Public Utilities

Public Utilities

Management Challenges for the 21st Century

David E. McNabb

An introduction to the current issues and challenges facing managers and administrators in the investor and publicly owned utility industry, this engaging volume addresses management concerns in three sectors of the utility industry: electric power, natural gas, and water and wastewater systems. Beginning with a brief overview of the historical development of the industry, the author looks at policy issues and discusses management ethics. He then examines a number of the major challenges in these organizational functions: management and leadership, planning, marketing, accounting and finance, information technology, governance, and human resources. In the final section of the volume he looks at issues specific to each of the three industry sectors.

Chapter 10: Utility Finance and Accounting Challenges

David E. McNabb

Subjects: economics and finance, industrial organisation


10. Utility finance and accounting challenges The drive for deregulation and restructuring of the public utility industry has brought substantial modifications to its regulatory structure. This, in turn, has resulted in a host of new challenges being added to the traditional problems of financial managers. Public utility finance officers must now focus on more than the old questions of return on investment and recovery of investments in the industry; they are becoming more involved in justifying the investment and operating decisions that must be made to meet the needs of a newly designed, unbundled, industry that is characterized by financial turmoil. Public utilities have always been heavily dependent upon outside investment. There are few if any industries that are so consistently in need of large infusions of capital. The costs for the following infrastructure improvements must be paid for in the next several decades: ● ● ● ● ● ● ● Designing and constructing huge coal-fired or nuclear generating systems; Constructing dams and reservoirs; Exploring and drilling for natural gas; Constructing an entire new infrastructure to receive, store, and distribute liquefied natural gas (LNG); Laying new natural gas pipelines; Upgrading the North American electricity transmission grid; And more. Payment for these new facilities will be spread over very long periods of time – in some cases, as long as 50 years or more. Repaying the huge loans that will be needed for these utility infrastructure improvements will require public utility commissions to allow utilities to subtract the debt service from operating revenues. Otherwise, reasonable...

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