Unlocking the Secrets of Utility Filings (pt 1)

Imagine a vast, dimly lit library of dusty old books. There is no librarian, and the indexing is so faded that it’s not useful. A daunting starting point for a hopeful researcher, but the books contain essential secrets that can predict the future and bring the reader great wealth. This is the world of electric utility filings and dockets — specifically Integrated Resource Plans (IRPs) and rate cases.

These lengthy, complex documents require specific knowledge to understand but contain potentially lucrative benefits if you know how to read them.

Both IRPs and rate cases are primarily required of investor-owned utilities (IOUs), for-profit companies with a government-granted monopoly to provide power to a specific region. They are also typical for transmission and distribution (T&D) utilities, which manage the electricity infrastructure but not the power generation, in competitive markets.

Because of their monopoly status, the government regulates the prices IOUs can charge customers, sets the rate of return they may earn, and monitors and limits their spending. IRPs and rate cases form the core of that oversight.

Think of IRPs as a utility's predictions and long-term (~10-20 year) product roadmap. Utilities submit these plans to regulators every 2-4 years to show that they can reliably keep the lights on, hit their renewable energy targets, and keep costs low. Currently, 35 states require IOUs to publish IRPs, which contain vital information like:

• How the utility expects electricity demand to grow or shrink
• What new power plants or new transmission lines the utility aims to procure or build
• When the utility plans to retire aging generation assets
• Where utilities need help, presenting partnership opportunities
• How the utility performed against goals set in previous IRPs

Rate cases, however, are shorter-term and more binding. They are the product of a high-stakes budget negotiation between the utility, the Public Utility Commission (PUC), and the public. Every 1-4 years, these stakeholders hash out the “revenue requirement,” which is how much the utility can spend and on what. Once the future spending plan is set, the rate case (or a related rate design case) determines how the utility will recover those approved costs from its customers via utility rates. 

After negotiations, the utility will release a precise spending plan with updated specific rate structures intended to fairly distribute costs among its customers. Rate cases offer insights into a utility’s financial health, the quality of its regulatory relationship (which can reveal the risk of long-term contracts or potential future revenue opportunities) and establish the likely timing of new budget cycles, procurements, or grid modernization efforts. 

Clean energy developers, climate-tech companies and energy market investors spend significant resources monitoring and analyzing these two types of proceedings because:

• They announce what the utility plans to build or buy, allowing these companies to find their next utility customer. A long-duration battery energy storage developer might look at page 123 of Salt River Project’s 2023 IRP and find:

“SRP is also exploring other uses for excess power generation, including storing in long-duration energy storage and generating hydrogen through electrolysis.”

In most cases, utilities follow the IRP with Requests for Proposals (RFPs) so developers and technology can bid to win business. This signals that SRP is likely to issue a long-duration storage RFP in the near future! Developers can also simply look for utilities with growing peak load – the load forecast itself is an indicator of demand. 

• Companies can be “intervenors” and help shape the market. Companies need to create markets for their products, and rate case negotiations can take a year or more. Negotiations are an opportunity for product companies to advocate that buying their technology – say, virtual power plants or grid-scale batteries – is a responsible use of utility resources.
• Predicting rates and tariffs can help save money or optimize behind-the-meter offerings. Tariffs are hugely consequential because they determine electricity costs. With every rate case, tariffs are adjusted and new tariff categories may be launched. Tariffs are so dense and byzantine that clean energy companies and large electricity users rely on consultants to help them interpret these tariffs so they can better forecast future electricity prices and minimize spending. By understanding utilities’ generation plans and pricing strategies, these companies can decide whether to negotiate power purchase agreements (PPAs) through the utility or invest in on-site generation and energy storage.
• They help investors learn critical information that affects asset prices. Large utilities may represent major stock holdings for a hedge fund, and smaller utilities can be potential take-private targets for a private equity firm – rate cases directly impact their value. Similarly, for energy traders, utility plans for new transmission lines and plant retirements are essential determinants of future power prices.

Halcyon’s mission is to make this information more accessible — or build a librarian to help shed some light in our dimly lit abode. We’ve aggregated ~1 million+ authoritative energy documents and regulatory filings, and we’re encoding our industry knowledge into our platform to help surface connections between fragmented, opaque data. We’re also building out notification capabilities to help clean energy developers and investors get a handle on information velocity so they can better monitor relevant developments.

We’ll be back with part 2 next week that will show off some of the work we’ve done to help make IRPs and rate cases more actionable - if that sounds interesting to you, drop us a line! 

Comments or questions? We’d love to hear from you - sayhi@halcyon.eco, or find us on LinkedIn and Twitter