Improving an investor owned utility’s financial planning and risk analysis capabilities with FRST
“It was lightning speed ahead of our prior model. With FRSTTM, we could create more reports and more dimensions in a fraction of the time. There hasn’t been a need that’s come up that we haven’t been able to solve with FRSTTM.”
—Corporate Financial Analyst
Background
A mid-sized investor-owned utility was using an inefficient, “black box” planning model to develop their financial forecasts. The time required to manage the data inputs andgenerate reports was incompatible with the company’s goal to quickly produce alternative regulatory and financing scenarios. In addition, the company wanted to dramatically improve the flexibility of the financial forecasting process and efficiency of generating new forecasts. To achieve these goals, the company selected MCR to implement the Financial and Regulatory Strategy Tool (FRSTTM) financial planning model.
Solution
Working closely with our client, we tailored key features of FRSTTM to meet their financial and regulatory planning needs. Their previous database-oriented planning model created a complex array of output reports that were difficult to compare and contrast in a quick and useful manner.
We configured the construction module to allow specific assets to be associated with regulatory jurisdictions and enabled detailed forecasting of capital spending, including the impacts of renewables on the utility.
The regulatory logic incorporated automated revenue requirements calculations for state and FERC regulated jurisdictions. FRSTTM’s unique risk analysis logic was implemented for developing risk management scenarios. We also worked with the client’s staff to develop a scenario tool that compares multiple runs of the model and is flexible to allow changes in time periods and corporate entities.
Results
Our client was up and running with FRSTTM in just 8 weeks and their planning process was dramatically improved. The scenario tool we developed cut days off the time to generate scenario comparisons and the client is able to provide quicker turnaround of new forecasts with a significantly reduced staff. The risk analysis function provides senior management and the Board with a greater clarity around the potential variability of future financial metrics.