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[California Energy Commission Letterhead]

In the Matter of: )      Docket No. 06-IEP-1M
Preparation of the )      NOTICE OF STAFF WORKSHOP
2007 Integrated Energy Policy Report )       
(2007 IEPR) )       
_________________________________________ )       

Notice of a Staff Workshop on the Use of Portfolio
Analysis in Electric Utility Resource Planning

View Workshop Documents

The California Energy Commission staff will conduct a workshop to investigate the potential application of Portfolio Analysis in electric utility resource planning. Two Energy Commission Committees oversee the work on this subject: the IEPR Committee, with Chairman Jackalyne Pfannenstiel as the Presiding Member and Commissioner John L. Geesman as the Associate Member; and the Electricity Committee, with Commissioner Jeffrey Byron as the Presiding Member and Commissioner John L. Geesman as the Associate Member. Commissioners may attend and participate in this workshop. The workshop will be held:

MONDAY, JUNE 4, 2007
9 a.m.
1516 Ninth Street
Hearing Room A, First Floor
Sacramento, California
(Wheelchair Accessible)

Audio from this meeting will be broadcast over the Internet.
For details, please go to: www.energy.ca.gov/webcast/
To participate in the meeting by phone, please call 800-857-6618 by 9 a.m.
Passcode: IEPR Call Leader: Lorraine White


This workshop will explore the potential for Portfolio Analysis to be incorporated into electric utility resource planning. It will provide an overview of planning activities in California and other selected areas, describe long-term resource plans, discuss Portfolio Analysis and underlying Modern Portfolio Theory, and seek the comments of interested parties with regard to applying Portfolio Analysis to long-term utility resource planning.

Following the workshop, staff will prepare a summary of comments and a technical report. This technical report will be presented at a Joint IEPR - Electricity Committee workshop on July 11, and may serve as a technical appendix for policy recommendations in the 2007 IEPR.


Although electric utility resource long-term planning utilizes risk assessment and scenario analyses, gas-fired resources continue to be added at levels that do not meaningfully reduce California's reliance on natural gas, resulting in long-term price and carbon risk. Renewable resources represent relatively risk-free alternatives to gas-fired resources and the value of this risk reduction is not being properly considered in either the procurement or long-term planning processes. The Commission is concerned that neither least cost best fit (LCBF) or to-expiration value at risk (TeVaR) analyses adequately consider the benefits of renewable resources, in that LCBF compares technologies too narrowly and TeVaR does not affect portfolio construction.

Total portfolio risk should be the primary measure of concern, so that some version of "portfolio analysis," based on Modern Portfolio Theory, may be the means by which such risk should be examined. Portfolio analysis may enable a decision maker to assess potential changes to a portfolio's risks and costs brought about by adding assets having their own individual risk and cost profiles. The resultant risks and costs of various combinations of assets can be quantified, such that the most efficient portfolios can be recognized on a curve referred to as the "efficient frontier." That is, for any given level of risk, the least expensive portfolio can be determined. Conversely, for any given level of cost, there is an associated least-risk portfolio. Portfolio analysis allows for considering risk preferences in choosing among portfolios, as well as for examining different tradeoffs among various risks and costs.

Workshop Participation and Comments

The Energy Commission staff requests participation of interested parties in this workshop and encourages interested parties to present their views either orally at the workshop or through written comments. The attached list of workshop discussion topics and questions may serve as a guide to the scope of comments sought by staff. The staff will take general comment from the public immediately following the workshop presentations.

Written comments must be submitted by 5 p.m. on June 12, 2007. Include the docket number No. 06-IEP-1M and indicate 2007 IEPR - Portfolio Analysis in the subject line or first paragraph of your comments. The Energy Commission encourages comments by electronic mail (e-mail). Please include your name or organization in the name of the file. Those submitting comments by e-mail should provide them in either Microsoft Word format or as a Portable Document File (PDF) to docket@energy.state.ca.us. Mailed materials may be sent to:

California Energy Commission
Dockets Office, MS-4
Re: Docket No. 06-IEP-1M
1516 Ninth Street
Sacramento, CA 95814-5512

Workshop participants may also provide an original and 10 copies at the beginning of the workshop. All written materials relating to this workshop will be filed with the Dockets Unit and become part of the public record in this proceeding.

Additional Information

The Energy Commission's Public Adviser provides the public assistance in participating in Energy Commission activities. If you would like information on how to participate in this workshop, please contact the Public Adviser's Office by phone at (916) 654-4489 or toll-free at (800) 822-6228, by FAX at (916) 654-4493, or by e-mail at pao@energy.state.ca.us. If you have a disability and require assistance to participate in this hearing, please contact Lou Quiroz at (916) 654-5146 at least five days in advance.

Please direct all news media inquiries to Claudia Chandler, Assistant Executive Director, at (916) 654-4989, or by email at mediaoffice@energy.state.ca.us. Questions regarding the 2007 IEPR proceeding should be directed to Lorraine White, IEPR program manager, at (916) 654-4075 or by e-mail at lwhite@energy.state.ca.us. For technical questions regarding the subject matter of this workshop, please contact Mike Ringer at (916) 654-4168, or by e-mail at mringer@energy.state.ca.us.

The service list for the 2007 Integrated Energy Policy Report is handled electronically. Notices and documents for these proceedings are posted to the Energy Commission website www.energy.ca.gov/2007_energypolicy/index.html. When new information is posted, an e-mail will be sent to those on the energy policy e-mail list server. Parties interested in receiving these notices may sign up for the list server through the website www.energy.ca.gov/listservers/index.html.

Date Posted: May 23, 2007

Note: California Energy Commission's formal name is State Energy Resources Conservation and Development Commission.

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