A Consumer Advocate's Perspective on Utility RFPs
The manner in which PacifiCorp (or any Commission-regulated electric utility) conducts its process for acquiring new electric supply resources will have a profound effect on customers’ rates, the environment and the strength (or existence) of a competitive independent generation market. The primary goal of a utility’s Integrated Resource Plan (IRP) should be to minimize costs to the customer and to society including environmental impacts; the primary goal should not be to breathe life into a competitive independent generation market. However, that competitive market may be a critical tool necessary to achieve the IRP’s goal of minimizing costs. Therefore, a Request for Proposals (RFP) used to implement a utility’s IRP should not intentionally or unintentionally harm the competitive independent generation market by favoring the utility’s self-build-and-rate-base option. The competitive generation market should be used at least to discipline the utility’s self-build options and should allow for the potential for the development of a less expensive non-utility resource.
Since the utility itself is designing and running the RFP and is selecting the winning resource, i.e. the winning developer, and because the corporate goals favor rate basing a self-build “regulatory asset,” then issues of fairness, transparency and ultimate responsibility must be examined. The RFP process must be fair and transparent in order to give competitors confidence that the process is fair and worth bidding into. The process must be fair and transparent in order to give regulators and customers’ confidence that the process resulted in the least cost option.
And a fair and transparent process benefits the regulated utility, because while it may not seem fair that the utility might be able to collect only the lesser amount of the self-build cost or the market cost, whichever option was actually chosen, that it the very purpose of this competitive bid is to select the least cost option. And a fair process actually protects the utility from subsequent regulatory surprises.
Jason Eisendorfer, Citizens’ Utility Board of Oregon (CUB), Comments before the Oregon PUC, May 22, 2003
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