanisms, as well as, performance incentives, shared-savings mechanisms, and scorecards and reported metrics.
Other states, including Minnesota, are also considering performance-based ratemaking, according to Utility Dive.