In an earlier blog post, RAP discussed the role of the regulatory commission in the integrated resource planning process and the importance of clearly defining that role. In this follow-up, we discuss the various ways “approving” an integrated resource plan may impact future commission proceedings and stakeholder actions. 

A lot of effort goes into creating an integrated resource plan (IRP). Utilities and stakeholders put significant time and money into creating these plans, which are road maps for investments in generation and other resources to meet customers’ future energy needs. After all that effort, a natural question is: How much can the utility and other parties rely on the plan later, such as when regulators are considering whether to OK individual resource investments in a resource approval filing? 

The answer can come down to the meaning of a single word: “approve.”

That’s one of the options often given to state utility commissions as they consider the resource plans that utilities file periodically: to approve, modify or deny the plan. Stakeholders in IRPs, including advocates and even the utilities themselves, need to know what approval actually means. 

It is important to clearly say in statute or regulation how much weight the commission’s approval of an IRP will bear upon its future decisions. Lack of clarity can result in different stakeholders having different understandings and assumptions on that point. For example, some stakeholders want an opportunity to examine the details of important resource investments before adding them to the cost of service, and will generally oppose giving the IRP significant weight during a cost recovery proceeding. In contrast, utility investors want certainty around cost recovery of large assets before they commit their capital, and will generally look to the IRP to provide that certainty. Such differences inevitably lead to tension and, likely, litigation.

There is an array of potential meanings that statute or regulation could apply to approval, as shown in Figure 1. The options presented here are organized from least to greatest impact on future decisions.  

Figure 1. The regulatory weight of IRP approval

• If statute and regulations are silent, then the various parties in subsequent dockets are free to offer their own views of the meaning of an approved IRP. The commission may receive the full range of interpretations and arguments on whether to use the IRP as it makes case-by-case decisions on resources. If the commission is consistent regarding its reliance on the IRP, then precedent may eventually emerge and become the most compelling guidance to parties. If the commission is inconsistent, that may instead create additional uncertainty and confusion. 
• “Must be considered” means the analysis from the resource plan is explicitly relevant for the record as a foundation or point of departure, but other factors that may come into the record are not necessarily less important or weighty than the plan.
• “Great weight” means the analysis from the resource plan is explicitly relevant and counts heavily in the balance of the evidence, but there is no presumption that the resource choice is in the public interest. The commission would still need to make determinations on public interest, cost recovery and prudence based on all evidence — including the IRP — provided during the resource approval process.
• “Rebuttable presumption” is a legal term of art meaning that a fact or assertion is taken to be true unless it is contested and disproved by evidence that meets the standard of proof. In a regulatory proceeding, it essentially gives the IRP the benefit of the doubt, meaning the commission will rely on the plan’s conclusions unless satisfactory evidence to the contrary is presented. Stakeholders concerned for any reason that the resource choice is problematic are allowed to make that case to the commission to rebut the choice. Reasons may go beyond changed circumstances to matters that were not considered in the plan approval but are arguably relevant to the resource choice.
• “Conditional preapproval” provides for approval unless important predicates have changed. It means the utility will need to present updated evidence during the resource approval process to show that the assumptions underlying the plan remain similar or representative enough to justify the resource choice. Stakeholders can support or challenge that evidence.
• “Preapproval” means that resource investments included in a plan are deemed approved. This status rests on the rigor of the plan approval process. Resource investments in the plan are automatically considered prudent, and the utility is preauthorized to recover the cost from ratepayers. Preapproval usually applies to resource choices near in time to the decision and may also include requirements for all-source procurement or competitive bidding on the approved resource. 

The meaning of “approve” has prompted debate for as long as there have been IRPs. Defining the word clearly for the utilities, advocates and customers in a state is important, so their focus can remain on meeting future energy needs. 

RAP discusses this and other critical elements of IRPs in our publication “Putting It All Together: Options for Modernizing Integrated Resource Planning.”