We just hired two junior auditors and I'm struggling with how to teach them the differences between PUD and investor-owned utility billing. Here in Washington we deal with both - Puget Sound Energy accounts are straightforward IOU billing, but then we have Snohomish County PUD with completely different rate structures. The cost-of-service methodologies are totally different and I'm not explaining it well. Anyone have good training approaches for this?
Training new auditors on PUD vs IOU rate structures
Janet, great question. Here in Tennessee I deal with TVA distributors all the time and the cooperative/municipal structures can be confusing. What I do is start with the ownership model - explain how IOUs answer to shareholders while PUDs answer to ratepayers directly. Once they understand that fundamental difference, the rate-setting philosophies make more sense.
I've found it helps to show real examples side by side. Take a 500kW industrial customer and show them what the same usage profile would cost under both structures. Florida has some municipal utilities like JEA alongside FPL, so I can usually find comparable rate schedules to demonstrate the differences.
The regulatory oversight angle is huge too. IOUs have to justify every rate increase to state PSCs with formal hearings and intervention rights. PUDs just need board approval from locally elected commissioners. That changes everything about how rates are structured and adjusted. I always emphasize this when training new folks on Ameren Missouri vs our local municipal utilities.
Vermont is interesting because we have both Green Mountain Power (IOU) and several municipal utilities. The rate design philosophy differences are stark. Municipal utils often have much simpler rate structures because they don't have the regulatory complexity. I teach new auditors to always check the utility ownership first - it tells you a lot about what to expect in the tariff.
Minnesota Power is IOU but we also have tons of rural electric cooperatives up here. The co-op wholesale power costs flow through so differently than IOU purchased power adjustments. I created a flowchart showing how costs flow from generation to final customer for each ownership type. Visual learners really benefit from seeing the structure mapped out.
Carl, a flowchart sounds perfect. The cost flow is exactly where my new hires get confused. When they see a PUD fuel adjustment, they don't understand why it's so different from PSE's purchased power recovery mechanism. Gary's point about regulatory oversight is spot-on too - that really drives the rate design differences.
Don't forget about the tax implications! IOUs pay federal and state income taxes that get built into rates. Public utilities don't, which is why their rates are often lower for comparable service. I always use this as a teaching moment - helps explain why a municipal utility rate might seem "too good to be true" compared to the local IOU.
Kurt, excellent point about taxes. I never thought to emphasize that but you're absolutely right. Public power rates should be lower all else being equal because of the tax advantage. That's a great way to help them understand why the numbers work out differently.
This is all great stuff. Arkansas has both Entergy (IOU) and several municipal utilities. The PILOT payments that some municipals make in lieu of taxes add another wrinkle. I've started having new auditors research the utility ownership and regulatory structure before they even look at the bills. Context is everything in this business.
Great discussion everyone. This ownership structure training is something we should probably formalize across the industry. I've seen too many junior auditors make assumptions about rate structures without understanding the underlying utility business model. Janet, if you develop a good training module on this, I'd love to feature it in our next newsletter.