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Connecticut Performance-Based
Ratemaking for LDCs
Liberty served as an extension of the Connecticut Department of
Public Utility Control (DPUC) staff as that body considered its
first application of performance-based regulation (PBR) to gas
distribution companies. Liberty led the staff’s effort in
considering the companies’ proposals and in examining alternative
approaches. Aspects considered included gas costs, non-gas costs
and service-quality measures.
The
approach adopted for non-gas costs was an earnings-sharing mechanism
as opposed to a conventional PBR plan. Six service-quality measures
were adopted for each of the three companies, and penalties were
established for service-quality deterioration if it occurred. For
gas costs, several approaches were considered including savings
relative to a target index, savings relative to a base period, and
sharing savings under an optimization agreement with a third party.
A hybrid plan involving both savings relative to a base period and
savings relative to a target index was adopted.
The
results to date under the adopted plans are encouraging. For the
two companies whose plans have been in operation for the longest
period of time, operation and maintenance expenses have declined by
11.2 and 12.9 percent, respectively. Cost-effectiveness of
operations has increased by 15 to 26 percent, depending on which
performance metric is selected. Importantly, service quality, as
measured both by the quality measures adopted as part of the plans
and by customer surveys, has improved. Gas-cost savings are still
being evaluated. |
