CA Energy Consulting Report Informs Maine Public Utilities Commission Incentive Regulation Research

Categories: Performance-Based Ratemaking, Rate Design

June 27, 2025 - Nicholas Crowley, Sherry Wang, Andis Romanovs-Malovrh, and Corey Goodrich

In March 2025, the Maine Public Utilities Commission opened Docket 2025-00107, a Commission Initiated Inquiry into Performance Based Regulation of Investor-Owned Transmission and Distribution Utilities. On behalf of the Commission, Christensen Associates Energy Consulting (CA Energy Consulting) authored a report on the theory and practice of incentive regulation in the utility sector. The study, Performance Based Regulation with Recommendations, analyzes the PBR tools used by electric utilities in North America in the context of Maine’s electric utility industry.

One of the central findings of this report is that the regulatory framework in Maine has already incorporated several PBR elements into its ratemaking structure. We found that the Service Quality Indicators (SQIs) filed each year by Central Maine Power and Versant Power meet the definition of asymmetric Performance Incentive Mechanisms (PIMs), as they include financial penalties for poor performance. The state has past experience with price cap regulation, though neither investor-owned utility currently operates under an indexed cap plan.

Our report recommends that that the Maine PUC allow the state’s IOUs to file new PIMs as part of future rate applications, to be assessed on a case-by-case basis, but that before instituting any mandatory PIMs or any PIMs that apply to all IOUs, the Maine PUC determine which specific policy goals might be addressed by PIMs and meet with stakeholders to discuss potential benefits and drawbacks. We encourage the adoption of either forecasted or indexed cap MYRPs to incent cost efficiency.