38.5.8212 RESOURCE ACQUISITION

(1) A utility should apply industry standard procurement practices to acquire electricity supply resources. The commission cannot prescribe in advance the precise industry standards a utility must apply since industry standards vary depending on context and circumstances. Generally, an acceptable approach to resource procurement should encompass the following basic steps:

(a) obtain and consider upfront input and recommendations from an advisory committee throughout planning and procurement processes, as described in ARM 38.5.8225;

(b) explore a wide variety of alternative electricity supply resources;

(d) analyze the feasibility and economic costs, risks, and benefits of rate basing versus alternative electricity supply arrangements;

(e) analyze alternative electricity supply resources with respect to price and nonprice factors in the context of the goals and objectives of these guidelines;

(f) select the most appropriate options and develop a shortlist;

(g) refine the analysis of short-listed options and select the most appropriate option; and

(h) anticipate changing circumstances and remain flexible.

(2) Although these basic steps could be achieved through a variety of methods, a utility should use competitive solicitations with short-list negotiations as a preferred procurement method. A utility should design requests for proposals based on its resource needs assessment. Competitive solicitations should treat bidders fairly, promote transparent portfolio planning and electricity supply resource procurement processes and contribute to achieving the goals and objectives of these guidelines. A utility's resource acquisition process should conform to the following principles:

(a) A utility should clearly define the resources, products, and services it needs before issuing a resource solicitation and clearly communicate these needs to potential bidders in the request(s) for proposals. Multiple solicitations and/or solicitations for multiple resources, products, and services may be necessary to obtain information sufficient for prudent analyses and decision-making;

(b) A utility should establish bid evaluation and bidder qualification standards and criteria it will use to select from among offers before issuing a resource solicitation and clearly communicate these standards and criteria to potential bidders in the request for proposals. Once bids are received, a utility should apply its bid evaluation and bidder qualification standards and criteria firmly and consistently;

(c) A utility should develop a systematic rating mechanism that allows it to objectively rank bids with respect to price and nonprice attributes. A utility is not required to reveal to bidders the specific ranking method used to select preferred bids, however a utility should thoroughly document the development and use of the method for later presentation to the commission;

(d) A utility should establish a shortlist of offers from bidders with which the utility will pursue contract negotiations. A utility should complete due diligence regarding bid qualifications, bidder credit worthiness and experience and project feasibility before selecting an offer for the shortlist. A utility should not indicate to a bidder that its offer is being considered for the shortlist while performing initial due diligence;

(e) If, in evaluating offers, a utility determines that a previously unidentified resource attribute should be considered in the bid evaluation, or that additional evaluation criteria should be used, all bidders should be given an opportunity to supplement their offering to address the utility's desire for the new attribute or the new criteria. The utility should attempt to minimize such occurrences;

(f) A utility should not reassign or "flip" supply contracts to an additional third party(ies) after the original bid activity and during the evaluation of bids. A utility must notify the commission before reassigning any fully executed contract;

(g) During competitive solicitation and resource acquisition processes, a utility should not publicly disclose specific information related to particular bids, including price, before the utility completes its resource acquisition process and has signed contracts with the selected bidder(s);

(h) The utility should obtain input and recommendations from an advisory committee regarding any procurement process that may involve projects or proposals by an affiliate of the utility. The utility should employ an independent third party to develop competitive solicitations if affiliate interests could be involved. An independent third party should review the contract terms and conditions in any power purchase agreement between a utility and an affiliate before the utility signs the agreement. A utility should consult with its advisory committee before selecting the independent third party and should evaluate the third party's findings with the advisory committee. The utility should be prepared to offer substantially the same form of contract to other bidders for similar products to the extent procuring such products is otherwise justified under the goals, objectives, and procedures established in these guidelines; and

(i) A utility should not provide any information to an affiliate with respect to the utility's resource needs assessment, evaluation criteria, bidder qualification criteria, due diligence, or any other relevant resource procurement information unless such information is simultaneously provided to all other prospective bidders.

(3) To the extent a utility does not use competitive solicitations to acquire electricity supply resources it should thoroughly document the exercise of its judgment in evaluating and selecting resource options, including the decision not to use competitive solicitations.

(4) A decision by a utility regarding the acquisition of an equity interest in an electricity generating plant or equipment or the construction of such a resource on its own should be thoroughly evaluated against available market-based alternatives.

(5) Use of competitive solicitations as the preferred method for procuring electricity supply resources may not adequately achieve the goals and objectives of these guidelines with respect to demand-side resources. A utility should design programs and associated marketing and verification measures, as necessary, to ensure that its procurement of demand-side resources is optimized in the context of the goals and objectives of these guidelines.

History: 69-8-403, MCA; IMP, 69-8-403, MCA; NEW, 2003 MAR p. 654, Eff. 4/11/03; AMD, 2008 MAR p. 575, Eff. 3/28/08.