Better Project Accounting Using Ferc Rus Standards

FERC and RUS Construction Accounting Standards and Your Electric Rates

Electric work orders are the not-so-secret sauce that drives electric rates. Using work orders for projects is the industry best practice and based on construction standards established by the Federal Energy Regulatory Commission (FERC) or the Rural Utilities Service (RUS). You can find these standards in the Plant Instructions Section of the FERC and RUS Uniform System of Accounts.

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. Here's our Top 5 reasons why using FERC and RUS Construction Standards leads to better work orders and project accounting.

Basic Project Management System Insights

Here are some insights into what goes into a great work order process:

1. Include All Cost Types in Each Work Order to Ensure Proper Cost Recovery

The four significant costs are:

• Labor
• Materials
• Outside contractors
• Overheads

2. Overhead Costs Can Account for Twice as Much as Other Construction Costs

All overheads represent the cost of doing business in the utility. These costs include:

• Labor overheads
• Materials management
• Equipment
• Administrative and general support
• Cost of capital

3. Overhead Costs Should Be Reviewed and Adjusted Annually

Adjusting more frequently than that may skew construction costs during the year.

4. The Flow of Information from the Field to the Office Is a Common Bottleneck

Map key processes, train your construction crew and finance team to understand what the other group does and minimize unnecessary information clutter.

5. Standard Units Are the Foundation of an Effective Work Order Close and Unitization Process

Where the costs are classified drives how they are included in customer rates. This is the same approach for projects that are internally funded, debt funded, or grant funded.

This Is the First Step in Updating Electric Project Management Accounting Systems

These insights are a high-level starting point for evaluating your electric project management accounting systems. Digging into the details is the next step in determining effective processes and best practices.