The changing environment has fostered considerable interest in incentive regulation, including price caps, revenue caps, targeted incentives, and related concepts. Possible benefits and drawbacks of performance-based regulation are examined, and several factors to consider in alternate regulatory plan proposals are enumerated. The role of demand side management will likely change as the industry evolves, and programs should be reviewed for continued effectiveness, but current Commission policy should be continued. Given the complexity and long lead times for construction which have characterized the electric industry, system planning has been an important responsibility for utilities. It is unclear whether functions such as the close coordination between generation and transmission and selection of optimal capacity additions will be undermined by a move to a restructured model.
Important questions remain.
The Commission should consider steps to make planning data provided by utilities more reflective of utility-decisionmaking in the current period of uncertainty. Other aspects of restructuring must also be considered. The environmental impact of restructuring is subject to some dispute, with federal agencies taking conflicting views of the likely result. Of additional concern to Virginia may be the impact of competition on tax revenues derived from gross receipt taxes as well as the competitive implications of taxing some energy suppliers and not others. In the conclusion section of the Report, we provide additional observations on the driving forces behind the move toward restructuring, the position and approaches being taken by Virginia utilities and additional views regarding the possible benefits and disadvantages of a major restructuring at the retail level.