Full Title: Transforming the Way We Serve Vulnerable Communities: Performance Incentive Mechanisms and Beyond
Author(s): Rachel Gold and Carina Rosenbach
Publisher(s): Rocky Mountain Institute
Publication Date: April 26, 2024
Full Text: Download Resource
Description (excerpt):
Each year, nearly 3 million Americans have their power shut off, leaving them unable to heat and cool their homes or access essential services like the internet. Meanwhile, 1 in 7 families live in energy poverty. These families are forced to make difficult choices, often sacrificing necessities like food and medicine to keep their lights on, all while living under the constant threat of having their power shut off. Unsurprisingly, this energy affordability crisis hits low-income communities the hardest, particularly communities of color.
Compounding this issue is the difficulty these communities face in accessing clean energy technologies. Resources like energy efficiency, rooftop and community solar, and battery storage can provide various customer benefits, including lower bills and energy resilience and independence. However, the barriers to adoption remain high for those who need these benefits the most, due to high up-front costs, poor housing stock, and inadequate policy and regulatory support.
Improving energy equity requires a robust, multi-faceted policy strategy. State regulators, who oversee utility investment and program decision-making, have a crucial role to play in securing equitable policy reforms. One tool that regulators are increasingly using to promote equity is performance incentive mechanisms (PIMs). A PIM is a regulatory tool intended to realign utility incentives with desired outcomes by providing a financial reward or penalty for the utility’s performance on a specific metric. PIMs are increasingly being used to incentivize performance improvements in service of emergent outcomes, such as demand flexibility, reduced greenhouse gas emissions, and — more recently — equity.