Coming Soon: Cloud-Based Service Capitalization Framework
Utilities are increasingly relying on cloud-based software and data services for critical operations, from managing customer information to monitoring the electric grid. However, under current Federal Energy Regulatory Commission (FERC) accounting standards, most cloud services must be treated as operating expenses (O&M) rather than capital investments. This accounting treatment creates a misalignment, as traditional IT systems can be capitalized and added to rate base (earning a return over time), whereas functionally similar cloud solutions are expensed and earn no return. The result is a “capital bias” favoring legacy, on-premise investments over potentially more efficient cloud alternatives.
Here at the Ops Center, we’re creating a framework to help utilities identify these accounting misalignments and move forward to capitalize on cloud-based applications and data.
What We’re Working On
White Paper: Advocating Capitalization of Cloud-Based Services in Utility Accounting - An overview of the current state of utility accounting and why cloud-based services should be classified as capital investments. This white paper will include real-world case studies to show the value, innovation potential, and grid resilience benefits of treating cloud-based services as capital assets.
Research: State Policies and Regulations - A compilation of current state policy guidelines around cloud-based software.
Outreach Campaign: A step-by-step guide for outreach to state regulators and policymakers, including letter templates, evaluation criteria checklists, and messaging you can use to argue for capitalization of cloud-based services.
Are you part of an AEIC member utility?
We need your expertise as we develop a framework to help utilities capitalize on cloud-based services. Get in touch with us.