A prudency review does not ask whether a utility spent money. It asks whether the utility can defend how it spent it. Increasingly, that defense turns on something unglamorous: the quality of the field data underneath the program. Spend backed by verified, traceable asset data tends to be recovered. Spend backed by estimates and stale records tends to be written down. The difference is rarely the size of the budget. It is whether the work can be defended line by line when a commission asks.
This is the prudency multiplier. Defensible field data does not just support a capital program. It converts inspection spend into approved capital.
What a prudency review actually tests
A prudency review is a backward-looking test of judgment. The question is not whether a program was a reasonable thing to want, but whether the decision was reasonable given what the utility knew, or should have known, at the time. Good intentions do not survive that test. Documentation does. When a utility can show that its scope was set against verified field conditions, that its costs map to documented assets, and that its outcomes are traceable, the spend reads as prudent. When the same program rests on modeled assumptions nobody checked, every line is contestable, whether or not anyone in the rate case says the words field data.
What regulators are rewarding right now
Colorado offers the clearest recent signal. In June 2025 the Commission unanimously approved Public Service Company of Colorado’s 2025 to 2027 Wildfire Mitigation Plan, roughly $1.9 billion, and named a comprehensive asset registry in high-fire-threat areas, drone inspections, and 3D mapping among the core approved activities.¹ The regulator did not just approve a number. It approved a documentation methodology, and set an expectation for what defensible wildfire spend looks like. The unanimity matters too: when staff, intervenors, and the utility all sign on to billion-dollar wildfire spend, the underlying data held up, and every other utility in the region just learned where the bar is.
Colorado is not alone. Washington’s Utilities and Transportation Commission has required circuit-level analysis as a condition of wildfire-related cost recovery, asking for inspection-grade data rather than modeled assumptions.² Oregon secured a $23 million high-fire-risk-zone commitment from PacifiCorp.³Arizona now requires wildfire mitigation plan filings on a fixed schedule.⁴The specifics differ by state. The direction does not: across the West, regulators want data they can trust, at the resolution the risk requires.
The cost of data a regulator cannot trust
The downside is not abstract. Spend that cannot be defended gets disallowed, and disallowed capital is a write-down that lands on shareholders, not ratepayers. Underneath that sits a compliance cost. Under NERC’s facility-ratings standard, discrepancies between documented ratings and actual field conditions create violation exposure, with penalties of up to $1 million per day, per violation under the Federal Power Act.⁵ A stale asset record is not only a recovery risk in the next rate case. It is a liability sitting in the system of record waiting to surface in an audit or an incident review.
The asymmetry is stark. Verified field data is a modest, programmatic cost. Unverified data is an open-ended exposure on both the recovery side and the compliance side.
Why this is a now problem
The dollars in motion make the timing urgent. Wood Mackenzie tracked roughly $36.4 billion in grid-modernization investment filed by major investor-owned utilities between 2018 and 2023, growing at a 37% compound annual rate.⁶ A large and rising share of capital is moving through exactly the proceedings where prudency is tested.
At the same time, utilities are resource-constrained. In Black & Veatch’s 2024 survey of more than 625 respondents, 54% named budget as the top barrier to modernization.⁷ Budget pressure compresses inspection scope, and compressed scope produces the thin asset data that does not survive review. The way out is to treat inspection as a programmatic, defensible spend rather than a discretionary one that gets trimmed first.
What “survives a review” actually requires
Defensible data has a specific shape. It is field-verified, captured by people who have worked the assets they inspect, not inferred from a desktop. It is traceable, so any finding maps back to a specific structure and condition. And it is owned from the field to closeout, so the chain from inspection to capital plan to filing does not break at a hand-off where accountability disappears.
That last point is where most programs fail. Data gathered by one party, modeled by another, and filed by a third accumulates gaps at every seam. A program that owns the work end to end can answer the commission’s questions because the same accountability runs the length of it.
The prudency multiplier
A prudency review is not a tax on spending. It is a test of whether the spending was defensible, and defensibility is built in the field long before it is argued in a docket. Verified data turns inspection from a cost center into the foundation of recovered capital. Unverified data turns the same program into a write-down waiting to be found. The regulators have already told us what they want. The open question is whether the data under your next filing can answer them.
Notes
1. Colorado Public Utilities Commission, Proceeding No. 24A-0296E (Public Service Company of Colorado 2025–2027 Wildfire Mitigation Plan; approved June 6, 2025 by unanimous settlement; asset registry, drone inspections, and 3D mapping among approved activities).
2. Washington Utilities and Transportation Commission, order conditioning Puget Sound Energy wildfire-tracker cost recovery on circuit-level analysis.
3. Oregon Public Utility Commission, Docket UM 2207 (PacifiCorp $23 million high-fire-risk-zone commitment).
4. Arizona HB 2201 (wildfire mitigation plan filing requirement).
5. NERC Reliability Standard FAC-008-5; penalty authority under Federal Power Act §215 (up to $1,000,000 per day, per violation).
6. Wood Mackenzie, U.S. grid modernization spending, 2018–2023 (approximately $36.4B; 37% CAGR).
7. Black & Veatch, 2024 Electric Industry Report (54% of more than 625 respondents cite budget as the top modernization barrier).
