B26-0596, the “Utility Rates and Ratemaking
Amendment Act of 2026”
and
Exploring Policy Solutions to Improve Utility Affordability
Testimony of:
Kevin Donahue
City Administrator
Jenny Reed
Deputy City Administrator
Richard Jackson
Director
Peter Damrosch
Policy Advisor
Department of Energy and Environment
Before the
Committee on Transportation and the Environment
Council of the District of Columbia
The Honorable Councilmember Charles Allen, Chairperson
July 2, 2026
Good afternoon, Councilmember Allen, members and staff of the Committee on Transportation and the Environment. I am Kevin Donahue and I have the privilege of serving as City Administrator. I am joined by Jenny Reed, the Deputy City Administrator, Richard Jackson, the Director of the Department of Energy and Environment (DOEE), and Peter Damrosch, Policy Advisor at DOEE.
Our testimony today will be divided into two parts. First, Director Jackson will discuss Bill 26-596, the “Utility Rates and Ratemaking Amendment Act of 2026.” Then, Director Jackson, Peter, Jenny, and I will provide context on what’s driving energy price increases and how Mayor Bowser’s proposals on energy affordability can help bend the curve on skyrocketing consumer costs.
We’ve spent the past several months digging into the problem and we know addressing the root causes will require a comprehensive package of legislative and policy tools. We look forward to discussing our proposals today and working collaboratively to maintain energy reliability – especially in high energy demand times like this week – and to drive down costs. I will now turn it over to Director Jackson to provide testimony on the bill.
Bill 26-596, the “Utility Rates and Ratemaking Amendment Act of 2026”
Good afternoon. I am Richard Jackson, Director of the Department of Energy and Environment.
I’d like to begin by conveying our appreciation to the public witnesses who testified at Monday’s hearing. I’m continually impressed by the depth of engagement and understanding of complex energy issues that DC residents, community organizations, and businesses bring to these conversations, and Monday’s hearing was no exception. Many of the suggestions raise important questions around the design of future energy programs and policies, and we at DOEE stand ready to work with interested residents and businesses to further develop these ideas. Please do reach out if you are interested in continuing to work on these issues with us.
The bill before you today is a worthy piece of legislation, given the current affordability challenges. Some initial background is helpful to understand our agency’s perspective on the bill. Traditionally, the Public Service Commission (PSC) set utility rates using historical information concerning the utility’s actual investments and operations. In recent years, the PSC has piloted a different approach for setting rates known as multiyear rate plans. Under a multiyear rate plan, the PSC approves a series of rate increases for several future years based on the utility’s projections of its future costs and revenue needs. The PSC has approved two multiyear rate plans on an extended pilot basis, although the most recent approval was vacated earlier this year by the DC Court of Appeals and remanded to the PSC for additional proceedings.
Multiyear rate plans provide utilities with greater revenue certainty and increase the rate of return that utilities can expect to earn. In exchange for an increased financial benefit to the utility, it is important that such ratemaking structures include appropriate controls and mechanisms to ensure ratepayers are protected and public interests are safeguarded.
We are now in a period where energy costs are rising sharply. Against that backdrop, it is important for the District to balance the various equities involved in piloting novel approaches to ratemaking with protections for ratepayers from rising costs. In general, we expect that using historical costs to set utility rates – rather than utility projections of future costs – will help keep costs lower for consumers. Historical costs are known and certain, while future costs are uncertain and unpredictable. Traditional utility ratemaking leverages the value of known, historical costs as the basis for reviewing the utility’s revenue needs based on real data. By contrast, multiyear rate plans that employ utility projections of future costs are subject to much greater uncertainty and are much harder for the PSC and other public agencies and organizations to review. Multiyear rate plans also have the practical effect of making rate increases take effect sooner, because the utility has received pre-approval to increase rates for several years into the future. That in turn can reduce incentives for the utility to find operational efficiencies and cost savings, relative to the traditional methods for setting rates.
Local experience and national research have both shown that if multiyear rate plans are to continue, it is important to include safeguards to make sure that future costs are appropriately contained and that utility ratepayers receive a good deal. For example, in 2025, Maryland enacted legislation prohibiting utilities which use multiyear rate plans from seeking to increase rates again at the end of their multiyear rate plan, if their actual costs were higher than the utility had originally projected. More recently, in 2026, Maryland enacted a moratorium on new multiyear rate plans through the Utility RELIEF Act.
Bill 26-596 includes several safeguards on how utility rates are set going forward. For example, we would expect that a return to using actual known historical costs, rather than future projections of costs, will improve affordability for consumers. Likewise, the bill’s prohibition on utilities filing to increase costs at the end of a multiyear rate plan is good practice and consistent with the recent Maryland legislation. Meaningful cost-benefit analyses are also needed, both to evaluate whether multiyear rate structures as a whole provide meaningful public benefits, and to compare specific investments to alternatives that could be more cost-effective for consumers.
One area not mentioned in the bill that we want to highlight is performance incentive mechanisms. Performance incentive mechanisms tie a portion of utility revenues to meeting specific benchmarks for performance in key areas. Performance incentive mechanisms are frequently a component of multiyear rate plans as they provide accountability, through financial incentives and penalties, for the utility to meet key goals over the extended period of the multiyear rate plan. Although they have been discussed in PSC working groups for a number of years, so far the District has not implemented any meaningful performance incentive mechanisms for utilities. This is a deficiency of the current multiyear rate plan structure. Bill 26-596 could be amended to clarify the need for performance incentive mechanisms. We recommend identifying two specific performance incentive mechanisms in the legislation – related to increasing the speed for connecting to the grid and reducing peak demand on the grid – both of which can result in substantial savings for consumers. We anticipate having some smaller suggestions around changes to the bill and will provide our comments on those items after the hearing.
Energy Prices: How We Got Here and How to Respond
Before I turn it back over to the City Administrator, I want to provide a short overview of the drivers for rising energy costs and why a holistic response is needed.
Many of those energy cost drivers are regional in nature. The District participates in a regional grid, operated by PJM, which administers electricity markets and undertakes transmission planning on behalf of 13 states and the District. PJM is regulated by the Federal Energy Regulatory Commission (FERC), and together they are undertaking an unprecedented level of work to redesign PJM’s markets, planning, and governance structure to address data center demand, improve decision-making, and speed up the pace for getting new generation online. Now is a pivotal moment for the District to join forces with other states to advance solutions to these regional and national challenges.
The District has a robust toolkit we can utilize to both manage regional costs and address the cost drivers that are more directly under our control. Energy efficiency is rightfully called the “first fuel,” because every kilowatt of electricity a resident or business doesn’t need is one they don’t have to pay for. Continuing to invest in energy efficiency and other demand-side strategies is critical. New technologies, including batteries and electric vehicles, have strong potential to be cost-saving assets. DOEE for example, recently completed a study with Pacific Northwest National Laboratory on the financial benefits of deploying energy storage, with a focus on protecting the District from rising wholesale electricity prices. Finally, strengthening energy affordability requires identifying the most cost-effective ways to meet our energy goals. I will now turn it back to the City Administrator.
Mayor Bowser’s Energy Affordability Action Plan
Over the past few months, we have been working on an analysis of how we got to today’s higher energy costs and proposals to bending the cost curve – including how we can immediately reduce consumers’ electricity bills. Together with Director Jackson and DOEE’s subject matter expert, Peter Damrosch, Deputy City Administrator Jenny Reed and I will walk through the presentation.
