In order to motivate utilities to consider all the options when planning and making resource decisions on how to meet their customers' needs, the sales-revenue link in current rate design must be broken.
Breaking that link between the utility's commodity sales and revenues, removes both the incentive to increase electricity sales and the disincentive to run effective energy efficiency programs or invest in other activities that may reduce load.
The result is a better alignment of shareholder and customer interests to provide for more economically and environmentally efficient resource decisions.
As an added benefit, breaking the sales-revenue link streamlines the regulatory process for rate adjustments.
As a result, many consumer advocates have requested and state and federal regulators have required that utility companies profit levels (measured through a return on equity allowance) be reduced to reflect lower risk.