38.5.2004 UNCERTAINTY AND RISK

(1) Integrated least cost resource planning and resource acquisition requires evaluating uncertainty and managing risk associated with a utility's market characteristics and its alternatives for supplying energy services and products. In order to evaluate uncertainty and manage risk, utilities should determine the sources of risk using their own techniques and judgment. Sources of risk include, but may not be limited to:

(a) resource lead-time,

(b) water availability,

(d) shortcomings of various forecasting methods,

(e) performance and useful lives of existing resources,

(f) cost and performance of future demand- and supply-side resources,

(g) the rate of technological change,

(h) future fuel availability and price,

(i) the existence and social evaluation of environmental externalities, and

(j) the future sociopolitical and regulatory environment.

(2) Utilities should consider risk management techniques when evaluating and acquiring resources. Planning techniques that manage the risk associated with the above sources include, but may not be limited to:

(a) assessing the risk of resource alternatives,

(b) developing resource options which increase scheduling flexibility,

(c) developing small, short lead-time resources which better match loads with resources and reduce the amount of, and period over which, capital must be invested to meet future load growth,

(d) diversifying the resource portfolio to allow adaptation to a range of future outcomes,

(e) managing loads to increase utility control over resource requirements,

(f) encouraging the acquisition of resources through competitive processes,

(g) incorporating consumer response to rate design into forecasting models,

(h) providing for public involvement and education in resource decisions, and

(i) maintaining a transparent integrated least cost resource planning and acquisition process (i.e., one which produces resource plans that can be reasonably understood by the public and the commission.)

History: 69-3-103, MCA; IMP, 69-3-102, 69-3-106(1), 69-3-201, MCA, ARM 38.5.2001; NEW, 1992 MAR p. 2764, Eff. 12/25/92.