Most people—including many legislators, regulators, and other decision makers in the electric utility industry—have misconceptions about how electric utilities really "work" and plan for the future. This lack of understanding can lead to poorly informed decisions and policies that directly affect the choices utilities must make.

Using easy-to-understand text and examples, Electric Utility Resource Planning: Economics, Reliability, and Decision-Making clarifies how utilities operate their systems and prepare for the future. This explanation will show readers that both expected and counterintuitive results can occur (i.e., conservation might result in higher air emissions, or lowering costs could lead to higher electric rates).

Taking readers step by step through this process, the book (in the following order):

•"Creates" a hypothetical utility
•Explains how and why a utility operates its system of generating units
•Discusses the planning methods that a utility would (or should) use
•Guides readers through each stage of a planning analysis for the hypothetical utility, examining various resource options (conservation, new power plants, and solar)
In addition, the author introduces four Fundamental Principles of Resource Planning that should guide utilities. He also offers opinions on how certain trends in utility regulation and legislation can hinder utility planners’ efforts to identify and select the best resources for the utility’s customers.

With this book, author Dr. Steven Sim applies his experience and insights from more than two decades of resource planning for Florida Power and Light (FPL). As one of the largest utilities in the United States, FPL has faced a multitude of resource planning challenges, and Dr. Sim has performed and supervised thousands of analyses designed to meet these obstacles. He has also served as an FPL witness in regulatory hearings on a wide variety of topics, ranging from the economic implications of nuclear, conservation, coal, gas, and other resource options, to the non-economic impacts (air emissions, fuel usage, system reliability, etc.) they present.

Introduction

Why Write This Book?

Who Is This Book Written For?

An Overview of the Book

Are We Keeping It Simple?

A Few Words Regarding Assumptions Used in the Book

A Couple of Disclaimers


How Does an Electric Utility Actually "Work"?

Two "Types" of Electric Utilities

Whose Perspective Will Be Taken?

What Aspects of an Electric Utility Will We Focus On?

Types of Generating Units a Utility May Have

How Does a Utility Decide Which Generating Units to Use?

Let’s Create a Hypothetical Utility System

Now Let’s Operate Our Hypothetical Utility System

So What Have We Learned and Where Do We Go Next?


Overview of Utility Resource Planning

One More Assumption Regarding Our Hypothetical Utility System

Three Questions Utility Resource Planning Must Always Answer

Reliability Analysis: When Does a Utility Need to Add New Resources and What Is the Magnitude of Those Needed Resources?

Resource Option Evaluation and Selection: What Is the Best Resource Option to Select for a Given Utility?


Reliability Analyses for Our Utility System

When Does Our Utility System Need New Resources?

What Is the Magnitude of the New Resources Needed by Our Utility System?

What Have We Learned and What Is Next?


Resource Option Analyses for Our Utility System: Supply Options

Types of Supply Options Under Consideration

Preliminary Economic Screening Evaluation of the Supply Options

Creating the Competing "Supply Only" Resource Plans

Final (or System) Economic Evaluation of Supply Options


Resource Option Analyses for Our Utility System: DSM Options

Types of DSM Resource Options Under Consideration

Preliminary Economic Screening Evaluation of DSM Options: Understanding the Cost-Effectiveness Screening Tests

Preliminary Economic Screening Analyses of DSM Options: Results

Creating the Competing "With DSM" Resource Plans

Final (or System) Economic Analysis of DSM Options


Final Resource Option Analyses for Our Utility System

Economic Comparison of the Resource Plans

Non-Economic Analyses of the Resource Plans

Summary of Results from the Resource Option Analyses for Our Utility System


Are We Done Yet? Other Factors That Can (and Will) Complicate Resource Planning Analyses

Constraints on Solutions: Six Examples

Examples of "Absolute" Constraints

Examples of Legislative/Regulatory-Imposed Constraints

Examples of Utility-Imposed Constraints

What Are the Impacts of Addressing These Constraints?


Final Thoughts (Including Some Opinions)

A Summary of the Key Points We Have Learned About Utility Systems in General

A Summary of the Key Lessons We Have Learned Regarding Utility Resource Planning

A Few Opinions on Various Topics

What Lies Ahead for Electric Utilities and Utility Resource Planning?


Appendix A: Fundamental Principles of Electric Utility Resource Planning

Appendix B: Glossary of Terms

Appendix C: Mini-Lesson #1— Concepts of Revenue Requirements, Present Valuing of Costs and Discount Rates, Cumulative Present Value of Revenue Requirements, and Levelized Costs

Appendix D: Mini-Lesson #2— Further Discussion of the Limitations of a Screening Curve Analytic Approach

Appendix E: Mini-Lesson #3— Further Discussion of the RIM and TRC Preliminary Cost-Effectiveness Screening Tests for DSM

Appendix F: Mini-Lesson #4— How Can a Resource Option Result in Lower Costs, but Increase Electric Rates?

Appendix G: Mini-Lesson #5— How Can a Resource Option That Produces Emissions Lower a Utility’s Total System Emissions? ("The Taxi Cab Example")