Explore how utilities can shift to a performance-based mindset and operating model.

1. Future
corporate
utilities
models
Shifting to a “performance-based”
mindset and operating model
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2. 2
Shifting to a “performance-based”
mindset and operating model
Are your back-office capabilities optimized to
adapt to a new, performance-based structure?
The transition to low-carbon energy is well
underway in the utility market. Yet, in all markets,
“prosumers” are increasingly fulfilling their own
needs, geopolitical volatility is creating regulatory
uncertainty, and global events, like COVID-19,
are rerouting the supply chains and customer
channels. These new forces encountered in
recent years will continue to drive utilities to
adapt their grid and business models as well as
for emerging disruptors to come.
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3. 3
The utility market has seen a variety of
emerging trends breakthrough, impacting
traditional regulated models;
• Large-scale low-carbon electricity generator
• Energy-as-a-service provider
• Local low-carbon energy access provider
• Increased services as energy generation and
storage moves behind the meter
• More states moving from cost-of-service
to performance-based
• Oil and gas players entering the integrated
energy space
But even these reshaped models may still fall short
in a new market structure that required significant
changes across ways of working, technology, and
regulatory impacts. Rather than being receivers
of regulatory constraints, utilities must now shift
towards being performance-based.
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4. 4
What does it mean to be
“performance-based”?
Historically, utilities have developed their corporate structures in reaction to the regulatory
environment. Investing in infrastructure implied better, more reliable gas and electric service
for the consumer, and increased revenues for the utility.
Utilities were incentivized to spend capital dollars and reduce operations and maintenance
costs in the name of customer affordability and shareholder value. There was, however, little
incentive to innovate products and services, or build and deliver more efficiently.
Now, several U.S. states are considering or have completed a shift towards performance-based
regulatory models. If a utility can prove dollars have been spent not only to improve
infrastructure but also to do so in the most cost-efficient way, additional revenue may be
allowed while also reducing the impact to customers.
4
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5. 5
Both strategic objectives and the
organization’s mindset shift from
defense towards growth.
A regulated business model creates structure but
can also cause complacency to satisfy minimum
requirements with an increased level of automation
of core processes, utilities can shift in focus to
growth and competition. In order to successfully
shift, a performance-based mindset must be
adopted with a focus on the outcomes of
invested capital.
As the COVID pandemic, the emergence of oil
and gas players in the utility space, and increasing
polarization of U.S. politics have demonstrated,
planning must consider more than regulators and
the weather. Scenario-based planning capabilities
are necessary to navigate the modern landscape.
Codeblock is a language, answering
operational questions in addition to
meeting accounting requirements.
Typically, codeblock structures have been
developed in order to defend regulatory requests
and to facilitate cost allocation breakdown.
They also may have residual complexities from
mergers and acquisitions.
However, when multiple blocks provide the same
information or when value sets are not clearly
defined and purposeful, the regulatory and
allocation story can be overly verbose. Modern
codeblocks are leaner and designed for growth,
telling stories with more brevity.
Processes are designed end-to-end
with a focus on shared outcomes.
Processes have typically been designed to serve
the function rather than the desired outcome of
the enterprise. For example, the asset accounting
function may be focused on regulatory compliance
and enforce stringent work order approval policies.
Inadvertently, a lengthy financial approval process
may delay work execution.
By focusing on the shared outcome, that is,
performing projects that improve service to
customers, Finance can work to remove obstacles
from the business process through better data
models and appropriate thresholds, rather than
adding them.
What are the characteristics of a
“performance-based” operating model?
5
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6. 6
6
Are your back-office
capabilities optimized
to adapt to a new,
performance-based
structure?
• Are your people ready to shift their
mindset to compete with the most
innovative industries?
• Does your codeblock tell the
full story of each transaction?
• Do your finance processes
maximize efficiency by focusing
on business outcomes rather
than solely financial objectives?
Copyright © 2021 Accenture. All rights reserved.

7. 7
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Contacts
Craig Richey
Senior Managing Director, Consulting, Global Utilities, CFO & Enterprise Value Lead
Nick Farwig
Managing Director, Consulting, Utilities, CFO & Enterprise Value
Jignesh Amin
Principal Director, Consulting, Utilities, CFO & Enterprise Value
Regina Tollinchi
Manager, Consulting, Utilities, CFO & Enterprise Value
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