Background

During Mosaic development, ODOT heard from many stakeholders that the term “least cost planning” was confusing, since the goal is to help find cost-effective options in line with goals and policies rather than always the least immediate cost option.  While the Legislature’s definition of least cost planning still forms the foundation of Mosaic, it was renamed to help eliminate confusion over the tool's purpose and intent.

A least cost planning (LCP) analysis identifies some mix of capacity expansion (supply-side) and demand reduction (demand-side) options to meet future needs, and results in a cost-minimizing combination of the two sets of options. Least cost planning also involves evaluation of a wide variety of options (including demand management) and consideration of the financial, environmental, and social costs of options to meet identified community needs.

Read more info on the history of the project by clicking the titles below.

Roots in the Electric Utility Industry

The concept of LCP originated as part of the energy debate of the 1970s and was motivated by volatility in oil prices and federal legislation promoting energy conservation. LCP was initially developed to consider a broader set of choices for meeting energy requirements, while reducing total societal cost.

The term "least cost planning" was originally coined in a 1979 paper by the Mellon Institute that proposed estimating the energy savings associated with end use efficiency strategies and comparing the costs of those strategies with conventional, supply side options. As a result, LCP was used widely by the utility industry to consider both demand and supply strategies to meet service requirements. This included offering peak period pricing and free or discounted energy efficient light bulbs to customers. Since that time, the utility industry has renamed LCP "integrated resource planning."

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Applying Least Cost Planning to Transportation

In the 1990s, some transportation planners—faced with rising highway construction costs and mounting environmental concerns—turned to the utility industry for guidance on how to improve decision-making processes. Of particular interest were the methods used by utilities and energy planning agencies to compare demand-side options on an equal footing with capacity expansion, while considering a broad range of effects.

However, it was found that LCP, as used by the utility industry, could not be directly applied to transportation because the choices and tradeoffs in transportation are highly complex. In the electric utility industry, for example, all decisions come down to one common unit—kilowatt hours—and the supply of electricity can be easily moved around the network. In transportation, however, individuals make trips each day from varied origins and destinations. Unlike a kilowatt, a trip varies widely in its key characteristics, including value, duration, mode, and direction. Unlike electric power, savings in transportation demand gained in one place or time cannot be transferred to another.

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Key Principles and Attributes of Least Cost Planning

While the concept of LCP in the utility industry cannot be directly applied to transportation, several key principles and attributes are relevant to transportation planning in Oregon. These key principles and attributes, identified as a result of extensive review of the literature during development of Mosaic, are described below.

Key Principles

  • The evaluation framework rolls up multiple goals. 
  • Oregon-specific transportation policy goals and objectives are addressed. 
  • A broad range of possible multimodal capacity, demand management, land use, maintenance, and other planning options can be considered. 
  • Members of the community and decision makers are engaged in the planning and decision-making process. 
  • The approach facilitates the adoption of a meaningful, relevant, and operationally useful basis for choice. 
  • The methodology can be applied at the system (multi-project) level.

Key Attributes

  • Costs and benefits are measured in terms that facilitate the comparison of monetized and non-monetized impacts. 
  • The approach makes use of quantitative and qualitative evidence. 
  • Impacts on users (for example, commuters using a new transit system along a previously-congested corridor) and nonusers (for example, members of the general public who do not travel within the corridor, but may benefit from improvements in air quality in the vicinity of that corridor) are estimated. 
  • The approach accounts for indirect effects such as changes in local employment and land use. 
  • Interactions (“synergies”) among planning options are considered. 
  • The approach explicitly accounts for risks and uncertainty in forecast, cost, and benefit calculations.

More information on the history of LCP and its application to transportation is available in the 2010 discussion paper, "The History and Application of Least Cost Planning to Transportation."