California Regulators Want Climate Planning Incorporated into Rate Cases

California regulators are considering a proposal that would require the state’s utility companies to incorporate climate planning into their general rate cycles.  The idea is that this information can help plan for long-term infrastructure investments. 

Relationship between Climate Planning and Rate Cases

The proposal was put forth because regulators believe that infrastructure investments can be made more efficient and effective if utilities consider how each investment might impact the natural environment, and vice versa.  Specifically, the proposal would require utilities to report on their exposure to temperature, sea level, forest fires, increased rainfall, and other climate risks, along with proposed mitigation factors, every four years.

The burning question is, why require this of utilities now?  The reason is that changing weather patterns associated with climate change presents new risks to utility companies.  A few examples include:

• There is a growing proportion of renewable energy sources in the overall electricity production mix that are dependent on the weather.
• Higher temperatures could lead to consumption spikes – and possibly supply shortfalls – for cooling during the hottest months.
• Hotter temperatures increase the risk of forest fires.
• Coastal facilities could be hampered by rising sea levels.

There are many other examples, but you get the point.  Climate planning is becoming more difficult every year because the weather influences the location and design of new infrastructure, as well as decisions on existing infrastructure investments such as those involving hardening, moving or removing vulnerable assets. 

The proposal would require utilities to frame their strategic plans across three timeframes: the next 10-20 years, the next 20-30 years, and the next 30-50 years.  Current regulations only require a 10-year view.  It would also require the submittal of facility safety plans.

Another key element of the proposal is that utilities would be required to develop community engagement plans so that investment decisions are optimized for communities that are particularly vulnerable to the negative impact of climate change.

All told, while the proposal is unprecedented, it’s not a surprise that California is the first state to suggest these types of changes.  The bottom line is that climate planning goes hand-in-hand with emergency preparedness, so it makes sense to incorporate it into the rate case process.