In most U.S. states, the utility commission has a formal role to play in reviewing or approving the contents of a utility’s integrated resource plan (IRP). These plans serve as long-term, forward-looking energy strategies that electric utilities use to meet their customers’ electricity needs. IRPs are a common component of planning in most states, as seen in Figure 1 below. And the nature of the commission’s role can have far-reaching implications for how much a state utilizes and relies upon the assumptions and analysis in an IRP.
In states where commissioners have a stronger role with more rigorous IRP review, the plan’s contents may be relied upon more heavily in other proceedings, such as rate cases. Conversely, in states where the commission’s review is minimized or the role undefined, the contents of the IRP may not be relied upon in other proceedings and may simply “sit on the shelf.” These very different implications demonstrate why it is important for statutes to clearly define the role and expected actions of the commission in the IRP process.
Roles of the Commission
In the context of an IRP proceeding, the commission’s role can be of three types: informational, adjudicator or reviewer, as defined more fully below. The majority of IRP state statutes require the commission’s role to be reviewer or adjudicator, so as to maintain the body’s original function. Recall that regulatory commissions were first created in the early 1900s to ensure oversight of natural monopolies by an agency with specialized expertise that a legislature generally lacked. Provisions that curtail the commission’s role to informational do not enable the commission to function as intended.
Some IRP statutes are silent on the commission’s role in the process. This may give commissions some discretion to define their role for themselves. Or this silence may limit the commission’s role for lack of explicit statutory guidance. In any case, it is critical to establish and communicate the commission’s role to all stakeholders in an IRP process to ensure clarity, infuse transparency into the process, and allow the commission to fully understand what is, and is not, expected of it. This will further inform stakeholders, including utilities and advocates, as they react to the commission’s actions.
Informational Role
IRPs are filed with the commission, but no commission action is required by statute, regulation or rule.
Informational filings may tell the commission and stakeholders about the utility’s plans over the prescribed period of time. But absent a meaningful role for the commission, the IRP may become a mere filing requirement and likely will not guide decision-making in a meaningful manner. Without stakeholder involvement or commission ability to examine and make findings on the contents of the filing, the commission is unlikely to rely on the IRP in any substantive manner in other proceedings such as rate cases or certificate cases for new generation assets or transmission lines. Consequently, the utility likewise may not adhere to the plan that is filed.
Adjudicator Role
IRPs are filed in a contested case hearing before the commission.
Adjudicated proceedings require more commission examination and deliberation on the IRP. In an adjudicated proceeding, the utility commission is acting in a quasi-judicial function and conducting a formal legal process where it hears evidence from witnesses and makes findings based on the record. As a consequence of this rigorous process, the content maybe relied upon by the commission when making decisions in other dockets. Because an adjudicated IRP process is a formal legal proceeding, those wishing to participate must legally intervene in the docket. The formal intervention requirement is similar to rate case proceedings and may prove to be a barrier to public participation due to the greater amount of procedural effort and the need for legal representation. Anecdotally, there is reason to believe that the contested nature may encourage settlement. In Michigan, for example, the Public Service Commission approved a settlement on DTE’s 2023 IRP that was signed by 21 organizations that intervened in the case.
Reviewer Role
IRPs are filed with the commission, and some commission action is required (e.g., approve or accept, deny or modify).
The reviewer role is the one that IRP statutes most commonly describe. Reviewed IRPs require some role for the commission and usually stakeholder engagement as well. The type and rigor of the review varies, and it’s important for the statute to clearly indicate the level of review required. The IRP statute should use clear language on whether the commission shall “accept” the plan versus “approve” the plan. These terms can be ambiguous and are not synonyms.
Accepting vs. Approving
In the IRP context, “accepting” could simply mean that the plan meets the threshold for the process or analytic requirements established by statute or regulation. Making acceptance the equivalent to a filing requirement can reduce the importance of the plan and have the effect of minimizing the entire resource planning exercise.
“Approving” the plan may be understood to go farther, as the word “approve” has a variety of connotations. An approved plan has all the same qualities of an accepted plan but generally carries more weight in subsequent decisions. For example, approving could suggest the commission is in support of the utility’s proposed option. This support could be inferred to equate to preapproval of utility investment decisions that align with the proposed plan, setting the expectation for future cost recovery through a prudency evaluation that has not yet been done. The presence of a regulatory option to preapprove a utility’s investment decisions through an IRP should not be viewed as approval for cost recovery unless explicitly stated as such. Although preapproval may streamline later regulatory decisions, many assumptions used in an IRP may not hold true by the time a utility makes its preferred investments. That is why it is important for regulators to verify the veracity of these assumptions in subsequent proceedings — such as certificate cases prior to construction, and rate cases prior to capital expenses being placed into rates.
However “accept” or “approve” is used, decision-makers should be clear on the intent and definition of the word, being mindful of the impact of that word choice on the process and the expectations it sets. Best practice also indicates that in addition to having a clearly stated authority to accept or approve an IRP, commissions should have the ability to reject or modify an IRP. Regulators should be able to reject filings that do not meet the standards set by statute, requiring the utility to fix deficiencies and refile the plan. Commissions should also have the ability to modify an IRP after review, which may enable a more robust outcome.
In a follow-up blog post, RAP will further discuss the weight that IRP approval carries in resource procurement and other regulatory decisions. We’ll also look at the ways different meanings of “approval” affect how the commission, utility and other stakeholders may use the IRP in subsequent proceedings. Stay tuned!
For more on the commission role and other elements of IRP statutes, read our publication: “Putting It All Together: Options for Modernizing Integrated Resource Planning.”
Special thanks to Shawn Enterline and Richard Sedano for their contributions to this piece.
