Cost recovery following a natural disaster

Context

Two severe hurricanes within a month caused extensive damage to the utilities and power company's electricity transmission and distribution systems, as well as several generating plants and a natural gas distribution system. In the US, in addition to seeking recoveries from their property and casualty insurers, utility and power companies can seek recovery of the costs of such events, either as part of a traditional rate case or as a separate case which focuses on the particular costs incurred.

Deliverables

PwC performed procedures to validate the storm related costs, including rigorous audits of the filed costs prior to filing with the regulator. In some instances, we provided formal reports on the validity of the costs and wrote expert testimony on the results of our work. In performing such reviews, we helped ‘scrub the data’. We identified and eliminated certain costs that were not related to the project and produced an ‘audit trail’ of support for the requested costs. This type of review was useful by providing the company and regulators with an independent review and assurance that the costs submitted were documented and supported costs that were eligible for recovery. In addition, PwC’s forensic accountants and insurance claims consultants assisted the company in its recovery of losses through its insurance carriers. PwC provided resources, insurance claim process expertise and strategy, and analyses to support the company in its claim preparation and filing. This resulted in maximising their recovery, speeding up its recovery from insurers, all while minimising the stress that goes along with the process for the company's management.

Comment

“These cases can be quite lengthy, leaving companies to finance the costs of the required recovery between the time they are incurred and when recovery begins, which can stretch from several months to even over a year. Not only does the recovery case need to be assembled but it is then subject to a lengthy ‘audit’ by the state public utility commission and other intervening parties who are searching for costs they can potentially disallow. PwC assisted the utilities and power company in the case in which the company recovered substantially all of the storm costs requested. Our work also helped to accelerate the recovery of the billion plus dollars of costs by several months” (PwC).