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6 Questions to Ask Finance about Visioneering the Grid Technology of the Future

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Carolyn Scissons's picture
CEO (Previously Director, Regulated Accounting) Regulatory Learning Lab

I specialize in utility finance. My most recent role was as Director of Regulated Accounting and Finance prior to taking the opportunity to serve as CEO of the Regulaotry Learning Lab. My...

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  • Aug 24, 2020 4:00 pm GMT
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It’s that time again - budget season. Here are the 6 questions you need to ask your finance department to get support visioneering the grid technology of the future.

The future of grid networks is exciting. Technology is evolving at lightning speed and while no one really knows what the future will look like, we can all agree utilities will look different. Now for the bad news. Budget season is right around the corner. Have you spoken to your finance department about these changes? We all know that when the fall roll around, the accountants will be asking you to nail down a prediction for the utility’s financial future.

In this article, I’ll help you with practical strategies to build an adaptable business plan and financial future, one that is flexible enough for a wide range of private networked grid futures.

1. Adjust your forecasting methodology from historic to future oriented. Most finance departments will rely on past trends to build up a budget but you know that in these unprecedented times, this methodology is not going to work. Start the conversation today to get your finance partners bought in on the need for a different planning this year. It can be effective to capture the output of these discussions in a risk and opportunity register. The idea being to explicitly document and bring transparency around how the evolving technological landscape could impact the utility’s financials.

 

2. Build out three scenarios that represent distinct possibilities around the “what” and “when” of various grid investment paths. While there may be far greater range of future outcomes, keeping it to manageable number of scenarios makes it easier to digest for the board and internal stakeholders. You want to remind them of the range and magnitude of unknowns, without overwhelming them.

 

3. Appoint a “red hat” team tasked specifically with challenging the assumptions that underlie your business case and multi-year financial projections. This team should be encouraged to pick apart the forecast and find counter-points to serve as a stress test to your plans. Not only can this add credibility around the power grid sponsor’s figures, it is also an excellent way to build organizational allies that can help champion the investments that need to get made.

 

4. Overlay grid investment plans with upcoming regulatory application milestones. Getting alignment with the regulatory affairs department on how these developments might impact regulated revenue streams such as what will be recoverable will including what is expected to be recoverable will save you major headaches down the road.

 

5. Grab an organizational chart and use it to guide you in thinking through the budget implications of the periphery activities that will accompany moving to a private network. For example, will you need to invest more in training and development to up-skill the utility staff base? Are there any foundational IT functions that will need to be changed? Will you need to reserve any budget for customer communication implications with this change? This is also where you will want to evaluate your contingency budget needs. With contingencies, it is important to walk a fine line between how conservative and aggressive you go. The goal is to enable rapid real time approvals and decision making while avoiding overly padded buffers.

 

6. Determine if there will be any financial master data elements that will need to be created. These are often called the utility departments or cost centers. It is wise to engage in requirement identification upfront around how these costs will be tracked and using what specific data elements. If this is not done thoughtfully, some utilities end up with grid innovation spend co-mingled with base business activities that prevent them from answering the many questions to be expected such as how much was really spent on these initiatives compared to plan. It also enables clear ownership and budget accountability so that the team is well equipped to demonstrate that they are making prudent use of funds to meet the utility’s vision for the future.

Carolyn Scissons's picture
Thank Carolyn for the Post!
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Karen Marcus's picture
Karen Marcus on Aug 31, 2020

Thanks for the informative article, Carolyn. This process sounds like one that could benefit from ongoing information gathering. Do you recommend that readers check in on these questions quarterly or so, to avoid (or minimize) having to do a larger amount of planning once per year? 

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