FERC and XBRL: What's in It for Energy Firms
Times are changing, even for government regulators.
In my previous article, I described the nature of the recently adopted change in reporting requirements for entities regulated by the Federal Energy Regulatory Commission (FERC). You might remember FERC announced in June that it would begin requiring energy companies to submit annual financial and operations information in XBRL® format, or Extensible Business Reporting LanguageTM, rather than the current system of Visual FoxPro, which is no longer supported by its developer, Microsoft.®
In this article, I will focus on the impact of the move to XBRL format.
All participants in the energy market will benefit from this change:
- FERC will have access to timely, standardized, machine-readable data that will allow it to regulate energy companies more effectively
- Companies will be able to report information more quickly and efficiently using tools they already have
- Energy consumers will benefit from a more transparent, robust energy market
FERC’s move to XBRL filing promotes the integrity of the energy distribution market. The new ruling will allow the regulatory system to move much more smoothly, but it will also create new connections and possibilities—allowing energy companies to connect with the public and consumers to better understand and relate to the energy market. Customers will now be connected to fairer markets. High-quality open data should also lead to better performance.
How will FERC's XBRL mandate benefit the commission?
The goal of FERC is to support the development of a transparent, reliable, and trustworthy energy market. Among its duties is to regulate the transmission and wholesale selling of electricity in interstate commerce markets. Key to fulfilling that mission is access to standardized, machine-readable data. Strong markets rely on transparency and trust. The meaning of that data must be unambiguous, so that market participants can trust the quality of the data and analysis drawn from that information.
It becomes a problem for the market if there is a huge latency period before FERC receives financial and operational data from the reporting energy companies. When the information takes a long time to arrive, a long time to ingest, and is fraught with potential ambiguities and quality concerns, it is difficult to support an efficient and fair market. Operational issues spill out to undermine public confidence.
Our energy sector powers the economy, from the lights on the New York Stock Exchange (NYSE) to the laptops in a small coworking space in rural Iowa to the data centers that allow our computers to function. It helps us to stay connected. And now, through open data, energy providers can be connected to one another, to their regulatory bodies, to investors, and to consumers.
Having reliable energy data is central to the functioning of the market, but the complexities of the market can make it vulnerable to error and fraud. FERC’s regulatory role helps to provide the best price for energy by ensuring no one is manipulating the market or energy prices. Using machine-readable, standardized data will create a more transparent energy market and engender consumer trust.
How will it benefit energy companies?
FERC chose an open, nonproprietary data standard to make the reporting process easier for companies. In doing so, the commission is shifting from an awkward process that required reporting companies to enter data by hand to a more elegant system that allows companies to automate the transfer of their information to FERC’s system.
This change does not increase the amount or type of data that is reported to FERC. It just changes the means of data delivery to FERC: same data, now delivered in XBRL format. XBRL is a nonroprietary, globally used, data encoding standard. All publicly traded energy companies are already required to submit their quarterly and annual statements to the U.S. Securities and Exchange Commission (SEC) in XBRL format, so the new FERC rule allows them to keep data in that same familiar format.
Energy companies should expect that the software tools they use to submit disclosures to the SEC will also accommodate the FERC reporting taxonomy. There is no need to invent or learn something new—the system is built on the domain knowledge that FERC reporting companies already have. An additional benefit already familiar to SEC reporting companies: software providers should enable data validation prior to submission, so delivery will be easier, the data will be of higher quality, and companies will mitigate risks of reporting incorrect data.
A further benefit is that the shift will allow utilities to connect to their own data, as well as the data of other market participants, so that they can analyze potential inefficiencies or find models for better business practices. Utilities and power providers who are already transparent, innovative, and serving their communities can find a bigger stage. And providers who are lagging behind or providing incomplete information can be brought to light.
Advantages for consumers—and society as a whole
A robust, trustworthy energy grid is one of the driving forces behind how modern societies function and grow. It connects us, allows our machines to make our lives easier, and—yes—enables us to process important data to help drive decisions large and small.
The use of an open data standard leads to the democratization of data, making datasets available to anyone with a computer and an internet connection. With standardized data, consumers can connect to the energy market, enabling analysis and engagement. As energy sources become a focus of national conversations, having standardized data allows us to have open, informed conversations about the prices and advantages of different kinds of energy sources.
By connecting us to energy data, the FERC rule helps us to understand who we are and where we’re going. It gives us the power to compare and assess different players in the energy market.
A final word on connected data and connected reporting
As a leader in helping companies create XBRL and Inline XBRLTM filings, Workiva can support energy companies that report to FERC, helping them to convert existing data to XBRL, validate that data, and submit their reports in XBRL format.
With multiple support options available—including full-service creation of an XBRL report, on-call assistance when companies need it, or a more in-house, DIY approach—Workiva and its connected reporting and compliance platform can help energy companies transition smoothly and efficiently to the new reporting requirements, creating a report that is both human and machine-readable.
XBRL®, Extensible Business Reporting Language, and Inline XBRLTM are trademarks of XBRL International, Inc. All rights reserved. The XBRL®/TM standards are open and freely licensed by way of the XBRL International License Agreement. Microsoft is a registered trademark of Microsoft Corporation in the United States and/or other countries.