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.