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Shared support services costs - are you transparent - Overview - EY - Global

Shared support services costs: are you transparent?

Are your shared support services costs sufficiently transparent?

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How did efforts to reduce support costs become such a problem?

The COO of a multistate electric utility faced a huge challenge: their current plan outlined capital expenditures translating into a 4% to 5% annual rate increase for customers over the next five years.

Increasing Operations & Maintenance costs would be on top of this asset-driven rate increase resulting in a double-digit rate increase across all jurisdictions. The regulators were going to be unhappy, but the COO felt he could demonstrate the need for the investment and the validity of the O&M costs.

To avoid even greater rate increases, the company had initiated cost-reduction efforts in support services areas (IT, finance, accounting, HR and legal) through a limited centralization or sharing strategy. The COO felt the regulatory team was doing a good job educating regulators and staff on shared support services allocations and methodologies.

But the COO had just gotten off a conference call with the General Counsel and the SVP of Regulatory Affairs. Settlement discussions with regulatory staff and interveners in connection with two ongoing general rate cases suggested that a significant portion of allocated support costs in both were being challenged and might be disallowed.

What was happening?

Our series, 5: insights for executives, explores the questions:



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5: insights for executives series asks five questions to get to the core of an issue – and answers them at a glance.

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