COVID-19 Accounting and Reporting Considerations for Power, Utilities, and Renewables
The coronavirus disease 2019 (COVID-19) pandemic is affecting major economic and financial markets, and virtually all industries are facing challenges associated with the economic conditions resulting from efforts to address it. Many entities have seen sharp declines in revenues due to regulatory and organizational mandates (such as “shelter-in-place” mandates and school closures) and voluntary changes in consumer behavior (such as social distancing).
As the spread of the pandemic increases, entities are experiencing conditions often associated with a general economic downturn, including, but not limited to, financial market volatility and erosion of market value, deteriorating credit, liquidity concerns, further increases in government intervention, increasing unemployment, broad declines in consumer discretionary spending, increasing inventory levels, reductions in production because of decreased demand and supply constraints, layoffs and furloughs, and other restructuring activities. The continuation of these circumstances could have a prolonged negative impact on an entity’s financial condition and results.
The impacts of COVID-19 on the Power, Utilities, and Renewables sector continue to evolve. COVID-19 is expected to impact both regulated and unregulated operations and the magnitude of the impacts will depend largely on the length and severity of the economic downturn experienced in impacted regions. Operational disruptions may occur in a number of areas, including generation operations, grid reliability and mutual assistance networks. Supply chain issues impacting critical parts for new construction as well as plant maintenance are also possible. Governmental policy directives in response to the outbreak will also need to be carefully considered. In certain markets, such directives may directly impact local utility providers as governments attempt to provide financial relief to citizens through measures which could include reduced utility bills. In addition, most utilities in the United States have suspended service disconnections for non-payment either voluntarily or in response to state mandate.