MAKING THE MOST OF THE POWER PLANT MARKET: BEST PRACTICES FOR ALL-SOURCE ELECTRIC GENERATION PROCUREMENT

This report analyzes electric generation procurement by vertically integrated utilities in the United States, contrasting 'all-source' procurements—which are technology-neutral—with single-source processes. Using case studies from states like Colorado, Georgia, and New Mexico, the authors argue that utilities often exercise monopsony power to favor self-built, gas-fired generation over cheaper renewable alternatives. The report provides five best practices for regulators to ensure fair, competitive, and cost-effective procurement of power plants.

• All-source procurement is a unified resource acquisition process where requirements for capacity or generation are neutral regarding the range of available resources or combinations in the market.
• Vertically integrated utilities often possess monopsony power as the single buyers of wholesale power in their territories, allowing them to control information, make arbitrary decisions, and impose onerous contract terms to discourage competition.
• Utilities have financial incentives to over-procure capacity and favor self-built generation because they earn an authorized return on invested equity, which can increase stock prices.
• Xcel Colorado's all-source procurement process resulted in 'shockingly' low prices for wind and solar, with median bid prices of $18 per MWh for wind and $30 per MWh for solar in 2018.
• The report recommends five best practices for regulators: using resource planning to determine technology-neutral need, requiring competitive all-source bidding with robust evaluation, conducting advance review of assumptions and terms, ensuring utility ownership does not conflict with competitive bidding, and revisiting rules for fairness and efficiency.
• Single-source RFPs often result in less competition and can be used to favor utility self-build projects, as seen in Florida where 'winners' have consistently been the utility's own options.
• NIPSCO's 2018 all-source RFP revealed that wind and solar were significantly less expensive than new gas-fired generation, leading to a projected cost reduction of $1.1 billion compared to its 2016 IRP scenario.
• In Georgia, the use of separate single-source RFPs for capacity and renewables prevents the optimization of a resource mix, as bids are often ranked individually rather than evaluated together in a system planning model.
• The report notes a cultural bias within utilities toward fuel-based generation, which is reinforced by rate designs that pass fuel costs directly to consumers via rate riders.

APA

WILSON, J. D., O’BOYLE, M., LEHR, R., & DETSKY, M. (2020). MAKING THE MOST OF THE POWER PLANT MARKET: BEST PRACTICES FOR ALL-SOURCE ELECTRIC GENERATION PROCUREMENT. Energy Innovation. https://energyinnovation.org/wp-content/uploads/All-Source-Utility-Electricity-Generation-Procurement-Best-Practices.pdf

Chicago

WILSON, JOHN D., MIKE O’BOYLE, RON LEHR, and MARK DETSKY. MAKING THE MOST OF THE POWER PLANT MARKET: BEST PRACTICES FOR ALL-SOURCE ELECTRIC GENERATION PROCUREMENT. Energy Innovation, 2020. https://energyinnovation.org/wp-content/uploads/All-Source-Utility-Electricity-Generation-Procurement-Best-Practices.pdf.

Wikipedia

{{cite report |last1=WILSON |first1=JOHN D. |last2=O’BOYLE |first2=MIKE |last3=LEHR |first3=RON |last4=DETSKY |first4=MARK |title=MAKING THE MOST OF THE POWER PLANT MARKET: BEST PRACTICES FOR ALL-SOURCE ELECTRIC GENERATION PROCUREMENT |publisher=Energy Innovation |date=April 2020 |url=https://energyinnovation.org/wp-content/uploads/All-Source-Utility-Electricity-Generation-Procurement-Best-Practices.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{wilson2020making, author = {WILSON, JOHN D. and O’BOYLE, MIKE and LEHR, RON and DETSKY, MARK}, title = {{MAKING THE MOST OF THE POWER PLANT MARKET: BEST PRACTICES FOR ALL-SOURCE ELECTRIC GENERATION PROCUREMENT}}, institution = {Energy Innovation}, year = {2020}, month = apr, url = {https://energyinnovation.org/wp-content/uploads/All-Source-Utility-Electricity-Generation-Procurement-Best-Practices.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }