Performance Blog

Building a Utilities Rate Case? It is Easy – when you use the right tools.

By Performance Analytics Staff – Performance Analytics

Building a Rate Case to file with the regulators is the single most important exercise that is undertaken by Finance departments in regulated industries, such as Utilities. Preparing for the rate hearing takes a significant effort and time. During the preparation phase of this process, the company’s strategy and goals are set for the next rate period. In order to quantify the strategy Finance professionals need the ability to model scenarios in real time to determine the financial impact.

When building a Rate Case, Utilities companies need to know the effect that capital has on funding the debt right through to the impacts on the Financial Statements all in a way that gives them the maximum flexibility to run the complex calculations and track the changes. The process of predicting capital spending and the associated impacts on the required debt has a direct impact on the Financial Statements and the calculation of required revenue. This is an iterative process that is often circular in its calculations and scenario’s, as shown on the right.

Using SAP’s EPM (Enterprise Performance Management) Suite of tools, BPC (Business Planning and Consolidation) is the one common platform that can achieve a Rate Case submission that is easy to use, in a familiar format, using an Excel front end, and offers the data security that is required from an audit perspective by using a single platform.

To make it even easier, Performance Analytics has developed a Rapid Deployment Solution (RDS) for Rate Case Budgeting built on top of SAP BPC to provide this capability out of the box. This RDS is a pre-configured solution that has the ability to use the complex formulas that are needed to determine the amount of funding and debt required to fund the spending as well as to instantaneously visualize the impact on the Financial Statements.

In the first part of the Capital Expenditure process the following are determined;

• Capital Expenditure Planning
• Depreciation Calculation
• Determining Borrowing Requirements
• Debt Issue: Short Term & Long Term

For a demo on how this is achieved please see demo below;

In the second part of the process we continue with the following calculations;

• Expense Planning
• Revenue Targets
• Revenue & Rate Calculation
• Financial Statements / Reporting

Are SAP BPC and the Performance Analytics’ RDS for Rate Case Budgeting right for your organization? Give us to 30 minutes to listen to your business objectives to determine if we can help.