The US electric sector faces a massive spending surge in the coming years as utilities decarbonize, strengthen system resilience, and embrace technological advances. To maintain affordability during this investment boom, utility spending must be cost effective. Totex ratemaking is a regulatory innovation that could help keep utility rates affordable through the clean energy transition. By changing how regulators set the utility’s revenue allowance, it allows alternative solutions to compete with capital projects on a level playing field.
Based on the research presented in RMI’s new report, Making the Clean Energy Transition Affordable, the organisation believes totex ratemaking is broadly compatible with existing US accounting standards, and that if conflicts do arise the impacts should be manageable. It therefore sees no reason why US regulators who wish to explore it should not move forward. To help jump-start these discussions, the report offers some initial thoughts on a series of design and implementation questions.
Download the report here