Since 2021, Copperleaf® has partnered with Black & Veatch Management Consulting, LLC to support utilities in developing their rate case submissions and achieving their strategic goals. Recently, Copperleaf and Black & Veatch hosted a webinar with clients Duke Energy and Public Service Company of New Mexico to learn how they use Copperleaf solutions to navigate the evolving regulatory landscape.
Today, we follow up with Jim Shields from Black & Veatch and Copperleaf’s Garrett Sizer to understand how utility clients are using Copperleaf’s value-based decision-making methodology and software solution, and Black & Veatch’s deep utility asset and infrastructure knowledge, to redefine asset investment planning and streamline the regulatory process.
How do Copperleaf and Black & Veatch work together?
Garrett: “Utility companies around the world leverage Copperleaf’s decision analytics solutions to transform investment planning and streamline regulatory submissions. Our solution provides a decision-making framework that allows clients to make objective, informed investment decisions, and optimization capabilities to create the highest-value investment portfolio. Tailoring that decision-making framework to ensure investments are evaluated appropriately for a specific industry and organization, is critical to client success. That’s where Black & Veatch comes in. In 2021, we announced a strategic alliance with Black & Veatch’s infrastructure-focused management consulting practice, pairing Copperleaf’s powerful technology with Black & Veatch’s extensive knowledge of utility assets and infrastructure—to provide organizations with a proven methodology to evaluate potential projects and communicate the benefits of investment plans to internal and external stakeholders.”
Jim: “Black & Veatch has partnered with utility clients around the world, giving us unique insights into the sector’s evolving objectives and challenges. Copperleaf and Black & Veatch offer complementary services to our clients. We apply our expertise in utility asset management and cost-benefit analysis to evaluate and monetize the benefits of all programs and projects and rely on powerful, enterprise-level decision analytics to align investments with strategic goals and create optimal portfolios that deliver tangible value. Utilities need the ability to enter and evaluate all projects in a consistent way, providing transparency into the decision-making methodology—and the ability to clearly demonstrate the cumulative value of their plans to regulators, stakeholders, and customers.”
How has the regulatory landscape changed for utilities?
Jim: “Regulatory commissions have always been tasked with determining whether the cumulative benefits of proposed investment plans outweigh cost. What we have seen changing over the last decade is the types of benefits being evaluated, along with the magnitude and complexity of potential projects being proposed. Traditional benefits like safety, reliability and affordability remain core considerations, but regulators are also looking to utilities to demonstrate how their plans advance decarbonization, resilience, and grid modernization, and distribute benefits equitably across the customer base.”
What are some of the specific challenges utilities face in the investment planning process?
Garrett: “Utilities are charged with designing a plan that deals with aging infrastructure, leverages emerging technology, and delivers maximum value to customers. That means filtering thousands of candidate projects into an optimized portfolio and defending how decisions are made to regulators. Performing objective analysis at that scale would be challenging anywhere, but in an industry that is undergoing massive transformation, it’s even more complex.”
Jim: “For investment planners, quantifying and demonstrating the financial and non-financial benefits of thousands of candidate projects to regulators is key. Those projects and their benefits often span multiple operational verticals within a utility. To perform accurate benefit-cost analysis at this scale, breaking down silos in the planning process is essential. Using a single platform and a consistent approach to evaluate projects and map benefits to an organization’s strategic objectives, makes the planning process more efficient, and gives regulators confidence that the plan supports the interests of all stakeholders.”
What do you mean by non-financial benefits? How can utilities account for these?
Jim: “As regulator expectations have evolved, we’ve seen a greater focus on benefit-cost analysis. In the past, it was acceptable to rely on qualitative benefits of risk reduction and improved reliability, however, regulators are increasingly looking for all plan benefits to be fully monetized. What is the real value of a decarbonization project or an ESG-focused investment? How can projects like these be compared alongside investments required to replace or refurbish aging equipment? Utilities need to capture the details of all projects and assess their contribution to strategic goals. Black & Veatch has extensive benefit-cost analysis experience in the utilities sector that helps clients do this. We work with clients to tailor frameworks to suit their operational objectives and needs.”
Garrett: “Copperleaf’s Value Framework is key to understanding the value of all types of investments. Utilities use Copperleaf to capture all of the cost factors involved in a particular project or program—and monetize all the benefits. Traditional benefits, like improved reliability or quality of service can be considered alongside other, harder to quantify elements, like economic development or environmental benefits, and increased customer satisfaction. Critical to this analysis is also the impact the project offers in terms of avoided future costs. Taking all of these elements into account, utilities can compare disparate investments on a common economic scale, effectively scoring each project and determining its contribution to the organization’s objectives.”
What are some of the ways your solutions streamline the regulatory process?
Jim: “As objectives have expanded for utilities, so has regulator scrutiny—and the process can be time-consuming and challenging. Our clients are able to provide regulators with a transparent view of their decision-making processes and a clear line of sight from key objectives through to the project level. Our clients feel not only a higher degree of confidence in their plan’s ability to deliver customer value, but also well prepared to answer regulator questions quickly and accurately.”
Garrett: “Paired with the Value Framework, Copperleaf’s optimization engine also allows our clients to respond quickly to change. During any regulatory submission process, circumstances can change. Funding levels can fluctuate, objectives can shift. Our clients can develop ‘what-if’ scenarios to get ahead of potential changes and re-optimize portfolios quickly when required. An exercise that used to take months can be reduced to days or weeks and a revised plan generated, communicated, and defended.”
How can utilities prepare for future challenges in the investment planning and regulatory process?
Jim: “The most progressive utilities are making choices today to future-proof their operations and maintenance processes to offer hyper-reliability for customers. In the US alone, energy utilities account for about a quarter of all GHG emissions and they are under enormous pressure from regulators, government, and consumers, to make renewables a larger part of their generation portfolios. At the same time, decentralization and the rise of the prosumer is turning traditional utility planning strategies and operations practices on end. In order to meet these challenges—and fully take advantage of the opportunities—utilities need to make informed decisions, spending on the right infrastructure at the right time.”
Garrett: “’Unprecedented times’ feels like a cliché since we hear the phrase so often—but utilities really are the vanguard when it comes to meeting the challenges of climate threats, technological innovation, and evolving consumer needs. There just isn’t a historical template to follow. Utilities need to assess opportunities quickly, and understand and communicate the full impact of their investment decisions clearly and confidently. It’s an incredibly complex ask, and in order to rise to that challenge, utilities need to adopt investment planning processes that provide both a robust framework for decision making, and the flexibility to plan, test, and operationalize alternate scenarios when circumstances change.”
For more details on the process and solutions, read our webinar recap on The Utility Perspective: Navigating the Evolving Regulatory Landscape.