The Colorado Public Utilities Commission (PUC) last week launched a review on performance-based regulation in response to a new state law signed by the governor earlier this year.

State Senate Bill 236 B 236 directed the PUC to investigate financial performance-based incentives and metrics for the energy utilities with the idea of “aligning operations, expenditures and investments with various public benefit goals,” such as safety, reliability and cost-efficiency. It would also consider climate-related goals tied to emissions reductions and expansion of distributed energy resources.

The law calls for the PUC report to be sent to the state legislature by the end next November.

PUC’s John Gavan is the designated member to act as hearing commissioner, working with staff to take input from stakeholders and other interested participants to review performance-based regulation, which they are defining as a broad concept that has been examined by several other states, including California, Hawaii, Minnesota and Oregon.

“The result of this examination will be a report on financial performance-based incentives and performance-based metric tracking for Colorado’s investor owned utilities, consistent with the new statute,” Gavan said.

The PUC is aware that multi-year rate plans and formulaic rate setting are effective in Maryland, Massachusetts, New York and North Carolina. “The lessons learned from other states will be an important part of Colorado’s review of new performance-based incentives,” Gavan said.

Officials at Colorado’s largest utility, Minnesota-based Xcel Energy, indicated they are ready to work with the PUC to “explore this issue and complete SB 236’s mandate for an analysis.” They pointed out that performance-based ratemaking and performance incentive mechanisms are not new to the PUC, and said “this proceeding is the appropriate place to review potential incentives and metrics.”