Planning Reform at Duke Energy and Arizona Public Service: Engaging Stakeholders to Address Emerging Power System Needs

New resources, technologies, and voices emerging from the energy transition are prompting many planners and analysts to call for improvements to utility integrated resource planning (IRP). IRP is an investment strategy that utilities submit to regulators every one to three years in most states, designed to ensure reliable and affordable electricity supply and to meet policy goals and obligations. However, many regulators and stakeholders believe that, amid rising electricity price pressures, demands for clean energy and equity, and shifting federal and state policies, new approaches such as those being tried by Arizona Public Service (APS) and Duke Energy Indiana need to be explored.

"Market forces are shaping utility resource portfolios," said Pat O'Connell, a commissioner on the New Mexico Public Regulation Commission. "But this moment of transformation is a prime opportunity to advance high-level IRP reform and conduct deeper analysis of more factors." Justin Joiner, vice president of resource management at APS, emphasized: "The changing landscape requires the IRP process to be transparent with stakeholders. That means coming to planning meetings without pre-set answers, because ideas are generated collectively, and decisions about affordability, reliability, and clean energy are best reached with diverse perspectives."

Some note that introducing best practices such as all-source solicitations, distribution system planning, and incorporating new voices could increase the workload of already overburdened utility planners and regulators. But others respond that comprehensive system planning that employs state-of-the-art modeling techniques and optimizes solutions to current reliability and affordability challenges will be easier than correcting flawed planning decisions.

Opportunities for 'reimagining'

A new report from the independent analysis firm RMI notes that utilities' "planning processes are being stretched and challenged" to address new dynamics in the power system. But utilities, regulators, and stakeholders can "shape the future power system" by "reimagining" the "rules and guidelines" of IRP to make planning more comprehensive, transparent, and aligned with policy. The report states that by 2025, "utilities serving at least 40% of total U.S. electricity sales and covering more than 90 million customers" will submit IRPs involving "more than $300 billion" in proposed system investments. This presents an opportunity to integrate new operations, resources, and technologies over the "next 10 to 30 years" to meet expected demand "at the lowest cost, while reducing risk and achieving policy goals."

The RMI report expands on and corroborates a broad call from regulators in 15 states and Puerto Rico in 2021 for planning to "evolve to accommodate new technologies, changing costs, and stakeholder needs," said Danielle Sass Byrnett, senior director of the National Association of Regulatory Utility Commissioners (NARUC) Center for Partnerships and Innovation. A joint task force report from NARUC and the National Association of State Energy Officials (NASEO) noted that state policy "should be part of the planning process," stakeholder engagement is "critical," and regulators should "establish IRP rules early in the planning process." The NARUC-NASEO document states that recommendations for improving planning vary by state regulatory system and policy, as well as by the complexity of reforms, implementation provisions, and stakeholder participation requirements.

The RMI report argues that IRP reform should move toward transparent utility data, thorough regulatory review, and broader stakeholder engagement. Reforms must also align with traditional utility priorities such as reliability, affordability, and safety, while meeting new state and federal policies and customer demands for emissions reduction and equity. Lauren Shwisberg, co-author of the report and leader of RMI's carbon-free electricity practice, said that significant changes to IRP scope, rules, and engagement could burden time- and cost-constrained regulators and utilities, which is "the biggest pushback to the report." But she added, "Bearing this burden now can significantly reduce future planning burdens," such as the challenges of complex computer modeling.

Shwisberg noted that IRP reforms, including new planning frameworks that incorporate new technologies, resources, and improved stakeholder engagement, have already produced significant rate savings and policy compliance results. RMI says that in Xcel Energy's 2016-2030 Upper Midwest resource plan, stakeholder challenges to the need for natural gas plants prompted revisions to its 2020-2034 IRP, ultimately resulting in a lower-cost option that could save ratepayers $372 million over the planning period. Between 2016 and 2022, the Georgia Public Service Commission built a robust stakeholder ecosystem, with "nearly 20 participants" involved in the recent three-year planning cycle, during which Georgia Power's proposed natural gas additions declined and renewable resources "grew by 200%."

"This is an example of the commission using leverage supported by IRP rules," said Simon Mahan, executive director of the Southern Renewable Energy Association. "The RMI report shows how good commissioners can craft new IRP rules that leave a legacy of protection for ratepayers beyond their tenure." Shwisberg said: "We are planning a power system with new demands, new options, and new goals. But nearly half of utilities are still not required or are not conducting fully transparent, consistent, and comprehensive planning, even though this would make the IRP process more useful for all participants. This report is a challenge to regulators and utilities to update planning."

Planning innovations for policymakers

The RMI report says that a few states have essentially no IRP requirements, while others impose limits only on certain utilities, such as investor-owned or publicly owned ones. In leading innovative states such as Minnesota, Washington, Colorado, and South Carolina, regulators and legislators require most or all electricity providers to submit IRPs. RMI notes that state legislators can influence key parts of planning rules, such as the use of regulatory review and stakeholder input, to approve, conditionally approve, or require rulings on plans. Progressive commissions in states like Oregon and Washington even use policy directives as guidance.

Oregon House Bill 2021 requires utilities to include clean energy plans in IRPs submitted to the commission to achieve the clean energy and emissions reduction goals set by the bill, said Kandi Young, spokesperson for the Oregon Public Utility Commission. In response, Oregon regulators approved an order providing "content guidance" for utility plans. Washington's 2019 Clean Energy Transformation Act (Senate Bill 5116) similarly prompted state regulators to issue ongoing guidance. The new rules define compliance requirements for 100% clean electricity and set a target date of 2045, while guiding implementation of affordability, reliability, equity, emissions reduction, and more transparent electricity markets.

"Planning has evolved," said Elaine Prause, senior associate at the Regulatory Assistance Project (a former Oregon commission staffer and senior planning manager at PacifiCorp). "Best practices once envisioned to avoid adverse outcomes, such as nuclear investments with severe cost overruns or delays, can now put 'all possible resources on a level playing field.'" Prause said: "You may not be able to quantify the value of planning, but without a shared vision, unwise investments are more likely to occur." She added that her experience at the Oregon commission and PacifiCorp shows that "both utilities and regulators face change and need new processes to achieve better outcomes." She believes new processes and stakeholders may make things take longer, but "more diverse perspectives enable the commission to build the best and most comprehensive record," which is different from decision paralysis, because the best decisions take time and new processes are essential.

New Mexico Commissioner O'Connell said: "Utilities own the IRP, regulators and policymakers provide information, and 'affected stakeholders' must be included." But he noted that many current reliability and affordability scenarios in utility planning are "too vague," lacking clear 'destinations,' such as 'achieving carbon neutrality by a specific date or always having enough capacity to support economic development.' He acknowledged: "The reality of the regulatory world is that all participants have limited resources, and planning reforms can add complexity. But today's technology makes new possibilities a reality, which means there may be no choice but to reimagine planning." He added that more stakeholder input "can lead to conflict, especially when utility data does not support stakeholder-assumed outcomes," but the RMI report shows "this is a moment of great change, requiring efforts to understand challenges, even if it means doubling planners and tripling computing capacity."

Collaborative planning between utilities and stakeholders

Some utilities are working closely with policymakers and regulators to rethink planning. Avista Utilities develops its IRP to comply with the Clean Energy Transformation Act and commission implementation rules, with spokesperson Mary Tyrie saying "the new rules help facilitate the plan." Similarly, Puget Sound Energy's IRP focuses on implementing state policy "in the most efficient and equitable manner," said spokesperson Andrew Padula. But many utilities still conduct integrated resource planning independently, leaving some stakeholders dissatisfied with clean energy integration and fossil fuel reductions.

"Overall, whether southeastern utilities follow IRP best practices still depends on the individual, and unfortunately many are not partners," said Mahan of the Southern Renewable Energy Association (who has participated in IRP processes in the region). He believes "better rules could require utilities to adhere to submitted plans and allow commissions to order them to redo plans lacking substantiating information." Reforms could also enable regulators to require utilities to issue competitive all-source solicitations, "which essentially replaces modeling with market tests, precisely showing the lowest-cost resources." RMI says that conclusions from IRP processes after such reforms do not guarantee approval of proposed resource investments in general rate cases, but they can help. The report adds that few states approve capital investment rate recovery based on IRPs, instead requiring utilities to prove investments are reasonable and prudent in rate cases.

Mark Oliver, vice president of integrated system planning at Duke Energy, said that IRP strategies recognized by commissions, developed with broader stakeholder engagement, and including more diverse resource portfolios "can give utilities some confidence in rate cases." The RMI report says Duke Energy Indiana, through stakeholder-driven changes in 2021, avoided overbuilding natural gas generation and emissions growth, with its 2019 preferred resource portfolio replacing gas plants with solar and storage. Oliver said: "Indiana stakeholders raised their voices and influenced planning," and such engagement allows Duke to plan "in a broader and more integrated way." He added that federal and state policies are key planning factors, but "Duke runs scenarios through its new EnCompass modeling tool, recognizing the value of customer-owned resources, storage, and transmission."

Erin Childs, director at Strategen Consulting, said: "Most widely used modeling tools cannot handle the new complexity of IRPs," but Duke's relatively new EnCompass tool "points in the right direction by modeling the broadest set of solutions." Oliver proposed a way to simplify planning complexity: "Prioritize demand-side flexibility opportunities, procure clean resources whenever possible, always protect reliability and affordability, and adopt an all-source clean resource procurement strategy to hedge against uncertainty and reduce risk, especially after 2030."

Although RMI did not emphasize it, Arizona has had "strong planning rules" since 2010, allowing utilities to consider distributed energy and air quality, said report co-author Shwisberg, noting that stakeholder engagement in the process "has become more transparent over time." APS's Joiner added: "We continuously look for every opportunity to improve the IRP process." The utility expanded transparency by providing access to its Aurora modeling tool to multiple participants on its Resource Planning Advisory Council, "allowing them to view and evaluate all planning inputs, propose changes, or run their own scenarios." Joiner (who previously worked in planning at Indiana and Illinois utilities) said reviewing multiple modeling scenarios "is a significant time and personnel investment," but "ensures the planning process does what it is supposed to do." He said: "In other states, best efforts are used to find the best solutions, but decisions often lack stakeholder engagement, failing to generate dialogue and planning development. When stakeholders are engaged early and often, and planning comes without pre-set answers, outcomes are more likely to be transparent, credible, and comprehensive."