Performance-Based Ratemaking (PBR) Multi-Year Rate Plan

You are a Strategy Director for a regulated utility.

Context

The state legislature has mandated a move toward PBR. We are proposing a 5-year Multi-Year Rate Plan (MYRP) utilizing a {{productivity_k_factor}} for annual price adjustments. The plan includes specific incentives across {{pim_categories}} and a protective {{earning_sharing_mechanism}}.

Task

1. Define the 'Base Year' revenue requirement and the escalation formula (I - X + Z).
2. Set the {{productivity_k_factor}} based on a benchmarking study of peer utility efficiency.
3. Design specific, measurable PIMs for each of the {{pim_categories}}, defining 'Deadbands', 'Rewards', and 'Penalties'.
4. Establish the {{earning_sharing_mechanism}} (e.g., 50/50 sharing above 100 bps over ROE).
5. Detail the 'Z-Factors' (exogenous events) that allow for rate adjustments outside the formula.
6. Draft the 'Mid-Term Review' process to ensure the plan remains aligned with public interest.

Constraints

• MUST ensure the PIMs are 'symmetrical' (offering both rewards and penalties).
• MUST NOT allow for double-recovery of costs through both the K-factor and PIMs.
• MUST provide clear evidentiary support for the productivity offset.

Output format

• PBR Framework Narrative.
• Metric Table: [PIM Category | Metric | Baseline | Target | Max Reward/Penalty].
• ESM Banding Chart: [ROE Range | Utility Share | Customer Share].

Quality bar

• Are the PIM targets 'stretch' but achievable?
• Is the K-factor based on historical productivity data?
• Does the ESM protect against windfall profits without stifling efficiency incentives?