• Adopt performance-based regulation (PBR) to align utility financial incentives with Washington’s clean buildings and grid flexibility goals by completing and implementing the performance-based regulation docket underway at the Utility and Transportation Commission (UTC). Implementing the completed framework would reward utilities for measurable progress on outcomes that advance clean buildings, such as load flexibility, emissions reductions, electrification, Distributed Energy Resource (DER) deployment, and Virtual Power Plant (VPP) performance.
• PBR implementation would apply only to investor-owned utilities (IOUs), but the fact that these utilities serve a significant share of Washington’s residential and commercial buildings – and influence the market and public utilities – makes PBR a sizable leverage point for systemic change.

Traditional cost-of-service regulation rewards utilities for capital investment rather than for desired outcomes like quality of service or advancing policy goals. As Washington transitions to clean buildings and a more dynamic electric grid—while facing increasing electricity demand—utilities must be incentivized to embrace solutions like flexible loads and behind-the-meter generation and storage that can lower system costs and improve reliability. Completing and implementing the PBR framework would directly tie utility earnings to progress on priorities such as clean buildings, shaping utility behavior by aligning profit motives with compliance requirements for policies such as the Clean Energy Transformation Act (CETA) or gas system decarbonization.

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A PBR framework should integrate equity-centered PIMs that reward utilities for actions such as:

• Delivering electrification or efficiency upgrades to income-qualified customers, small businesses, and renters.
• Reducing energy burden.
• Prioritizing upgrades that improve indoor air quality.
• Partnering with community organizations to design and deliver customer programs.

2026 and 2027:

• The UTC reopens and completes the PBR docket, informed by intervenor feedback and pursuing financial alignment with policy goals.

2027:‍

• The Washington State Legislature provides direction or clarifying authority if needed to support a PBR framework, including potential adjustments to allowable return-on-equity for IOUs.

2028:

• The UTC finalizes performance incentive mechanisms for metrics such as load flexibility, winter peak reduction, behind-the-meter storage capacity, VPP performance, beneficial electrification, and customer experience. IOUs file implementation plans showing which performance incentive mechanisms they plan to pursue and how.

2029:

• The UTC adjusts Performance Incentive Mechanisms (PIM) metrics, penalties, and rewards as needed. PBR evolves to incorporate new technology capabilities and opportunities.