A challenge in many utilities is correctly recording equipment used on projects. The main bottleneck is the flow of information from the field construction to the finance office - if the hours of use are not recorded, there’s no way that amounts can be added to projects. There are best practices in this area that can streamline the process and provide needed information with minimal work. Here are 5 ways to reduce headaches and congestion in this area.

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.

In FERC work order accounting, overhead costs are part of the universe of costs that should also be charged to construction projects - along with the direct costs of utility construction - direct labor and materials. These costs fall under the umbrella of "overheads" and can sometimes be close to or above a project's direct labor and inventory costs.

This article is a high-level discussion of utility construction overheads, i.e. their make-up, calculation, and application.

Electric work orders are the not-so-secret sauce that drives electric rates. Using work orders for projects is the industry best practice. Still, if all costs are not recorded, the customers will not fully reimburse your electric utility or cooperative for the total costs of capital replacement. Cash flow will suffer, directly impacting customer service and system reliability.

Electric overhead costs are the icing on the cake of an electric project - while the cake contains most ingredients, a cake is not a cake without frosting. This frosting is made up of the overhead costs that make the construction process possible.