Joint Demonstration Projects: Options for Regulatory Treatment

A utility's state law obligation to serve includes an obligation to use all cost-effective technological advances.  One way is to form consortia that co-fund an experimental technology.  These consortia raise two key regulatory questions.  The first is generic to all experimental projects: To what extent should ratepayers pay for experiments that do not, or might not, lead to tangible ratepayer benefits?  The second challenge arises from the multi-state character of these consortia:  Where the consortium includes utilities and others from multiple states, yet the physical experiment, e.g., a generating plant or a demand-side innovation, is located in a single state, how do regulators ensure prudent expenditures, and fair allocation of costs and benefits? 

This paper was funded by the Electric Power Research Institute and published in The Electricity Journal.