MadisonSquare

New Benchmarking and Productivity Studies

Thu, 16 Apr 2026 19:14:04 GMT

PEG is Statistical Benchmarking Leader

In addition to its ongoing work for the Ontario Energy Board (OEB) to develop a new cost benchmarking model for smaller Ontario power distributors, PEG recently won three competitive bids to perform custom benchmarking studies for three of Ontario's larger utilities: Alectra Utilities, Elexicon Energy, and the hydroelectric operations of Ontario Power Generation. The Alectra study was filed April 12th. Using Ontario, U.S., and Alberta data, PEG developed new econometric models of the operation and maintenance expenses, capital cost, and total cost of power distributors. PEG also calculated the recent productivity trends of Ontario power distributors. During the eleven growth rate years during which the OEB's Renewed Regulatory Framework has been in effect, the total factor productivity growth of these distributors averaged 0.16% annually using simple arithmetic averages and 0.49% annually using cost-weighted averages. O&M productivity growth was more rapid than capital productivity growth, especially for larger companies.

New PEG Report on Multiyear Rate Plan Design Challenges

Fri, 09 Jan 2026 18:37:17 GMT

Focus on Skewed Utility Spending Patterns

The Ontario Energy Board has released a Pacific Economics Group report on a challenge in multiyear rate plan ("MRP") design and administration: the penchant of some utilities to shift their spending to later years of the plan, when it can boost rates in the next plan. Utility witnesses often claim that customer benefits from MRPs chiefly take the form of lower rates in the next plan. Skewed spending can materially reduce this benefit. PEG surveyed the academic literature on skewed spending and did statistical research on its magnitude in Ontario MRPs. Informed as well by discussions with several regulatory commissions, various means of mitigating problematic skewness are discussed in the paper. Designing MRPs to benefit customers is one way to address the heightening affordability challenge facing utility regulators today. Our report can be accessed here: Spending Pattern Analysis Report

New Cost Benchmarking Study

Mon, 01 Dec 2025 22:41:56 GMT

Focus on North American Power Distributors

PEG won a competitive bid in February 2025 to help the Ontario Energy Board improve its statistical research on utility cost. The OEB has been a pioneer in the use of statistical benchmarking and productivity trend research in rate setting. PEG is updating the power distributor cost benchmarking and productivity studies that the Board uses to design attrition relief mechanisms for its multiyear rate plans. Using Ontario, Alberta, and U.S. data, PEG has developed sophisticated new econometric models that can benchmark the operation & maintenance (O&M), capital, and total cost performances of all sampled power distributors. Results for ex Ontario utilities are available. We greatly appreciate the opportunity the OEB is providing for us to do unbiased research on power distributor cost and stay at the cutting edge of the PBR field.

Edison Electric Institute Releases PEG’s New Altreg Survey

bob@webwisconsin.com (Web Wisconsin) — Fri, 20 Dec 2024 12:50:48 GMT

PBR is Spotlighted in the 4th Edition of PEG's Authoritative Survey

PEG Research has for many years periodically prepared a survey and report on alternatives to traditional ratemaking (“Altreg”) for the Edison Electric Institute. EEI release d the latest report in this series on April 1. It provides an authoritative taxonomy and explanation of Altreg approaches and documents Altreg precedents. The usefulness of Altreg in addressing the increasingly complex regulatory landscape is discussed. An important focus of the new report is multiyear rate plans and other forms of PBR.

New PEG White Paper on PBR for Electric Utilities

Wed, 18 Dec 2024 20:34:40 GMT

PBR is a hot topic in Virginia

Virginia's legislature has directed the State Corporation Commission to prepare a report on the potential use of performance-based ratemaking for electric utilities. A collaborative discussion has been initiated by the Virginia Department of Energy. PEG prepared this white paper for Clean Virginia that explains PBR options and their potential application to Appalachian Power and Dominion Energy. The design of multiyear rate plans for vertically-integrated electric utilities is emphasized.

PEG Scores Win in Ontario Gas Proceeding

bob@webwisconsin.com (Web Wisconsin) — Mon, 16 Dec 2024 15:15:49 GMT

Latest of Many Wins for PEG's Canadian Clients

PEG has had many successes in its productivity and benchmarking research and testimony over the years. Its latest success is in a recently-concluded proceeding that approved a multiyear rate plan for Canada’s largest gas distributor, Enbridge Gas Inc. The plan features a 5-year term and an indexed attrition relief mechanism. The X factor term in the index formula is the sum of a productivity growth target and a stretch factor linked to statistical cost benchmarking research.

The Enbridge witness proposed a -1.52% productivity factor and a 0% stretch factor ( thus , Enbridge’s revenues would rise 1.52% faster than inflation each year). However, p roductivity and benchmarking research and testimony by PEG for Ontario Energy Board Staff produced much different results than those of the Enbridge witness. PEG found that the total factor productivity trend of a sample of U.S. gas utilities averaged a 1.26% annual decline, but this was largely due to cast iron and unprotected bare steel main replacement programs in the northeast U.S. Enbridge replaced such mains years ago. Enbridge is also not subject to U.S. gas transmission safety regulations.

PEG proposed a -0.20% productivity factor for Enbridge based on a custom productivity peer group consisting of U.S. utilities that were primarily distributors and had less than 5% of their distribution mains composed of unprotected bare steel or cast iron. PEG also proposed a 0.45% stretch factor based on Enbridge’s performance using the latest econometric total cost benchmarking model that PEG has developed using U.S. gas industry data. The Board approved a settlement with provisions that were closer to PEG's positions and features a 0% productivity factor and a 0.28% stretch factor.

PBR is a Hot Topic for North American Regulators

bob@webwisconsin.com (Web Wisconsin) — Sun, 01 Dec 2024 20:41:05 GMT

CAMPUT Talk on Tuesday January 21

Performance-based ratemaking ("PBR") and other alternatives to traditional ratemaking (collectively called "Altreg") continue to be a hot topic at courses and conferences about energy utility regulation. The leading utility regulator organizations in the U.S. and Canada are no exception. PEG president Mark Newton Lowry gave a webinar on "PBR: Navigating the Trends, Energy Transition, and Best Practices" to the CAMPUT Connection in January. Last October, he again taught his popular three-day PBR webinars for NARUC’s Regulatory Training Initiative with funding from the U.S. Department of Energy.

Last March, Dr. Lowry gave a lecture on PBR at the Osgoode Hall Law School of York University in Toronto. In April, he discussed Canadian PBR at a SURFA conference in Richmond, VA. In August, he lectured on Altreg at the Michigan State University IPU Fundamentals Course. In September, Dr. Lowry gave a talk on multiyear rate plans to a DOE Energy Security and Grid Reliance Cohort. In October, he gave a presentation on PBR at the Wisconsin Public Utilities Institute and in December he discussed PBR for the energy transition at an EUCI conference.

Input Price Inflation Testimony for Puget Sound Energy

bob@webwisconsin.com (Web Wisconsin) — Mon, 19 Feb 2024 20:39:01 GMT

PEG places inflation forecasts on solid research foundation

Many energy utilities were not compensated for the rapid input price inflation that was recently triggered by the pandemic and the war in the Ukraine. Rate cases were unwelcome in these years, and few utilities had mechanisms to protect them automatically from unforeseen inflation. Some that did had only crude protection mechanisms that were not based on sound research methods. Inflation has slowed but remains brisk and there is a material risk of reacceleration.

PEG Research personnel have been calculating utility input price trends for decades. Puget Sound Energy engaged us to undertake inflation research that would support credible multiyear rate plan proposals for its gas and electric services. Our expert report and inflation forecast evidence in the case can be found here . We found that familiar macroeconomic price indexes such as the CPI and the gross domestic product price index (“GDPPI”) materially underestimate utility price inflation. Inflation in material and service prices has been understated by several utilities in past proceedings.

Interest in PBR and Altreg Continued in 2023

bob@webwisconsin.com (Web Wisconsin) — Fri, 22 Dec 2023 20:20:47 GMT

Dr. Lowry Spoke at Seven Conferences

Myriad Botanical Gardens in Oklahoma City

Performance-based regulation (“PBR”) and other alternatives to traditional ratemaking (collectively called “Altreg”) continue to be hot topics in 2023. PEG President Mark Newton Lowry gave a talk on Altreg at the spring conference of the NARUC Staff Subcommittee on Accounting and Finance in Oklahoma City. He then taught the Altreg segment and Regulatory Strategy workshop at the Edison Electric Institute (“EEI”) Electric Rates Course July 23-26 at the University of Wisconsin in Madison. In August he taught a session on Altreg at the Fundamentals Course of the Michigan State University Institute of Public Utilities. In September, he gave a talk on Incentivizing Capital Efficiency to NARUC’s PBR State Working Group. In October he conducted a 3-day seminar on PBR for NARUC’s Regulatory Training Initiative and taught the PBR segment at the Energy Utilities Basic Course of the Wisconsin Public Utilities Institute in Madison. On behalf of the Edison Electric Institute, Dr. Lowry organized and moderated a panel on Alternative Regulation for Emerging Electric Industry Challenges at the NARUC Annual Meeting in La Quinta, CA. Also in La Quinta, he participated in a panel on rate design at the Critical Consumer Issues Forum. In December, he spoke on “Why Performance-Based Rates Make Sense” at EUCI’s Advanced Rate Design conference in Denver.

Electricity Journal Study Documents Multiyear Rate Plan Benefits

bob@webwisconsin.com (Web Wisconsin) — Thu, 10 Aug 2023 21:03:05 GMT

Power Distributor Productivity Growth Surged Under PBR

Stronger performance incentives are a touted advantage of multiyear rate plans (“MRPs”), but few studies have documented their performance impact. PEG published an article in the June issue of The Electricity Journal on their recent study to quantify the impact of MRPs on power distributor productivity growth in Canada’s Alberta province. Four power distributors and two gas distributors there have completed two rounds of mandatory “generic” MRPs that are called performance-based ratemaking. PEG found that the productivity growth of Alberta power distributors was materially more rapid under MRPs than under cost trackers or frequent rate cases. Operation and maintenance, capital, and multifactor productivity trends were all considered. The study produced similar results for gas distributors. With support from utilities and consumer groups, Alberta’s utility commission has decided to continue MRPs and is currently finalizing details of its third generic plan. Please contact PEG president Mark Lowry for further details of the study.

PBR and Altreg were Hot Topics in 2022

bob@webwisconsin.com (Web Wisconsin) — Wed, 17 Aug 2022 19:46:33 GMT

Dr. Lowry Made Several Appearances

Entrance to Pittsburgh's Pennsylvania Railroad Station, designed by Daniel Burnham

Performance-based regulation (“PBR”) and other forms of alternative regulation (“Altreg”) were hot topics at courses and conferences about energy utility regulation in the second half of 2022. Mark Newton Lowry taught the Altreg segment and the Regulatory Strategy workshop at the Edison Electric Institute (“EEI”) Electric Rates Course July 24-27 at the University of Wisconsin in Madison. On August 11, he taught a session on Altreg at the Fundamentals Course of the Michigan State University Institute of Public Utilities. Dr. Lowry spoke on PBR at an EEI Rate Committee meeting in Pittsburgh September 20 and at the Energy Utilities Basic Course of the Wisconsin Public Utilities Institute on October 5 in Madison.

Former PEG Economist Now Johns Hopkins University Professor

bob@webwisconsin.com (Web Wisconsin) — Tue, 28 Jun 2022 17:52:09 GMT

Past PEG Interns and Junior Economists Have Entered Prestigious Grad Programs

PEG has a long history of pointing its interns and junior economists towards careers in the fields of economics and business. Some have gone on to graduate programs at Oxford, Stanford, Yale, Chicago, and the Universities of Minnesota and Maryland. Travis Johnson is now a business school professor at the University of Texas. In this context, we are pleased to announce that former junior economist Stelios Fourakis is now an assistant professor of economics at Johns Hopkins University. This summer we are pleased to have as an intern Ben Cohen, a Toronto/Cleveland native who is a student at the University of Pennsylvania.

Dr. Lowry Presents at NASUCA's Mid-Year Meeting

bob@webwisconsin.com (Web Wisconsin) — Wed, 27 Apr 2022 17:52:49 GMT

Session addressed multiyear rate plans and other kinds of performance-based regulation

Dr. Lowry was an instructor at a technical training session that the U.S. Department of Energy's Grid Modernization Laboratory Consortium funded at the National Association of State Utility Consumer Advocates (NASUCA) midyear meeting. The focus of his segment, on June 14 in Indianapolis, was multiyear rate plans and other approaches to performance-based regulation.

Dr. Lowry Discusses PBR at Seattle Conference

bob@webwisconsin.com (Web Wisconsin) — Wed, 27 Apr 2022 17:52:47 GMT

Benefits and challenges of PBR discussed

Lawrence Berkeley National Laboratory sponsored a presentation by Dr. Lowry at the Seattle meeting of the National Conference of State Legislators' (NCSL) Energy Supply Task Force. His presentation on May 19 ^th addressed multiyear rate plans and other approaches to PBR. The discussion covered the structure of these regulatory tools and their benefits and implementation challenges.

PEG Files PBR Testimony for Puget Sound Energy in Washington

bob@webwisconsin.com (Web Wisconsin) — Mon, 14 Feb 2022 21:13:55 GMT

Dr. Lowry Proposes Demand Response and Electric Vehicle Incentives

Gas and electric utilities in Washington are now required by law to propose performance-based ratemaking (“PBR”) with their general rate cases. Each proposal must include a multiyear rate plan, performance metrics, and performance incentive mechanisms (“PIMs”). Puget Sound Energy, Washington’s largest provider of retail gas and electric services, filed a PBR proposal for these services on January 31st. A team from Pacific Economics Group helped the Company develop its proposal. Mark Newton Lowry, the President of PEG, submitted testimony that detailed the Company’s metric and PIM proposal and included a white paper on PBR. PIMs are proposed that encourage demand response and managed electric vehicle loads. A copy of his evidence is accessible here .

PEG Files PBR Commentary for Duke Energy in North Carolina

bob@webwisconsin.com (Web Wisconsin) — Fri, 11 Feb 2022 21:13:58 GMT

New Law Encourages Multiyear Rate Plans

A new law in North Carolina encourages multiyear rate plans for jurisdictional electric utilities. The state regulatory commission just concluded a proceeding to set rules for PBR applications. PEG President Mark Newton Lowry and Senior Advisor Scott Brockett advised Duke Energy in this proceeding and submitted commentary on rules issue. Their commentary included a white paper on PBR. A copy of PEG’s evidence is accessible here .

Edison Electric Institute PBR Presentation

bob@webwisconsin.com (Web Wisconsin) — Mon, 02 Aug 2021 16:34:24 GMT

Electric Rates Advanced Course Held Virtually This Year

PEG President Mark Newton Lowry taught the Alternative Regulation segment at the Edison Electric Institute’s 2021 Electric Rates Advanced Course in late July. The course was held virtually this year. In response to the rising interest in performance based regulation, Dr. Lowry’s presentation emphasized recent PBR options and precedents. Speakers from Hawaiian Electric and National Grid discussed their Company’s recent PBR experience.

PBR for Distribution Resiliency

bob@webwisconsin.com (Web Wisconsin) — Mon, 28 Jun 2021 17:37:24 GMT

PIMs and Other PBR Tools Can Encourage Cost-Effective Resilience

Mark Newton Lowry spoke on "PBR for Distribution System Resiliency" at a virtual meeting of NARUC's Performance-Based Regulation State Working Group. The topic of the meeting was Performance Incentive Mechanisms (PIMs) for Resilience. Dr. Lowry's presentation is accessible HERE. He described PBR as an implement in a toolbox for regulating resilience that also includes traditional rate cases and grid planning. Various approaches to PBR can encourage better resilience. In addition to PIMs, these approaches include special incentives for underused inputs and strategies. Challenges in the design of PIMs for resilience were explained.

Indexing O&M Revenue

bob@webwisconsin.com (Web Wisconsin) — Tue, 08 Jun 2021 17:03:58 GMT

Useful tool for the "hybrid" revenue caps that are popular in California and Vermont

Dave Hovde and Mark Newton Lowry have developed a formula to escalate operation and maintenance revenue ("ROM") of U.S. power distributors. An article discussing their research was published in the July issue of the Electricity Journal . The authors explain that ROM escalators are used in "hybrid" revenue caps for multiyear rate plans. ROM is indexed, while capital revenue is based on a sensible assumption regarding future capital spending. Hybrid revenue caps have been used for decades in California and are now used in other states as well (e.g., Vermont). A key advantage is their ability to sidestep controversies over capital price and productivity trends, like those that have arisen recently in Massachusetts, where multiyear rate plans index capital as well as O&M revenue. ROM indexes can also be used to escalate O&M revenue requirements in forward test year rate cases. The research was based on publicly available data on the operations of investor-owned U.S. electric utilities. The logic supporting revenue cap index design is detailed.

Performance-Based Regulation and Climate Change

bob@webwisconsin.com (Web Wisconsin) — Mon, 24 May 2021 21:03:21 GMT

New PEG Article in Climate and Energy

Climate and Energy published an article on “Performance-Based Regulation and Climate Change” in its July issue. The article, coauthored by Matthew Makos and Mark Newton Lowry, discusses four established approaches to PBR and then explains how it has helped to address mounting climate concerns. These concerns have boosted the popularity of PBR in the United States, for several reasons. The key role of California in the development of American PBR is noted. A state of the art, climate-minded regulatory system is a multiyear rate plan that also features the other three established PBR approaches. Current challenges in the design of climate-related provisions of these plans are emphasized. Climate-minded ratemaking proposals should give utilities the incentive to embrace them while also encouraging general operating efficiency, regulatory efficiency, and good value for customers.

Washington State Chooses PBR

bob@webwisconsin.com (Web Wisconsin) — Tue, 04 May 2021 15:29:31 GMT

PBR Approach Includes Multiyear Rate Plans

Washington governor Jay Inslee signed Bill 5295 on 3 May 2021 transforming the regulation of gas and electric utilities toward multiyear rate plans (“MRPs”) and performance-based rate making. Utilities will be required to file MRPs with each general rate case. These plans will include performance metrics, entail benefits for low income customers, and be aligned with each utility’s clean energy implementation plan. The Washington Utilities and Transportation Commission will conduct a proceeding to develop a PBR policy statement.

Parties Seek Continuation of Alberta PBR

bob@webwisconsin.com (Web Wisconsin) — Mon, 26 Apr 2021 20:38:35 GMT

AUC Kicks Off PBR Plan Renewal

The Alberta Utilities Commission has for many years been a leading North American practitioner of performance-based ratemaking (“PBR”). Gas and electric power distributors are in the fourth year of their second successive multiyear rate plan. Rates (or in the case of gas utilities, revenue) are indexed for inflation and industry productivity trends. Interested parties filed comments on April 22 that appraised past experience with Alberta PBR and expressed their views about its continuation. Utilities and major consumer groups alike reported generally positive experience with PBR and recommended its continuation. Regulation was streamlined and some utilities materially improved cost performance. Service quality was maintained. Some problems in the design of the first-generation plans were rectified in the second-generation plans. Consumer groups seek more assurance that customers will receive a fair share of plan benefits. Pacific Economics Group played a prominent role in the PBR proceedings that approved both plans.

Benchmarking Granular Power Distributor Costs

bob@webwisconsin.com (Web Wisconsin) — Mon, 19 Apr 2021 16:38:07 GMT

New Research Uses Ontario’s Extensive, Detailed Data

The Ontario Energy Board is the leading user of statistical benchmarking in North American regulation. The allowed pace of revenue growth is linked to the results of an annually-updated total cost benchmarking study. Board staff have for several years explored the possibility of benchmarking granular power distribution costs using the detailed data they gather on distributor operations. PEG Vice President Dave Hovde has assisted Board staff in this initiative. His latest report was released April 1. Econometric cost models and unit cost metrics were developed for six kinds of operation expenses ("opex") and four kinds of capital expenditures ("capex").

Opex

Lines
Metering
Billing
Vegetation Management
Station Equipment
Poles, Towers and Fixtures

Capex

Meters
Station
Poles, Towers and Fixtures
Line Transformers

The report presents the results of the work and evaluates the relative merits of each. A webinar was held May 13 to discuss the results and directions for future research.

Revenue Decoupling at 40

bob@webwisconsin.com (Web Wisconsin) — Wed, 07 Apr 2021 20:39:24 GMT

Popular PBR Mechanism Needed Now More than Ever But Tweaks Merit Consideration

Mark Newton Lowry, President of PEG and Matthew Makos, a company consultant, published an article celebrating the 40th anniversary of revenue decoupling in the April issue of Public Utilities Fortnightly. The article, accessible HERE , presents a wide range of arguments that favor this popular form of performance-based ratemaking ("PBR") and explains why decoupling is needed now more than ever. Its usefulness in encouraging rate designs that facilitate demand-side management in an era of increased reliance on intermittent renewable resources is emphasized.

There are new research results on the design of the revenue adjustment mechanisms (“RAMs”) that typically accompany decoupling. The authors show that regulators can escalate allowed revenue for customer growth or GDPPI inflation (or even both) without concern about overearning. Without a RAM, utilities with decoupling have to file frequent rate cases that needlessly raise regulatory cost and weaken performance incentives.

The authors also discuss how decoupling discourages utilities from promoting the electrification of transportation. This problem can be remedied by combining decoupling with a targeted performance incentive mechanism for beneficial electrification. New York is the only state in the union that currently does this.

Dr. Lowry has testified for diverse clients on revenue decoupling and the design of RAMs.

New Transmission Productivity and Benchmarking Study

bob@webwisconsin.com (Web Wisconsin) — Wed, 24 Feb 2021 20:15:52 GMT

Study Documents Continued Productivity Decline and Details New Benchmarking Methods

Pacific Economics Group filed its latest power transmission cost and productivity study on Friday, 19 February. The study updates PEG’s estimates of productivity trends in the U.S. power transmission industry and details new econometric benchmarking models of operation and maintenance, capital, and multifactor cost efficiency. PEG reports that the deterioration in the productivity of the industry has continued since its prior study, which was filed in a 2019 Ontario Energy Board proceeding. The multifactor transmission productivity growth of 51 utilities in the study averaged a 0.62% annual decline over the full 1996-2019 sample period but a 2.26% annual decline in the last fifteen years. The study was authorized by Québec’s Régie de l’énergie in proceeding R-4058-2018 Phase 2. The Régie de l’énergie and the Ontario Energy Board have both established performance-based approaches to the regulation of power transmission which escalate allowed revenue growth using mathematical formulas. Hydro-Québec is North America’s largest transmission service provider.

Hawaii PBR Decision

bob@webwisconsin.com (Web Wisconsin) — Tue, 05 Jan 2021 22:18:50 GMT

The Hawaii Public Utilities Commission issued a final decision in December in its lengthy proceeding to upgrade performance-based regulation for the Hawaiian Electric Companies. The new regulatory system will feature a multiyear rate plan with an indexed revenue cap, targeted performance incentive mechanisms, and innovative pilot programs. PEG President Mark Newton Lowry was a witness for the Companies in the proceeding and participated in several workshops.

Massachusetts PBR Testimony

bob@webwisconsin.com (Web Wisconsin) — Mon, 04 Jan 2021 17:35:22 GMT

Pacific Economics Group personnel have played a prominent role in Massachusetts PBR since its inception in the 1990s. In December, PEG Senior Advisor Larry Kaufmann continued this tradition by filing testimony in support of a PBR proposal by Boston Gas, a National Grid company. The plan features a five year term, an indexed revenue cap, revenue decoupling, and targeted performance incentive mechanisms. Dr. Kaufmann discussed PBR from a policy perspective and detailed a statistical benchmarking study that he prepared which found Boston Gas to be a superior cost performer. Last year, he supported a PBR plan for Grid’s power distribution services in Massachusetts which the Department approved.

Colorado PBR

bob@webwisconsin.com (Web Wisconsin) — Tue, 01 Dec 2020 21:48:00 GMT

Commission Greenlights Expanded PBR Role

Colorado’s PUC issued a positive report, available here , on performance-based regulation in late November, stating that

Going forward, the Commission clearly sees value in the use of PBR as another key “tool in the toolbox” of the regulatory process. The rapidly changing utility and regulatory landscape will certainly provide ample opportunity for the use of well-designed and effective PBR programs. . . It will be our intent to aggressively explore these opportunities in future proceedings.

PEG President Mark Lowry spoke at a Commissioners' Information Meeting in August 2020 and prepared a report and presentation that the Commission cited as key PBR references. Dr. Lowry's presentation on Incentivizing and Measuring Utility Cost Efficiency can be accessed here .

PBR for Ontario Power Distributor

bob@webwisconsin.com (Web Wisconsin) — Fri, 20 Nov 2020 16:49:47 GMT

PEG Plays Key Role

The Ontario Energy Board issued a decision in November approving a new multiyear rate plan for Hydro Ottawa. The plan resulted from a settlement between the parties and features a hybrid revenue cap. Revenue for OM&A expenses will be indexed while revenue for capital will be escalated based on forecasts less a stretch factor. Dr. Mark Newton Lowry, President of PEG, prepared benchmarking and plan design research and testimony for Ontario Energy Board staff in the proceeding.

Wisconsin PBR Presentation

bob@webwisconsin.com (Web Wisconsin) — Wed, 07 Oct 2020 19:36:56 GMT

Energy Utility Basics Course at Wisconsin Public Utility Institute

Dr. Mark Newton Lowry, President of PEG gave a presentation on performance-based regulation (“PBR”) October 5th at the Energy Utility Basics Course of the Wisconsin Public Utility Institute. He explained why PBR is a popular alternative to traditional cost of service regulation under contemporary utility operating conditions. The four basic approaches to PBR (revenue decoupling, performance incentive mechanisms, multiyear rate plans, and special incentives for underused inputs) were detailed. “Utility of the future challenges” were emphasized. A copy of the presentation can be accessed HERE .

PBR for British Columbia

bob@webwisconsin.com (Web Wisconsin) — Fri, 28 Aug 2020 17:14:59 GMT

PBR Workshop Followed White Paper Release

Pacific Economics Group is advising the British Columbia Utilities Commission on performance-based regulation ("PBR") for BC Hydro, a large vertically integrated electric utility owned by the BC government. Our white paper on basic features of PBR and possible applications to BC Hydro can be found here . A PBR workshop in Vancouver was held on September 8th. Dr. Lowry is leading the project.

New PEG Study Includes Custom Productivity Growth Projections

bob@webwisconsin.com (Web Wisconsin) — Fri, 15 May 2020 17:01:12 GMT

Research Filed in Hawaii PBR proceeding

PEG filed a new research report, accessible here , on May 13 in Hawaii’s closely-watched proceeding to develop new performance-based regulation (“PBR”) plans for the Hawaiian Electric companies. A key issue in the proceeding is how to design revenue cap indexes for the companies that reflect the special operating conditions that they face and the fact that the plans will include capital cost trackers for major and renewables-related capital expenditures. New econometric research identified several drivers of the ongoing decline in the productivity growth of vertically integrated electric utilities. These drivers include the increasing age of transmission and distribution systems. Aging T&D systems are a particular challenge for the HECO companies at a time when these systems must handle high levels of distributed solar generation and withstand increasingly severe storms. PEG developed projections of the productivity growth that typical utility managers would achieve in the next five years if faced with HECO’s special operating challenges. This research used tools that PEG had presented in a Review of Network Economics paper.

OOCUR Conference in Anguilla

bob@webwisconsin.com (Web Wisconsin) — Wed, 13 Nov 2019 17:01:34 GMT

Presentation on Performance-Based Regulation

Dr. Mark Newton Lowry, President of Pacific Economics Group Research, spoke November 13 at a conference of the Organization of Caribbean Utility Regulators on Anguilla in the British West Indies. The topic of his talk was Performance-Based Regulation ("PBR") for Hawaiian Electric Utilities. Hawaii's utilities face many of the same challenges that utilities in the Caribbean basin face, including a transition to greater reliance on renewable resources such as solar energy. The state of Hawaii is committed to the use of PBR to meet these challenges. Dr. Lowry explained key PBR tools and their potential use in Caribbean regulation. He has for many years advised the Hawaiian Electric companies on PBR issues.

Power Transmission Benchmarking and Productivity Study

bob@webwisconsin.com (Web Wisconsin) — Wed, 11 Sep 2019 16:24:39 GMT

New evidence filed in Ontario

PEG filed evidence September 5th in an Ontario Energy Board proceeding to establish a performance-based ratemaking (“PBR”) framework for power transmission services of Hydro One Networks. The evidence includes a study of the productivity trends of a large sample of U.S. power transmitters. The typical multifactor productivity of the sampled transmitters declined at an increasing rate over the sample period considered. PEG also developed a sophisticated econometric cost benchmarking model and used it to benchmark the recent historical and forecasted future cost of Hydro One. Hydro One is one of North America’s largest power transmitters.

Regulatory Strategy Workshop

bob@webwisconsin.com (Web Wisconsin) — Fri, 16 Aug 2019 21:06:15 GMT

EEI Advanced Rates Course in Madison, Wisconsin

Mark Newton Lowry supervised the Regulatory Strategy Workshop at the Edison Electric Institute’s 2019 Electric Rates Advanced Course in Madison and taught the Alternative Regulation segments of the course. In the Workshop, six teams of Rates School participants considered a detailed scenario prepared by Dr. Lowry before developing settlement proposals for a hypothetical rate case. The scenario featured many of the challenges facing electric utilities today.

New PEG Study

bob@webwisconsin.com (Web Wisconsin) — Fri, 16 Aug 2019 21:00:50 GMT

Designing Revenue Adjustment Mechanisms for the Hawaiian Electric Companies

The Hawaiian Electric companies submitted their initial comprehensive proposal for a new performance-based regulation (“PBR”) framework on August 14th. PBR proposals were requested from all parties in Phase 2 of the Hawaii Public Service Commission’s generic PBR proceeding. The Commission has mandated a multiyear rate plan approach to PBR that includes a revenue adjustment index. The index proposed by HECO is based on a new study by PEG that is entitled Designing Revenue Adjustment Mechanisms for the Hawaiian Electric Companies . Several workshops have been scheduled to discuss the alternative proposals.

Statistical Benchmarking for Power Distributors

bob@webwisconsin.com (Web Wisconsin) — Tue, 25 Jun 2019 16:33:13 GMT

PEG recently released its latest statistical benchmarking models for power distributors. Five models, estimated econometrically using recent historical data on the operations of U.S. electric utilities, address operation and maintenance expenses, capital cost, capital expenditures, total cost, and two important reliability metrics (SAIDI and SAIFI). Results can be accessed here . The research was undertaken for the Ontario Energy Board ("OEB") in a proceeding to consider a performance-based ratemaking ("PBR") proposal by Toronto Hydro-Electric. PBR in Ontario features multiyear rate plans with terms that are linked to the outcomes of statistical benchmarking studies. A demonstrably superior cost performer can enjoy more rapid rate growth.

The OEB also uses an econometric model, estimated with Ontario data, to benchmark the total cost of all provincial power distributors. Results are updated annually and posted on public scorecards that also report results for various other performance metrics. PEG developed this model and will soon release results for the 2018 operating year.

Pennsylvania Bar Institute's 2019 Public Utility Conference

bob@webwisconsin.com (Web Wisconsin) — Wed, 29 May 2019 00:00:00 GMT

Dr. Mark Newton Lowry, President of PEG Research, spoke on May 31st at the Pennsylvania Bar Institute's 2019 Public Utility Conference in Harrisburg. He was a panelist on the topic of Alternative Rate Making: Structure and Design. His focus was on multi-year rate plans and his presentation can be found here . Other panelists spoke on Performance Based Rate Making and Alternative Rate Making in New York. Recent legislation permits a wider range of Altreg options in the Keystone State. Dr. Lowry was an assistant professor of applied economics for several years at the main campus of the Pennsylvania State University.

Carilec CEO & Leadership Conference in St. Lucia

bob@webwisconsin.com (Web Wisconsin) — Fri, 17 May 2019 19:32:44 GMT

Mark Lowry spoke on May 24th at the Caribbean Electric Utility Services Corporation CEOs & Leadership Conference in Saint Lucia. He discussed his experience with Alternative Regulation in Hawaii and how alternatives to traditional rate regulation have been adopted to address challenges such as slow demand growth and rapidly increasing reliance on renewable generation resources in the Aloha State. Hawaiian law has mandated an increasing role for performance based regulation ("PBR") for electric utilities. Dr. Lowry has for many years advised the Hawaiian Electric companies on PBR issues.

PBR in Hawai'i

bob@webwisconsin.com (Web Wisconsin) — Wed, 09 Jan 2019 20:36:48 GMT

PEG report filed in Hawaii proceeding

A PEG report prepared for the Hawaiian Electric companies on regulatory reform in Hawai'i and the role that PBR can play was submitted January 4th in proceeding 2018-0088. The report discusses PBR mechanisms like performance metrics and multiyear rate plans and their uses in “utility of the future” regulation. Results of new empirical research supporting development of a new revenue adjustment mechanism for the companies are included.

Power Transmission PBR

bob@webwisconsin.com (Web Wisconsin) — Wed, 09 Jan 2019 18:38:11 GMT

Canada Continues PBR Leadership

Hydro One Networks has proposed a multiyear rate plan for an affiliated power transmission utility. PEG will advise the Ontario Energy Board in this groundbreaking proceeding. The project will include a statistical transmission cost benchmarking study using U.S. data and a study of the productivity trends of U.S. power transmission owners. Hydro One owns one of North America's largest transmission systems. PEG is also active in transmission PBR in neighboring Quebec, where the Regie de l'Energie is close to finalizing a multiyear rate plan for Hydro-Quebec Transmission.

FRI's 2018 Symposium

bob@webwisconsin.com (Web Wisconsin) — Sat, 01 Dec 2018 00:00:00 GMT

Innovations in Public Utility Business Models and Financing for the 21st Century

Mark Newton Lowry was a panelist in the Financial Research Institute (FRI)'s 2018 Symposium on Innovations in Public Utility Business Models & Financing for the 21st Century. The Symposium took place on September 26th at the University of Missouri. The panel examined the economics underlying existing business models and how such models might evolve in the future. Included in this discussion were issues such as the current state of rate of return design, the challenge of distributed resources, fuel diversity, estimating the cost of capital, incorporating affordability and access, and possible innovations and adjustments in utility revenue capture models.

Participation in Hawaiian PBR Workshops

bob@webwisconsin.com (Web Wisconsin) — Thu, 23 Aug 2018 00:00:00 GMT

Mark Newton Lowry, President of PEG Research, was invited to speak at the Hawaii Public Service Commission's third technical conference on Performance-Based Regulation ("PBR") . The conference was held on November 28 in Honolulu. Dr. Lowry spoke on new needs for performance incentive mechanisms in Hawaii.

Mark Newton Lowry also spoke at the July 23rd PBR workshop in Honolulu. The Hawaii Public Utilities Commission invited Dr. Lowry and made his recent Berkeley Lab study, PBR for a High Distributed Energy Resources Future , a required read for the conference. PBR is already popular in the Aloha State, and recent legislation there has mandated its use in electric utility regulation. This workshop was the first step in a multiyear Commission initiative to retool its PBR approach to meet "utility of the future" challenges.

Hawaiian regulation is closely watched nationally because utilities grapple there with high rooftop solar penetration and a state mandate to transition to 100% reliance on renewable resources. Dr. Lowry is advising the Hawaiian Electric companies in the proceeding.

Scott Brockett joins PEG as Senior Advisor

bob@webwisconsin.com (Web Wisconsin) — Thu, 23 Aug 2018 00:00:00 GMT

Scott Brockett has joined PEG Research as a Senior Advisor. An expert on gas and electric utility regulation, he brings to the Company more than twenty years of experience as a regulatory economist working for diverse organizations in midwestern and western states. Most recently, Scott held various positions over twelve years at Public Service Company of Colorado. He previously worked as a Supervisor of Pricing and Revenue Forecasting at Consumers Energy in Michigan and as Manager of Energy Planning and Advocacy at the Minnesota Department of Public Service. Areas of expertise include gas and electric pricing, distributed generation, net metering, cost trackers, multiyear rate plans, forward test years, qualifying facility buyback rates, service quality, revenue decoupling, integrated resource planning, and demand side management ("DSM") incentives. He has testified on many of these issues. Scott holds an MA from Miami University in Ohio and a BA in English and Economics from Otterbein College. An Ohio native, he resides in suburban Denver.

Other PEG news

bob@webwisconsin.com (Web Wisconsin) — Wed, 22 Aug 2018 00:00:00 GMT

PEG recently issued its Phase 1 report in a project to develop an activities and program benchmarking ("APB") capability for the Ontario Energy Board. The Board has twice used total cost benchmarking studies by PEG to set stretch factors in the price cap indexes of provincial power distributors. The goal of the APB project is to benchmark more granular power distribution costs as an aid to rate applications. The Board is charged with regulating more than seventy power distributors.

Zachary Legge has rejoined PEG's staff as an Economist II. Zack took a year off to earn a master's degree in Resource and Energy Demand Management Analysis from the Department of Applied Economics at the University of Wisconsin-Madison. A Trenton NJ native, Zack previously worked for PEG as an intern while earning UW undergraduate degrees in mathematical economics and classical studies. Zack replaces AJ Callis, who will be entering the PhD program in Economics this fall at Oxford University.

Interns have long played a valued role at PEG, enlivening the work place while helping us offer good value to our clients. Past interns have been admitted to graduate programs at Oxford, Stanford, Yale, and the Universities of Chicago, Maryland, and Minnesota. One is now a business school professor at the flagship Austin campus of the University of Texas. PEG's summer intern was Gwendolyn Davis. A Whitefish Bay WI native, Gwen has an undergraduate degree in economics from Marquette University. She is currently working on a masters degree in applied economics at Marquette.

Previous News: 2017

bob@webwisconsin.com (Web Wisconsin) — Sun, 31 Dec 2017 00:00:00 GMT

December 2017

Dr. Lowry filed testimony December 21st in Minnesota on behalf of Northern States Power-Minnesota. NSPM recently began operating under a multiyear rate plan. The Minnesota Public Service Commission convened a hearing to review the company's performance metric system and consider new performance metrics and targeted performance incentive mechanisms. Dr. Lowry reviewed NSPM's regulatory system and discussed appropriate adjustments to the performance metric system.

Also in December, PEG Research won a competitive bid to advise the Ontario Energy Board on a new multiyear rate plan for Ontario gas utilities. Enbridge Gas Distribution and Union Gas have proposed a merger and an unusual ten-year rate plan. Their filing includes testimony on a productivity study deemed pertinent in the choice of an X factor for the proposed revenue cap index. PEG will review this evidence and, if warranted, prepare an alternative study and file testimony in the proceeding.

October 2017

Mark Newton Lowry filed extensive testimony for Xcel Energy in a Colorado rate proceeding which is accessible here . Public Service of Colorado is proposing a multiyear rate plan ("MRP") for its electric services in the proceeding. The plan includes revenue decoupling. Colorado's Public Utilities Commission recently approved revenue decoupling for the company's electric services but did not approve any mechanism for escalating the revenue requirement. Dr. Lowry's testimony discusses general merits of MRPs for electric utilities under today's business conditions and appraises the specific rate plan proposed by Public Service. His evidence includes statistical benchmarking of the company's proposed revenue requirements for the four years of the plan. The need for automatic revenue escalation when electric utilities operate under revenue decoupling is discussed with supportive empirical evidence.

Dr. Lowry gave a presentation on performance based regulation on October 10th at the Wisconsin Public Utilities Institute's Energy Utility Basics Course. On October 31, he conducted a seminar on his research at the Department of Applied Economics at the University of Wisconsin. Dr. Lowry is an alumnus of the department.

September 2017

PEG Research LLC has won a competitive bid to assist the Ontario Energy Board with a Hydro One Networks ("HON") rate filing. HON is Ontario's largest power distributor. The company has proposed a custom incentive regulation ("IR") plan. The Board requires utility custom IR proposals to be supported by statistical benchmarking and productivity evidence. HON has submitted a report on its productivity growth along with several benchmarking studies. PEG will review the benchmarking and productivity evidence and prepare testimony in the proceeding if needed.

Also in September, Dr. Lowry spoke at a training session on Distribution Systems and Planning for the New England Council of Public Utility Commissioners in Hallowell, Maine. The session was organized by the Grid Modernization Laboratory Consortium of the U.S. Department of Energy. Dr. Lowry spoke on Regulation of Modernizing Power Distributors: Results from Research on Performance Based Regulation.

August 2017

Dr. Lowry gave a webinar for Lawrence Berkeley National Laboratory August 4th to discuss results of his recent research paper for the lab on multiyear rate plans for U.S. electric utilities. Also in August, he served as an instructor at the Edison Electric Institute's Electric Rates Advanced Course in Madison WI. He presented a session on Alternative Regulation and supervised an Altreg workshop.

July 2017

Lawrence Berkeley National Laboratory has issued a report by PEG Research on Performance-Based Regulation Using Multiyear Rate Plans for U.S. Electric Utilities. Multiyear rate plans ("MRPs") are a comprehensive approach to performance-based regulation that is popular in Canada, Britain, and many other countries overseas. Their use is growing in the United states, especially for vertically integrated electric utilities. The paper, available here , details key plan design issues, presents several case studies, and considers the impact of MRPs on electric utility performance. Results are presented on the recent growth in the productivity of 86 U.S. utilities in the provision of power distributor services. The research suggests that utilities operating under well-designed MRPs (and, more generally, infrequent rate cases) tend to achieve better operating performance.

June 2017

Green Mountain Power has retained Pacific Economics Group to assist it in the development of a new regulatory strategy. Vermont's largest electric utility, an affiliate of Montreal-based Gaz Metro, is a national leader in the transition to cleaner sources of energy. The Company announced its intent to develop a new regulatory system in recent testimony. With PEG's assistance, it will participate in a collaborative process initiated by the Department of Public Service to consider new approaches to regulating Vermont electric utilities.

Mark Newton Lowry filed extensive testimony June 2 in support of a multiyear rate plan ("MRP") for the gas division of Public Service of Colorado. Public Service is a unit of Xcel Energy and one of the largest U.S. gas utilities. Dr. Lowry discussed general merits of MRPs and appraised the specific plan proposed by Public Service. His appraisal included statistical benchmarking of the company's proposed revenue requirements for O&M expenses and total cost during the three years of the plan. He also reported recent trends in the productivity of U.S. gas distribution utilities. The testimony and report can be found here .

May 2017

Mark Newton Lowry participated in a National Regulatory Research Institute webinar on multiyear rate plans. The webinar discussed Ken Costello's recent NRRI white paper on these increasingly popular plans. PEG congratulates Ken on his recent selection by the Financial Research Institute to receive the 2017 Crystal Award. The award was created to recognize an individual who has made outstanding and sustained contributions to the design, implementation, or analysis of public utility regulatory policy.

Dr. Lowry also spoke at the National Conference of Regulatory Attorneys in Portland, Oregon. The theme of the conference, held May 7- May 10, was New Horizons - The Future of Utility Regulation . Dr. Lowry discussed his paper, nearing completion, on multiyear rate plans for US electric utilities. The work is funded by Lawrence Berkeley National Laboratory of the U.S. Department of Energy.

April 2017

The Regie de l'Energie in Quebec issued its long-awaited decision on PBR for the power distributor services of Hydro Quebec. The Regie has directed the company to operate under a four-year multiyear rate plan featuring a revenue cap index. The index will reflect input price inflation, customer growth, and trends in the multifactor productivity of power distributors. The company has also been directed to develop an incentive mechanism for its power procurement services. The plan largely conforms to the recommendations of Mark Newton Lowry, an expert witness in the proceeding.

PBR is required in Quebec by provincial statute. The statute states the goals of PBR to be

continuous improvement in utility operating performance
sharing of benefits
streamlining of the regulatory process.

February 2017

Mark Newton Lowry filed testimony February 24th on incentive regulation for the power transmission services of Hydro-Quebec. Provincial law requires regulation of the company's transmission and distribution services. Designing an incentive regulation mechanism for transmission is especially challenging since there are few precedents for this in North America. Dr. Lowry proposes a multiyear rate plan with revenue escalated between rate cases by an index or "California-style" hybrid methodology.

January 2017

Mark Newton Lowry and Tim Woolf of Synapse Energy Economics addressed the Technology and Economic Development Committee of the Washington State House of Representatives January 31. They discussed their recent research on performance-based regulation for Lawrence Berkeley National Laboratory.

January 2017

Dr. Charles Cicchetti and Colin Long have joined Berkeley Research Group ("BRG") as Managing Directors. Both were founding members of Pacific Economics Group and were Senior Advisors to PEG Research LLC. Questions about the transition can be addressed to Colin Long at clong@thinkbrg.com or 213.261.7696. We wish Charlie and Colin the very best in their new endeavor.

Previous News: 2016

bob@webwisconsin.com (Web Wisconsin) — Sat, 31 Dec 2016 00:00:00 GMT

December 2016

The Alberta Utilities Commission reached a decision December 16th on the outlines of next-generation performance-based ratemaking ("PBR") plans for Alberta's gas and electric power distributors. Distributors will once again operate under multiyear rate plans with rates (or revenue) escalated by rate indexes with an inflation - X formula. The X factor slows escalation and was a central issue in this proceeding. The Commission chose an X factor of 0.30% that was similar to the 0.43% estimate of the productivity growth of U.S. power distributors provided by Pacific Economics Group ("PEG") Research President Mark Newton Lowry.

November 2016

Mark Newton Lowry and David Hovde of PEG filed testimony in November for the Ontario Energy Board on the design of an incentive regulation mechanism for Ontario Power Generation. PEG proposed a multiyear rate plan featuring a price cap index with an inflation - X formula. His recommended 0.59% X factor is based on a study of the productivity trend of North American hydroelectric power generators. Methods for measuring productivity growth have been a central issue in the proceeding.

November 2016

Dr. Blaine Gilles, a Senior Advisor at PEG Research, recently completed a multi-million dollar funding raise for Conversion Energy Systems, Inc. ("CES"). CES has developed a propriety system for processing hazardous wastes using a gasification process which allows recovery of recyclable metal and glass and produces significant heat energy. Dr. Gilles formulated the firm's launch strategy, developed its financial model and represented the firm before investors.

November 2016

Mark Newton Lowry made a presentation November 17th to the Vermont Future of Electric Utility Regulation Workshop. The workshop was held at the offices of Green Mountain Power in Colchester, Vermont. Dr. Lowry discussed his recent research on performance-based regulation for Lawrence Berkeley National Laboratory.

August 2016

PEG Research filed testimony in a Minnesota proceeding on behalf of Fresh Energy. The testimony, prepared by PEG economist Kaja Rebane and company President Mark Newton Lowry, reported on a study of the incentives provided by Minnesota regulation for Otter Tail Power to embrace demand-side management and other distributed energy resources. The study found problems with the company's current incentive structure that are particularly large in the areas of rate design, peak load management, and distributed generation and storage ("DGS"). The authors recommend reforms to Otter Tail's regulatory system that include revenue decoupling and an expanded scope for performance incentive mechanisms to encourage efficient peak load management and DGS.

May 2016

PEG Research won a competitive bid to advise the Ontario Energy Board in a proceeding to develop a performance-based ratemaking ("PBR") plan for the hydroelectric operations of Ontario Power Generation. OPG is one of the largest hydroelectric power producers in North America. The project will include productivity and econometric cost research using data from OPG and a sample of US hydroelectric power generators. The project will be led by PEG President Mark Newton Lowry.

April 2016

Dr. Mark Newton Lowry, President of PEG Research, spoke at the Annual Financial Forum of the Society of Utility and Regulatory Financial Analysts on forward test years . He has been active in the forward test year field since writing a white paper on this alternative regulation tool for the Edison Electric Institute. A copy of this paper can be accessed here .

March 2016

Dr. Lowry testified for the Natural Resources Defense Counsel in Harrisburg PA at an en banc hearing of Pennsylvania's Public Utility Commission. The hearing was convened to consider alternative ratemaking methodologies, such as revenue decoupling , that strengthen incentives for energy utilities to pursue aggressive conservation and efficiency initiatives. Dr. Lowry provided strong support for revenue decoupling as part of a package of regulatory reforms to encourage utility embrace of demand-side management programs. The recommended reform package also includes multiyear rate plans and demand-side management performance incentive mechanisms. A copy of his written evidence in the proceeding can be accessed here .

Dr. Lowry was invited by the Wisconsin Public Service Commission to make a presentation on performance-based regulation at the Wisconsin Retreat on Utility Business Models of the Future. The retreat is organized by the National Governor's Association and was held March 29th in Madison. Other speakers at the event included nationally recognized experts Peter Kind and Ken Costello.

Larry Kaufmann was invited by Naturgas, the Colombian natural gas association, to speak at its 19th Annual Convention. He participated in an international panel on international regulatory issues, and his presentation addressed two issues: the challenges in efficiency measurement, and building trust in regulatory institutions.

Larry Kaufmann has published an article titled "Natural Gas Market Reforms in Mexico" in the latest issue of Geopolitics of Energy . The article reviews natural gas reforms in Mexico's natural gas sector over the last 20 years and analyzes which reforms have been successful and which have not. The article also shows why the natural gas reform experience is relevant to the sweeping changes in Mexico's oil and gas industries that have taken place in recent years. Dr. Kaufmann is a Senior Advisor to Pacific Economics Group Research and in 2015 became a Fellow at the Canadian Energy Research Institute, which publishes Geopolitics of Energy .

February 2016

Dr. Lowry made his second presentation to Minnesota's e21 Initiative February 26th in Minneapolis. This nationally prominent "utility of the future" initiative, now in Phase II, is considering alternative kinds of performance-based compensation for Minnesota electric utilities. The initiative is spearheaded by the Great Plains Institute. Dr. Lowry spoke on Performance-Based Regulation in a High Distributed Energy Resources Future.

January 2016

Mark Newton Lowry has been involved in the past year in the preparation of five reports that consider regulation of the electric "utility of the future". This work has included a role as consulting economist to the Powering Tomorrow Initiative, which was funded by the Energy Foundation and a diverse stakeholder group that included some of the nation's largest electric utilities and third party energy companies. Phase 2 of the Initiative considered alternative industry structures and appropriate regulatory systems for embracing higher levels of distributed energy resources. Powering Tomorrow has now released its Phase 2 final report entitled New Utility Industry Structures and Regulatory Packages in An Era of Increasing Energy Decentralization . A copy of the report is available here .

Also in January, Lawrence Berkeley National Laboratory published a paper Dr. Lowry coauthored entitled Performance-Based Regulation in a High Distributed Energy Resources Future . A copy can be obtained here . This paper explains disincentives electric utilities experience under traditional rate regulation to embrace efficient levels of demand-side management, distributed generation, and other kinds of DERs. Two well-established approaches to strengthening incentives to embrace DERs are considered: multiyear rate plans ("MRPs") and targeted performance incentive mechanisms ("PIMs"). The authors find that the strongest incentives to embrace DERs are provided by a "four-legged stool" supported by MRPs, revenue decoupling, the tracking of DER-related expenses, and PIMs that provide rewards for efficient DERs. The scope of PIMs should be extended beyond their traditional focus on conservation to encourage peak load management and distributed generation and storage. A variety of other strategies are detailed that can apply to utilities in various special situations. A webinar to discuss results of the project was held January 27th. The webinar and associated slides can still be accessed on the LBNL website here .

Previous News: 2008 - 2015

bob@webwisconsin.com (Web Wisconsin) — Thu, 31 Dec 2015 00:00:00 GMT

October 2015

Mark Newton Lowry filed testimony on performance-based regulation ("PBR") for the transmission and distribution services of Hydro-Quebec. He was the only consultant chosen in August by the Regie de l'Energie to provide testimony from amongst three who were nominated. PBR is now required for the T&D services of Hydro-Quebec under Article 48.1 of the Regie's authorizing legislation. The Regie has established three goals for PBR mechanisms: 1) continual improvement in performance and service quality, 2) sharing benefits of cost reductions between consumers and the utility and 3) reduced regulatory cost.

Application of PBR to transmission is commonplace overseas but unusual in the US and Canada. Hydro-Quebec operates the largest transmission system in North America and exports large quantities of clean hydroelectric power to the northeastern US. Dr. Lowry drew on his extensive experience to trace the outlines of workable PBR plans for Hydro-Quebec's T&D services.

July 2015

Lori Smith Schell has become a Senior Advisor to PEG Research. She is a Certified Energy Risk Professional ("ERP") with over 25 years of experience in the energy industry, including policy analysis work at the U.S. Department of Energy and Los Alamos National Laboratory. Lori is the 2015/16 Vice President-Communications of the International Association for Energy Economics ("IAEE") and is Past President and Senior Fellow of the United States Association for Energy Economics ("USAEE").

Quantifying the costs and benefits of emerging energy technologies, including all types of solar technologies and fuel cells is a specialty. Her current focus is on "power-to-grid" economics, the use of excess renewable generation to produce hydrogen for injection into natural gas pipelines. She works closely with the Advanced Power and Energy Program at the University of California-Irvine to provide MATLAB-based economic analysis in support to APEP's technical modeling.
Dr. Schell was previously the Director of Energy Risk Management for Trigen Energy Corporation, a combined heat and power company focused on maximizing the efficiency of distributed generation. She represented Trigen on the Board of Directors of the Independent Power Producers of New York, Inc. She earlier served as the Manager of Regulatory Affairs & Energy Market Analysis for Air Products and Chemicals, Inc., and as a Project Manager at Benjamin Schlesinger and Associates, Inc.
Lori holds a Ph.D. in Mineral Economics and Operations Research from the Pennsylvania State University and a B.A. in Economics (Honors) from the University of Washington. She and her husband, Jeff, live in Durango, Colorado where they raised their three daughters.

June 2015

Blaine Gilles, a Senior Advisor to PEG Research, has been providing economic research and interim senior management services to Conversion Energy Systems, Inc. ("CES"), a Chicago-based startup firm. CES is a leader in the development of advanced thermal conversion technologies for use in disposal of medical, contraband, military and municipal wastes. CES plans to act as a distributed energy resource provider, utilizing a proprietary thermal gasification technology to process certain types of solid waste, extracting recyclable materials and energy. CES recently executed a strategic partnership agreement with Science Application International Corporation ("SAIC"), for the sale and integration of its technology in advanced solutions for the U.S. federal government.

May 2015

Mark Newton Lowry has been asked to coauthor the third technical report in the Lawrence Berkeley National Laboratory's ("LBNL") Future Electric Utility Regulation series. The white paper will be on Performance-Based Regulation ("PBR") in a high distributed energy resource ("DER") future. The report is expected to discuss the use of multiyear rate plans and performance-based metrics focused on DER. Dr. Lowry is joining an expert advisory group of state regulators, utilities, stakeholders and national experts who are working on the Future Electric Utility Regulation project. In conjunction with this white paper, at least one public webinar will be held to present the results of the final published report to state regulators, policymakers, utilities and other interested parties. The report is expected to be released in late 2015.

LBNL is a member of the national laboratory system supported by the U.S. Department of Energy and managed by the University of California. Its staff includes 13 Nobel prize winners. LBNL's research is focused in a wide array of scientific disciplines including policy analysis and technical assistance activities at the state, regional and national levels in electricity markets, electricity sector policies, and coordination of national, regional and state electricity policy.

April 2015

Larry Kaufmann, a Senior Advisor to PEG Research, recently advised the staff of the Ontario Energy Board ("OEB") on a custom incentive regulation ("IR") plan proposed by Toronto Hydro. The company proposed a price cap index of inflation-X form that is similar to those used today by most Ontario distributors, as well as a "C factor" intended to provide supplemental compensation for high expected capital expenditures. The Board requires statistical benchmarking evidence for custom IR applications. Dr. Kaufmann was asked to analyze the benchmarking work underpinning the Custom IR plan and the X and C factors that the company proposed. PEG's analysis found that the benchmarking work supporting Toronto Hydro's Custom IR plan was conceptually and empirically flawed. The combination of data errors and an unwarranted explanatory variable used in the benchmarking analysis over-stated Toronto Hydro's estimated productive efficiency by more than 40%. PEG also found that Toronto Hydro registered a bad reliability performance and was projected to become an inferior cost performer over the term of its Custom IR plan. Given its substandard performance on both cost and reliability, PEG recommended that the X factor contain a "stretch" factor of between 0.6% and 1.0%. PEG also found Toronto Hydro's C factor was not designed appropriately and would over-recover the Company's projected capital expenditures under Custom IR. PEG accordingly recommended an adjustment in the C-factor calculation that would reduce price growth under the plan by an estimated 1.5% in each year. All evidence and arguments in the case have been filed, and the Board is expected to issue its decision on Toronto Hydro's Custom IR proposal sometime this summer.

April 2015

Larry Kaufmann, a Senior Advisor to PEG Research, recently moderated a session at the annual Oil Conference of the Canadian Energy Research Institute (CERI) in Calgary, ALTA. The session addressed the growing transportation of oil by rail rather than pipeline, and the safety and regulatory concerns associated with this development. Dr. Kaufmann recently became a Research Fellow at CERI.

March 2015

Mark Newton Lowry spoke at the Electric Utility Rate Cases conference in Las Vegas on "How Alternative Approaches to Regulation such as Revenue Decoupling and Performance-Based Regulation (Including Britain's "RIIO" Approach to PBR) Can Help Regulate the 'Utility of the Future.'" The conference, organized by Law Seminars International, was held March 5-6 in Las Vegas. Dr. Lowry discussed the potential for multiyear rate plans with revenue decoupling and a mix of cost trackers and award/penalty mechanisms to spur innovation and balance incentives for cost containment and other goals such as clean energy.

March 2015

Mark Newton Lowry has been retained as an economic advisor to the Powering Tomorrow initiative. This initiative, led by several former regulatory commissioners, is designing new regulations and laws for electric utilities which are more appropriate for an era of rapid technical change and increased penetration by distributed energy resources. The initiative has been funded by a group of prominent stakeholders. Dr. Lowry developed a new regulatory framework for the initiative and presented it at a recent meeting with stakeholders in Tempe, Arizona.

December 2014

Mark Newton Lowry has been chosen by the Edison Electric Institute to lead a multiclient study on Performance-Based Regulation for Emerging Utility Challenges. The project will consider the potential roles of award penalty mechanisms, multiyear rate plans, and marketing flexibility in providing US investor-owned electric utilities with the timely rate relief, performance incentives, and operating flexibility they need to meet emerging challenges. Deliverables for the project include national webinars and white papers.

October 2014

PEG Research wishes to congratulate Jean Tirole of the Toulouse School of Economics for winning the Nobel Prize in Economics. Dr. Tirole did pathbreaking theoretical research on incentive regulation of utilities through such classic works as A Theory of Incentives and Procurement in Regulation (Cambridge, MIT Press, 1998). Our hope is that the international recognition accorded to Dr. Tirole will prompt American regulators to take a closer look at the PBR option. A rare example of world-class PBR in North America can be found here .

September 2014

Mark Newton Lowry, President of PEG Research, gave a presentation on Performance Based Regulation ("PBR") for the Utility of the Future to Minnesota's e21 Initiative. Convened by the Great Plains Institute and other parties, the e21 Initiative is working with Minnesota utilities, consumer advocates, and other stakeholders to map out a transition to a new regulatory model for Minnesota. Goals of the e21 initiative include:

transition to a sustainable, carbon-neutral energy system;
economically-viable utility business model(s) that support energy efficiency, renewable energy, distributed generation, and advanced energy technologies;
reasonable rate of return for utilities;
fair allocation of costs between customer classes; and
reduced regulatory administration costs and resources.

PBR can play a key role in the attainment of these goals.

September 2014

Dr. Lowry also spoke at the 2014 symposium of the Financial Research Institute at the University of Missouri in Columbia. His remarks there chiefly addressed the potential of distributed solar power generation to trigger disruptive change for vertically integrated electric utilities. He prepared a brief paper for conference participants that showed how changing business conditions are prompting VIEUs today to file for frequent small rate increases. These filings are triggering increased experimentation with multiyear rate plans.

September 2014

Dr. Lowry has been active in the performance-based ratemaking field since the early 1990s and still produces results for clients in the regulatory arena. The most recent victory was in September. Pursuant to directives by the British Columbia Utilities Commission, Fortis had filed performance based ratemaking ("PBR") proposals for Fortis BC Energy, the largest BC gas utility, and Fortis BC, an electric utility. The PBR plans featured revenue decoupling and revenue cap indexes of general form inflation - X + customer growth. The BCUC chose revenue cap index formulas that were largely in line with Dr. Lowry's input price and productivity research and testimony. Both PBR plans have a term of six years.

September 2014

The U.S. government and the Navajo Nation reached a settlement in a lawsuit alleging more than 50 years of U.S. government mismanagement of royalties from extracted resources on the Navajo reservation. The government will pay $554 million, the largest amount that it has paid to a single American Indian tribe in a lawsuit. The Navajo Nation was advised by PEG members Charlie Cicchetti and Colin Long.

August 2014

PEG Research was recently retained by the Ontario Energy Board to prepare econometric benchmarking models for power distributor cost and reliability. Econometric cost models are a form of "top down" benchmarking that is also featured in the "RIIO" approach to performance-based regulation ("PBR") that is popular in Britain. The new benchmarking models for the OEB will be estimated with data on the operations of US power distributors and used to appraise the performance of Toronto Hydro-Electric System. Most Ontario power distributors operate under incentive ratemaking plans featuring price cap indexes with Inflation - X escalation formulas. The X factor for each company includes a "stretch factor" determined using an econometric cost benchmarking model previously developed by PEG Research. Toronto Hydro has argued that this model, which is estimated using only Ontario data, doesn't take proper account of its special operating conditions.

May 2014

Mark Newton Lowry has been invited to speak at the Financial Research Institute's 2014 Symposium. The theme for this year's conference is Emerging Challenges in the Sustainability of Public Utilities . Dr. Lowry will discuss how dynamic market forces are shaping the cost structures that will allow for the sustained production and distribution of utility services. The Symposium will be held September 17th in Columbia, MO.

April 2014

PEG Research personnel headlined a Chicago conference on "Alternative Regulation for Emerging Utility Challenges". Mark Newton Lowry, company President, chaired the conference and provided in-depth discussions of multi-year rate plans, revenue decoupling, capital cost trackers, and PBR in western Canada. Senior Advisor Larry Kaufmann discussed service quality PBR and recent developments in Ontario PBR. Senior Advisor Blaine Gilles discussed how PBR helped telecom utilities cope with emerging competitive challenges.

February 2014

Dr. Lawrence Kaufmann, Senior Advisor to PEG Research, has been advising the Staff of the Ontario Energy Board on the review of Enbridge Gas Distribution's "Customized Incentive Regulation" application. In October 2013, Dr. Kaufmann prepared a report assessing the merits of the application, and recommended that it not be accepted in its current form. He also helped Board Staff prepare interrogatories in the proceeding and testified in February 2014 on his work. A Board Decision on the application is expected in the summer of 2014.

December 2013

Mark Newton Lowry filed testimony on behalf of Commercial Energy Consumers of BC in the PBR proceeding of two British Columbia energy utilities. FortisBC (formerly West Kootenay Power) and FortisBC Energy (formerly Terasen Gas) had recently returned to cost of service regulation after years of operation under PBR. The BC Utilities Commission had stated a concern that they maintain a "productivity improvement culture". Both companies have proposed multi-year rate plans in which budgets for operation and maintenance expenses and routine capex would be escalated by inflation - X formulas. Large plant additions would be subject to certificates of public convenience and necessity and separate cost tracking. In his testimony, Dr. Lowry addressed appropriate designs for the O&M and capex escalator formulas and formulas for more conventional revenue cap indexes. He presented results of recent PEG Research studies of the multifactor productivity trends of US gas and electric power distributors.

November 2013

The Ontario Energy Board ("OEB") issued its report on "Rate Setting and Benchmarking under the Renewed Regulatory Framework for Ontario's Electricity Distributors." This report sets out the Board's policies and approaches to incentive rate setting for electricity distributors and the benchmarking of electricity distributor total cost performance. The Report also includes the Board's determination on rate adjustment parameter values for multiyear rate plans in 2014.

Most Ontario distributors will continue to operate under price caps with Inflation - X formulas. In setting the X (aka productivity) factor, the Board relied on the estimates of industry multifactor productivity ("MFP") trends developed by Board Staff's expert consultants, Dr. Lawrence Kaufmann and his team at PEG Research entitled " Empirical Research in Support of Incentive Rate-Setting: Final Report to the Ontario Energy Board ." The MFP of a large sample of Ontario power distributors was found to average a 0.33% decline annually. The Board also used the econometric model developed and recommended by Dr. Kaufmann to assign Ontario distributors to one of five efficiency cohorts, each of which is given a different stretch factor. PEG Research's econometric model, and distributors' stretch factor assignments, will be updated in each of the five years of the price cap incentive regulation plan. The inflation measure is a weighted average of an Ontario labor price index and the Gross Domestic Product Implicit Price Index for Final Domestic Demand.

September 2013

Mark Newton Lowry filed supplemental testimony in September in support of a revised PBR proposal by Central Maine Power. The revision was prepared in response to a July decision by Maine's Public Service Commission rejecting the general concept of a "hybrid" revenue adjustment mechanism ("RAM"). The hybrid RAM previously proposed by the Company required a multi-year forecast of its capital cost. CMP is now proposing a comprehensive revenue cap index based on research by Dr. Lowry on the input price and productivity trends of Northeast power distributors.

July 2013

Mark Newton Lowry filed testimony in Massachusetts on behalf of Fitchburg Gas and Electric ("FG&E"), a Unitil utility. FG&E has for several years operated under a revenue decoupling plan that provides little revenue escalation between rate cases. FG&E has accordingly been compelled to increase the frequency of its rate cases. Dr. Lowry's testimony details two Altreg approaches that can provide revenue escalation and reduce the frequency of rate cases. One is a broad-based capital cost tracker similar to those that have been approved for several Ohio power distributors and Massachusetts Electric. The other is a PBR plan featuring a revenue cap index ("RCI"). The RCI was designed with the aid of research by PEG Research on the input price and productivity trends of Northeast power distributors. No PBR plan has been approved in Massachusetts since the implementation of decoupling several years ago.

May 2013

Blaine Gilles, Senior Advisor to PEG Research, presented a paper entitled "New Regulatory Frameworks for Energy Distribution: Lessons from the Disruptive World of Telecommunications," at the Eastern Conference Advanced Workshop in Regulation and Competition sponsored by the Rutgers University Center for Research in Regulated Industries. The paper discusses how alternative regulation dealt with disruptive technologies in telecommunications and its implications for the energy distribution industry as it faces disruption from distributed energy technologies.

May 2013

The Edison Electric Institute ("EEI") has released a new survey of trends in alternative regulation ("Altreg") in the North American energy utility industry. The report, entitled Alternative Regulation for Evolving Utility Challenges, was prepared by PEG Research under the direction of Eric Ackerman, EEI's Director of Alternative Regulation. Dr. Mark Newton Lowry, President of PEG Research, was the principal investigator on the survey. New developments in cost trackers, revenue decoupling, forward test years, multiyear rate plans, and formula rates are documented in the report. The survey covers important gas as well as electric precedents.

Interest in Altreg has increased in recent years as utilities struggle to cope with the financial attrition caused by slower growth in the volume of energy delivered per customer. Drivers of slower growth in average use have included sluggish economic growth, changing building codes and appliance efficiency standards, and the demand side management programs of utilities and state agencies. Load losses due to distributed energy resources are an emerging problem for some electric utilities. The survey found that all of the major approaches to Altreg have expanded in recent years. Of special note is the growing popularity of lost revenue adjustment mechanisms by electric utilities and the increasingly widespread use of multiyear rate plans ("MRPs") in Canada. Capital cost trackers have been popular with energy distributors engaged in accelerated system modernization. Several utilities have recently agreed to MRPs that combine a capital cost tracker with a rate freeze. To obtain a copy of the report from the EEI website click here .

May 2013

Mark Newton Lowry, President of PEG Research, filed testimony in early May in support of a new Alternative Rate Plan for Central Maine Power. The new plan features a revenue decoupling mechanism that will help CMP contend with declining average use of power by its customers. Revenue decoupling is typically accompanied by a revenue adjustment mechanism ("RAM") that automatically escalates allowed revenue for inflation and other changes in business conditions. CMP is proposing a "hybrid" RAM design that features index-based escalation of the budget for O&M expenses and a forecast-based "stairstep" trajectory for the capital cost budget. Dr. Lowry's testimony included evidence on the O&M input price and productivity trends of Northeast US electric utilities. Hybrid RAMs have been used for decades by California utilities and are known for their flexibility in financing capital spending surges. Hybrid RAMs are currently used by Southern California Edison and the Hawaiian Electric companies.

May 2013

Larry Kaufmann, a Senior Advisor to PEG Research, recently prepared rebuttal and surrebuttal testimony on behalf of the Wisconsin Public Service ("WPS"). Dr. Kaufmann testified on the value of reliability improvements to WPS customers which are expected to result from WPS' $222 million System Modernization and Reliability Project ("SMRP"). Dr. Kaufmann estimated that the value generated by the SMRP would recoup the program's costs in a maximum of 15 years.

May 2013

On May 3, the Ontario Energy Board ("OEB") released a report from PEG Research titled "Empirical Research in Support of Incentive Rate Setting in Ontario". The report provides recommendations on three elements of the "fourth generation" index-based ratesetting mechanism that likely will apply to more than seventy power distributors in the most populous Canadian province: 1) an industry-specific inflation factor; 2) the productivity factor component of the X factor; and 3) the stretch factor component of the X factor. PEG Research used econometric and unit cost/peer group benchmarking methods to identify five "efficiency cohorts" of distributors within the Ontario electricity distribution industry. The productivity factor recommendation was based on TFP research using newly available Ontario data. Recommended stretch factors will differ among cohorts. Dr. Larry Kaufmann of PEG Research will answer questions on the PEG report and recommendations at a May 16th stakeholder meeting at the OEB. He will also participate in a May 27-28 stakeholder conference in which Board members will consider evidence from PEG and other stakeholders who may present alternate proposals.

PRODUCTIVITY UPDATE

PEG Research is the leading expert witness on the productivity trends of energy utilities in the United States and Canada. Here is a summary of our recent results presented in testimony and other recent publicly available reports.

Industry	Productivity Growth Trend	Sample Period

Northeast U.S. Power Distributors O&M PFP	1.48%	2002-2011
Ontario Power Distributors	-0.05%	2002-2011
Northeast U.S. Power Distributors	0.64%	1999-2010
U.S. Gas Distributors	0.85%	1999-2010
Gaz Metro	1.29%	2002-2011
Enbridge Gas Distribution	1.07%	2005-2010
Union Gas	1.65%	2005-2010

December 2012

The Washington Utilities and Transportation Commission on December 26 approved a multi-party settlement of a rate case for the gas and electric services of Avista Utilities (UE-120436 and UG-120437). The Company had requested substantial attrition adjustments to their 2013 revenue requirements for both services to compensate for the inability of Washington's traditional rate case process to properly account for Avista's current high capital spending and slow sales volume growth. Attrition allowances were common in the early 1980s and there has been renewed interest in them in states with historical test years. Avista filed Washington rate cases for 6 consecutive years and nonetheless experienced chronic underearning.

Mark Newton Lowry and David Hovde of PEG Research developed the methodology for calculating the electric attrition adjustment and Dr. Lowry testified in the proceeding. Avista prepared a companion attrition study for its Washington gas operations based on the PEG Research method. Commission Staff filed a study that also indicated the need for substantial attrition allowances using a methodology similar to that developed by PEG Research.

The approved settlement details a two-year rate plan in which electric rates will rise by $13.7 million (or 3% on average) in 2013 and by $14.0 million (or 3% on average) in 2014. Gas rates will rise by $ 5.3 million (or 3.7% on average) in 2013 and by $ 1.4 million (or 0.9% on average) in 2014. The Commission states in its order that "We find sufficient evidence in both Staff and the Company's attrition analyses to demonstrate that, based on the 2011 test year data, Avista will experience some level of attrition in 2013 ... at least half of the Settlement's 2013 rate increase must be associated with some kind of attrition."

The Commission also commented favorably on the idea of a multi-year rate plan, stating that "The Settlement provides rate stability ... and represents an innovative approach that will provide incentives for Avista to cut costs in order to earn a fair rate of return. Moreover, the lack of annual rate filings will provide the Company, Commission Staff, and all parties with a respite from the burdens and costs of litigation."

October 2012

Mark Newton Lowry, President of PEG Research, has filed testimony before the Surface Transportation Board on behalf of the Western Coal Traffic League and a group of other coal shippers and trade associations that includes the Edison Electric Institute. The testimony concerns changes recently proposed by the Board concerning the Stand Alone Cost ("SAC") test that shippers use to file claims of rail freight overcharges. Shippers construct hypothetical standalone replacement railroads ("SARRs") to deliver their coal and compare their hypothetical charges to those of incumbent railroads. A key to the calculation of accurate charges is the ability of the SARR to boost system utilization with "cross-over traffic" that is not delivered to the shipper. Dr. Lowry's testimony stressed the key role that efforts to boost capacity utilization and realize scope and density economies plays in any efficient business. He challenged the Board's proposed cross-over traffic rules as unduly restrictive and likely to reduce the effectiveness of the SAC tests in identifying rail freight overcharges.

September 2012

The Alberta Utilities Commission issued a landmark decision in its lengthy proceeding on regulatory reform in Alberta. The Commission, intent on eliminating frequent rate cases, established five-year rate or revenue cap plans for Alberta gas and electric power distributors. These caps are escalated annually for changing business conditions using formulas based, in the North American style, on input price and productivity research. In contrast to many performance-based regulation ("PBR") proceedings, where regulators approve settlements between interested parties, the Commission discouraged settlement talks and instead rendered decisions on numerous plan design issues. The escalation formulas for all distributors will feature a custom inflation measure, based on Statistics Canada indexes, and a 1.16% X factor. A window has been established for possible supplemental funding of certain capital spending projects. A commission spokesman noted to the Calgary Herald that "Over time, the PBR plan should make the regulatory system more efficient. We expect that under PBR, customers will experience lower rates than they would have if we stick with the current system." These new regulations will also provide for "measures, targets, and consequences" to ensure that providers fairly calculate their performance while maintaining an acceptable level of service quality.

PEG Research President Mark Newton Lowry, a long time champion of index-based PBR, represented the Consumers' Coalition of Alberta in this important proceeding. He provided testimony on the inflation and productivity trends of gas and electric utilities and on numerous additional issues in PBR plan design. Charles Cicchetti, a co-founding member of PEG, was a witness for EPCOR Distribution and Transmission.

September 2012

The California Public Utilities Commission has approved the transfer of ownernership of Pac-West Telecomm to Unipoint Holdings, LLP. PEG Research Senior Advisor Blaine Gilles advised Pac-West in the proceeding. Dr. Gilles is an expert on regulatory strategy, telecommunications economics, and mergers and acquisitions activities.

July 2012

PEG Research has been chosen as a "Vendor of Record" by the Ontario Energy Board. This status prequalifies the Company to continue its extensive work for the Board for several years. The Board has established itself as one of the most innovative and influential regulators in North America. Most gas and electric power distributors in Ontario currently operate under index-based multiyear rate or revenue cap plans. This streamlined approach to regulation, which encourages good operating performance and shares benefits with customers, is now being adopted in Alberta and Quebec. The X factors in the price cap formulas of Ontario power distributors are linked to statistical benchmarking studies. PEG Research has been prequalified to assist the Board in a wide variety of areas, including performance-based regulation, benchmarking, rate design, and DSM policy. PEG Research looks forward to helping the Board fashion economical and effective regulatory systems for the utilities in Ontario's growing economy.

April 2012

Mark Newton Lowry filed testimony in the state of Washington in support of an attrition adjustment for the electric services of Avista. Avista offers vertically integrated electric service in eastern Washington and has been engaged in recent years in an aggressive capital spending program. Under Washington's largely traditional approach to regulation the Company has filed frequent rate cases but nonetheless experienced chronic under earning. Dr. Lowry studied the trends in the Company's costs and billing determinants and quantified the revenue deficiency that is likely in 2013, the first year that new rates take effect. Avista requests that the revenue deficiency be added to the revenue requirement. Attrition adjustments were a common form of alternative regulation in Washington and other states during the 1970s and 80s.

December 2011

Dr. Lowry filed testimony in Alberta on behalf of the Consumers Coalition of Alberta. The Alberta Utilities Commission has launched a Rate Regulation Initiative that requires energy distributors in the province to step away from the current practice of biennial rate cases and instead adopt multi-year rate plans (aka performance-based ratemaking or PBR plans) that escalate rates using inflation - X formulas. To assist in setting the X factors, Dr. Lowry submitted evidence from a recent study of the multifactor productivity trend of US gas distributors. Over the 14 year 1996-2009 period he reports 1.32% average annual productivity growth for the full US sample. This was similar to the productivity growth of the U.S. economy.

December 2011

Mark Newton Lowry filed testimonies for Pepco and Delmarva Power in Maryland and for Delmarva Power in Delaware supporting an alternative approach to the Companies' rate regulation. Pepco and Delmarva Power are both entering periods of high capital spending to improve the reliability of distribution service. Dr. Lowry explains in each filing why traditional ratemaking practices produce chronic under earning and frequent rate cases for energy distributors engaged in accelerated system modernization. He surveys salient alternative forms of regulation that can mitigate the problem and recommends that the Commission approve capex cost recovery mechanisms in the instant proceeding and the use of forward test years in subsequent rate cases.

October 2011

Mark Newton Lowry filed testimony for Atlantic City Electric in support of a capex cost recovery mechanism for an extension of the Company's Infrastructure Investment Program. The New Jersey-based power distributor is engaged in a program of high capital spending to help it improve system reliability. Dr. Lowry explains in his testimony why traditional ratemaking practices do not work well for contemporary energy distributors engaged in accelerated system modernization. Average use grows much more slowly than in the early post war period, while the rate base of electric utilities grows much more rapidly than in the 1990s and the early years of the present century, when there was a hiatus on new generation construction. Accelerated system modernization is thus likely to result in frequent rate cases and chronic under earning under traditional regulation. Dr. Lowry surveys salient alternative forms of regulation that can mitigate the problem.

September 2011

PEG Research has filed a report for the Ontario Energy Board assessing the incentive regulation plans for Union Gas and Enbridge Gas Distribution. Both companies operate under incentive regulation plans that were approved in 2008 and include index-based attrition relief mechanisms and partial revenue decoupling. This project has been led by Senior Advisor Larry Kaufmann, and evaluated the impact of each Company's incentive regulation plan on its gas delivery rates, cost and productivity trends, financial indicators, and service quality performance. The analysis indicated that the incentive regulation plans encouraged both Enbridge and Union to control costs more effectively and generate productivity and efficiency improvements while sharing those benefits with ratepayers.

July 2011

Mark Newton Lowry filed testimony in Oklahoma on the cost efficiency of Oklahoma Gas & Electric. The study addressed the company's generation maintenance expenses as well as its total non-fuel O&M expenses. In 2010 the company continued to be a top quartile O&M cost performer and was a second quartile generation maintenance cost performer.

July 2011

PEG Research President Mark Newton Lowry filed testimony for Potomac Electric Power in the District of Columbia supporting an alternative approach to the Company's regulation. Pepco is entering a period of high capital spending as it scrambles to improve the reliability of its service in the District. Dr. Lowry explains in his testimony why traditional ratemaking practices do not work well for contemporary energy distributors engaged in accelerated system modernization. The cost of energy distribution grows much more rapidly than billing determinants even under normal circumstances today because of a gap between inflation and productivity growth that isn't offset by growth in customers' average use. Accelerated system modernization widens the inflation - productivity gap and results in frequent rate cases and chronic under earning. He surveys salient alternative forms of regulation that can mitigate the problem and recommends that the Commission approve a Reliability Investment Recovery Mechanism in the instant proceeding and use of fully forecasted (forward) test years in subsequent rate cases.

July 2011

Blaine Gilles Joins PEG Research

PEG Research is pleased to announce that Blaine Gilles has joined the firm as a Senior Advisor. His career has spanned more than two decades in which he has been a business leader, government regulator, and economic researcher focused on the issues of network-based businesses. Issues that arise with the development of competition in regulated industries are a specialty. He is also an expert in formulating strategies to deal with challenges posed by developing and pricing capital-intensive services and effectively managing profitability amid challenging and rapidly changing regulatory and market conditions. Blaine has served as an expert witness in a variety of regulatory and legal proceedings.

Dr. Gilles played a significant role in the transformation of the U.S. telecommunications industry from regulated monopoly to competition. Between 1999 and 2006, he led the voice services business of WilTel Communications, previously a subsidiary of the Williams Companies, to achieve annual revenues of over $1.3 billion. He held a variety of positions in the regulatory department of Ameritech in metropolitan Chicago. He has also led product management, marketing and sales, and business and technical operations at Level 3 Communications, NewCross Technologies, and WorldCom. Blaine earlier served as an economist for the Policy Analysis and Research Division of the Illinois Commerce Commission and was an Assistant Professor of Economics at Kalamazoo College.

Prior to joining PEG Research, Dr. Gilles operated a private consultancy where he supported a variety of network-based firms and private equity companies, as well as the U.S. Securities & Exchange Commission and the U.S. Department of Justice. He has been a key advisor to clients on mergers and acquisitions, competitive strategy, and pricing. At PEG Research, Blaine will participate in the Company's energy utility consulting as well as opening a practice in the field of telecommunications.

Dr. Gilles received his PhD and MA in Economics from Michigan State University where he studied regulatory economics with Harry Trebing of Michigan State's Public Utilities Institute. He also earned a BS in Economics and a BA in International Relations from the University of Minnesota. A native of Amherst, Wisconsin, he currently resides in Hoffman Estates, Illinois with his wife and daughter.

May 2011

The U.S. Securities and Exchange Commission announced today that the United States District Court for the District of Colorado entered a Final Judgment, in a civil action against Joseph P. Nacchio, the former chief executive officer of Qwest Communications International Inc., a Denver-based telecommunications company. According to the SEC's complaint in this matter, from at least April 1, 1999 through March 31, 2002, Nacchio and others at Qwest engaged in a large-scale financial fraud that hid from the investing public the true source and nature of the company's revenue and earnings growth. The complaint alleged that, although Qwest publicly touted its purported growth in services contracts which would provide a continuing revenue stream, in fact the company fraudulently and repeatedly relied on revenue recognition from one-time sales of assets known as "IRUs" and certain equipment without making required disclosures. PEG Research Senior Advisor Blaine Gilles was the SEC's expert witness in the case and used his expertise and experience to opine on Qwest's contracting methods and provided analysis Qwest's contracts, financial disclosure information and network data.

May 2011

The Edison Electric Institute released a white paper on "Innovative Regulation Remedies for Regulatory Lag". The paper was prepared by a PEG Research team lead by company President Mark Newton Lowry. It explains the salient alternatives to traditional cost of service regulation which can remedy the problem of regulatory lag that many utilities face today. The paper focusses on multiyear rate plans, revenue decoupling, formula rates, forward test years, and capital spending ("capex") trackers. There is an authoritative listing of recent precedents for each innovation. The problem of regulatory lag and promising remedies are currently a major focus of the EEI. To obtain a copy of the Report, click here .

May 2011

The United States District Court for the Southern District of Florida granted the SEC's request for summary judgment in the case of the US Securities and Exchange Commission v. Joseph J. Monterosso, et.al . The Court supported the SEC's position and ruled that GlobeTel Communications Corp. had defrauded investors by falsifying claims of millions of dollars of revenue. PEG Research Senior Advisor Blaine Gilles was the SEC's expert witness in the case and performed econometric event studies and empirical analysis of telecommunications traffic data to demonstrate that the traffic data reported by GlobeTel to its auditors in support of its declared revenues had been falsified and that the falsified revenues had a demonstrable impact on investor behavior.

March 2011

PEG Research issued a report on the design of a new Performance Incentive Mechanism for Gaz Metro in Montreal. The study calculated the recent input price and productivity trends of Gaz Metro and developed forward looking productivity growth targets that reflect the company's forecasts of its future business conditions. The research provides the basis for a revenue decoupling mechanism that indexes the revenue requirement to inflation. Index-based cost targets were developed for O&M expenses and capital spending which can be used in an incentivized formula rate regulatory system that Gaz Metro recently proposed.

February 2011

PEG Research has won a competitive bid to advise the Ontario Energy Board on how to define and measure the performance of the province?s electric utilities. The review, led by Senior Advisor Larry Kaufmann, will begin with the issuance of a Concept Paper to provide a framework and structure for analyzing performance issues. The review will culminate with the issuance of a Board report setting out the Board's policy for defining and measuring performance of electricity distributors and transmitters that will be used to inform the setting of rates whether through a cost of service review or through a multiyear rate adjustment mechanism. Currently, companies in the province operate under index-based attrition relief mechanisms with the option to opt out and operate under cost of service regulation.

January 2011

PEG Research issued a report on the generation maintenance expenses of Oklahoma Gas and Electric. The company is seeking special ratemaking treatment for a mechanical integrity program that would involve higher maintenance expenses. The study found that the company's maintenance expenses in recent years were unusually low.

January 2011

PEG Research President Mark Newton Lowry testified on revenue decoupling for Commonwealth Edison (ComEd) in Chicago. The company proposed fixed variable pricing in the proceeding, while the Natural Resources Defense Council proposed a decoupling true up plan. Dr. Lowry's testimony included an authoritative white paper that considers the pros and cons of both approaches and their appropriateness for ComEd and details recent precedents. The Illinois Commerce Commission approved in a May decision a move to fixed variable pricing. To obtain a copy of the Report, click here .

December 2010

Mark Newton Lowry filed statistical benchmarking testimony on the cost efficiency of Public Service of Colorado's gas system. Total cost and O&M expenses were both considered. PEG Research is one of the only consultancies in the world that is a long-time practitioner of rigorous total cost benchmarking. As in previous testimony on the electric operations of Public Service, the focus of this study was the company's proposed forward test year expenses. The proposed costs were found to reflect a superior level of cost management. The study also provided statistical evidence that forward test years and historical test years generate similar performance incentives on balance.

December 2010

PEG Research was selected by the Edison Electric Institute to help the trade association develop a database on approaches to Altreg that help utilities reduce regulatory lag in the recovery of capital expenditures. Approaches to Altreg that are included in the database include capex trackers, CWIP in rate base, formula rates, and multiyear rate and revenue caps. Gas utility precedents are included because of their relevance to electric power distributors. The database is now available to EEI member utilities.

December 2010

Dr. Charles J. Cicchetti, a founding member of California-based Pacific Economics Group LLC, released a report on December 8, 2010 entitled " Expensive Neighbors: The Hidden Cost of Harmful Pollution to Downwind Employers and Businesses. " The report finds that pollution from coal-fired power plants that have failed to install pollution controls is costing businesses in affected downwind states nearly $6 billion annually because of higher labor and insurance costs, lost work days, and lost productivity. The report also quantifies the costs avoided by reducing sulfur dioxide (SO2) and nitrogen oxides (NOX) emissions in downwind states. It concludes that, under any reasonable set of assumptions, the benefits of the Environmental Protection Agency's (EPA) proposed "Transport Rule" under the Clean Air Act far outweigh any associated compliance costs. To obtain a copy of the Report, click here .

November 2010

PEG Research issued a report on the O&M expenses of Oklahoma Gas and Electric. The study, which was filed in their Arkansas rate case, used unit cost indexes and an econometric benchmarking model. The company was found to be a significantly superior O&M cost performer.

August 2010

The Hawaii Public Utilities Commission today gave final approval to the decoupling true up plans of the three Hawaiian Electric utilities. The Commission stated in its decision approving the plans that

While Hawaii could rely only on setting specific [renewable portfolio standard (RPS)] mandates and other clean energy objectives, relying only on mandates may not yield the desired results...decoupling represents a possible means of enhancing Hawaii's commitment to wean itself from fossil fuels. Thus, decoupling supports the achievement of the RPS by the HECO Companies and supports the [energy efficiency portfolio standard]. Decoupling also helps reduce or eliminate regulatory lag, thereby allowing the HECO Companies more timely cost recovery, which facilitates their ability to fulfill Hawaii's statutorily mandated energy policy objectives.

Each plan features revenue decoupling for all service classes and an explicit revenue adjustment mechanism ("RAM") that adjusts the revenue requirement between rate cases for a wide range of business conditions. The RAM has a "hybrid" design like those used for many years in California decoupling plans. It includes indexation of O&M expenses and special treatment of major plant additions. The Commission has directed the companies to operate under three year staggered rate case cycles to ensure that the RAMs reduce the frequency of rate cases.

The HECO plans continue the trend in the electric power industry away from the revenue per customer ("RPC") approach to decoupling that is common in the natural gas industry. The Commission explicitly rejected this approach, stating that

The RPC mechanism, which was not intended to address issues such as regulatory lag, will not perform as well as the RAM in meeting the objective to maintain the HECO Companies' financial integrity. In addition, the Commission finds that the RPC method may not provide adequate rate relief where the increases in costs may be far greater than increases in customers, or where the customer base is decreasing. Although various packages, including RPC plus rate cases, were discussed at the hearing, it does not appear from the record that any of these options would reduce regulatory lag, maintain the HECO Companies' financial integrity, or support the achievement of Hawaii's objectives as well as the RAM.

The plan is a component of the Hawaii Clean Energy Initiative, under which HECO has agreed to a wide range of measures to promote conservation and clean energy. PEG Research President Mark Lowry was a witness for the HECO companies in the proceeding.

August 2010

PEG Research President Mark Newton Lowry has just filed testimony in California on the productivity trends of U.S. gas and electric power distributors. Over the 1999-2008 sample period, he reports that the total factor productivity ("TFP") of a large sample of U.S. electric power distributors grew at a 0.88% average annual pace. The TFP of a sample of natural gas distributors averaged 1.18% annual growth. The multifactor productivity index of the U.S. private business sector averaged 1.31% growth over the same period. The testimony was filed on behalf of two Sempra Energy utilities: San Diego Gas and Electric and Southern California Gas. SoCalGas is the largest gas distributor in North America. Dr. Lowry has provided productivity testimony for these companies in their general rate cases since the mid-1990s. SoCalGas has operated under revenue decoupling continuously since that time.

Springtime in Madison

PEG Research employees are enjoying the springtime weather at the company's office in Madison, Wisconsin. From our perch above Capital Square, we have watched the grass turn green, the tulips bloom, and the oak trees burst into leaf. We wish you all the best in this season of hope and renewal.

April 2010

Larry Kaufmann, Senior Advisor to PEG Research, recently submitted Direct and Rebuttal testimony in support of an O&M net inflation adjustment mechanism proposed by National Grid for a gas utility decoupling plan in Massachusetts (D.P.U. 10-55). The proposed mechanism would allow National Grid to recover annual, formula-based adjustments in its O&M expenses over a multi-year period. The net inflation adjustment formula is inflation in the gross domestic product price index (GDP-PI) minus an O&M productivity offset of 0.52%. Dr. Kaufmann's proposed productivity offset was calibrated using a study of O&M input price and productivity trends for gas distributors in the northeast United States. A final Order in this proceeding will be issued by the end of October 2010.

March 2010

The Ontario Energy Board has posted a report by PEG Research on revenue decoupling. The report, authored by company president Mark Newton Lowry and entitled Review of Revenue Decoupling Mechanisms , is the outcome of a months long study. It is intended to provide Ontario policymakers with a solid background for considering new directions for its decoupling policy. The report discusses all three established approaches to decoupling: lost margin trackers, decoupling true-up plans, and straight fixed variable pricing. There is an authoritative review of key precedents and an analysis of the circumstances in which each decoupling approach is advantageous. A discussion of the design of revenue adjustment mechanisms draws on the company's extensive experience with this complex subject. Linkages between decoupling and other regulatory issues are stressed, including rate design and the choice between forward and historic test years. The report also reviews Ontario's decoupling policies and considers promising new directions. The Board recently established a consultation process (EB-2010-0060) to address provincial decoupling strategy. A conference to discuss the report is scheduled for April 19 in Toronto. Ontario energy distributors have extensive DSM programs that slow growth in average use by small volume customers. Conservation and long displacement generation are also encouraged in the province by the recently passed Green Energy and Green Economy Act. A copy of the report is available here .

December 2009

On Friday December 4, the Colorado Public Utilities Commission approved a settlement in the rate case of Public Service of Colorado. The company's featured evidence was based on a forward test year (FTY). PEG Research provided statistical support for the FTY filing. It showed that the company's proposed O&M expenses reflected a good level of operating performance. The sample used in the benchmarking study was also used to show that the trend in the O&M performance of companies operating under forward test years was similar to, and a little better than, that of companies operating under historic test years. The approved revenue requirement is based on an historic test year with extraordinary adjustments for future business conditions, including the costs of a smart grid project. The settlement also provides that Public Service will file forward test year evidence in its next rate case but also provide historic data and a thorough deviations analysis. The company will work with interested parties to improve reporting requirements with respect to budget and actual data to facilitate the review of future cases.

November 2009

PEG Research won a bid to investigate the use of "top down" techniques for estimating the reductions in gas consumption from utility DSM programs. The estimates would be developed by applying econometric methods to gas distributors' billing data, in an effort to identify the changes in gas consumption that result from energy efficiency programs. These "top down" estimates could potentially substitute for the "bottom up" methods that are currently used to calculate gas savings, and which are based on assumptions regarding projected savings from particular measures and programs. PEG Research will develop statistical models that can be used for the "top down" measurement and verification of utility DSM programs and prepare a white paper that evaluates the merits of a top-down approach compared with the current methodology.

November 2009

PEG Research was recently selected by the Edison Electric Institute in Washington DC to prepare a white paper on forward test years in the U.S. electric utility industry. Roughly half of all investor-owned electric utilities are still required to use historic test years in their rate case filings. The results are increasingly uncompensatory in today's rising unit cost environment. States that have in recent years moved away from historic test years include Idaho, New Mexico, Wyoming, and Utah. The paper will present data on the financial harm caused by historic test years and explain the forward test year alternative.

September 2009

Mark Newton Lowry, President of PEG Research LLC, filed testimony in Rhode Island on behalf of the Energy Efficiency and Resource Management Council. The testimony supported the general outline of a revenue decoupling proposal recently filed by National Grid in the state. Dr. Lowry discussed basic approaches to decoupling, decoupling precedents, and criteria for choosing between alternative decoupling methods such as decoupling trueup plans and straight fixed variable ("SFV") pricing. He commented that "the trueup approach to decoupling is the best practice approach because it encourages, at a reasonable administrative cost, the full range of measures that can promote clean energy. These advantages help to explain why decoupling trueup plans are spreading rapidly in the gas and electric power industry and are used or scheduled for use in most states that have a strong commitment to clean energy".

Summer 2009

As a result of recently passed legislation, the New Zealand Commerce Commission is required to set up new electricity distribution rate plans for the period 2010-2015. The plans will utilize the format of CPI-X to escalate rates. Total factor productivity (TFP) is the preferred basis for setting the X factor. PEG Research Senior Advisor Larry Kaufmann has been retained to evaluate the Commission's proposals on behalf of the Electricity Networks Association. PEG Research personnel have extensive experience in New Zealand, having testified in the previous price controls for electricity and gas distributors. A final decision on the price controls is expected in December 2009.

June 22, 2009

The Oklahoma Corporation Commission staff filed responsive testimony today in Oklahoma Gas & Electric's (OG&E) rate case. As part of its testimony, it reviewed the February 2009 PEG Research report, filed as evidence by OG&E in the rate case. The report stated that OG&E was a top performer at minimizing non-fuel O&M expenses, which are the company's chief controllable cost. Staff's testimony concluded that "Staff is in agreement [with the PEG Research study] that OG&E is a very cost-conscious company in its O&M expenses as compared to other utilities".

Spring 2009

Public Utilities Reports has published Charlie Cicchetti's latest book, Going Green and Getting Regulation Right: A Primer for Energy Efficiency , which responds to the rising interest in energy efficiency and demand-side management programs by exploring the important lessons that can be learned from earlier mandated conservation efforts. Going Green and Getting Regulation Right is a valuable resource for regulators, legislators, utilities, public advocates, and other policy makers. The book draws on a vast database of results from utility programs throughout the nation over the past 15 years. Energy efficiency programs are addressed both quantitiatively and comprehensively. These analyses are complemented by a thorough qualitiative and institutional review of the different approaches to conservation and efficiency that have been taken across the nation and over time. For more information or to order, visit http://www.pur.com/books/55.cfm

April 16, 2009

Bay State Gas today filed a revenue decoupling plan with the Massachusetts Department of Public Utilities (DPU). Bay State proposes to add revenue decoupling to its existing PBR plan, where rates escalate in accordance with a GDPPI-X formula with an X factor of 0.51%. This is the first decoupling plan to be filed in Massachusetts which conforms to DPU guidelines that decoupling plans can be PBR plans with revenue adjustment mechanisms that feature revenue adjustment mechanisms which provide automatic relief for price inflation.

In today's filing, PEG Research Senior Advisor Larry Kaufmann testifies that the existing PBR plan and the revenue decoupling proposal are compatible. His testimony also supports the continued use of Bay State's existing X factor. PEG Research personnel have supported PBR in Massachusetts numerous times over the past 15 years, including the research underpinning the current power distribution rate plan of NStar Gas & Electric and testimony in support of the original and current rate plans of Boston Gas and the current Bay State plan.

March 4, 2009

The Essential Services Commission of Victoria (ESC) today filed comments in an examination of the merits of adding a total-factor productivity (TFP)-based regulatory option in Australia's energy regulatory framework. This examination is being undertaken by the Australian Energy Market Commission (AEMC). The ESC advised the AEMC that a TFP-based option was feasible and appropriate and provided details on a specific, TFP-based regulatory approach. The ESC was advised by Larry Kaufmann when preparing its submsission.

February 26, 2009

Mark Newton Lowry filed testimony today in support of the rate filing of Oklahoma Gas & Electric Co. He reported results of a statistical benchmarking study of the company's base rate operation and maintenance expenses. These expenses are a critical concern in any rate case because they are the principal costs that a utility can control in the shorter run. Using publically available data, Dr. Lowry developed an econometric model of O&M expenses and used it generate benchmarks for the company from 2006 to 2008. The econometric results were also used to guide the development of unit cost indexes and an associated peer group. The research found OG&E to be one of the nation's top O&M cost performers.

January 30, 2009

The Hawaiian Electric companies (Hawaiian Electric, Maui Electric, and Hawaiian Electric Light) today filed a revenue decoupling proposal in Docket No. 2008-0274. The companies have reached an agreement with the State of Hawaii Division of Consumer Advocacy to redouble their efforts to promote energy conservation and renewable energy resources. Revenue decoupling plans for all three utilities are a key part of the agreement. The plans would compensate the utilities for declining sales per customer such as may result from aggressive programs to promote demand-side management and distributed generation.

The companies favor a traditional "true-up" approach to decoupling rather than Straight Fixed Variable ("SFV") pricing. The proposed revenue adjustment mechanism would escalate the revenue requirement as needed for input price inflation, output growth, and new investments. It has a "hybrid" design like that which has often been used over the years by several California utilities. Mark Newton Lowry advised the HECO companies on plan development and prepared a white paper on revenue decoupling for the filing. The paper discusses decoupling experience and plan design issues and presents results of historical simulations for the HECO companies using alternative revenue adjustment mechanisms.

November 11, 2008

An Appeal Panel in Victoria, Australia today dismissed a complaint by a gas distributor that challenged PEG's methodology for adjusting allowed operating expenditures (opex) in a multiyear gas distribution price indexing plan. The Essential Services Commission (ESC) in Victoria employs a "building block" approach to setting the price cap that requires a multiyear forecast of operating expenses (opex). The opex escalation formula includes a productivity growth target. PEG developed an econometric methodology for calculating the target for each distributor. PEG also recommended specific values for changes in input prices and output for these adjustment formulas. These recommendations were adopted by the ESC in its final price determination. One of the three Victorian distributors challenged PEG's econometric methodology on a variety of technical grounds. The Appeal Panel rejected these challenges and found that PEG's approach was "an objective quantitative analysis undertaken by a qualified and experienced consultant." The Panel rejected two alternative approaches proposed by the company's consultants, finding that one did not "appear to the Panel to derive from an entirely objective analysis" and that the other "seems to be based on a series of general assumptions." PEG's analysis on this project was overseen and sponsored by Larry Kaufmann.

September 30, 2008

The Vermont Public Service Board today issued an order approving an alternative regulation plan for Central Vermont Public Service. The plan, which extends to December 2011, features a revenue adjustment mechanism that will escalate the company's revenue requirement for most of the company's non-power cost using an inflation - X formula. There is a separate mechanism for funding a surge in plant additions, which are detailed in an Asset Management Plan. The inflation measure is the CPIU for the northeast U.S. The X factor is set at 1% pending the completion of a business process review. The revenue requirement will be reset to reflect the results of the company's 2009 rate-base filing. The plan also features an earnings sharing mechanism, service quality provisions, and a new Power Cost Adjustment Mechanism.

Mark Newton Lowry provided testimony on behalf of CVPS on the design of the revenue adjustment mechanism. The testimony included research on the input price and productivity trends of northeast power distributors. This marks the tenth time that Dr. Lowry has filed testimony supporting an approved revenue adjustment mechanism.

September 17, 2008

The Ontario Energy Board today issued its supplemental report in case EB-2007-0673, which has established price cap plans for provincial power distributors. The supplemental report resolved certain issues in plan design.

The base productivity target for the X factor of the price cap index has been set at 0.72%, the average trend in the total factor productivity of the U.S. electric power distributors from 1988 to 2006.
A stretch factor term will be added to the X factor that ranges from 0.20 to 0.60, depending on a company's ranking in an operation and maintenance expense.
Companies who qualify under a materiality threshold formula established in this decision may qualify for supplemental funding for capital spending surges.
Changes in tax expenses due to currently legislated tax changes will be shared 50/50 between companies and ratepayers.

Larry Kaufmann advised Board staff in this proceeding with assistance from Mark Newton Lowry on benchmarking issues.

July 16, 2008

The Department of Public Utilities in Massachusetts issued its Order today in D.P.U. 07-50, which opened a statewide generic proceeding on implementing revenue decoupling for gas and electric utilities. At the outset of the proceeding, the DPU presented a "strawman" decoupling proposal which involved the elimination of multiyear performance based regulation (PBR) plans, which have recently been popular in the Commonwealth. Larry Kaufmann of PEG was hired by a coalition of gas and electric distributors to testify on the relationship between PBR and decoupling and explain why PBR should be maintained after decoupling takes effect. In its final Order, the Department did not mandate the elimination of PBR plans, and allowed distributors to retain their current PBR plans and to propose new PBR plans in conjunction with decoupling.

July 1, 2008

The Maine Public Utilities Commission today issued an order in Docket Nos. 2007-215 and 2008-111 concerning an Alternative Regulation Plan for Central Maine Power. The Commission approved a stipulation between CMP and other interested parties providing for a new five year Alternative Rate Plan for company's power distribution services. The plan features a price cap index with an inflation - 1 growth rate formula. The inflation measure is the gross domestic product price index. The plan also features an earnings sharing and service quality provisions. Mark Newton Lowry of the PEG companies provided the inflation and productivity testimony in the proceeding.

April 2008

A team of PEG economists lead by Mark Newton Lowry today published an article in Natural Gas and Electricity on the declining average use problem facing local gas distributors (LDCs). Frequent rate cases are the remedy for this problem under traditional cost of service regulation. Revenue decoupling is a salient alternative. One approach to decoupling is the periodic trueup of rates to the revenue requirement. Frequent rate cases are then avoided only with a revenue adjustment mechanism and several established approaches are identified. Decoupling can also be achieved by straight fixed variable (SFV) pricing, which sets the volumetric charge to marginal cost and gathers most base rate revenue from customer or demand charges. Econometric research by PEG to estimate marginal costs supports a monthly customer charge of around $20 dollars and a per therm charge of around $0.014 for residential customers of a typical LDC. The correct charges vary with local business conditions.

February 11, 2008

The Ontario Energy Board issued its decision today in Case EB 2007-0615, which concerned an alternative regulation plan for Enbridge Gas Distribution, Canada's largest gas distributor. The decision approves a settlement which figures a multi-year revenue cap plan for Enbridge. The escalation formula is

Growth Revenue per Customer = P x Inflation.

The inflation measure is Canada's Gross Domestic Product Implicit Price Index for final domestic demand. P, the inflation coefficient, ranges in value from .60 to .45. With current inflationary expectations, this is equivalent to an X factor ranging from .82 to 1.12. Revenue per customer indexes have applications in decoupling since they provide full attrition relief without multiple forward test years. Such an index was first used by Southern California Gas in the late 1990's. Mark Newton Lowry of the PEG companies was a witness for SoCalGas and advised Board Staff in this proceeding, conducting gas utility input price and productivity research using Ontario and US data. He provided similar support to Board staff in the design of the price cap plan recently approved for Union Gas.

MadisonSquare

New Benchmarking and Productivity Studies

PEG is Statistical Benchmarking Leader

New PEG Report on Multiyear Rate Plan Design Challenges

Focus on Skewed Utility Spending Patterns

New Cost Benchmarking Study

Focus on North American Power Distributors

Edison Electric Institute Releases PEG’s New Altreg Survey

PBR is Spotlighted in the 4th Edition of PEG's Authoritative Survey

New PEG White Paper on PBR for Electric Utilities

PBR is a hot topic in Virginia

PEG Scores Win in Ontario Gas Proceeding

Latest of Many Wins for PEG's Canadian Clients

PBR is a Hot Topic for North American Regulators

CAMPUT Talk on Tuesday January 21

Input Price Inflation Testimony for Puget Sound Energy

PEG places inflation forecasts on solid research foundation

Interest in PBR and Altreg Continued in 2023

Dr. Lowry Spoke at Seven Conferences

Electricity Journal Study Documents Multiyear Rate Plan Benefits

Power Distributor Productivity Growth Surged Under PBR

PBR and Altreg were Hot Topics in 2022

Dr. Lowry Made Several Appearances ﻿

Entrance to Pittsburgh's Pennsylvania Railroad Station, designed by Daniel Burnham

Former PEG Economist Now Johns Hopkins University Professor

Past PEG Interns and Junior Economists Have Entered Prestigious Grad Programs

Dr. Lowry Presents at NASUCA's Mid-Year Meeting

Session addressed multiyear rate plans and other kinds of performance-based regulation

Dr. Lowry Discusses PBR at Seattle Conference

Benefits and challenges of PBR discussed

PEG Files PBR Testimony for Puget Sound Energy in Washington

Dr. Lowry Proposes Demand Response and Electric Vehicle Incentives

PEG Files PBR Commentary for Duke Energy in North Carolina

New Law Encourages Multiyear Rate Plans

Edison Electric Institute PBR Presentation

Electric Rates Advanced Course Held Virtually This Year

PBR for Distribution Resiliency

PIMs and Other PBR Tools Can Encourage Cost-Effective Resilience

Indexing O&M Revenue

Useful tool for the "hybrid" revenue caps that are popular in California and Vermont

Performance-Based Regulation and Climate Change

New PEG Article in Climate and Energy

Washington State Chooses PBR

PBR Approach Includes Multiyear Rate Plans

Parties Seek Continuation of Alberta PBR

AUC Kicks Off PBR Plan Renewal

Benchmarking Granular Power Distributor Costs

New Research Uses Ontario’s Extensive, Detailed Data

Revenue Decoupling at 40

Popular PBR Mechanism Needed Now More than Ever But Tweaks Merit Consideration

New Transmission Productivity and Benchmarking Study

Study Documents Continued Productivity Decline and Details New Benchmarking Methods

Hawaii PBR Decision

Massachusetts PBR Testimony

Colorado PBR

Commission Greenlights Expanded PBR Role

PBR for Ontario Power Distributor

PEG Plays Key Role

Wisconsin PBR Presentation

Energy Utility Basics Course at Wisconsin Public Utility Institute

PBR for British Columbia

PBR Workshop Followed White Paper Release

New PEG Study Includes Custom Productivity Growth Projections

Research Filed in Hawaii PBR proceeding

OOCUR Conference in Anguilla

Presentation on Performance-Based Regulation

Power Transmission Benchmarking and Productivity Study

New evidence filed in Ontario

Regulatory Strategy Workshop

EEI Advanced Rates Course in Madison, Wisconsin

New PEG Study

Designing Revenue Adjustment Mechanisms for the Hawaiian Electric Companies

Statistical Benchmarking for Power Distributors

Pennsylvania Bar Institute's 2019 Public Utility Conference

Carilec CEO & Leadership Conference in St. Lucia

PBR in Hawai'i

PEG report filed in Hawaii proceeding

Power Transmission PBR

Canada Continues PBR Leadership

FRI's 2018 Symposium

Dr. Lowry Made Several Appearances