”The zero-base budgeting approach gives us the ability to align our budget targets with our risk tolerance…it significantly increases the depth and credibility of our business plan submissions.”
—Senior Vice President, Nuclear Generating Station
A Canadian nuclear generating station was consistently a top quartile performer as measured in cost per MWh. However, looking forward, the plant faced large increases in operations, maintenance and administration (OM&A) expenses, projecting that it would drop from the first quartile to the second quartile in costs. As the nuclear generating station entered the upcoming budget cycle, senior management knew it needed more rigor in the budgeting process and turned to MCR for help.
MCR’s initial analysis showed a $66 million spending gap between the budget projection and target. To close the gap, we guided management through our zero-base budgeting process, and together we identified opportunities to reduce costs. We worked with our client to challenge the need for every line item in the budget. The risk of not funding a line item was analyzed and discussed; and nothing was budgeted without a compelling reason to back it up.
MCR and the client team identified opportunities to save over 10% in OM&A costs, putting the plant on a path to achieve its cost targets. The final comprehensive budget plan included a justification of every expenditure. The potential risks of not funding each specific budget line item was transparent to management and strategies were in place to minimize the risks incurred by not performing certain work.