Performance-Based Regulation: States to Watch

This report is a non-exhaustive review of how some states and utilities have put PBR into practice, including states to watch in 2026.

Use the form to the left to download the report.

As utilities across the U.S. are pushed to decarbonize, improve customer service, manage peak demand, and make electricity more affordable, among other policy goals, performance-based regulation (PBR) is emerging as a powerful tool to align profit with public interest. Performance-based adjustments to earnings are an approach to PBR, the goal of which is to improve utility performance by altering the dynamics around how utilities earn revenue. The rationale for implementing such adjustments is that financial incentives can help utilities contain costs while pursuing initiatives that align with consumer demands and state policy goals. Because there is no singular approach to implementing PBR, each state’s implementation requires careful consideration and planning.
If utilities perform well on outcomes set by the regulator, they should expect to earn returns over the base level return on equity (ROE); if they perform poorly, they should expect to earn no more than the base level ROE. Performance adjustments can be made using incentives or penalties. The level of incentives or penalties may or may not be equivalent or proportional depending on the framework design. This report is a non-exhaustive review of how some states and utilities have put PBR into practice.

STATES TO WATCH IN 2026
EQ Research has identified nine states in the process of evolving current PBR or initiating new PBR: Colorado, Hawaii, Illinois, Michigan, Minnesota, New York, Vermont, Virginia, and Washington.