38.5.8219 RISK MANAGEMENT AND MITIGATION
(1) Prudent electricity supply resource planning and procurement includes evaluating, managing, and mitigating risks associated with the inherent uncertainty of wholesale electricity markets and customer load. A utility should identify and analyze sources of risk using its own techniques, market intelligence, risk management policies, and judgment. The utility should apply industry standard instruments and strategies, document decisions to use various instruments and strategies, and monitor the ongoing appropriateness of such instruments and strategies. Sources of risk that should be evaluated may include, but are not limited to:
Underlying Price/Cost Load
Risk Uncertainty Uncertainty
Factor Risk Risk
(a) Fuel prices and price volatility X X
(b) Environmental regulations and taxes X X
(c) Retail supply rates X X
(d) Competitive suppliers' prices X
(e) Transmission constraints X
(f) Weather X X
(g) Supplier capabilities X X
(h) Supplier creditworthiness X
(i) Contract terms and conditions X X
(j) Construction costs X X
(2) A utility's strategy for managing and mitigating risks associated with the identified risk factors should be developed in the context of the goals and objectives of these guidelines and include an evaluation of relevant opportunity costs.
(3) A utility should manage and mitigate risk through adequate utility staffing and technical resources (e.g., computer modeling), diversity (fuels, technology, contract terms), and contingency planning.
(4) A utility should use an independent advisory committee of respected technical and public policy experts as a source of upfront, substantive input to mitigate risk and optimize resource procurement outcomes in a manner consistent with these guidelines.
(5) A utility should use cost-effective resource planning and acquisition techniques to manage and mitigate risks associated with the above identified risk factors, including, but not limited to:
(a) modeling and analyzing the relative risks of alternative resources, individually and integrated with all portfolio resources;
(b) acquiring resources which enhance scheduling flexibility;
(c) acquiring an optimal mix of small, short lead-time resources that better match load requirements;
(d) diversifying the resource portfolio to accommodate a broad range of future outcomes; and
(e) maintaining a transparent planning and procurement process (i.e., one which produces resource plans that can be reasonably understood by the public and the commission.)
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.