CUB Supports the Performance-Based Regulation Bill (SB 688)

Posted on April 17, 2025 by Charlotte Shuff
Tags, Energy, General Interest

Oregon’s for-profit electric utilities need some encouragement to make choices that reflect Oregonians’ values. Between skyrocketing costs, wildfire destruction, and struggles to reduce emissions, the existing model of utility regulation is becoming more and more harmful to customers.

Oregon has the opportunity to create a new system that creates strong financial incentives for electric utilities to adjust their priorities to ones that have social benefits. Other states, like Hawaii, have already seen success with this system of utility regulation.

CUB supports the Performance-Based Regulation bill (Senate Bill 688) in the Oregon legislature this year.

Performance-Based Regulation (SB 688)

SB 688 empowers regulators to create a new model for setting rules for utilities that tie earnings to performance benchmarks that are in the public interest. With this new framework, utilities’ profits would be tied to what Oregonians value most. These priorities can be related to affordability for customers, reducing emissions, meeting safety standards, and other goals.

What SB 688 Does

Authorizes the Regulators to Implement Performance-Based Regulation: Allows, but does not mandate, the Oregon Public Utility Commission (PUC) to adopt Performance-Based Regulation. This moves regulation away from incentives for unchecked utility spending.
Develops Performance Metrics: Empowers regulators to set benchmarks on wildfire mitigation, clean energy transitions, and reliability, tying financial incentives to actual results
Supports Modernization of Utility Regulation: Provides resources to help the Oregon Public Utility Commission shift toward accountability-driven reviews of utilities’ requests to change customers’ billing rates, making utilities more responsive to public interest needs.

Under the current utility regulation model, utilities earn money for shareholders by building more assets and increasing sales. This is not always in the customer’s interests. SB 688 encourages the Oregon Public Utility Commission to investigate and implement a customer-centered way of setting billing rates for customers. While adopting this new strategy for handling utility regulation is not required, SB 688 does direct the Commission to conduct an investigation into whether it is in the public interest.

Regulating Utilities for the Public Interest

With performance-based regulation, utilities would be rewarded—or penalized—for meeting goals that are in the public interest.

Examples of benchmarks for public interest include (but are not limited to):

Reducing emissions
Expanding low-cost technologies for reducing energy consumption
Enhancing quality, reliability, and resilience of service (ex: wildfire mitigation)
Reducing disconnections for low-income customers
Reducing costs and passing on savings to customers

A successful performance-based regulation framework results in the utility earning a reasonable profit for its shareholders by changing business practices that more clearly benefit customers and the general public. It can create win-win solutions for both utility investors and everyday customers.

Performance-Based Regulation is Not a New Idea

Performance-Based Regulation is not a novel idea in the U.S. In fact, a number of other states have already adopted performance-based regulation with great success!

Early Adopter: Illinois

Illinois was the first state to begin to implement the performance-based regulation model. In 2011, the state legislature passed the Energy Infrastructure Modernization Act. The law requires utilities in the state to either meet or exceed various performance-based goals that include four reliability goals, four customer benefit goals, and one diversity-related performance goal.

The results have been remarkably positive for customers and for Illinois’ overarching energy system. Between 2011-2019, customer bills have remained stable, and the number of outages decreased by nearly 50 percent.

Performance-Based Regulation is Spreading

Nearly half of the U.S. states have considered performance-based regulation:

“[Performance-based regulation] is becoming much more common among states looking to create a greener grid. Twenty states, plus Puerto Rico and Washington, D.C., have enacted policies directing the utility sector to reduce grid emissions. Of those, 17 have either enabled or are currently implementing PBR mechanisms.” - Rocky Mountain Institute

In addition to creating a greener grid, this form of utility regulation has been proven to protect customers’ energy bills when affordability is set as a priority for utilities.

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