Building a Defensible Investment Plan Streamlines Regulatory Approval

November 29, 2022 Martha Blakely

Today’s investment planning landscape looks drastically different than just 15 years ago. Building defensible plans that account for growing stakeholder demands—from grid modernization to net-zero targets to Environmental, Social, and Governance (ESG) commitments—while still operating a fiscally sound business has become increasingly complex.   

Just as stakeholder expectations have grown, so has regulatory scrutiny. Utilities must perform more detailed cost and benefit analyses to show regulators that the most optimal investment plan has been selected, considering all stakeholder needs and requirements.  

Copperleaf® works with regulated utilities around the world to help them quantify all financial and non-financial benefits of every proposed investment—allowing even the most dissimilar investments to be compared on a common scale. Not only does this methodology create the best possible investment plan to meet future business needs, but it allows utilities to demonstrate tangible and defensible results to regulators, investors, customers, and employees. 

A US Regulatory Commission recently approved a $2 billion grid modernization plan, which was developed to meet strategic objectives established from the Transmission, Distribution and Storage System Improvement Charge (TDSIC) statute: cost-effective improvements in safety, reliability, grid modernization, and economic development. Copperleaf and Black & Veatch supported the development and defense of the plan which details how the $2 billion investment in proposed transmission, distribution, and economic development projects will deliver $6.8 billion in benefits to customers and the economy over a 6-year planning horizon.  

This TDSIC plan builds upon the grid modernization efforts from an earlier plan by focusing on grid improvements that prepare the system for the future. To ensure any new investment will provide the most benefit for customers and other stakeholders, the utility performed a more rigorous analysis using the Copperleaf Decision Analytics Solution to develop the new plan.  

Black & Veatch helped define thirteen benefit categories such as: “improved power quality” for transmission line and substation reliability; “compliance risk” for measuring impact on meeting compliance; and “increased customer satisfaction” to improve external relations with customers, legislators, regulators, community leaders, the public, and the media. Once defined, the benefits and operating constraints were entered into the Copperleaf system which then quantified all financial and non-financial benefits of every proposed investment. The resulting Value Framework ensures all proposed investments can be compared on a common scale and are aligned with the utility’s defined strategic objectives.  

With a Value Framework in place, Copperleaf’s AI-powered optimization can demonstrate that every dollar spent will deliver maximum value to the utility and its customers. Powerful what-if scenario analysis allows for different possibilities to be explored—not just one or two, but thousands of potential scenarios. For example, the utility wanted to guarantee that the plan did not exceed a one percent increase in customer rates per year. Through what-if scenario analysis and portfolio optimization, the utility could objectively consider improvements on the system that would directly benefit customers without significantly impacting rates.  

After the optimized plan was submitted to the Utility Regulatory Commission for consideration, a litigation process occurred. Ultimately, the Utility Regulatory Commission approved 100% of the proposed plan without revision.

The Commission finds [the utility] has sufficiently prioritized and optimized the incremental benefits of TDSIC 2.0 and otherwise shown a sound basis for the proposed projects and associated costs.

UTILITY REGULATORY COMMISSION 

In the end, the utility was able to create a clear, defensible plan that balances investing in the future while maintaining service and reliability today. This plan’s development exemplifies what Copperleaf is seeing across the industry and the globe: increased expectations from customers and regulators require increased analytical rigor in investment planning to meet these expectations. 

For more details, we encourage you to review the full public record here

About the Author

Martha Blakely

Martha is a Product Marketing Manager at Copperleaf. She has spent the better part of a decade in critical infrastructure and energy focusing on security and resilience. Technically trained in bioengineering, Martha has directed her efforts on translating technical information to different audiences (whether policymakers, utility executives, or regulators) and on building partnerships across functions, teams, and organizations.

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