May is just around the corner, which means utilities that are on the fiscal year calendar are in the midst of budget season. Finance departments ask utility directors to start thinking about what resources may be needed in the coming year. One of the most challenging aspects of planning for next year is the utility is barely into the second quarter of this year.
The process of looking ahead provides an opportunity to take a step back to focus on the larger goals of the utility. Which lenses offer the best perspective and viewpoint? It will vary from utility to utility as each has its own unique approach. In general, here are a few recommendations for starting the process.
- Schedule time with all levels of staff in your department. Listen to what challenges they may have in their day-to-day demands. Ask what they see as the biggest hurdle over the next 12 months. Ask if there are pieces of equipment that are vulnerable to failure.
- Utility directors should ask themselves what success looks like three years from now. This can provide insights into what needs to be done in the interim. Is there a large new user that you want to successfully serve? What risks of failure result in the most significant consequences? Is there a track record of line breaks that you want to see decrease?
- Next, look at the utility’s capital improvement plan. Is it reflective of the challenges staff face and the utility’s goals? Review budget line items in terms of things that bring the utility closer to reaching goals and items that may not be necessary at this time.
- Ask whether the utility has the resources to accomplish its goals, or will rates need to be updated?
- Take time to review estimated or planned construction costs. Elevated construction costs appear to be continuing. If not reviewed and adjusted on an annual basis, underbudgeting the actual cost of construction could complicate planned funding/financing plans for Capital Projects.
The meaningful dialogue from these conversations will allow utility leadership to shift priorities and/or start planning to avoid future surprises. Taking time now will allow the utility to be better prepared as the budget process continues.
If you would like additional guidance during budget season, contact Ryan Graf, AE2S Nexus Senior Consultant.