The Age of Alternative Ratemaking (paper)
The use of Alternative Ratemaking Mechanisms (“ARM”) is not a new concept. Yet, despite its solid record of being beneficial to utilities, regulators, and stakeholders, it has historically had a slow level of adoption by many states. That has now changed, and we are entering a new regulatory age: The Age of ARM. Even states that have been extremely reticent to shift away from the traditional rate design methodology are now moving to embrace the use of alternative ratemaking. Whether or not your state has adopted the use of ARM, it is important to consider ways in which these mechanisms could create both opportunities and challenges.