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Finding the Utility's Core

Where should outsourcing end—and the real utility begin?

Fortnightly Magazine - September 2005

support the regulators' mandate to protect ratepayer interests. Yet, the idea of BPO serving as a contributor to the rate case remains a paradigm shift for most utilities. Historically, they have looked to rate cases for capital improvement and fuel cost recovery only, rather than for demonstration of operational savings.

Viewed through an alternate lens, rate cases provide an opportunity to align rates more closely with a utility's current market conditions and changing customer expectations. For utilities that consider BPO a part of innovation, better performance, and good stewardship of ratepayer assets, we offer the following suggestions for engaging regulators in going beyond standard service definitions. First, be prepared. Get solid data by tracking your current CIS and service costs rather than relying on historical and inaccurate data. Adjust analyses for factors such as end effects, capital costs, and depreciation. Next, engage analysts and leading outsourcers to provide data on service level benchmarks, cost models, and the service improvements customers value and are willing to pay for. And last, communicate your outsourcing strategy and business case with regulators before the rate-case horizon is imminent.