Insights
Are You Capitalizing All the Costs You Are Entitled to?
Reducing O&M costs is a high priority for utilities today, but some O&M spending is more appropriately capitalized. As a utility incorporates numerous interdependent pieces of equipment and components, it can become difficult to identify whether items constitute discrete units of property, major components, or something else. By updating its capitalization policies, a utility can streamline the capitalization decision process and capitalize significant O&M spending.
Achieving Significant O&M Reduction with Risk-Informed Budgeting
Utilities face cost pressure as demand grows and reliability expectations remain high, yet rate relief is increasingly challenged by political pressure and affordability concerns. The typical responses of across-the-board budget cuts, staff reductions, or deferred projects can deliver short-term relief but often misallocate resources. A more effective option is risk-informed budgeting (RIB), which systematically challenges every budget line item to ensure funding is prioritized according to need and strategic alignment. Well-implemented RIB programs can deliver 10%–15% savings in routine budgets even after attempting other cost-reduction efforts.
Process Improvement: Identifying the Most Elusive Sources of Cost
MCR employs a proven strategy to identify and remedy inefficiencies in core business processes. Our comprehensive approach identifies the causes of process breakdowns and has been successfully implemented for numerous clients. MCR’s unique blend of industry guidance, employee feedback, and intuitive heatmaps produces targeted initiatives to enhance performance and reduce operating costs.
Utility Cost Management – A Strategic Approach
Utilities no longer enjoy the economic tailwinds defining the pre-pandemic decade. Competing pressures underscore the importance of strategically prioritizing and managing operating and capital costs across the utility enterprise. To help utilities achieve real and sustainable success, MCR aligns utility cost management to a “north star” of five strategic pillars. This strategy replaces one-off tactical cost management with sustainable cultural change and commitment to cost discipline.