How Xcel Energy could have minimized rate case risk with HPC UFA

The recent news about Xcel Energy inadvertently including $460,000 in campaign expenses in a rate increase request illustrates one of the ways that HPC Utility Financials Accelerator (UFA) helps utility companies to properly identify below-the-line costs and minimize the risk of utility commission inquiries and public relations crises.

Per FERC regulations, all shareholder-funded donations and political contributions of any kind are to be recorded to account 426:

Expenditures for certain civic, political and related activities.
(a) This account must include expenditures for the purpose of influencing public opinion with respect to the election or appointment of public officials, referenda, legislation, or ordinances (either with respect to the possible adoption of new referenda, legislation or ordinances or repeal or modification of existing referenda, legislation or ordinances) or approval, modification, or revocation of franchises; or for the purpose of influencing the decisions of public officials.

To ensure that such costs are recorded below-the-line (i.e., borne by shareholders not ratepayers), utilities must assign the correct regulatory indicator on orders used to pay vendors. The translation of the indicator also needs show the correct FERC account of 426. This is not so easily done with the legacy FERC module alone, as most users won't take the time to query a range of accounts in the standard drill-down to resemble line item views. Or, they won't use the drill-down at all because it starts at the account level.

In contrast, using HPC UFA, accounting managers can spot such mistakes earlier using UFA's interactive P&L drill-down tool. Large or unusual payments are easier to identify because UFA enables users to detect variances at the line item level (such as A&G where we suspect Xcel's campaign expenses may have been charged incorrectly). UFA then facilitates the recasting of FERC results even after a period is closed. In this way, utilities running UFA can more accurately validate their financials before any external reporting to regulatory agencies.

SAP for Utilities 2014

It's that time of year again, and HPC is looking forward to learning and sharing at the annual SAP for Utilities conference in Hollywood, Florida. While our own HANA-based regulatory accounting solution for FERC reporting is in development, we'll be interested to see how others are leveraging in-memory to deliver tangible, practical benefits. In this regard, Vikki Pope and Dave Campbell's presentation for National Grid is definitely on our short list of speaking engagements to attend. And since we do quite a bit of work optimizing the integration of Financials and Work Management, we're also keen to listen to SCE's talk about fleet management, and SAP's Rory Shafer's thoughts on EAM solutions.

If you're roaming the show and want to chat about SAP FERC for the modern utility, as well as broader Financials and Asset Lifecycle Accounting issues, let us know at (510) 542-9558.