The adoption of technology and digitalization in the electric industry varies and doesn't always correlate with the size of the cooperative or utility. Regardless of the utility's size, implementing technology can enhance efficiency and address challenges such as record accuracy and staffing shortages.

An overly conservative approach in accounting can result in missed opportunities to optimize business management and enhance customer service.

How can this lead to missing opportunities to improve cost recovery, stabilize revenues, and smooth customer rates?

Creating a capital budget involves planning for significant long-term investments in assets or projects. Sounds easy?, but it is a combination of long-term forecasting of system needs, financing (debt and equity), and impact on rates. Here is a framework that is effective.

In the utility business, overhead costs can be greater than the direct costs of a project, i.e., labor and inventory. An effective overhead calculation process is one crucial factor in ensuring that infrastructure costs are recovered in customer rates.

Electric utility finance and accounting professionals can rejoice! FERC has solved your dilemma regarding accounting for renewable energy fixed assets and the related software specific to each operational area.

With the issue of Order 898 - FERC has upgraded its chart of accounts to include the account number for:

- Solar production

- Wind production

- Other renewable production

- Energy storage

Using FERC and RUS "standard units" in utility construction and accounting for construction cost processes is the foundation of electric rate recovery. This is Step 1 in the electric construction accounting process and this article walks you through the process.

The FERC defined allowance for funds used during construction (AFUDC) should be part of the cost of every electric project. This cost of capital, represents the investment the utility or electric cooperative is making in providing service to customers. The impact of not including all costs will be felt in future years when it is time for asset replacement. A utility could find itself in the position of not having recovered the total cost of assets in customer rates, thus not generating sufficient funds to pay for the replacement of the related assets. This article discusses the rate impact of including AFUDC.

FERC accounting is the industry required practice for utility accounting for regulated utilities (electric co-ops use the RUS Uniform System of Accounts, which is very similar). It can be difficult for new employees to get their arms around it at first. Many employees learn on the job or take industry classes to learn the ins and outs of FERC accounting. While FERC accounting is required for what are called “public utilities” (i.e. utilities subject to FERC oversight for their rates), you can use your utility’s existing accounting system and chart of accounts to record costs in a FERC Uniform System of Accounts (USOA) manner.

Using FERC and RUS accounting and best practices can provide a firm foundation for infrastructure costing and historical fixed asset reporting. Electric fixed asset records that are not accurate can have a negative impact on customer rates. This post discusses that linkage and how the issue may be resolved.