Uncertainty in long-term resource planning for electric utilities

Abstract

This report applies the basic tenets of decision analysis to the resource problems faced by electric utilities. The report is aimed primarily at managers and executives in electric utilities and in state regulatory commissions, and secondarily at the analytical staffs in such organizations. Our aim is to increase awareness of the importance of uncertainty in utility planning, to demonstrate the value of different methods for treating uncertainty in planning, and to identify additional analysis and data needed to improve utility planning processes. Although various analytical approaches are discussed, the report is not a technical treatise and does not break new ground in the areas of operations research, applied mathematics, or decision sciences. The next chapter presents a hypothetical example of how explicit consideration of uncertainties can assist in deciding among alternative resources. Chapter 3 discusses the various uncertainties facing utilities. Chapter 4 discusses alternative approaches to managing uncertainties in the decision-making process (i.e., the types of actions utilities can take to deal with uncertainty). Chapter 5 discusses the methods that utilities currently use in their analysis of alternative resources (especially in their development of long-term resource plans). Chapter 6 describes how utility plans are implemented and updated. And the lastmore » chapter suggests additional work that would improve our understanding of the uncertainties that affect utility planning. 66 refs., 13 figs., 15 tabs.« less