Creating a capital budget involves planning for significant long-term investments in assets or projects. Sounds easy?, but it is a combination of long-term forecasting of system needs, financing (debt and equity), and impact on rates. Here is a framework that is effective.

In the utility business, overhead costs can be greater than the direct costs of a project, i.e., labor and inventory. An effective overhead calculation process is one crucial factor in ensuring that infrastructure costs are recovered in customer rates.

Electric utility finance and accounting professionals can rejoice! FERC has solved your dilemma regarding accounting for renewable energy fixed assets and the related software specific to each operational area.

With the issue of Order 898 - FERC has upgraded its chart of accounts to include the account number for:

- Solar production

- Wind production

- Other renewable production

- Energy storage

Using FERC and RUS "standard units" in utility construction and accounting for construction cost processes is the foundation of electric rate recovery. This is Step 1 in the electric construction accounting process and this article walks you through the process.

The FERC defined allowance for funds used during construction (AFUDC) should be part of the cost of every electric project. This cost of capital, represents the investment the utility or electric cooperative is making in providing service to customers. The impact of not including all costs will be felt in future years when it is time for asset replacement. A utility could find itself in the position of not having recovered the total cost of assets in customer rates, thus not generating sufficient funds to pay for the replacement of the related assets. This article discusses the rate impact of including AFUDC.

Using FERC and RUS accounting and best practices can provide a firm foundation for infrastructure costing and historical fixed asset reporting. Electric fixed asset records that are not accurate can have a negative impact on customer rates. This post discusses that linkage and how the issue may be resolved.