Incentive regulation in the electric utility industry. Volume I. Final report

This report describes the results of conducting a comprehensive analysis of the issues involved in formulating an incentive regulation program and to develop and evaluate an incentive regulation program to be considered for implementation by FERC. In conducting this study, the analysis was structured with the primary objective of designing an incentive regulation program that would encourage the provision of electrical service to customers at the lowest possible price, consistent with a satisfactory level of service quality. To facilitate structuring such a program, we identified and analyzed a set of fundamental issues that must be considered in designing and implementing an incentive regulation program. Three major incentive programs were recommended: (1) a rate contol incentive program; (2) a construction cost control incentive program; and (3) an automatic rate adjustment mechanism. 83 references, 21 figures.