Developing a regulatory strategy capability for an IOU

Background

A large utility owned electric, gas, water and wastewater utilities across a multi-state area. As they focused on growth through acquisition, they lacked the ability to analyze each entity’s need for rate cases consistent with their planning horizon.

Solution

MCR configured its Financial and Regulatory Strategy Tool (FRST™) to support annual planning with a seamless integration with the client’s financial system and reporting tools. The model loads data from supporting systems, which include the operating and capital budgets from the multiple utility districts. MCR developed a regulatory control panel, which allows users to adjust key factors, including test year date range, rate effective dates, rates of return, and capitalization ratios. The model also provides flexibility for building up ratebase, allowing the user to include/exclude items and determine the time period (e.g., 13-month average, end of period, etc.). Coupled with the regulatory panel, FRST™’s logic solves for revenue requirements for both historic and future test years without complex macros or circular references. Users are able to test various scenarios and adjustments to revenue, expense, ratebase and any high-level driver. The individual utility districts are on a common platform ensuring consistency across their forecasts.

Results

MCR completed the model and the client is now analyzing potential strategies. Within a year, the model was easily expanded to incorporate a number of newly acquired utilities. Client staff was able to develop the additional components with minimal assistance from MCR. FRST™’s flexible architecture supports continued growth in their business.