The premise of a Public Utility Commission (PUC) rate case is simple: It’s a formal review process conducted when regulated utility companies request a rate change or when required by the PUC in order to justify a change. The main objective is to evaluate the reasons for the proposed rate change and determine if they are fair and just.
While this sounds like a straightforward and logical requirement, the process itself is an extremely complex, data-intensive ordeal. The accompanying documentation can consist of hundreds, if not thousands, of pages. Once a request is made, companies can expect their case to be held under the microscope, as commissioners comb through the details and supporting data.
How can you best prepare yourself for the questions that will inevitably come after you submit a rate case? We have four key recommendations:
1. Accept that your next PUC rate case is a matter of when, not if.
Typically, a rate case begins out of necessity — when current rates no longer cover operating costs. This occurs every 2-5 years on average and every state has its own requirements and rules governing deadlines and scheduling.
Embracing rate cases as part of “business as usual” should serve as an incentive to create a framework that streamlines the process. A good first step is examining the rate cases filed by other utility companies, and also by consulting with third parties on what best practices can be implemented. We routinely work with utilities and energy companies to help them harness the power of advanced analytics, best practices, and lessons learned to achieve their business goals.
2. Define your PMO to include the documentation and search capabilities that will make information easy to find.
Simply put, the success of any rate case rides on the thoroughness of your data and your team’s ability to access it. Make sure your project management office equips the team preparing your rate case with the documentation and search capabilities they need to find, sort, filter, and share the relevant data as needed. This will enable them to:
- Prepare and present thorough documentation
- Minimize the time needed to prepare your rate case
- Respond more quickly with answers, verification, and additional documentation once the process has begun
3. Specify your documentation requirements in your vendor RFPs.
A considerable amount of the data you need for a rate case involves quotes, estimates, invoices, and other AP/AR information from your vendors. By giving your vendors clear specifications for the documents they provide, you can align their documentation with your needs. This will enable you to create a data environment where it is easier to access, analyze and share the data you need, when you need it. Typically, documentation for a rate case includes items such as:
- Cost of labor
- Interest on debt used for financing
4. Be prepared to respond to questions.
Like the rate case itself, questions that arise from your rate case are a matter of when, not if. Most state regulatory agencies have three to five commissioners whose responsibility it is to oversee the prices that utilities charge in their state. Reviewing a rate case is one of the most important functions of their job — and it is treated as such.
The commissioners audit the request and supporting documentation, and can invite questions and comments from customers and the public. Interveners may perform audits and reviews, as well as present additional questions to get a clearer understanding.
It’s important for regulated utility companies to prepare for this by documenting the right amount of information. There’s a balance to strike when it comes to proper documentation to support a rate increase – Sendero can help you find it.
While it is a complex and time-intensive task, there are things you can do to streamline the process and prepare yourself for the inevitable questions that will come from regulatory bodies. We help regulated utility companies navigate rate cases successfully, and position themselves for further improvement on the road ahead. To find out more about how Sendero can help you with rate cases and other challenges you face, fill out the form below.