The NSPM principles serve as a foundation for conducting DER BCAs. Developed and informed by DER industry stakeholders, they can play a critical role in guiding regulators and others in the assessment of DER cost-effectiveness. The principles:
- are policy-neutral (in that they do not prescribe specific BCA tests), are technology-neutral, and are in line with sound economic practices;
- Provide guidance on how to select relevant categories of benefits and costs for a jurisdiction to include in its primary (and any secondary) BCA test, whether in cases where a new primary BCA is being developed, or updating an existing BCA practice;
- Can guide the selection and application of analytical methods used to quantify BCA impacts, as well as any complementary analyses (such as rate and bill impact analyses); and
- If applied broadly, can help to increase consistency in valuing DERs across a broad range of regulatory and other contexts.
1. Align with Applicable Energy Policy Goals
Jurisdictions invest in DERs to meet a variety of energy goals and objectives. Accounting for the associate benefits and costs in a jurisdiction’s primary BCA test helps to ensure that least-cost investments are used to achieve the goals and objectives.
2. Treat DERs as a Utility System Resource
DERs are energy resources that can help meet utility system needs. Using consistent BCA tests, valuation methods, and assumptions when comparing DERs to traditional resources, or to other DERs, avoids bias across resource investment decisions.
3. Account for all Relevant and Material Impacts
The relevance and materiality of impacts can vary depending on the DER type or use case. Accounting for all relevant and material impacts, even when difficult to quantify or monetize, ensures DERs are appropriately valued and avoids biased investments.
4. Ensure Symmetry in the Treatment of Benefits and Costs
DER investments produce benefits to the utility system and to customers. Treating benefits and costs symmetrically in BCA tests, such that benefits and costs are both either included or excluded, avoids biased results and uneconomic investments.
5. Conduct Forward-Looking, Long-Term, Incremental Analyses
BCAs address how benefits and costs will differ in the future because of a specific resource investment relative to what would have occurred absent the investment. This ensures that sunk costs do not influence investment decisions.
6. Avoid Double-Counting Impacts
Some BCA benefits and costs can potentially be captured in more than one impact category. Clearly documenting the way in which a BCA includes all impacts in helps to avoid double-counting and either over- or under-estimating the value of DERs.
7. Conduct BCAs Separately from Other Complementary Analyses
BCAs address whether total economic benefits exceed total economic costs of a specific resource investment. Depending on a jurisdiction’s policy goals, separate analyses that address different questions, such as a rate and bill impact analysis, may be warranted.
8. Ensure Transparency
Clear documentation of the rationale for decisions on BCA tests, complementary analyses, and associated methods, inputs, and results supports transparency. Transparency enables engagement and instills confidence in resource decision-making processes.