Embracing Artificial Intelligence in Power and Utilities Accounting and Ratemaking
Artificial intelligence in the accounting and finance departments will make everyday tasks easier, freeing your team for other tasks
There are various thoughts on artificial intelligence (AI) in the workplace. Fear that it will take jobs, other thoughts on accuracy, and other thoughts on the benefits it brings to organizations. Embracing AI will make it possible to maximize efficiencies in the accounting and finance departments, open up team members for other tasks, and provide the tools for deeper analysis of customer use of electricity. The depth of AI data analysis will provide additional tools to directly design rates that can modify customer behavior in their electricity use and with choices on how they use electricity.
This article provides a very high-level view of areas used in the accounting and rates functions of power and utilities organizations. The list will undoubtedly grow.
Artificial intelligence
Key areas where AI can enhance the accounting, finance, and rates function
1. Financial Forecasting: AI algorithms analyze historical financial data and can be used to forecast revenue, expenses, and cash flows.
2. Fraud Detection: AI detects fraudulent activities such as billing fraud or unauthorized transactions, helping to prevent financial losses. AI never sleeps, AI transaction analysis can be continuous and done in real-time.
3. Risk Management: AI models can analyze the impact of long-term projects and the resulting finance and rate impacts.
4. Customer Rate Design: AI can be used to determine customer load patterns by customer class. This data and insights is useful in designing electric rates tailored to each customer class.
5. Invoice Processing: AI automates invoice processing by extracting relevant information, matching invoices with purchase orders, and flagging discrepancies.
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6. Budget Optimization: AI optimizes budget allocation by analyzing past spending patterns and identifying areas for cost reduction or investment.
7. Contract Analysis: AI workflows and system add-ones are used to analysis contracts for lease provisions. This identifies potential accounting entries needed to record leases under accounting standards.
8. Predictive Analytics: AI predicts customer loads based on various factors such as economic conditions, technology, changes in distributed generation loads, regulatory changes, pricing, and operational efficiency.
9. Tax Planning for Investor-Owned Utilities: AI assists in tax planning by analyzing tax laws, optimizing deductions, and identifying tax-saving opportunities.
10. Asset Management: AI optimizes the management of fixed assets through asset tracking and linking of accounting records to GIS data.
Artificial intelligence - Are you ready?
Some enterprise resource planning (ERP) computer systems incorporate AI workflows into various modules. Our experience in working with these utilities is that the adoption of workflows greatly improves efficiency.
Some of you may have already recognized the potential of AI in your office structures and workflows. For those who are still on the fence, it's crucial to keep abreast of AI developments through industry publications. The growth and utilization of AI will only continue, and it's essential not to lag behind.
About Russ Hissom - Article Author
Russ Hissom, CPA is a principal of Utility Accounting & Rates Specialists a firm that provides power and utilities rate, expert witness, and consulting services, and online/on-demand courses on accounting, rates, FERC/RUS construction accounting, financial analysis, and business process improvement services. Russ was a partner in the power and utilities group of a national accounting and consulting firm for 20 years. He works with electric investor-owned and public power utilities, electric cooperatives, broadband providers, and gas, water, and wastewater utilities. His goal is to share industry best practices to help your business perform effectively and efficiently and meet the challenges of the changing power and utilities industry.
Find out more about Utility Accounting & Rates Specialists here, or you can reach Russ at russ.hissom@utilityeducation.com.
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided by Utility Accounting & Rates Specialists. You should seek formal advice on this topic from your accounting or legal advisor.