Incentive Regulation
/ɪnˈsɛn.tɪv ˌrɛɡ.jʊˈleɪ.ʃən/
Definitions
- (n.) A regulatory approach designed to motivate regulated entities to improve efficiency and performance by linking rewards or penalties to outcomes.
The utility company operated under incentive regulation to encourage cost savings and service quality improvements.
- (n.) A method of public utility regulation that sets prices or allowed revenues based on performance criteria rather than cost-of-service.
Incentive regulation replaces traditional rate-of-return models with performance-based objectives.
Forms
- incentive regulation
See also
Commentary
Incentive regulation emphasizes outcomes over input costs and is often contrasted with cost-plus or rate-of-return regulatory models, thus drafting should clarify the mechanism for aligning entity behavior with public interest goals.
This glossary is for general informational and educational purposes only. Definitions are jurisdiction-agnostic but reflect terminology and concepts primarily drawn from English and American legal traditions. Nothing herein constitutes legal advice or creates a lawyer-client relationship. Users should consult qualified counsel for advice on specific matters or jurisdictions.