The FERC Uniform System of Accounts
The FERC Chart of Accounts: Framework for Utility Metrics and Strategy
FERC accounting is the industry-required practice for utility accounting for regulated utilities. (Electric co-ops use the RUS Uniform System of Accounts, which is very similar.) It can be difficult for new employees to get their arms around it at first. Many employees learn on the job or take industry classes to learn the ins and outs of FERC accounting.
While FERC accounting is required for what are called "public utilities" (utilities subject to FERC oversight for their rates), you can use your utility's existing accounting system and chart of accounts to record costs in a FERC Uniform System of Accounts (USOA) manner.
Key Points on the FERC Uniform System of Accounts
- It's required for investor-owned utilities subject to FERC oversight. Using the FERC USOA is required for electric investor-owned utilities. Many large and mid-sized municipal utilities and electric joint action agencies use it as well.
- New employees should be trained as soon as possible. New finance, engineering, and operations employees should be trained in the FERC Chart of Accounts soon after they start employment. The employees should learn the why of the FERC Chart of Accounts, not just the what.
- Metrics and KPIs are a benefit of using the FERC USOA. It is built for determining operating and financial metrics and key performance indicators.
- Running your electric utility or co-op on metrics and KPIs will improve performance. Key performance indicators and metrics can be used to measure results, impact short and long-term strategies, and serve as inputs into electric rates.
The Story the FERC Chart of Accounts Tells
In any accounting system, the chart of accounts tells a business's story — its operating and capital spending, strategic priorities, workforce management, how the business is financed, where it's been, and where it's going. Think of the FERC Uniform System of Accounts as applied to a manufacturing business. In this case, electricity is being manufactured and delivered.
The FERC Chart of Accounts uses simplicity and consistency. Get a copy and see how. The simplicity shows up in these areas:
Simplicity of the FERC USOA
- The FERC USOA uses a simple 3-digit account number.
- It comes in a book — with general instructions on accounting for assets, liabilities, revenues, and expenses.
- That same book includes more detailed instructions for electric construction accounting.
- The account distribution divides utilities into major business units: generation, transmission, distribution, customer service, and finance activities.
- There are detailed explanations for accounting for more complex transactions.
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Explore the Course →Using Metrics and Key Performance Indicators
The electric business is a combination of uniqueness and uniformity. While each electric cooperative or utility is unique, the business mainly delivers a uniform set of products and services (electricity) to end-users. Electric rates are the center of the utility universe and are built around classifying transactions and fixed assets into categories to allocate the cost to serve customers.
The FERC Chart of Accounts and RUS Chart of Accounts lend themselves to developing metrics and key performance indicators (KPIs), which are used for:
- Analyzing cost structures
- Developing and implementing long-term strategies
- Comparing cost components to peer organizations
What Is the Meaningfulness of a Metric That Measures the Cost to Serve a Customer?
The utility or co-op can use this metric as:
- A comparison to its budget
- A comparison to recent internal trends
- A measure of productivity
- A comparison to peer organizations
- A baseline amount to measure future strategy implementation
Example: Cost Per Customer Analysis
For example, the utility compares its $100 cost per customer to a nearby peer utility's cost per customer of $80. That gap raises several questions that could result in action:
- What services does our utility provide that the peer utility does not (for example, more customer service representatives employed to enhance the customer experience)?
- Is our cost structure higher than the peer organization? If so, why?
The analysis leads to actionable steps. For example, the utility or co-op may decide on a long-term strategy of reducing customer service representatives and moving toward more online payments or self-service kiosks. Or it might choose to increase customer service representatives and retrain them to provide a more hands-on counselor-type experience.
In either case, the use of the FERC USOA/RUS USOA allows the future expense of the strategy to be recognized and analyzed systematically and comparably. This approach can be played out in all operational areas.
Train Your Employees
This article is only a brief discussion on the FERC USOA. To maximize the contribution of new finance, engineering, and operations employees, they should be trained in the why of the FERC Chart of Accounts and RUS Chart of Accounts — not just the what.
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- FERC Accounting 101 — The essential foundation for understanding the FERC Chart of Accounts
- RUS Accounting 101 — Built for electric co-op finance and operations teams
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