<P> With benchmarking, for example, the operator's performance is compared to other operators' performance and penalties or awards are assessed based on the operator's relative performance . For instance, the regulator might identify a number of comparable operators and compare their cost efficiency . The most efficient operators would be rewarded with extra profits and the least efficient operators would be penalized . Because the operators are actually in different markets, it is important to make sure that the operators' situations are similar so that the comparison is valid, and to use statistical techniques to adjust for any quantifiable differences the operators have no control over . </P> <P> Generally regulators use a combination of these basic forms of regulation . Combining forms of regulation is called hybrid regulation . For example, U.K. regulators (e.g. Ofgem) combine elements of rate of return regulation and price cap regulation to create their form of RPI - X regulation . </P> <P> Incentive rates are also prevalent in the utility sector, under any of the utility regulatory frameworks noted . Incentive rates are a vehicle for the utility to induce large commercial or industrial customers to locate or maintain a facility in the utility service territory . The incentive is provided in the form of a discount from the utility's standard tariff rates, terms or conditions . In the U.S., incentive rates (also known as Economic Development Rates and / or Load Retention Rates) are a common component of the utility strategy for supporting the economic development efforts of a particular geographic region or political entity . </P> <P> Incentive structures, however, are notoriously more tricky than they might appear to people who set them up. Incentives do not only increase motivation, they also contribute to the self - selection of individuals, as different people are attracted by different incentive schemes depending on their attitudes towards risk, uncertainty, competitiveness . Human beings are both finite and creative; that means that the people offering incentives are often unable to predict all of the ways that people will respond to them . Thus, imperfect knowledge and unintended consequences can often make incentives much more complex than the people offering them originally expected, and can lead either to unexpected windfalls or to disasters produced by unintentionally perverse incentives . </P>

The incentive to benefit from others' work without making a contribution is called