How Utilities Should Navigate Regulatory Audits
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Regulatory audits aren’t fun, but they can be useful from a strategic standpoint. Or they can be harmful. Simply put, these audits can either help advance a utility’s goals and reputation, or they can lead to even more regulatory scrutiny going forward. As always, the key lies in the preparation.
The Importance of Over-Preparing for Regulatory Audits
Regulatory audits have become more frequent over the years thanks to rising customer bills, a growing concern over outages due to increasingly volatile weather, and complications around renewable energy, to name just a few.
With this in mind, utilities can choose the degree to which they want to take the audit process seriously. One option is to have a more reactive, nonchalant approach which more times than not results in scrambles to assemble data and time pressures. Option #2 is to prepare strategically to make the process smoother and reinforce credibility as responsible stewards of customer resources.
Preparing strategically can enhance the perception of the utility from the regulator perspective – if you’re seen as proactive, transparent and customer focused, you can build trust. This requires the preparation of a coherent and consistent narrative, inclusion of fact-based evidence to support claims and positions, appropriate governance practices, regular benchmarking and scenario planning, and the ability to demonstrate a commitment to continuous improvement.
Click on the article I linked to above for a framework around how to successfully prepare. Really, the main point I’m trying to convey here is that regulatory audits should not be treated as one-off chores. The process should be embedded into operational processes to the extent possible, enabling fast, accurate and consistent responses to regulator questions.
In the final analysis, adopting an effective and efficient, strategic approach to regulatory audits will enable your utility to be viewed in the best possible light, which helps tremendously when it comes to outage scrutiny, cost recovery, and rate case acceptance.
