- BEFORE THE PUBLIC SERVICE COMMISSION OF UTAH - 

 ------------------------------------------------- 

 ) DOCKET NO. 90-2035-01

In the Matter of Analysis of an ) 

Integrated Resource Plan for ) REPORT AND ORDER ON

PACIFICORP. ) STANDARDS AND GUIDELINES ) 

 ------------------------------------------------- 

 ISSUED: June 18, 1992

By the Commission: 

The Commission's interest in promoting Integrated 

Resource Planning (IRP) for its regulated utilities is ongoing. 

The process is expected to evolve over time and thus need periodic 

revisiting. The Commission will require PacifiCorp to pursue the 

least cost alternative for the provision of energy services to its 

present and future ratepayers that is consistent with safe and 

reliable service, the fiscal requirements of a financially healthy 

utility, and the long-run public interest. The Commission believes 

that the IRP Standards and Guidelines describe a process that will 

help utilities accomplish this goal. 

PROCEDURAL HISTORY

The Commission established Docket number 90-2035-01, "In 

the Matter of the Analysis of a Least-Cost Power Plan for 

PacifiCorp," on Feb. 21, 1990, and ordered the Company to file its 

recently completed 1989 least-cost planning report, entitled 

Resource and Marketing Planning Program (RAMPP I). The name of the 

docket was subsequently changed to "In the Matter of the Analysis 

of an Integrated Resource Plan for PacifiCorp" to reflect the 

Commission's broader view of the planning process. 
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On April 24, 1990, the Commission held hearings to 

receive written and oral testimony concerning the Company's RAMPP I 

filing and to consider how best to proceed with integrated resource 

planning in Utah. On May 25, 1990, the Commission issued an Order 

finding PacifiCorp's general RAMPP I approach reasonable. This 

Order also requested that a Division-led task force identify and 

analyze relevant integrated resource planning issues that would 

require explicit Commission decision. 

The Task Force's Interim Report, issued on September 28, 

1990, analyzed critical threshold and procedural issues and 

recommended development of integrated resource planning rules for 

the Utah jurisdiction. The report also recommended active 

involvement in the RAMPP II planning process by the public and Utah 

regulatory representatives. As a result, the Commission's staff, 

the Division of Public Utilities (the Division), the Committee of 

Consumer Services (the Committee), the Utah Division of Energy 

(UDE) and Utah industrial representatives have regularly 

participated in the RAMPP II meetings held in Portland, Oregon. To 

facilitate local public involvement, a workshop was held in Salt 

Lake City on April 15 and 16, 1991, to explain PacifiCorp's 

integrated resource planning process. 

On September 3, 1991, the Commission issued its Order on 

Draft Standards and Guidelines and requested written comments from 

the parties. Comments were filed on December 3, 1991 by PacifiCorp 

(Company), the Division, the Committee, UDE, Kennecott et. al. 

(Kennecott), Environmental Intervenors (EI), which includes several 
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Utah and regional environmental interest groups, Nucor Steel, 

University of Utah Professor Craig Hansen and Conserve-A-Watt, a 

local energy service company. Replies to comments were submitted 

on January 8, 1992. 

DISCUSSIONS, FINDINGS AND CONCLUSIONS

THRESHOLD PROCEDURAL ISSUES:

Several threshold or procedural issues requiring 

Commission decision were identified in the Interim Report. The 

Draft Guidelines aggregated these issues into nine categories. 

Final Commission decisions on these issues are as follows. 

1. The Commission has the legal authority to promulgate 

Standards and Guidelines for integrated resource planning: 

The Interim Report raised the question whether the 

Commission had the legal authority to promulgate IRP rules. A 

clear statement of Commission authority is presented in the 

September 3, 1991 Order on Draft Standards and Guidelines. 

Subsequent comments did not challenge this statement, 

though Kennecott et. al. asserted that the Commission has no 

inherent authority to engage in any pre-approval process. The 

process the Commission herein establishes raises no such question, 

however. 

Kennecott reiterated its position that the state 

legislature explicitly withheld authority from the Commission to 

plan the energy market in Utah. The Commission, however, is merely 

issuing standards and guidelines for a utility directly under its 
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jurisdiction in order to meet its legislative mandate to properly 

conserve energy resources. 

The Division agreed with the Commission's position, but 

suggested that the Commission might pursue a permanent resolution 

through either judicial or legislative avenues. Given the lack of 

substantive arguments to the contrary and the affirmative argument 

contained in the Order on Draft Standards and Guidelines, the 

Commission concludes that it has the authority to promulgate IRP 

standards and guidelines. 

2. Information Exchange is the most reasonable method for 

developing and implementing integrated resource planning in Utah:

There is general agreement among the parties on the 

benefits of using this approach to develop a comprehensive IRP. 

The Company has shown a willingness to solicit and respond to 

public input and the Commission finds that this method appears to 

be functioning quite well for RAMPP II. However, the Division, the 

Committee and UDE suggested the need for better documentation of 

the planning process by the Company. The Commission agrees that 

the process must be thoroughly documented and notes the Company's 

willingness to accommodate reasonable documentation requests. If 

necessary, parties can request that the Commission resolve disputed 

requests. The Commission finds that the free flow of information 

between parties is beneficial to the IRP process and concludes that 

Information Exchange approach to IRP, supplemented with appropriate 

documentation, will be used in Utah. 
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3. Prudence Reviews of new resource acquisitions will occur 

during ratemaking proceedings. 

The parties are in basic agreement on this procedural 

issue, although Kennecott argued for stronger language. Kennecott 

maintained that the information exchange process should not 

restrict consideration of issues in proceedings to consider the 

prudence of resource acquisitions, rather the information contained 

in a comprehensive IRP could facilitate such a proceeding. The 

Commission finds that acknowledgment of an IRP will not foreclose 

full prudence examination of the resource acquisition at an 

appropriate later time. 

4. PacifiCorp's integrated resource planning process will be 

open to the public at all stages. The Commission, its staff, the 

Division, the Committee, appropriate Utah state agencies, and other 

interested parties can participate. The Commission will pursue a 

more active-directive role if deemed necessary, after formal review 

of the planning process. 

Kennecott, Nucor and the Environmental Intervenors 

requested that they be explicitly allowed to participate in the 

RAMPP process. The Commission finds that all interested parties 

can participate in the integrated resource process including the 

above mentioned parties. 

The Company expressed reservations about the Commission's 

pursuit of a more active-directive role, arguing that it could lead 

to a Commission plan rather than a Company plan. The Commission 

wants to alleviate the Company's concern. The Commission has no 
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intention of directing the Company's plan or having a Commission 

plan. However, the Commission reserves the right to request 

additional information and studies that might aid in its evaluation 

of the planning process. 

5. Consideration of environmental externalities and 

attendant costs must be included in the integrated resource 

planning analysis.

This issue generated considerable debate. The Company 

generally opposed explicit internalization of environmental costs 

because such a requirement could substantially raise the price of 

electricity and affect the Company's competitive position versus 

other energy providers. The Company proposed that its IRPs include 

a discussion of its external cost analysis and show how such 

information would be incorporated into the Company's planning 

decisions. The Company deemed environmental dispatch an 

inappropriate way to recognize external costs because of its 

adverse impact on the cost and price of electricity. Should the 

Commission judge that monetization of environmental cost is 

appropriate, the Company urged that a range of values be accepted. 

 The Company expressed concern about consistent regulatory 

treatment and stated a willingness to facilitate discussions 

between jurisdictions on environmental matters. 

The Division maintained that the consideration of 

environmental externalities is an important public policy concern 

which market forces alone can not adequately address. However, the 
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Division cautioned the Commission against making electric utilities 

a particular vehicle to achieve improvements in the environment. 

The Division contended that consideration of external environmental 

costs could lead to the selection of higher internal cost resources 

which must be recovered in rates through higher prices. The 

Division argued that this impact on rates is concomitant with and 

part of the Commission's direction that environmental externalities 

be included in PacifiCorp's IRP. 

The Division offered a number of recommendations on this 

matter. First, the issue of inclusion of environmental 

externalities in the IRP should be decided only after a through 

airing of the issue. Second, other externalities associated with 

the electric utility business should be identified and a determination made on how to include them in the IRP process. Third, 

the incorporation of external costs into ratemaking requires the 

study of a difficult set of analytical and policy issues. 

Decisions on these issues should be incorporated into the IRP 

design rather than be decided in a rate case. The Division then 

reiterated the Interim Report's list of environmental concerns that 

should be studied. 

The Committee recommended that environmental impacts 

associated with different plans be explicitly quantified, e.g., 

pounds of emissions per kWh, and given a monetary value equal to 

the damage caused. The Committee requested that the implications 

of environmental dispatch, or "full" costs dispatch which includes 

external costs be explored. In addition, it asked for clarification 
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of how external costs should be treated in the analysis. Are they 

to be taken into account in the acquisition of resources? If so, 

the Committee recommended that this be discussed in follow-up 

workshops. 

Kennecott opposed the inclusion of environmental 

externalities in the IRP process on several grounds. Higher 

electric rates, less competitive Utah industries, lack of explicit 

legislative authority and usurpation other governmental agencies' 

power were cited as reasons to exclude externalities. Kennecott 

argued that it is speculative to base resource planning on unknown 

changes in regulations. However, if environmental externalities 

are incorporated in the IRP process then other externalities should 

also be considered. Kennecott also argued that having one industry 

adhere to some strict economic efficiency criteria does not insure 

benefit to the economy as a whole. In economic literature, this is 

known as the problem of second best. For example, acquisition 

plans that include external costs could result in higher electrical 

rates and forestall electric cars which pollute less than internal 

combustion autos. 

The Environmental Intervenors, (EI), which represents 

several different environmental groups, recommended that 

environmental costs be included in the definition of total costs. 

Failure to account for these costs could perpetuate a serious 

market failure harming both ratepayers and the general public. 

Failure to assign a value to externalities implicitly assigns them 

a value of zero. It is clear such costs are greater than zero. 
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They recommended the explicit integration of environmental 

externalities into each resource acquisition strategy. All 

acquisition strategies should incorporate model runs that include 

costs associated with externalities so the Commission can assess 

the importance of such factors. They acknowledged that ratemaking 

treatment of such costs is complex and urged the Commission to form 

a task force to study the issue. 

The UDE acknowledged that Total Resource Costs (TRC) to 

society is the relevant index for evaluating new resource options. 

 Ideally, TRC should include all social costs including costs 

associated with environmental externalities. However, given the 

uncertainty involved with defining and measuring external costs, 

UDE concurs with PacifiCorp's current approach as an interim 

measure. This approach performs sensitivity analysis on the least 

cost resources selection using a range of external cost adders. 

UDE recommends that this issue be studied before the next IRP. 

Two other parties submitted comments to the Commission on 

this issue. University of Utah Professor Craig Hansen recommended 

that a range of values as well as a most-probable value for 

external costs be used. He cautioned the Commission against 

requiring a minimal impact scenario which could produce a public 

backlash against environmental considerations. He endorsed the 

acquisition of a diversity of resources as a hedge against 

uncertainty and suggested competitive bidding for renewable 

resources as a means to insure their inclusion in the Company's 

portfolio. Conserve-A-Watt, a regional energy service company 
 DOCKET NO. 90-2035-01

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declared that environmental costs are clearly not zero and 

recommended the use of some estimate between 0 and $.04 per kWh. 

The Commission finds that external costs associated with 

the electric utility industry are uncertain, but clearly not zero. 

 The studies and testimony cited by EI as well as the Pace 

University study cited by Kennecott substantively support such a 

finding. In addition, the Commission finds that without some form 

of government intervention current market forces can not adequately 

address the externality problem. The 1991 Clean Air Act Amendments 

are an attempt by the Federal government to fashion property rights 

for emissions in order to marshall market forces to efficiently 

comply with a predetermined emission level. These regulations have 

forced industry to accept financial responsibility for costs 

formerly borne only by society. 

 Although it is uncertain whether such an internalization 

process will continue in the future, it is clear that utilities 

which acquired resources with high external costs are at risk if 

such a process persists. For example, the international community 

is currently negotiating limits on CO2 emissions which could affect 

costs or operation of thermal plants in this country. The plight 

of the Northwest region's salmon population could trigger new 

regulations that force utilities to change the current operation of 

their hydroelectric facilities. Such regulations could alter the 

value of these resources and force the acquisition of replacements. 

 Thus, changing regulations can raise internal costs through 

changes in operation of current plant or requirements to add 
 DOCKET NO. 90-2035-01

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control technology or the purchase of emission permits. Such costs 

will ultimately be borne by either the ratepayer or the 

stockholder. 

The Commission finds that prudent business planning must 

evaluate risk and uncertainty. Such evaluations will weigh the 

consequences of such risk and uncertainty with the costs of 

strategies that insulate the Company from such risks. The 

Commission finds that future internalization of environmental costs 

is a risk that is currently facing the electric utility industry. 

Therefore, the Commission concludes that an analysis of 

environmental risk must be included in the Company's IRP. The 

analysis should include the quantification of actual emissions as 

well as a range of dollar values for external costs for each 

acquisition strategy. In addition, the analysis should include an 

appraisal of how operations of existing and future resources might 

be affected and how this would impact costs. Both the IRP plan and 

the Company's action plan should address the Company's approach to 

environmental risk. Such information will be useful for Commission 

understanding and evaluation of the Company's IRP. 

The Commission is sensitive to the concerns raised by the 

EI. However, until a better understanding of the problems of 

second best and global efficiency associated with externalities can 

be obtained, along with a reduction in the variance of estimates of 

their associated costs, the Commission, for now, will reject the 

recommendation to explicitly include external costs into the 

calculation of least cost and the subsequent acquisition of 
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resources. Nevertheless, the Commission concludes that requiring 

the Company to conduct an analysis of the risks associated with 

future internalization of environmental costs is appropriate at 

this time. Given this conclusion, the Commission believes that it 

has allayed the Division's concerns that consideration of 

environmental externalities will necessarily lead to the 

acquisition of higher cost resources and therefore require higher 

rates. Higher cost resources would be acquired when it is in the 

interests of the Company and its ratepayers to reduce the risks 

associated with future regulations. 

6. Integrated resource planning must evaluate supply-side and 

demand-side resources on a consistent and comparable basis. 

The Division recommended that neither supply-side 

resources (SSR) nor demand-side resource (DSR) be given any 

artificially advantageous or disadvantageous treatment in the IRP 

or resource acquisition processes. Kennecott cautioned the 

Commission against giving arbitrary incentives for acquisition of 

DSR. UDE agreed with the comparable evaluation requirement, but 

requested clarification on the issue. UDE stated that PacifiCorp 

is currently giving full and equal treatment to both resources in 

the assessment process, but questioned the comparability at the 

acquisition stage. UDE noted that the two resources, DSR and SSR, 

are very different and comparable treatment of these resources 

would require further analysis by a task force. 

The Commission agrees with UDE and finds that DSR and SSR 

are different resources in terms of their dispatchability, 
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certainty of output, reliability and the risks associated with 

environmental externalities. Planning, acquisition and ratemaking 

treatment should be consistent and comparable while acknowledging 

such differences. Ratemaking treatment can affect the Company's 

willingness to acquire resources. Ratemaking treatment for DSR has 

yet to be determined in this jurisdiction and this uncertainty 

might create a disincentive to invest in such resources. The 

Commission concludes that disincentives must be studied in more 

detail and assigns this analysis to a task force to be described 

later in this order. The Commission reaffirms its position on this 

threshold issue. Demand-side and supply-side resources must be 

evaluated on a consistent and comparable basis. The Commission 

however encourages parties to study how best to implement such a 

requirement. 

7. Avoided Cost should be determined in a manner consistent 

with the Company's Integrated Resource Plan. 

The Division agreed with this requirement, while 

Kennecott argued that the IRP should explicitly identify the 

resources that are least cost and can actually be avoided. Avoided 

costs should be based on such resources. The UDE stressed the need 

for internal consistency of the Company's IRP and its avoided 

costs. Avoided costs are usually calculated by determining revenue 

requirement for the Company's IRP and comparing it to the revenue 

requirement of the IRP with a decrement of predicted load. 

However, avoided costs are used to obtain a cost-effectiveness 

level for DSR and thus the supply of DSR to be incorporated in the 
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Company's IRP. Thus, the avoided costs determine the IRP and the 

IRP determines the value of the avoided costs. Accurate estimation 

requires an iterative process. Competitive bidding might provide 

an accurate estimate of the initial avoided cost for such an 

iterative process. The Commission finds that consistency between 

the Company's IRP and its avoided costs is necessary for both 

internal consistency of the IRP and for an accurate measure of 

avoided costs. The exact nature of this consistency will be better 

addressed in the avoided cost proceeding, 91-2035-01, or its 

successors. 

8. The planning standards and guidelines must meet the needs 

of the Utah service area, but since coordination with other 

jurisdictions is important, must not ignore the rules governing the 

planning process already in place in other jurisdictions. 

The Division stated that coordination is desirable as 

long as Utah interests are not unduly compromised. Important 

issues requiring coordination include the treatment of 

environmental externalities and the cost allocation of DSR. 

Kennecott warned that Utah jurisdictional needs must not be 

secondary to any other jurisdiction and that the Commission should 

reserve the right to disallow costs for higher cost resources that 

were not in conformance with Utah planning guidelines. The 

Committee stated that consistent jurisdictional treatment of 

externalities is desirable. 

The Commission finds that the jurisdictional needs of 

Utah will be a primary consideration in the Commission's evaluation 
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of the Company's IRP. However, where possible and when minimal 

impact on Utah's interests exists, coordination with other 

jurisdictions will be pursued. The Commission directs the Company 

to pursue its plan to form a task force to study how environmental 

issues should be incorporated into its IRP on an interjurisdictional basis. Other jurisdictional issues such as the 

interjurisdictional allocation of DSR expenditures can be addressed 

by the ongoing PacifiCorp Interjurisdictional Task force on 

Allocations (PITA). 

9. The Company's Strategic Business Plan must be directly 

related to its Integrated Resource Plan.

The Division agreed with this directive, but cautioned 

against unequivocal enforcement that would inhibit the pursuit of 

prudent resource acquisitions that were not included in the plan. 

The Committee argued to strengthen this directive and 

recommended that potential conflicts between the two plans be 

reported to the Commission in an up-front and timely fashion. They 

requested that the Company be required to report on an annual basis 

its short-run and long-run strategic business plan and corporate 

objectives. The Commission finds that consistency between the 

Company's strategic business plan and its IRP is necessary to 

ensure that ratepayers receive the benefits from IRP. Details of 

the consistency will be spelled out in the specific guidelines 

listed below. (see guidelines 4.e and 4.h. on page 36) 

STANDARDS AND GUIDELINES FOR IRP.

1. Definition: 
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Integrated resource planning is a utility planning 

process which evaluates all known resources on a consistent and 

comparable basis, in order to meet current and future customer 

electric energy services needs at the lowest total cost to the 

utility and its customers, and in a manner consistent with the 

long-run public interest. The process should result in the 

selection of the optimal set of resources given the expected 

combination of costs, risk and uncertainty. 

The Commission requested that parties recommend whether 

"lowest cost" be defined as lowest rates or as lowest revenue 

requirement; whether lowest costs should include costs incurred by 

ratepayers as well as the utility; and whether lowest cost should 

include external costs. 

Environmental Intervenors urged the Commission to include 

environmental external costs in the definition of lowest total cost 

for PacifiCorp's IRP, thus forcing the Company to integrate 

externalities into its resource selection process. They argue that 

without such a change in definition, the general public and 

ratepayers will be harmed. 

UDE recommended that lowest cost should be interpreted as 

Total Resource Cost (TRC), defined as the discounted sum of the 

direct costs of production and consumption of electric energy 

services incurred by the utility, its ratepayers and the general 

society. It recommended that sensitivity analyses be done for 

external costs rather than to explicitly include such costs in the 

definition. In addition, it recommended that the calculation of 
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TRC for DSR include a dynamic view of DSR's future impact on load 

and avoided costs. The Company argued that measurement of lowest 

total costs is imperfect because when evaluating a new resource one 

must take into account its reliability, the risks associated with 

the resource, its external costs and its effects on the Company's 

flexibility to operate and plan the system. Evaluation of costs 

must be in relationship to quality of service. Kennecott requested 

that the calculation of total revenue requirements for each model 

run be required so that ratepayers are assured of obtaining the 

least cost resources. 

The Commission finds that UDE's recommendation for using 

the Total Resource Cost to define the "lowest cost" criterion is 

reasonable; it should include the costs incurred by the utility and 

the ratepayer. However, the Company should also determine the 

costs incurred by the utility, that is, the present value of total 

revenue requirements of a resource acquisition strategy. If 

different strategies have the same total resource costs, the 

Company should choose that strategy that has the lowest total 

revenue requirement. 

The Commission finds external costs do not have to be 

explicitly included in the definition of lowest total costs. To do 

so would require that the Company acquire resources that included 

the full estimate of the external costs associated with them. 

However, the Commission's directive to the Company to consider the 

long-run public interest requires consideration of environmental 

ramifications of the production and consumption of electric energy 
 DOCKET NO. 90-2035-01

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services. All other things being equal, the Company will be 

expected to pursue resource acquisitions that minimize adverse 

environmental impacts as a method of reducing risk. The Commission 

has stated that the IRP process should select resources that yield 

the optimal combination of costs and risks. The risk of future 

internalization of environmental costs must be analyzed by the 

Company and such risk assessment must be incorporated in the 

Company's decision making and final choice of resources acquired. 

The Commission concludes that its modified definition of IRP as 

explained by the discussion above reflects the Commission's view of 

the role of cost in the IRP process. 

2. The Company will submit its Integrated Resource Plan 

biennially.

No party objected to this provision. Therefore, the 

Commission reaffirms its decision that submission of an IRP every 

two years is reasonable and will be required of the Company. 

3. The integrated resource plan will be developed in 

consultation with the Commission, its staff, the Division of Public 

Utilities, the Committee of Consumer Services, and appropriate Utah 

state agencies. PacifiCorp will provide ample opportunity for 

public involvement and the exchange of information during the 

development of its Plan. 

Nucor, Kennecott and the Environmental Intervenors 

requested that this requirement be amended to specifically name 

them as parties. The Commission finds that all interested parties 

may participate in PacifiCorp's public process but that it is not 
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necessary to name all parties that may contribute to this 

information-exchange collaborative process. The guideline will be 

so revised. 

3. (revised) The integrated resource plan will be developed 

in consultation with the Commission, its staff, the Division of 

Public Utilities, the Committee of Consumer Services, appropriate 

Utah state agencies and other interested parties. PacifiCorp will 

provide ample opportunity for public involvement and the exchange 

of information during the development of its Plan. 

4. PacifiCorp's future integrated resource plans will 

include:

a. A range of estimates or forecasts of load growth, 

including both capacity (kW) and energy (kWh) requirements. 

The Division suggested that the Commission specify that 

the load forecasts include: firm loads, non-firm loads, on-system 

and off-system loads, loads by jurisdiction and general class of 

service, forecast horizons of 20-years, and the Company's estimate 

of the likelihood that each forecast scenario may occur. The 

Company argued that it plans and acquires resources to meet the 

load requirements of its retail customers. Off-system or wholesale 

markets are uncertain and should not be relied upon for the 

disposition of substantial resources. 

The Commission finds that more specific requirements for 

load forecasting will aid in the Commission's evaluation of the 

Company's plan. The Commission will add the following language to 

its load forecast requirement. 
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a. i. (new) The forecasts will be made by jurisdiction 

and by general class and will differentiate energy and capacity 

requirements. The Company will include in its forecasts all onsystem loads and those off-system loads which they have a 

contractual obligation to fulfill. Non-firm off-system sales are 

uncertain and should not be explicitly incorporated into the load 

forecast that the utility then plans to meet. However, the Plan 

must have some analysis of the off-system sales market to assess 

the impacts such markets will have on risks associated with 

different acquisition strategies. 

For example, the draft report of RAMPP II concludes that 

it will be more advantageous to over-build than under-build in the 

future. This is based on assumptions about the off-system sales 

market. The Commission finds that conclusions must be based on 

analysis not assumptions. Therefore, the Commission concludes that 

the off-system sales market must be analyzed in order to evaluate 

the risks of over- or under-building to meet future system load. 

b. Analyses of how various economic and demographic 

factors, including the prices of electricity and alternative energy 

sources, will affect the consumption of electric energy services, 

and how changes in the number, type and efficiency of end-uses will 

affect future loads. 

The Division argued that such analyses are a part of 

normal demand forecasting and should be included in any forecast. 

The Commission agrees with the Division and such analyses will be 

included in the Company's requirements for load forecasting under 
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section a. ii. This change will require relettering of all 

subsequent requirements. A new set of requirements that includes 

all changes and relettering will be attached to this order. 

 c. An evaluation of all present and future resources, 

including future market opportunities (both demand-side and supplyside), on a consistent and comparable basis. 

i. An assessment of all technically feasible and costeffective improvements in the efficient use of electricity, 

including load management and conservation. 

ii. An assessment of all technically feasible generating 

technologies including: renewable resources, cogeneration, power 

purchases from other sources, and the construction of thermal 

resources. 

The Division recommended that the Commission clarify its 

definition of evaluation and assessment of all present and future 

resources. The Commission finds that such clarification will aid 

the Company is its future planning and adds the following 

guideline. 

iii. (new) The resource assessments should include: life 

expectancy of the resources, the recognition of whether the 

resource is replacing/adding capacity or energy, dispatchability, 

lead-time requirements, flexibility, efficiency of the resource and 

opportunities for customer participation. 

The Commission is cognizant of the fact that there is not 

a commonly accepted method for including all such factors into an 

optimization model. Therefore, the Commission concludes that 
 DOCKET NO. 90-2035-01

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although an evaluation of the resources in a consistent and 

comparable manner must consider the above mentioned factors, they 

need not be explicitly included in the model. The Commission will 

reletter requirement c. i. and c. ii. to b. i. and ii. and add 

section b. iii in its final Standards and Guidelines for IRP. 

d. An analysis of the role of competitive bidding for 

demand-side and supply-side resource acquisitions. 

The Division recommended that the Company should clearly 

explain how it intends to use competitive bidding in its 

acquisition strategy. The Company argues that competitive bidding 

is an implementation issue and although not directly incorporated 

in its IRP, it will be addressed in the Company's action plan. 

Kennecott supported the concept of requiring the Company to bid for 

new resources. It urged a go slow policy on DSR bidding because of 

the relative inexperience of all participants. The Committee 

argued that competitive bidding is one of the best ways to secure 

low cost resources and that it should be a permanent part of the 

IRP process. 

The Commission notes that the Company is currently 

evaluating bids for power in its first RFP in Docket No. 91-2035-

01. Further, the Commission notes that the Company's competitive 

bidding program is in its infancy and will require further study 

before the Commission decides whether formal inclusion in the IRP 

is warranted. Therefore, the Commission concludes that this issue 

is better addressed after the results from the competitive bidding 

process are analyzed. The issue will be addressed in Docket No. 
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91-2035-01. Therefore, the Commission will continue its 

requirement that the Company analyze the role of competitive 

bidding. This requirement will be relettered c. 

e. A 20-year planning horizon. 

No party objected to this requirement. Therefore, the 

Commission concludes that it is reasonable and reaffirms this 

requirement and will reletter it d. 

f. A two-year action plan outlining the specific 

resource decisions intended to implement the integrated resource 

plan in a manner consistent with the Company's strategic business 

plan. 

The Division recommended that the Company's action plan 

span a four-year time horizon. The action plan would describe 

specific decisions and actions to be taken in the first two years 

and would outline actions the Company anticipates taking in the 

last two years. In addition, the plan would include a report on 

the status of the specific actions outlined in the previous plan. 

The Company agreed that both suggestions would be useful additions 

to the IRP requirements. The Committee requested that the action 

plan be revised after any resource selection is made. The Company 

argued that an action plan submitted every two years is an adequate 

information requirement and sees little need for revising action 

plans between its biennial submission of their IRP. 

The Commission finds that the Division's recommendations 

that were agreed to by the Company are useful additions to the IRP. 

The Commission finds that the Committee's request for a formal 
 DOCKET NO. 90-2035-01

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revision of the action plan is unnecessary as long as the 

Commission is kept informed about new acquisitions and their 

impacts on future plans. The guideline will be changed to the 

following and will be relettered e. 

f. (new) An action plan outlining the specific resource 

decisions intended to implement the integrated resource plan in a 

manner consistent with the Company's strategic business plan. The 

action plan will span a four-year horizon and will describe 

specific actions to be taken in the first two years and outline 

actions anticipated in the last two years. The action plan will 

include a status report of the specific actions contained in the 

previous action plan.

 g. Load forecasts integrated with resource options in a 

manner which rationalizes the choice of resources under a variety 

of economic circumstances. 

The Division recommended revising this requirement such 

that the Company should plan different resource acquisition paths 

for different economic circumstances with a mechanism to select 

among and modify these paths as the future unfolds. The Division 

maintains that this is a rational way to deal with uncertainty. 

The Commission agrees with the Division's interpretation and will 

reword the guideline as follows and will reletter it h. 

g. (new) a plan of different resource acquisition paths 

for different economic circumstances with a decision mechanism to 

select among and modify these paths as the future unfolds. 
 DOCKET NO. 90-2035-01

 - 25 - 

h. An evaluation of the cost-effectiveness of the 

resource options from a variety of perspectives: the utility, the 

ratepayer, different classes of ratepayers, state, and society as a 

whole. 

The Division questioned whether the evaluation from the 

state's perspective should include economic and demographic impacts 

and impacts on other utilities in the state. The Division 

requested a better definition of the geographical and temporal 

meaning of "society's" perspective. Given the difficulty of 

defining these perspectives, the Division recommended removing the 

requirement of evaluating options from state and society 

perspectives. The Commission finds that these concepts are 

currently too difficult to precisely define and quantify and 

therefore will be excluded from the formal requirements. However, 

the Company will provide a description of how social concerns might 

be handled and how they might affect cost effectiveness decisions. 

 For example, the Northwest requires that conservation measures be 

given a 10 percent cost reduction to account for social benefits. 

This requirements will be relettered g. 

 h. (revised) An evaluation of the cost-effectiveness of 

the resource options from the perspectives of the utility and the 

different classes of ratepayers. In addition, a description of how 

social concerns might affect cost effectiveness estimates of 

resource options. 

i. An evaluation of the risks associated with various 

resource options and how the action plan addresses these risks in 
 DOCKET NO. 90-2035-01

 - 26 - 

the context of both the Business Plan and the 20-year Integrated 

Resource Plan. 

The Division recommended the explicit identification of 

financial, competitive, reliability, and operational, i.e, 

dispatchability risks. The Division recommended the identification 

of the group, ratepayers or the shareholders, who bears the risk. 

The Commission agrees with this recommendation and revises the 

guideline to read: 

i. (revised) An evaluation of the financial, competitive, 

reliability, and operational risks associated with various resource 

options and how the action plan addresses these risks in the 

context of both the Business Plan and the 20-year Integrated 

Resource Plan. The Company will identify who should bear such 

risk, the ratepayer or the stockholder. 

j. Considerations permitting flexibility in the planning 

process so that the Company can take advantage of opportunities and 

can prevent the premature foreclosure of options. 

The Division and the Company counseled the Commission on 

the benefits of such considerations and the Commission concludes 

that flexibility is in the public interest. However, acquisitions 

not contained in the plan will still come under the same scrutiny 

as any other resource acquisition when the Company applies for 

ratemaking treatment. 

j. (reaffirmed) Considerations permitting flexibility in 

the planning process so that the Company can take advantage of 

opportunities and can prevent the premature foreclosure of options.
 DOCKET NO. 90-2035-01

 - 27 - 

k. An analysis of tradeoffs; for example, between such 

conditions of service as reliability and the acquisition of lowest 

cost resources. 

Division noted that this is tied to the risks issues 

discussed in section (i) (revised) but recommended that reliability 

be analyzed separately and that dispatchability be included in the 

analysis. The Commission finds that dispatchability is an element 

that is critical for reliability and should therefore be analyzed. 

 The guideline will be reworded to reflect this concern. 

k. (revised) An analysis of tradeoffs; for example, 

between such conditions of service as reliability and 

dispatchability and the acquisition of lowest cost resources. 

l. A range, rather than attempts at precise 

quantification, of estimated external costs which may be 

intangible, in order to show how explicit consideration of them 

might affect selection of resource options, and one scenario 

showing the costs of resource acquisition strategy that has minimal 

environmental impact and thus minimal external costs to society. 

The Commission finds that a range of estimates for 

external costs is appropriate for analysis of the risks associated 

with changing environmental regulation. The Commission agrees with 

Professor Craig Hansen that requiring a minimal impact scenario 

could produce a public backlash against environmental 

considerations and therefore concludes that an explicit requirement 

to include a resource strategy that minimizes environmental impacts 

should not be formally required but may be requested by the 
 DOCKET NO. 90-2035-01

 - 28 - 

Commission. The requirement is revised as follows: 

l. (revised) A range, rather than attempts at precise 

quantification, of estimated external costs which may be 

intangible, in order to show how explicit consideration of them 

might affect selection of resource options. The Company will 

attempt to quantify the magnitude of the externalities, for 

example, in terms of the amount of emissions released and dollar 

estimates of the costs of such externalities. 

Other Specific Guideline Comments:

Nucor requested that interruptible service and retail 

wheeling be considered as resources in the Company's IRP analysis. 

 The Company responded with an offer to consider the benefits and 

appropriate pricing levels of future interruptible contracts during 

the planning process, but questioned the likelihood that retail 

wheeling would benefit all parties. If such opportunities can be 

identified, the Company recommended their inclusion in the Plan. 

However, the Company stated that retail wheeling is an issue with 

broad implications that must be considered before policy is 

determined. The Commission finds that future pricing policies for 

interruptible contracts should be studied as should retail 

wheeling. 

UDE requested that the Company provide a narrative in its 

IRP indicating the link between rate design and least-cost goals. 

Since price affects consumer behavior, long-term rate design 

strategy should be consistent with IRP goals. The Company argued 

that rate design is an implementation issue and should be kept 
 DOCKET NO. 90-2035-01

 - 29 - 

separate from the planning function. The Commission acknowledges 

that prices affect consumers decisions and therefore concludes that 

rate design and IRP goals should be consistent. The Commission 

finds that the requested narrative should not unduly complicate or 

interfere with the planning process and will provide some 

information for ratemaking proceedings, therefore it should be 

included in the IRP. The Commission will codify this request for 

analysis under the following guideline: 

m. (new) a narrative describing how current rate design 

is consistent with the Company's integrated resource planning goals 

and how changes in rate design might facilitate integrated resource 

planning objectives. 

5. PacifiCorp will submit its Integrated Resource Plan for 

public comment, review and acknowledgement. 

The Division requested that deadlines be specified for 

submission of the IRP, public comments and regulatory 

acknowledgement. The Company noted that the Division's suggested 

three-month interval between submission and review for comments and 

acknowledgement of the report is not enough time to fully analyze 

and evaluate the planning process. They also noted that time 

requirements are likely to vary from one plan to another. The 

Commission finds that the planning process is fluid and strict 

adherence to deadlines might be detrimental to the quality of the 

submitted plan. Therefore, the Commission concludes that specific 

deadlines are not required at this time. However, the Commission 

expects that the Company's next IRP will be due in the Fall of 
 DOCKET NO. 90-2035-01

 - 30 - 

1993. 

In order to clarify the review and acknowledgement 

process the Commission will add the following guideline. 

6. (new) The public, state agencies and other interested 

parties will have the opportunity to make formal comment to the 

Commission on the adequacy of the Plan. The Commission will review 

the Plan for adherence to the principles stated herein, and will 

judge the merit and applicability of the public comment. If the 

Plan needs further work the Commission will return it to the 

Company with comments and suggestions for change. This process 

should lead more quickly to the Commission's acknowledgement of an 

acceptable Integrated Resource Plan. The Company will give an oral 

presentation of its report to the Commission and all interested 

public parties. Formal hearings on the acknowledgement of the 

Integrated Resource Plan might be appropriate but are not required.

 7. Acknowledgement of an acceptable Plan will not guarantee 

favorable ratemaking treatment of future resource acquisitions. 

The Division agreed with this requirement because it 

preserves the Commission's right to a prudence review and allows 

the Company flexibility in resource acquisition. The Committee 

recommended that the burden of proof be on the Company to prove why 

its acquisitions conform with the plan. The Commission finds that 

the present language is sufficient. Acknowledgement of the plan 

means the Commission deems the plan reasonable at the time it is 

presented. Cost recovery for acquisitions will be decided in a 

formal rate case. 
 DOCKET NO. 90-2035-01

 - 31 - 

8. The Integrated Resource Plan will be used in rate cases 

to evaluate the performance of the utility and to review avoided 

cost calculations. 

There were no objections to this requirement. Therefore, 

the Commission finds that it is reasonable and in the public 

interest. 

OTHER COMMENTS

The Commission requested comments and input on a number 

of other issues germane to the IRP process, some have been 

discussed within the body of this report but others need further 

discussion. The Commission requested comments on the following 

issues: the proper definition of lowest total cost, the proper role 

of environmental externalities in the planning and ratemaking 

process, the role of the regulatory environment to encourage the 

Company to pursue its IRP, the relationship between avoided costs 

and the Integrated Resource Plan, the role of competitive bidding 

for both demand-side and supply-side resources, and issues 

surrounding the interjurisdictional consistency of planning 

requirements. 

1. Definition of Lowest Total Cost

The Commission's decision on this issue is discussed in 

the section on the definition of integrated resource planning on 

pages 15 through 17. 

2. Role of Competitive Bidding

This was discussed in detail in section 4. d. of specific 

guidelines on page 21 and will be analyzed in Docket 91-2035-01. 
 DOCKET NO. 90-2035-01

 - 32 - 

3. Regulatory changes to insure Company pursuit of its IRP.

 EI devoted a considerable part of its brief to the issue 

of regulatory reform and recommended that the Commission remove the 

current disincentives for DSR by decoupling revenues from profits. 

 The Company argued that positive incentives which allow profits to 

be made on the provision of energy services are more effective than 

eliminating disincentives. Kennecott argued against EI's 

suggestions for regulatory change, implying that higher rates in 

Utah will ultimately result. 

The Commission finds that demand-side resources, which 

includes end-use efficiencies, load management, and conservation, 

are more difficult to acquire than supply-side resources. 

Regulatory disincentives may exist. The Commission finds that 

currently there is no approved ratemaking treatment for DSR. Given 

the asymmetry of ratemaking treatment for DSR and the resulting 

uncertainty of cost recovery, the Commission questions whether the 

Company has sufficient financial incentive to pursue its IRP. 

Given the Commission's directive that DSR and SSR be treated on a 

comparable basis, the Commission finds that clarification of the 

regulatory treatment of DSR is necessary. However, this Docket has 

not provided an evidentiary basis for a Commission decision. 

Therefore, the Commission concludes that further study is warranted 

and establishes Docket No. 92-2035-04, "In the Matter of Ratemaking 

Treatment of Demand-Side Resources and the Analysis of Regulatory 

Changes to Encourage Implementation of Integrated Resource 

Planning". The Commission directs the Division to establish a 
 DOCKET NO. 90-2035-01

 - 33 - 

cooperative task force or incorporate these issues into the 

existing DSR task force to study these issues and bring 

recommendations before the Commission. The issues to be analyzed 

include: the ratemaking treatment of DSR expenditures, approval of 

energy service charges for efficiency improvements and 

conservation, electric revenue adjustment mechanisms, the granting 

of a cost advantage for efficiency or conservation acquisitions, 

and the decoupling of revenues from profits and any other issues 

that the group deems germane. 

ORDER

NOW, THEREFORE, IT IS HEREBY ORDERED that the standards 

and guidelines for integrated resource planning for PacifiCorp, 

Utah jurisdiction, be adopted. Appendix A attached to this Order, 

will specify the Commission's decisions on Threshold/Procedural 

issues and list the Standards and Guidelines for Integrated 

Resource Planning for PacifiCorp. The Company will prepare its IRP 

conformance with such procedures, standards and guidelines. 

The Commission opens a new proceeding, Docket No. 

92-2035-04, "In the Matter of Ratemaking Treatment of Demand-Side 

Resources and the Analysis of Regulatory Changes to Encourage 

Implementation of Integrated Resource Planning". The Division is 

directed to convene a task force to define the issues involved both 

short-run and long-run and bring recommendations on viable options 

before this Commission for its decision. The issue of consistency 

of avoided cost and integrated resource planning and the role of 
 DOCKET NO. 90-2035-01

 - 34 - 

competitive bidding in the IRP process will be addressed in Docket 

No. 91-2035-01. 

DATED at Salt Lake City, Utah, this 18th day of June, 

1992. 

 

James M. Byrne, Chairman 

 

Stephen C. Hewlett, Commissioner 

Attest: 

 

Julie Orchard 

Commission Secretary 
 DOCKET NO. 90-2035-01

 - 35 - 

 Attachment A 

 Standards and Guidelines for Integrated Resource Planning 

 for PacifiCorp, Utah Jurisdiction 

Procedural Issues: 

1. The Commission has the legal authority to promulgate 

Standards and Guidelines for integrated resource planning. 

2. Information Exchange is the most reasonable method for 

developing and implementing integrated resource planning in Utah.

3. Prudence Reviews of new resource acquisitions will occur 

during ratemaking proceedings. 

4. PacifiCorp's integrated resource planning process will be 

open to the public at all stages. The Commission, its staff, the 

Division, the Committee, appropriate Utah state agencies, and other 

interested parties can participate. The Commission will pursue a 

more active-directive role if deemed necessary, after formal review 

of the planning process. 

5. Consideration of environmental externalities and attendant 

costs must be included in the integrated resource planning 

analysis.

6. The integrated resource plan must evaluate supply-side and 

demand-side resources on a consistent and comparable basis. 

7. Avoided Cost should be determined in a manner consistent 

with the Company's Integrated Resource Plan. 

8. The planning standards and guidelines must meet the needs 

of the Utah service area, but since coordination with other 

jurisdictions is important, must not ignore the rules governing the 
 DOCKET NO. 90-2035-01

 - 36 - 

planning process already in place in other jurisdictions. 

9. The Company's Strategic Business Plan must be directly 

related to its Integrated Resource Plan.

Standards and Guideline: 

1. Definition: 

Integrated resource planning is a utility planning 

process which evaluates all known resources on a consistent and 

comparable basis, in order to meet current and future customer 

electric energy services needs at the lowest total cost to the 

utility and its customers, and in a manner consistent with the 

long-run public interest. The process should result in the 

selection of the optimal set of resources given the expected 

combination of costs, risk and uncertainty. 

2. The Company will submit its Integrated Resource Plan 

biennially.

3. IRP will be developed in consultation with the Commission, 

its staff, the Division of Public Utilities, the Committee of 

Consumer Services, appropriate Utah state agencies and interested 

parties. PacifiCorp will provide ample opportunity for public 

input and information exchange during the development of its Plan. 

 4. PacifiCorp's future integrated resource plans will 

include:

a. A range of estimates or forecasts of load growth, 

including both capacity (kW) and energy (kWh) requirements. 

i. The forecasts will be made by jurisdiction and by 
 DOCKET NO. 90-2035-01

 - 37 - 

general class and will differentiate energy and capacity 

requirements. The Company will include in its forecasts all onsystem loads and those off-system loads which they have a 

contractual obligation to fulfill. Non-firm off-system sales are 

uncertain and should not be explicitly incorporated into the load 

forecast that the utility then plans to meet. However, the Plan 

must have some analysis of the off-system sales market to assess 

the impacts such markets will have on risks associated with 

different acquisition strategies. 

ii. Analyses of how various economic and demographic 

factors, including the prices of electricity and alternative energy 

sources, will affect the consumption of electric energy services, 

and how changes in the number, type and efficiency of end-uses will 

affect future loads. 

 b. An evaluation of all present and future resources, 

including future market opportunities (both demand-side and supplyside), on a consistent and comparable basis. 

i. An assessment of all technically feasible and costeffective improvements in the efficient use of electricity, 

including load management and conservation. 

ii. An assessment of all technically feasible generating 

technologies including: renewable resources, cogeneration, power 

purchases from other sources, and the construction of thermal 

resources. 

iii. The resource assessments should include: life 

expectancy of the resources, the recognition of whether the 
 DOCKET NO. 90-2035-01

 - 38 - 

resource is replacing/adding capacity or energy, dispatchability, 

lead-time requirements, flexibility, efficiency of the resource and 

opportunities for customer participation. 

c. An analysis of the role of competitive bidding for demandside and supply-side resource acquisitions. 

d. A 20-year planning horizon. 

e. An action plan outlining the specific resource decisions 

intended to implement the integrated resource plan in a manner 

consistent with the Company's strategic business plan. The action 

plan will span a four-year horizon and will describe specific 

actions to be taken in the first two years and outline actions 

anticipated in the last two years. The action plan will include a 

status report of the specific actions contained in the previous 

action plan.

f. A plan of different resource acquisition paths for 

different economic circumstances with a decision mechanism to 

select among and modify these paths as the future unfolds. 

g. An evaluation of the cost-effectiveness of the resource 

options from the perspectives of the utility and the different 

classes of ratepayers. In addition, a description of how social 

concerns might affect cost effectiveness estimates of resource 

options. 

h. An evaluation of the financial, competitive, reliability, 

and operational risks associated with various resource options and 

how the action plan addresses these risks in the context of both 

the Business Plan and the 20-year Integrated Resource Plan. The 
 DOCKET NO. 90-2035-01

 - 39 - 

Company will identify who should bear such risk, the ratepayer or 

the stockholder. 

i. Considerations permitting flexibility in the planning 

process so that the Company can take advantage of opportunities and 

can prevent the premature foreclosure of options.

j. An analysis of tradeoffs; for example, between such 

conditions of service as reliability and dispatchability and the 

acquisition of lowest cost resources.

k. A range, rather than attempts at precise quantification, 

of estimated external costs which may be intangible, in order to 

show how explicit consideration of them might affect selection of 

resource options. The Company will attempt to quantify the 

magnitude of the externalities, for example, in terms of the amount 

of emissions released and dollar estimates of the costs of such 

externalities. 

l. A narrative describing how current rate design is 

consistent with the Company's integrated resource planning goals 

and how changes in rate design might facilitate integrated resource 

planning objectives. 

5. PacifiCorp will submit its IRP for public comment, review 

and acknowledgement. 

6. The public, state agencies and other interested parties 

will have the opportunity to make formal comment to the Commission 

on the adequacy of the Plan. The Commission will review the Plan 

for adherence to the principles stated herein, and will judge the 

merit and applicability of the public comment. If the Plan needs 
 DOCKET NO. 90-2035-01

 - 40 - 

further work the Commission will return it to the Company with 

comments and suggestions for change. This process should lead more 

quickly to the Commission's acknowledgement of an acceptable 

Integrated Resource Plan. The Company will give an oral 

presentation of its report to the Commission and all interested 

public parties. Formal hearings on the acknowledgement of the 

Integrated Resource Plan might be appropriate but are not required.

 7. Acknowledgement of an acceptable Plan will not guarantee 

favorable ratemaking treatment of future resource acquisitions. 

8. The Integrated Resource Plan will be used in rate cases to 

evaluate the performance of the utility and to review avoided cost 

calculations.