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Universal Service: A Performance-Based Measure for Competitive Industry

Fortnightly Magazine - June 15 1998

limiting costs." It shifts the focus from program activities to program results.

According to the GPRA, "The key concepts of this performance-based management are the need to define clear agency missions, set results-oriented goals, measure progress toward achievement of those goals, and use performance information to help make decisions and strengthen accountability."

Utilities face the same sort of problems in measuring efficiency as do federal agencies. As the U.S. General Accounting Office has observed, "Many agencies have a difficult time moving from measuring program activities to establishing results-oriented goals and performance measures."

The GAO explains further: "[A]gencies must move beyond what they control - that is, their activities - to focus on what they merely influence - their results." In this observation, one easily could replace the word "agencies" with the word "utilities."

Federal agencies have been given substantial guidance on the aspects of GPRA that relate to adequate and appropriate performance measures. One report, entitled Executive Guide: Effectively Implementing the Government Performance and Results Act, reviewed both private and governmental (including foreign) agencies and concluded that the most successful performance measures embraced four characteristics: (1) tied to program goals and showed the degree to which results were achieved; (2) included only data necessary for decision-making; (3) responded to multiple priorities and forced managers and policymakers to consider competing interests and demands; and (4) established accountability for results.

Yet as GPRA has made clear, "Even the best performance information is of limited value if it is not used to identify performance gaps, set improvement goals, and improve results." While not discussed here, a crucial element of performance management is establishing and reporting the desired goals so that gaps in performance can be identified and rectified. The goal of the proposed performance-based measurement system proposed here is not to establish a comprehensive strategic planning process. Instead, this system is set forth to answer the question: How can universal service performance be measured?

Setting Up a System

Whether in the telecommunications, natural gas or electric industry, a utility is ultimately responsible for the quality of universal service in its territory. While programs such as customer assistance, energy efficiency, arrearage forgiveness and the like can help a company attain that goal, the company should decide which mix of programs to implement.

If one accepts that philosophy, then regulators who adopt performance-based criteria to determine electric rates generally should incorporate outcome-based criteria to review a company's universal service. More specifically, these outcome-based criteria should recognize that affordable electric service does not exist for many low-income households, but that utilities can take affirmative steps toward achieving that goal. The company should then be judged not on what steps it took to achieve its goal of providing universal service, but on what actual progress it has made toward that goal. Conversely, if increased credit and collection efforts are needed, the impacts of such efforts should be reflected in improved universal service performance.

A utility should remain free to implement whatever programs it deems necessary to achieve universal service. And in the same manner as proposed for other objectives