PBR's Changing Face
William D. Steinmeier ("Price-Based Regulation: The Elegance of Simplicity," Jan. 15, 1996, p. 35) presents an unconvincing and misleading case for performance-based regulation (PBR). He is right that PBR is potentially simpler to implement than cost-of-service regulation and provides a strong incentive for companies to cut costs. However, one of his main points (em that profits don't matter, only prices do (em applies only to competitive markets. Instead, the most plausible application of PBR lies with noncompetitive monopoly markets, such as transmission and distribution. (Remember, competitive markets should need no regulation!) In that setting, without limits on profits, companies may reap unconscionably high rewards from their captive customers.