53.2 F
Laguna Hills
Thursday, Mar 28, 2024
-Advertisement-

The State Energy Crunch Has Meant an Increase in Consulting Work for Big Five

With companies facing unexpected electricity rate increases and major utilities like San Francisco-based Pacific Gas & Electric in or flirting with bankruptcy proceedings, all the Big Five accounting firms are seeing big increases in activity related to California’s electricity crisis.

“In the last year power-related business grew about 200% for us,” said Carl Marano, a Phoenix-based partner and national director of energy advisory services for New York-based Big Five accounting firm Ernst & Young. “Power work started during the onset of regulation, with a lot of our clients asking us for advice.”

Ernst & Young has a practice that advises clients on regulatory changes now taking place in California, as well as providing advice on conservation.

Chief clients in the power arena for E & Y; include Southern California’s data processing centers, educational institutions and companies with properties here.

Marano said corporate heads throughout the United States also are looking closely at California as a model to see how similar deregulation in their own regions could affect profit margins.

“California has been at the forefront of deregulation, so other companies in other parts of the country have begun asking questions about managing risk based on what they’ve seen happening here,” Marano said. “We advise them on what sort of things will affect their state or metro region and help them understand what’s going on that’s genuinely applicable to them.”

Ernst & Young also has been providing advice on negotiating contracts for natural gas purchases,the chief fuel used by large industrial users that generate their own electricity,a business that also has grown since natural gas prices fell.

Other Big Five accounting firms also have seen business pick up as a result of California’s electricity crisis.

“There’s been a much higher demand for our services over the past six months,” said Dean Samsvick, managing partner of the Costa Mesa office of New York-based KPMG. “We’re seeing much more focus by companies on energy usage right now,lately it has become a much bigger part of their cost base.”

Samsvick said KPMG’s power practice is showing double-digit growth in annual revenue.

KPMG assists clients,including companies in the consumer and industrial product arenas,in looking at what sort of contracts they have with energy providers, evaluating especially whether companies are being charged the appropriate rates.

Typically the Big Five helps clients look at whether they have better ways of structuring their energy contracts, and whether it’s more cost effective and energy efficient for a company to buy electricity or generate its own power.

A lot of the major clients that enlist help from the Big Five are manufacturing firms, which are typically the biggest power users. And some have confided that they are mulling whether to shift more of their operations away from California.

“We do have clients that have started conversations about leaving SoCal directly because of the energy crisis,” said Jannie Herchuk, a partner with the Costa Mesa office of Wilton, Conn.-based Deloitte & Touche. “This is the latest plague for businesses here, and some people feel unduly burdened by electricity costs.”

The Orange County office of Deloitte & Touche is not handling specific electricity-related matters, but Herchuk said the office’s clients are addressing power-related questions in the context of liquidity and financial health. The Los Angeles office of Arthur Andersen long has been the accounting firm of choice for California electrical utilities needing a tax and consultancy assist.

“We’re assisting entities within the California utilities sector with restructuring,” said Steve Varner, LA-based partner with Arthur Andersen, who cited client confidentiality in declining further comment.

Opinions are mixed on whether the state’s power woes will provide a boon to accounting firms for very long.

“The power sector’s impact on our growth depends on whether the rate situation will settle out and people lose focus on that part of their business,” said KPMG’s Samsvick. “If down the road energy prices level out then that could impact our practice, but right now the electricity crisis has generated a lot of interest.”

Ernst & Young’s Marano said he expects it will be quite awhile before California’s electricity sector once again becomes humdrum.

“Business in the power sector is going to continue for us,” Marano said. “Deregulation is still unfolding.” n

Want more from the best local business newspaper in the country?

Sign-up for our FREE Daily eNews update to get the latest Orange County news delivered right to your inbox!

-Advertisement-

Featured Articles

-Advertisement-
-Advertisement-
-Advertisement-
-Advertisement-

Related Articles

-Advertisement-
-Advertisement-