Utility performance and regulatory compliance are increasingly visible in the utility industry. “Doing more with less” is a common refrain. Regulatory bodies and public service commission regularly issue orders for Management Reviews and utilities themselves internally review their operations for efficiencies.
The depth needed to evaluate performance depends on the level of maturity model at your utility. If your utility practices continuous improvement, this may be a common activity. If your utility is new to this concept, then a more rigorous review will be needed. In any case, regular performance reviews are something that should not wait for regulatory or oversight action.
The general technical approach in the utility industry is based on the Management Audit Manual prepared by the National Association of Regulatory Utility Commissioners (NARUC) whose guide covers all major utility cycles, including:
The manual is widely accepted by State Commissions in their oversight role of utility operations. The manual is also an excellent tool to use in the preparation of the work plan scope for a management audit. The manual contains step by step guidance as to procedures to be followed, interview questions, etc. that make the process systematic and provides ample evidence to support conclusions on current performance and gaps that need to be addressed.
This section of the article reads like a checklist, but is easily translated into a work plan, information sources and key deliverables.
The basic project design is:
Information sources will include:
Key deliverables for this project should include:
At this point in the project, the next key step is to determine re-engineering, remediation and mitigation for areas defined as having performance gaps. Estimates will need to be made as to resources (timing, staffing, software needs, budget) needed to carryout activities to close performance gaps.
Performance of this project will be a comprehensive review of utility operations. It will be time-intensive and utilize a fair amount of internal and/or external resources to complete (especially if using outside consultants).
This is an exercise that should not wait for a commission order or oversight body request. If your utility has an internal audit group, portions of this project should be part of each year’s audit plan. The type of analysis that is performed in a performance audit can only help operations and contribute towards achieving utility strategic goals. Some specific positive outcomes will include:
For more information on this topic, or to learn how Baker Tilly energy and utility specialists can help, contact our team.