Integrated Resource Plan and Risk Analysis

PURPOSE: This rule requires the utility to design alternative resource plans to meet the planning objectives identified in 4 CSR 24022.010(2) and sets minimum standards for the scope and level of detail required in resource plan analysis and for the logically consistent and economically equivalent analysis of alternative resource plans. This rule also requires the utility to identify the critical uncertain factors that affect the performance of alternative resource plans and establishes minimum standards for the methods used to assess the risks associated with these uncertainties. (1) Resource Planning Objectives. The utility shall design alternative resource plans to satisfy at least the objectives and priorities identified in 4 CSR 240-22.010(2). The utility may identify additional planning objectives that alternative resource plans will be designed to meet. The utility shall describe and document its additional planning objectives and its guiding principles to design alternative resource plans that satisfy all of the planning objectives and priorities. (2) Specification of Performance Measures. The utility shall specify, describe, and document a set of quantitative measures for assessing the performance of alternative resource plans with respect to resource planning objectives. (A) These performance measures shall include at least the following: 1. Present worth of utility revenue requirements, with and without any rate of return or financial performance incentives for demand-side resources the utility is planning to request; 2. Present worth of probable environmental costs; 3. Present worth of out-of-pocket costs to participants in demand-side programs and demand-side rates; 4. Levelized annual average rates; 5. Maximum single-year increase in annual average rates; 6. Financial ratios (e.g., pretax interest coverage, ratio of total debt to total capital, ratio of net cash flow to capital expenditures) or other credit metrics indicative of the utility’s ability to finance alternative resource plans; and 7. Other measures that utility decisionmakers believe are appropriate for assessing the performance of alternative resource plans relative to the planning objectives identified in 4 CSR 240-22.010(2). (B) All present worth and levelization calculations shall use the utility discount rate and all costs and benefits shall be expressed in nominal dollars. (3) Development of Alternative Resource Plans. The utility shall use appropriate combinations of demand-side resources and supplyside resources to develop a set of alternative resource plans, each of which is designed to achieve one (1) or more of the planning objectives identified in 4 CSR 240-22.010(2). Demand-side resources are the demand-side candidate resource options and portfolios developed in 4 CSR 240-22.050(6). Supplyside resources are the supply-side candidate resource options developed in 4 CSR 24022.040(4). The goal is to develop a set of alternative plans based on substantively different mixes of supply-side resources and demand-side resources and variations in the timing of resource acquisition to assess their relative performance under expected future conditions as well as their robustness under a broad range of future conditions. (A) The utility shall develop, and describe and document, at least one (1) alternative resource plan, and as many as may be needed to assess the range of options for the choices and timing of resources, for each of the following cases. Each of the alternative resource plans for cases pursuant to paragraphs (3)(A)1.–(3)(A)5. shall provide resources to meet at least the projected load growth and resource retirements over the planning period in a manner specified by the case. The utility shall examine cases that— 1. Minimally comply with legal mandates for demand-side resources, renewable energy resources, and other mandated energy resources. This constitutes the compliance benchmark resource plan for planning purposes; 2. Utilize only renewable energy resources, up to the maximum potential capability of renewable resources in each year of the planning horizon, if that results in more renewable energy resources than the minimally-compliant plan. This constitutes the aggressive renewable energy resource plan for planning purposes; 3. Utilize only demand-side resources, up to the maximum achievable potential of demand-side resources in each year of the planning horizon, if that results in more demand-side resources than the minimallycompliant plan. This constitutes the aggressive demand-side resource plan for planning purposes; 4. In the event that legal mandates identify energy resources other than renewable energy or demand-side resources, utilize only the other energy resources, up to the maximum potential capability of the other energy resources in each year of the planning horizon, if that results in more of the other energy resources than the compliance benchmark resource plan. For planning purposes, this constitutes the aggressive legally-mandated other energy resource plan; 5. Optimally comply with legal mandates for demand-side resources, renewable energy resources, and other targeted energy resources. This constitutes the optimal compliance resource plan, where every legal mandate is at least minimally met, but some resources may be optimally utilized at levels greater than the mandated minimums; 6. Any other plan specified by the commission as a special contemporary issue pursuant to 4 CSR 240-22.080(4); 7. Any other plan specified by commission order; and 8. Any additional alternative resource plans that the utility deems should be analyzed. (B) The alternative resource plans developed at this stage of the analysis shall not include load-building programs, which shall be analyzed as required by 4 CSR 24022.070(5). (C) The utility shall include in its development of alternative resource plans the impact of— 1. The potential retirement or life extension of existing generation plants; 2. The addition of equipment and other retrofits on generation plants to meet environmental requirements; and 3. The conclusion of any currentlyimplemented demand-side resources. (D) The utility shall provide a description of each alternative resource plan including the type and size of each demand-side resource and supply-side resource addition and a listing of the sequence and schedule for the end of life of existing resources and for the acquisition of each new resource. (4) Analysis of Alternative Resource Plans. The utility shall describe and document its assessment of the relative performance of the alternative resource plans by calculating for each plan the value of each performance measure specified pursuant to section (2). This calculation shall assume values for uncertain factors that are judged by utility decisionmakers to be most likely. The analysis shall cover a planning horizon of at least twenty (20) years and shall be carried out on a yearby-year basis in order to assess the annual and cumulative impacts of alternative resource plans. The analysis shall be based on the assumption that rates will be adjusted annually, in a manner that is consistent with Missouri law. The analysis shall treat supplyside and demand-side resources on a logically-consistent and economically-equivalent basis, such that the same types or categories of costs, benefits, and risks shall be considered and such that these factors shall be quantified at a similar level of detail and precision for all resource types. The utility shall provide the following information: (A) A summary tabulation that shows the performance of each alternative resource plan as measured by each of the measures specified in section (2) of this rule; (B) For each alternative resource plan, a plot of each of the following over the planning horizon: 1. The combined impact of all demandside resources on the base-case forecast of summer and winter peak demands; 2. The composition, by program and demand-side rate, of the capacity provided by demand-side resources; 3. The composition, by supply-side resource, of the capacity supplied to the transmission grid provided by supply-side resources. Existing supply-side resources may be shown as a single resource; 4. The combined impact of all demandside resources on the base-case forecast of annual energy requirements; 5. The composition, by program and demand-side rate, of the annual energy provided by demand-side resources; 6. The composition, by supply-side resource, of the annual energy supplied to the transmission grid, less losses, provided by supply-side resources. Existing supply-side resources may be shown as a single resource; 7. Annual emissions of each environmental pollutant identified pursuant to 4 CSR 240-22.040(2)(B); 8. Annual probable environmental costs; and 9. Public and highly-confidential forms of the capacity balance spreadsheets completed in the specified format; (C) The analysis of economic impact of alternative resource plans, calculated with and without utility financial incentives for demand-side resources, shall provide comparative estimates for each year of the planning horizon— 1. For the following performance measures for each year: A. Estimated annual revenue requirement; B. Estimated annual average rates and percentage increase in the average rate from the prior year; and C. Estimated company financial ratios and credit metrics; and 2. If the estimated company financial ratios in subparagraph (4)(C)1.C. are below investment grade in any year of the planning horizon, a description of any changes in legal mandates and cost recovery mechanisms necessary for the utility to maintain an investment grade credit rating in each year of the planning horizon and the resulting performance measures in subparagraphs (4)(C)1.A.–(4)(C)1.C. of the alternative resource plans that are associated with the necessary changes in legal mandates and cost recovery mechanisms. (D) A discussion of how the impacts of rate changes on future electric loads were modeled and how the appropriate estimates of price elasticity were obtained; (E) A discussion of the incremental costs of implementing more renewable energy resources than required to comply with renewable energy legal mandates; (F) A discussion of the incremental costs of implementing more energy efficiency resources than required to comply with energy efficiency legal mandates; (G) A discussion of the incremental costs of implementing more energy resources than required to comply with any other energy resource legal mandates; and (H) A description of the computer models used in the analysis of alternative resource plans. (5) The utility shall describe and document its selection of the uncertain factors that are critical to the performance of the alternative resource plans. The utility shall consider at least the following uncertain factors: (A) The range of future load growth represented by the low-case and high-case load forecasts; (B) Future interest rate levels and other credit market conditions that can affect the utility’s cost of capital and access to capital; (C) Future changes in legal mandates; (D) Relative real fuel prices; (E) Siting and permitting costs and schedules for new generation and generation-related transmission facilities for the utility, for a regional transmission organization, and/or other transmission systems; (F) Construction costs and schedules for new generation and generation-related transmission facilities for the utility, for a regional transmission organization, and/or other transmission systems; (G) Purchased power availability, terms, cost, optionality, and other benefits; (H) Price of emission allowances, including at a minimum sulfur dioxide, carbon dioxide, and nitrogen oxides; (I) Fixed operation and maintenance costs for new and existing generation facilities; (J) Equivalent or full- and partial-forcedoutage rates for new and existing generation facilities; (K) Future load impacts of demand-side programs and demand-side rates; (L) Utility marketing and delivery costs for demand-side programs and demand-side rates; and (M) Any other uncertain factors that the utility determines may be critical to the performance of alternative resource plans. (6) The utility shall describe and document its assessment of the impacts and interrelationships of critical uncertain factors on the expected performance of each of the alternative resource plans developed pursuant to 4 CSR 240-22.060(3) and analyze the risks associated with alternative resource plans. This assessment shall explicitly describe and document the probabilities that utility decision-makers assign to each critical uncertain factor. (7) The utility decision-makers shall assign a probability pursuant to section (5) of this rule to each uncertain factor deemed critical by the utility. The utility shall compute the cumulative probability distribution of the values of each performance measure specified pursuant to 4 CSR 240-22.060(2). Both the expected performance and the risks of each alternative resource plan shall be quantified. The utility shall describe and document its risk assessment of each alternative resource plan. (A) The expected performance of each resource plan shall be measured by the statistical expectation of the value of each performance measure. (B) The risk associated with each resource plan shall be characterized by some measure of the dispersion of the probability distribution for each performance measure, such as the standard deviation or the values associated with specified percentiles of the distribution. (C) The utility shall provide— 1. A discussion of the method the utility used to determine the cumulative probability— A. An explanation of how the critical uncertain factors were identified, how the ranges of potential outcomes for each uncertain factor were determined, and how the probabilities for each outcome were derived; and B. Analyses supporting the utility’s choice of ranges and probabilities for the uncertain factors; 2. Plots of the cumulative probability distribution of each distinct performance measure for each alternative resource plan; 3. For each performance measure, a table that shows the expected value and the risk of each alternative resource plan; and 4. A plot of the expected level of annual unserved hours for each alternative resource plan over the planning horizon. AUTHORITY: sections 386.040, 386.250, 386.610, and 393.140, RSMo 2000.* This rule originally filed as 4 CSR 240-22.060. Original rule filed June 12, 1992, effective May 6, 1993. Amended: Filed Oct. 25, 2010, effective June 30, 2011. Moved to 20 CSR 4240-22.060, effective Aug. 28, 2019. *Original authority: 386.040, RSMo 1939; 386.250, RSMo 1939, amended 1963, 1967, 1977, 1980, 1987, 1988, 1991, 1993, 1995, 1996; 386.610, RSMo 1939; and 393.140, RSMo 1939, amended 1949, 1967.