Need to Change
The energy act of 2005 paved the way for utilities to invest more capital into their existing infrastructure to bring it up to the par in order to meet their customer expectations. Across the nation, utilities have been investing in upgrading their transmission and distribution infrastructure, spending more on reliability-centered programs and grid infrastructure. Due to regulatory guidelines in certain states, utilities are also increasingly looking to meet the guidelines of an efficient energy portfolio by collaborating and in some case investing in alternative energy providers.
On the operations aspect of the enterprise, utilities are becoming increasingly aware of risks associated with delivery and performing effective planning in terms of costs and resources to handle disruptions like infrastructure failures, outages and storm related disruptions. They are also increasingly spending resources on their customer outreach programs.
Increased Demands and the Need for Greater Transparency
With increased demands for more capital investment and a need for more budget dollars to meet effective asset maintenance strategies by the business units, the budget offices of today’s utilities are being forced to transform to meet these new challenges and opportunities. The simple mechanism of re-evaluating prior year budgets by an escalation rate for labor, nonlabor and shared services is proving to be less than efficient.
With a portfolio of increased budget dollars rises the need to effectively manage and control the distribution of these dollars and maintain adequate transparency of the budget office.
According to the 2007 PWC (PriceWaterhouseCoopers LLP) Budgeting and Forecasting Study:
- 56 percent of budgeting and forecasting effort is spent on low value activities, including data collection and consolidation, reviews, approvals and report preparation.
- 70 percent of respondents are dependent on spreadsheets for all or a portion of their financial planning activities.
- Management and employee dissatisfaction with the current planning process is high due to the increased level of granularity and lack of alignment with business strategy.
Best Practices and Principles
What are the principles and leading practices of establishing a world class budget office? How can the corporate budget office be efficiently brought into the transformations arena? In this article, I will examine some of these issues and address pathways to mitigate risks.
It is very clear from some of the results of the survey that there are efficiencies to be gained from budget and planning transformation activities. Transformations can be large-scale or piecemeal types as long as appropriate milestones and clearly associated measures have been identified and measured to show the value realization.
Pathway to Effective Transformation
Any significant transformation exercise at the budget office cannot be viewed holistically without the impacts of three core areas along the four key budgeting dimensions.
Figure 1: Dimensions Impacted 
