Penalties in Utility Incentive Mechanisms: A Necessary ‘Stick’ to Encourage Utility Energy Efficiency?

What policy and political factors drove New York and California to remove the penalty portion of their utility shareholder incentive mechanisms? These policies, designed to encourage utility energy efficiency program administrators to meet goals, were removed due to evaluation uncertainty, timing issues, the lack of a sustained constituency for penalties, and tensions between statewide and utility administration, among other factors.