Reimagining Utility Climate Risk Planning

The document outlines a four-step process for utility climate risk planning: identification, quantitative assessment, mitigation, and risk distribution. It emphasizes the need for utilities to move beyond siloed resilience plans by incorporating both physical risks (e.g., extreme weather) and transition risks (e.g., carbon taxes, policy changes) into core planning documents like Integrated Resource Plans (IRPs). The authors advocate for the use of high-resolution, long-term climate datasets (30+ years) to accurately model extreme events and argue that clean energy portfolios reduce financial volatility for residential customers compared to fossil-heavy portfolios. Finally, it provides actionable recommendations for regulators to mandate risk assessments, create financial incentives for transitioning away from fossil assets, and explore self-insurance funds to protect low- and middle-income customers from catastrophic costs.

• The authors propose a four-step utility climate risk planning process: identifying climate risks and their business impacts, quantitatively assessing those impacts, mitigating exposure and impacts, and distributing remaining risks among stakeholders such as ratepayers and investors.
• Current utility planning is often hindered by siloed processes and data asymmetry; many utilities conduct separate analyses for different modeling exercises or rely on historical weather data that fails to represent future climate risks.
• A robust risk assessment framework requires two specific types of data: an hourly multi-year utility-specific weather dataset for operational timelines and a 30+ year utility-specific climate dataset to capture chronic realities and extreme events, such as the 10-15 year intensity cycle of the El Niño Southern Oscillation (ENSO).
• Transition risks—including carbon taxes, CCS retrofits, and evolving EPA power plant emission rules—can significantly increase the cost of fossil-heavy portfolios, making clean energy portfolios more financially competitive when these externalized costs are integrated into modeling.
• Clean energy portfolios provide greater financial stability for residential customers and disadvantaged communities because they are less susceptible to the market fluctuations and fuel cost uncertainties that typically disproportionately affect the residential rate class.
• Regulators can mitigate the 'moral hazard' of fuel cost recovery—where utilities pass 100% of volatile fuel costs to customers—by implementing fuel-cost sharing, removing fuel-cost true-ups, or using fuel-risk reduction tariffs.
• To manage catastrophic, low-probability risks like wildfires and hurricanes that commercial insurance markets may not efficiently cover, some jurisdictions are implementing self-insurance funds, such as the California Wildfire Fund (up to $21 billion) and Utah's SB224.

APA

RMI (2024). Reimagining Utility Climate Risk Planning. https://rmi.org/resources/reimagining-utility-climate-risk-planning/

Chicago

RMI. Reimagining Utility Climate Risk Planning. 2024. https://rmi.org/resources/reimagining-utility-climate-risk-planning/.

Wikipedia

{{cite report |author=RMI |title=Reimagining Utility Climate Risk Planning |date=29 October 2024 |url=https://rmi.org/resources/reimagining-utility-climate-risk-planning/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{rmi2024reimagining, author = {{RMI}}, title = {{Reimagining Utility Climate Risk Planning}}, institution = {RMI}, year = {2024}, month = oct, url = {https://rmi.org/resources/reimagining-utility-climate-risk-planning/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }