An In-Depth Interview with Keith Foerster
In the utility industry, financial officers are tasked with balancing priorities with financially fit decisions. Juggling the financial needs of today with the investment needs of the future requires continual audits and strategic direction - something Chief Financial Officers know all too well.
Because of that, we sat down with our own Chief Financial Officer, Keith Foerster, to learn about the latest financial trends and opportunities.
Where should CFOs focus spending over the next few years?
The role of a Chief Financial Officer has changed incrementally over the last few decades. The modern CFO must be more more strategically-focused, more value-focused and more future-focused. To do so, CFOs must spend effort on three areas: sustainability, infrastructure, and human capital.
Sustainability is more important than ever before. In the past few years, many utilities announced plans to fully transition or start transitioning to more sustainable, environmentally conscious efforts over the next three decades. The type of financing a utility will need varies. After assessing metrics like cash vs. debt ratios, IRS restrictions and and borrowing rates, each organization should address if on-bill financing is feasible, or if loans or grants are a better option. After all, there’s already a customer and regulatory expectation for progress in this space, whether that’s a fundamental shift to electric vehicles, carbon accounting, or working from home. The time has come to prioritize sustainability.
Infrastructure also cannot be overlooked in the coming years. Many organizations have already started down their path to AMI, and others have plans to start transitioning in the near future. Whether it's pipe replacement, clean energy, hidden costs of water leaks, CFOs should audit and implement a path forward. Given the newest funding options, a utility would be negligent to not use the next few years to invest or re-invest in infrastructure initiatives. An alternative to outside funding is to increase operating revenue through enhanced customer payment options.
With the role of CFO expanding to encompass more than financial reporting, financial officers should take into consideration their human capital as much as other types of capital. Creating an environment built on HR best practices can lead to lower turnover and higher productivity. With efficient and happy employees doing their part to ensure customer needs are met, CFOs have a unique position to help integrate and enhance human capital assets to drive higher productivity and support business growth.
How will the Infrastructure Act affect utilities financially?
For starters, the Infrastructure Investment and Jobs Act (IIJA) is a federal bill that grants around 71 billion for the utilities and electric vehicle charging industries. Along with upgrades to utility information and operational technology, this legislation will add prioritization on grid management to ensure financial capacity for larger infrastructure initiatives. In addition, the IIJA will provide $11 billion in grants to organizations to upgrade their electric infrastructure against disruptive weather events and cyber attacks.
"The Infrastructure Investment and Jobs Act gives utilities more tools but may not be enough to cover the entire project. Consider capital productivity and capital allocation as a suitable alternative."
Besides having more access to funding, CFOs can also expect to audit all departments more often. The internal review of infrastructure, of human capital, and other projects can help shine a light on the gaps in service efficiency. Because the bill requires a heightened need to continuously monitor spending on initiatives, CFOs should expect to dedicate more time to look back on projects as much as they plan for the future.
How is the Great Resignation affecting utility finances?
The Great Resignation, sometimes called the Great Migration, is already affecting utilities internally and externally. On a community level, more end-users are working from home which increases consumption of all utility types. Further, some individuals working from home may have increased flexibility to finish home improvement projects like installing smart home technology or energy efficient appliances which would certainly affect consumption levels. Conversely, some end-users are out-of-work which could lead to non-payment, higher enrollment in assistance programs, and move-outs. Regardless of your community's need, it's important to address each account with due diligence.
On the other hand, the Great Migration is affecting utilities internally. On an employee level, more individuals working from home can decrease overhead costs associated with in-office working. Also, many employees are retiring which can lead to a gap in knowledge, so be sure to transfer skills appropriately. Additionally, some new employees may have left the traditional 9-5 role in search of more work-life flexibility, so CFOs should expect to see requests for office set-up, internet reimbursement stipends and other hybrid work allowances.
What other predictions do you have for the next few years?
Over the next few years, CFOs can expect to see a shift in customer autonomy through digitization, and an increase in complex rate structures to adequately recognize revenue for services provided.
First, financial officers should expect to see an expansion in payment forms. As utilities start moving away from the in-person or kiosk payment options, they will shift to online payments. Many utilities have already made the payment process streamlined and efficient for customers through self-service options like a customer portal, and other utilities are implementing new initiatives that allow customers to save secure payment methods, pay via bitcoin or PayPal, and even enroll in auto-pay. In the upcoming years, an increase in customer independence will assist all departments in meeting financial goals.
With increased regulatory pressures, utility financial officers will also be tasked with introducing and managing new and more complex rate structures. However, traditional Customer Information Systems lack the ability to support these intricate rates. Whether it's a time-of-use, tier, or real-time rate structure, CFOs should be a part of any and all technology upgrade conversations to assure no money is left on the table.
More About Keith Foerster
Keith has 25 years of experience working for software, IT, and BPO companies. He joined VertexOne in 2009 and is responsible for our financial reporting, accounting, tax, commercial insurance, and treasury services.
Before VertexOne, Keith worked for Diebold, Inc. There, he developed and implemented revenue recognition practices for their election services division. He also oversaw the financial operations of their innovative vote-by-mail and electronic poll book companies. Before Diebold, Keith worked for Affiliated Computer Services, Inc. and served in several financial and accounting roles. He also took on the management of the company’s high-volume print and mail fulfillment operations, serving utility, insurance, financial, and governmental clients.
Tomorrow's Utility, Today
A digital change is here and it will improve the daily operations, output, and customer support of utilities and make the lives of utility staff easier. VertexOne is your utility’s prime solution for this upcoming digital transformation. Learn more by watching our webinar, “UtilityWide Talk: Debt Relief and Revenue Security.”