Power and utility companies have a strong track record when it comes to preparing for emergencies. As a provider of critical infrastructure, the industry should plan for — and be prepared to respond to — many foreseeable hazards, including health emergencies. But, even the best thought-out and thoroughly tested business continuity plans should be adaptable to fully address the fast-moving and unknown variables of an outbreak like COVID-19.
Typical contingency plans enable operational effectiveness following events like natural disasters, cyber incidents and power outages, among others. Health emergencies add distinctive twists, including the potential of widespread quarantines, workforce disruptions and travel restrictions that may complicate previously tested continuity plans.
When it comes to disaster preparedness, we know you’re laser focused. However, here are some areas to think about as you address potential issues related to COVID-19.
Given how widespread COVID-19 is in the US, companies may need to build added flexibility into the already robust business-continuity capabilities they have demonstrated during past emergencies. Since these firms enable the generation and/or delivery of electricity, natural gas and water to customers, their service must remain dependable and consistent, even if a health emergency severely limits the number of employees and contractors who are able to work.
Also top of mind? Contingency planning in the case of a “double whammy” situation, such as the possibility of a natural disaster occurring in the midst of an ongoing health emergency.
While some functions can be done remotely or outsourced, the industry faces a unique challenge that many others don’t. A large portion of the workforce is critical to the continued operation of the business and the safe, reliable delivery of power, gas and water. The industry is accustomed to relying on mutual aid assistance when resources are needed. However, there’s the possibility that typical partners may not have available capacity to help.
While cybersecurity is always a top priority for industry firms, we note that there could be additional threats and vulnerabilities now. This is because workers will have significantly higher levels of remote access to core systems, and because employees and management could be more susceptible to social engineering efforts in the midst of a crisis.
While regulated utilities are mandated to have access to adequate supplies of critical parts, components, equipment and materials for emergencies, utilities might encounter shortages due to constrained production of supplies produced in countries highly affected by COVID-19.
Developers of renewable energy projects could potentially experience difficulties in getting critical components (e.g., photovoltaic cells, turbines) from suppliers in affected countries, especially those in Asia.
Additionally, we expect some utilities to experience load reductions due to dampened demand for power, gas and water from the commercial and industrial sectors. They also may find that some customers are struggling to pay their bills.
Utilities may experience continued supply-chain disruptions surrounding parts for grid-wide maintenance and repairs — as well as necessary components for renewable energy projects (e.g., solar cells and wind-turbine components). COVID-19 could also impact business continuity. Both scenarios could carry financial-reporting implications. Additionally, companies experiencing significant workforce disruptions may struggle to meet required quarterly financial reporting, annual FERC and state reporting deadlines.
Due to the COVID-19 outbreak, power and utility companies are reacting to and planning for changes to supply chains and, possibly, workforce mobility. These changes require careful consideration of potential tax implications.
In particular, power and utility companies are concerned about the impact that supply-chain disruptions could have on the new construction of wind facilities, some of which may need to be placed in service in 2020 to qualify for maximum production tax credits. IRS guidance to provide extended placed-in-service dates would be a welcome relief.
As COVID-19 continues to be a health emergency, power and utility companies may need to expand efforts to keep their workforce safe and have the necessary skills in place at all times. Thanks to the industry’s century-long tradition of resource-sharing (both in workers and in supplies), utilities will likely be able to extend those initiatives to previously unseen levels, creating an all-for-one, one-for-all collaborative response.
Michael (Casey) A. Herman
Energy, Utilities and Resources Co-Leader; US Power & Utilities Leader, PwC US
Energy, Utilities and Resources Tax Leader, PwC US
Gavin S. Hamilton
Partner, Trust Segment Team Leader - Power & Utilities, PwC US
Energy, Utilities and Resources Consulting Leader, PwC US