HomeAbout UsServicesClientsContact Us

Case Studies

..Case Studies


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.

Copyright © 2009 The Liberty Consulting Group