Performance-Based Regulation (PBR) is a regulatory approach that incentivizes utility companies to achieve specific performance outcomes rather than simply adhering to prescriptive rules. It aims to align the interests of utilities with societal goals such as efficiency, reliability, and environmental sustainability by linking financial rewards or penalties to performance metrics.

Performance-Based Regulation

regulatory approach

utility companies

specific performance outcomes

prescriptive rules

societal goals

Efficiency is the ability to achieve a desired outcome with the least amount of wasted resources, such as time, energy, or materials. It is a critical factor in both economic systems and engineering processes, driving innovation and competitiveness by maximizing output while minimizing input.

efficiency

Reliability refers to the consistency and dependability of a system, process, or measurement over time. It is crucial for ensuring trust and accuracy in various fields, such as engineering, psychology, and statistics, where repeated results are essential for validation and decision-making.

reliability

Environmental sustainability involves responsibly managing resources to ensure that natural ecosystems remain healthy and capable of supporting future generations. It requires balancing economic development, environmental health, and social well-being to maintain ecological integrity and prevent resource depletion.

environmental sustainability

financial rewards

penalties

Performance metrics are quantifiable measures used to evaluate the success of an organization, employee, or process in meeting predefined objectives. They provide a framework for assessing efficiency, effectiveness, and progress, enabling data-driven decision-making and continuous improvement.

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