Electricity Planning--Today's Improvements Can Alter Tomorrow's Investment Decisions

EMD-80-112: Published: Sep 30, 1980. Publicly Released: Sep 30, 1980.

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Forecasts project that the national demand for electricity could require electrical generating capacity to more than double by the end of this century. Although States have the primary responsibility for regulating electric utilities and overseeing their plans for balancing supply and demand, most States are not well prepared to deal with power planning under changing conditions, and few of them have developed sufficient analytical capabilities to evaluate these projections. Some utility forecasting capabilities could be expanded to better use available methods which deal more explicitly with uncertainty and other key factors, such as price and conservation. States which have taken a closer look at utility forecasts have identified deficiencies and have developed significantly different estimates of future power need from their utilities. Most States, however, continue to rely heavily on utility forecasts and to approve utility investment decisions with minimal scrutiny of forecasting practices and assumptions. Most States lack assurance that the full range of power supply/demand options are thoroughly studied and implemented when found to be more cost effective than conventional nuclear or coal-fired plants. Utilities presently have little positive economic or regulatory incentive to promote energy conservation, solar, and other renewable energy options.

The Department of Energy (DOE) recognizes that it has the authority to assist States and utilities in improving the quality of State, regional, and utility power plans. DOE officials also recognize that serious problems exist in demand forecasting, assessment of feasible alternatives, and public involvement; but they have not taken an aggressive approach to solve these problems. Federal responsibilities relating to electric power are fragmented and involve several energy agencies. Few of the programs implemented by those agencies are specifically designed to improve electricity planning, and are not coordinated through a set of common objectives, policies, or evaluation systems. Under these conditions, there is inadequate assurance that Federal efforts are responsive to the planning needs of electric utilities, State utility regulators, and power consumers. The Federal Government should work to supplement and strengthen, not subordinate, the State's role in the review and approval of utilities' electricity plans.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Energy should: (1) establish a responsibility center in the Economic Regulatory Administration (ERA) to coordinate all DOE efforts relating to improving electric power planning; and (2) undertake projects, whenever possible with the States and utilities, to identify at State, Federal, and regional levels, the energy, regulatory, and economic policies which are currently shaping utility policies, and suggest what policy changes are needed to carry out national energy objectives. He should direct the Administrator, ERA, to: (1) develop, with input from other DOE offices and Federal agencies, a unified electricity program that addresses needed improvements in forecasting future electricity needs, assessing power supply/demand alternatives, and providing timely public participation in electricity planning; and (2) prepare a plan for regulatory interventions to be used when DOE oversight of electricity planning at State and regional levels indicates that the interests of power consumers or the objectives of national energy policy are not being adequately protected by the planning and evaluation techniques in use. The Nuclear Regulatory Commission (NRC) should, before issuing both a construction permit and an operating license for a nuclear generating facility, review and use as a guide the information developed by the ERA electricity program. The Secretary of Agriculture should require the Administrator of the Rural Electrification Administration (REA) to, before making financing decisions on electrical generating facilities, review and use as a guide the same ERA information. Both NRC and REA should periodically explain to ERA their use of the information, and ways, if any, in which the data could be made more useful to them.

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