Ernst & Young LLP
Even in an age of uncertainty and volatility, opportunities abound for value creation among power and utility companies that are willing to reach beyond compliance to a decision-making process informed by risk assessment, according to a new report by Ernst & Young LLP's power and utilities advisory services practice.
The report, “Turning Risk into Results: America's Power & Utilities Snapshot,” asserts that compliance is insufficient in a post-San Bruno, post-Fukushima age of management. Utilities must move instead to a risk culture with a more sophisticated assessment and articulation of risk. Ernst & Young LLP recommends risk-informed decisions coordinated with regulatory recovery, as well as mitigation activities supported by modeling analytics.
“Utilities need to continue to excel at the basics: keeping the lights on and delivering the gas or electricity safely and efficiently,” said Matt Chambers, principal of Ernst & Young LLP's power and utilities advisory services practice and one of the authors of the report. “To achieve competitive advantage, utilities will have to strive for more. It will require a fundamental shift in corporate culture — one that moves beyond compliance and towards initiatives that are risk-informed, innovative and customer-focused to accelerate business performance.”
At the same time, American utilities are caught in a cost reduction bind. Cost challenges include aging infrastructure, environmental compliance and smart grid technology, but energy-efficient programs and a sluggish economy mean limited prospects for meaningful growth in energy usage. “Combined with curtailed or denied requested rate increases, utilities have to take an enterprise approach to cost reductions."