3 Reasons for Enterprises to Take Utility Regulatory Compliance Seriously

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It’s far more common today that enterprises seek to manage their utilities effectively and do so in a way that aligns with current social standards and governmental regulations. This facilitates good governance and social standing while also preventing any breaches of regulatory compliance, which could bring legal jeopardy to the organization.  

In this article, we’ll cover three primary areas that should be top of mind for modern-day, well-run large enterprises seeking to stay fully compliant with current government-mandated utility standards and regulations while simultaneously working to procure needed utility services at the most competitive costs.  

Before diving further into the details, let’s provide some background and context around some relevant and influential industry groups that do exert some influence on regulatory and compliance matters. 

Utility Regulatory Compliance & Industry Interests

Two well-known industry associations that represent utility provider interests are the Edison Electric Institute (EEI), which represents investor-owned utility companies, and the American Gas Association (AGA), which represents more than 200 energy companies that provide gas service to more than 180 million Americans. 

These organizations advocate and lobby for their business interests and represent one side of the utility industry coin. The other half of the coin is government agencies and authorities representing the public interest. (More details on these will follow below.) 

The utility industry is an industry that has high governmental involvement, and this will come as no surprise to anyone managing utility services for a large enterprise. 

Let’s look at a few front-and-center utility management priorities for enterprises that involve government. 

Utility Regulatory Priorities

  1. Environmental regulatory directives
  2. Tariff and rate compliance 
  3. Reporting and documentation expectations 

Most larger enterprises today will enlist the help of a third-party utility expense management provider to assist with these areas, amongst many other utility expense management concerns. And some enterprises choose to go it alone without utility expense management partner support.  

Either way, we hope this article helps your utility management team make strong and effective decisions from now on concerning your utility services. It’s not only socially responsible to abide by government standards and regulations, but it’s the law in many cases and, therefore, good business to stay out of trouble. 

Three areas of utility management need to be prioritized within large enterprises to manage utility expenses well and do so in a way that adheres to governmental standards and regulations.  

3 Top Areas of Utility Regulatory Compliance for Enterprises

1. Environmental regulations must be taken seriously for enterprises to avoid unwanted legal jeopardy

When it comes to managing utility services such as electricity, water, gas, and waste, society at large, and the government by extension, have a genuine and legitimate interest in ensuring that these often limited and precious resources are managed wisely and responsibly.  

Governmental agencies such as the Federal Energy Regulatory Commission (FERC), the Environmental Protection Agency (EPA), and The U.S. Department of Energy (DOE) are governmental agencies that work to ensure the public interest is respected in ways that protect both the environment and consumers alike concerning utility services. 

If working with a utility expense management provider, they will help your internal team navigate the relationship with government agencies to ensure regulatory compliance for your organization. If trying to manage this independently, performing proper due diligence is important to avoid legal exposure. 

Key Takeaways: 

  • Legal and Social Responsibility: Enterprises are best served by adhering to environmental regulations to avoid legal issues and maintain social credibility. 
  • Governmental Influence: Agencies like the EPA and FERC are critical in shaping and enforcing environmental standards. 
  • Resource Management: Proper resource management efforts ensure sustainable and responsible management of vital resources, and this is becoming more prioritized than in the past.

2. Tariff and rate compliance issues are important to stay abreast of to manage utility providers

Utility providers will collaborate with each other through associations like the Edison Electric Institute to help influence energy policies and regulations, which impact tariff guidelines and development.  

Tariffs for utility services most often fall under the supervision of state regional public utility commissions (PUCs) in the U.S. For example, consider a few big states like New York and California. In New York, the New York State Public Service Commission (NYSPSC) is the government entity that oversees utility services tariff and rate structures. In California, the California Public Utilities Commission (CPUC) has responsibility for regulating rates and tariffs. All other states within the U.S. have similar governmental organizations that regulate utility tariff services and rates. 

As a modern-day large enterprise, tight tariff management is essential in managing utility services costs. As noted above, for-profit utility companies accountable to their investors influence governmental authorities concerning utility services tariffs. Conversely, governmental authorities such as those stated also have significant input in developing utility services tariffs, the baseline for utility services offerings and pricing. 

Large enterprises most often have negotiated contracts with utility service providers. These contracts will usually work from the “baseline tariff” directives. For example, discounts on services may be offered from the tariff-listed pricing.  

Specific rates and other contractual provisions (e.g., volume commitments, service level guarantees, performance guarantees, et cetera) may be explicitly stated in the contract, which will override baseline tariff guidelines. 

The essential point to remember is that utility service offerings and pricing start from regional tariff guidelines. Suppose there are no overriding contractual provisions that trump these baseline directives. In that case, the tariff is the basis from which utility service offerings and their corresponding rates are managed between stakeholders, i.e., the utility provider and the enterprise purchasing their services. 

Enterprises have a strong interest in making contract management and compliance enforcement (e.g., rate transparency and audit capabilities) as easy as possible. This usually means having clear and explicit contract language for easier contract management. 

It’s worth noting that utility service providers do not have this same interest. It’s often in their interest that utility service provisions around service commitments and rates be more difficult to manage. It’s simply harder to hold them accountable this way.  

It may not be the case that they do this intentionally, as there are many moving parts and complexities between all parties influencing pricing (e.g., legal wrangling, regulatory requirements, negotiation quirks, etc.), but the point is that utility providers will benefit from pricing ambiguity and confusion; they will not go out of their way to make all service offering conditions and pricing black and white and easy to manage for enterprises. 

For example, suppose a utility provider has a contract with enterprise X that stipulates a 25% discount from tariff rates on electricity. This can become difficult to manage if the utility provider is afforded rights within the tariff and governmental guidelines to alter its tariff pricing often, as per various marketplace triggers that afford them the right to do so. 

There is nothing illegal or “wrong” per se in the technical sense; it’s just that it can become difficult and onerous – even for experienced subject-matter experts – to manage properly from the enterprise side.  

And oftentimes, by the time billing errors are caught – and they are most generally over-billings for the enterprise – there will either be restrictive tariff or contract language that limits how far back retroactive credits for errors can be issued. (This is usually in the utility provider’s favor.) 

The key takeaway is that even well-negotiated contracts can get enterprises in trouble if they are not easy to understand and enforce. A reputable utility expense management provider should be able to assist in this regard. 

If your organization is not working with outside third-party support from a company like Tellennium, please just be mindful of these considerations during contract negotiations.  

You want your contracts to be as easily digestible as possible so that you can enforce them properly and not be bamboozled by convoluted pricing shell games. (It’s worth noting that these same dynamics play out in the telecom expense management (TEM) industry.) 

Key Takeaways 

  • Navigating Complexity: Enterprises need to stay informed about tariff structures and regulatory changes to manage costs smartly and effectively. 
  • Stakeholder Dynamics: The interplay between utility providers and governmental bodies significantly affects tariff and rate policies. 
  • Contract Clarity: Clear contractual terms are crucial for ensuring manageable and enforceable agreements. 

3. Utility services documentation and reporting capabilities must be adhered to per governmental requirements

It’s imperative that companies maintain clean and accurate records of their utility usage and all data related to environmental impacts, et cetera. Significant government involvement within the utility industry exists, and there will be interactions between enterprises, their utility providers, and government agencies. 

Clean and accurate record-keeping is important to protect the company’s interests and operate with integrity between all parties. For enterprises that work in good faith with all parties, all will go well. But there will eventually be repercussions for those who try to cut corners or are disingenuous in some way. 

The key point is that this is not a laissez-faire marketplace and industry. Government involvement and regulations are to be taken seriously.  

Key Takeaways 

  • Critical Documentation: Accurate record-keeping is essential for compliance efforts, facilitating audits, and maintaining integrity. 
  • Regulatory Compliance: Comprehensive reporting practices are necessary to meet governmental standards. 
  • Operational Integrity: Thorough documentation supports good faith operations and can protect against regulatory repercussions. 

Final Thoughts on Utility Regulatory Compliance

Enterprise expense management leaders managing utility services are best served by taking governmental regulatory compliance seriously. Not doing so can have punitive consequences for enterprises not playing by the rules, and it’s simply not worth it overall.  

Utility services management will be successful for enterprises committed to doing the right thing by staying abreast of governmental regulations and requirements, being knowledgeable and skillful with tariff and contract management, and keeping clean records and accurate reporting. 

If you’d like to consider Tellennium in your utility expense management vendor comparisons, contact us to schedule a brief demo of our solution.

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