Reliability declines after 10 years of incentive regulation.
Electric distributors produce and sell a multi-dimensional output to their customers. Clearly, the customer service, reliability and voltage quality, among others, can vary substantially, producing different products depending on the mix of characteristics delivered to the customers. These different bundles of characteristics likely would have different costs associated with them and thus different prices. Evaluating the reasonableness of a distributor’s price must consider the context of the whole package (or packages) being delivered to customers.
Regulators usually have responsibility to ensure that regulated prices such as electric distribution are just and reasonable. But, most energy regulators have an associated, dual responsibility toward consumers. In addition to ensuring prices are just and reasonable, they also must ensure the appropriate levels of service and reliability are delivered. Without the latter, there can be no assurance that the prices being paid are, in fact, just and reasonable.