Definition of Least-Cost Planning

Least-cost planning is a process by which electric utilities evaluate the costs, benefits, and risks of different resources for meeting electric power demand (including traditional power plants and energy efficiency) in an effort to arrive at the mix of resources that will meet future demand at the lowest cost while still providing reliable electric service.

 

Twenty-seven states have a least-cost planning process (also known as an integrated resource planning process).  A twenty-year planning horizon is most common among states with a least-cost planning process.  The recommendations in a least-cost plan are not binding, but the utility would have to justify to the Commission why any departures from the plan were prudent and reasonable.

 

Why West Virginia Needs Least-Cost Planning

• There is currently no process by which the Public Service Commission reviews the long-term plans of electric utilities in order to ensure that they are indeed making long-term investment decisions that are in the best interests of the public.
• Appalachian Power's residential rates have increased more than 50% since 2006.  Mon Power and Potomac Edison residential rates have increased more than 30% since 2008.  Rising electric rates are having a serious impact on the budgets of residents, especially low-income residents or those on fixed incomes.
• Our electricity system is facing serious challenges from potential retirements of old and inefficient coal plants in next several years.  Three of Mon Power's coal plants, for example, are more than fifty years old and will likely have to be retired or retrofitted with pollution control equipment in the next few years.  Appalachian Power has already announced the retirement of units at the Kanawha River and Philip Sporn power plants.
• Our utilities are failing to invest significantly in demand-side resources like energy efficiency, even though investing in saving money through efficiency is cheaper than building new power plants.  Mon Power and Potomac Edison, for example, recently proposed an energy efficiency plan to the Public Service Commission that would save only 0.5% over 5 years, even though their parent company is required to achieve savings of 0.8% and 1% in two years in Ohio and Pennsylvania, respectively.

 

Proposed Legislation

We are proposing legislation that would:

ñ  Require the Public Service Commission to establish guidelines for least-cost planning

ñ  Require the state's major electric utilities (Appalachian Power, Mon Power and Potomac Edison) to file a least-cost plan by the end of the 2012 and every two years thereafter

ñ  Require the Commission to review the plans to ensure that they are in the public interest

ñ  The plans will not be binding but the utilities will have to justify deviations from the plans to the Commission