FERC Rate-of-Return Incentive is tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions. It sits in the Incentives dimension (INC) of the Human Behavior Taxonomy™ as element HBT-INC-0128, within the Government Perverse Pattern family. The core principle: tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
Scientific Definition
Tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions.
Plain-English Definition
Tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions.
Feynman Explanation
Make money on wires; lose money on conservation.
Core Principle
Tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions.
Mechanisms
Pending editorial review.
Tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions.
Pending editorial review.
Pending editorial review.
Cost-of-service regulation is a CapEx subsidy.
Pending editorial review.
Pending editorial review.
Inputs (Triggers)
Pending editorial review.
Outputs (Behaviors)
Pending editorial review.
Behavioral Signature
Make money on wires; lose money on conservation.
Examples
- Transmission overbuild relative to demand-side alternatives.
- Cost-of-service regulation is a CapEx subsidy.
Pending editorial review.
Original analysis from The Incentives Lab — how this element behaves inside real payoff structures.
Why this element matters to incentive design
Most organizations meet this element as a personnel problem. It is not one. The mechanism underneath it is straightforward: tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions. You can recognize it in the field by its signature: make money on wires; lose money on conservation. Every element in the Incentives dimension changes the perceived payoff of an action before the action happens, which is exactly where incentive design has leverage.
How it gets exploited
Left undesigned, cost-of-service regulation is a CapEx subsidy. It is amplified whenever cost-of-service regulation is a CapEx subsidy. Inside organizations that shows up as cost-of-service regulation is a CapEx subsidy. The pattern is the same one Goodhart's Law describes: the measurable proxy attracts the effort, and the purpose behind it quietly loses funding.
How the Lab designs around it
The redesign move is to performance-based ratemaking. Outcome-weighted returns. The leverage is not in explaining the behavior to people. It is in changing what the behavior earns.
Famous Experiments
Pending editorial review.
Design Principles
- Performance-based ratemaking. Outcome-weighted returns.
Measurement Approaches
Pending editorial review.
Evidence
Pending editorial review.
Pending editorial review.
The Perverse Incentive Lens™
How this behavior is exploited — and how to redesign around it.
- Performance-based ratemaking. Outcome-weighted returns.
Pending editorial review.
Pending editorial review.
Interactive Mini Network
Click any neighbor to re-center the graph and follow the threads of connection.
Knowledge Graph Neighbors
Auto-linked to the rest of the Human Behavior Taxonomy by family, domain, dimension, and shared keywords.
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Politicians optimize for the next election, not the next generation.
Subsidized rural flight frequency forces fuel-burning empty flights to secure annual payouts.
Subsidizing coastal living and freezing flood maps treats catastrophic risk as a public liability.
Federal funds subsidize new lanes while states absorb perpetual maintenance.
Federal policy forces homeowners to rebuild doomed structures while waiting on mitigation buyouts.
Where FERC Rate-of-Return Incentive is cited in the corpus
Essays, field guides, and diagnostics from The Incentives Lab that apply this element.
- Field guideIncentives: definition, types, examples
The parent field guide for this element.
- ReferenceThe laws of incentives
Goodhart, Campbell, and the Cobra Effect.
- EssayWhy Government Transformation Stalls
The public-sector version of this pattern.
- ReferenceThe incentive glossary
Definitions for every mental model, bias, and fallacy in the corpus.
- CourseIncentives 101
The free ten-part primer on reading a payoff structure.
- ReferenceThe Periodic Table of Human Behavior
The full 1,267-element map this page belongs to.
Questions about FERC Rate-of-Return Incentive
- What is FERC Rate-of-Return Incentive?
- FERC Rate-of-Return Incentive is tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions. It sits in the Incentives dimension (INC) of the Human Behavior Taxonomy™ as element HBT-INC-0128, within the Government Perverse Pattern family. The core principle: tying utility profit to capital spent penalizes cheaper non-wire efficiency solutions. In incentive terms, it matters because it changes the payoff people perceive before they choose — which means it can be designed for, or exploited.
- What is an example of FERC Rate-of-Return Incentive?
- Cost-of-service regulation is a CapEx subsidy. The Incentives Lab catalogs everyday, organizational, and historical instances of this element on its Human Behavior Taxonomy™ page (HBT-INC-0128).
- How is FERC Rate-of-Return Incentive exploited?
- Cost-of-service regulation is a CapEx subsidy.
- How do you design around FERC Rate-of-Return Incentive?
- Performance-based ratemaking. Outcome-weighted returns.
- Which behavioral dimension does FERC Rate-of-Return Incentive belong to?
- FERC Rate-of-Return Incentive is classified in the Incentives dimension (INC) of the Human Behavior Taxonomy™, family "Government Perverse Pattern", class "Perverse Incentive". Its permanent identifier is HBT-INC-0128 and its evidence grade is C.