Administrative and general expenses are a sub-category of expenses incurred in the normal day-to-day operations of a business. Utility expenses typically included in this category include:
For utilities, A&G expenses are important because they can be the focus of scrutiny by regulatory bodies (and intervenors) who may decide to disallow rate recovery of costs found to be unreasonable. Approved levels of A&G expenses are set in a utility’s rate case. If actual expenses end up being greater than the amount approved by the regulator, they are typically not recovered in rates and instead reduce shareholders' profits. Conversely, expenses that are less than what was appoved by the regulator can result in increased profits. The exception are expenses that are balancing account protected. In these cases, expenses that are higher or lower than approved typically do not affect profits.