Press Release

PUC Announces Management Audits, Efficiency Investigations with Potential Savings of Up to $69.3 Million Annually, $8.9 Million in One-Time Savings for Utilities in FY 2006-07

Published on 10/11/2007

Filed under: Electric Gas Water and Wastewater Telecommunications Transportation and Safety

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today released a 2006-07 annual report on management audits (MAs) and management efficiency investigations (MEIs) that showed that the PUC has helped utilities save millions of dollars through voluntary improvements to operations, service reliability and safety by regulated utility companies.

“This Commission takes the role as watch dog for the state’s utilities very seriously and works with the utilities to implement changes that will save significant amounts of money both in the short and long term,” said Commission Chairman Wendell F. Holland. “We are dedicated to ensuring cost-effectiveness when it comes to the operation of our utilities, which goes a long way toward ensuring that ratepayers are getting their money’s worth.”

The Commission voted 4-0 to make the audit report public.

In Fiscal Year 2006-07, the PUC Bureau of Audits conducted MAs on Aqua Pennsylvania Inc.; Columbia Gas of Pennsylvania; and Superior Water Co. and the state’s three FirstEnergy companies – Metropolitan Edison Co.; Pennsylvania Electric Co.; and Pennsylvania Power Co. These audits resulted in 121 improvement opportunities with 112 of the recommendations being accepted or partially accepted by the companies in their implementation plans.

The MAs determine the extent to which a utility has contained costs, developed reasonable long and short-range plans for the company’s continued operations, provided adequate service to its customers and provided proper management and organizational structure.

The quantifiable annual benefits from implementing the recommendations in the six MAs could save the utilities up to $38.9 million. The potential benefits can mainly be attributed to the recommendations for the FirstEnergy companies and Columbia Gas. It was estimated that FirstEnergy could reduce meter reading costs up to $21 million a year by implementing advanced meter reading technology and save $5.6 million by reducing overtime, charge-offs, non-pay disconnect and reconnect expenses while saving $1.7 million by implementing a collections system. It was estimated the Columbia Gas could save $4.3 million a year by refinancing its long-term debt and $4 million by reducing its residential write-offs and improving collections.

The quantifiable one-time savings from implementing recommendations in the six MAs could save the utilities up to $6.7 million. The potential savings are primarily associated with potential inventory reductions at the FirstEnergy companies and Aqua as well as reductions by Columbia Gas of long-term past due customer accounts.

Staff also conducted a MEI for Equitable Gas Co., which reviewed the utility’s efforts in implementing previous MA recommendations. The MEI showed that six of the 21 recommendations of a previous MA were effectively implemented. The company has taken action on 12 of the remaining recommendations and had yet to take any action on three recommendations. The findings show that the company is realizing annual savings of about $9 million after implementing improved collection procedures that decreased write-offs of uncollectible accounts.

Staff developed 19 follow-up recommendations of Equitable with a potential total annual savings of up to $30.4 million and potential one-time savings of $2.2 million. The majority of these potential savings are related to reductions in unaccounted-for-gas levels; reductions in distribution expense; inventory reductions and further reductions in uncollectible account write-offs.

More specific information on each of the original audits and investigations can be found at the Commission’s Web site at www.puc.state.pa.us under press releases.

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities to ensure safe and reliable utility service at reasonable rates; protect the public interest; educate consumers to make independent and informed utility choices; further economic development; and foster new technologies and competitive markets in an environmentally sound manner. For recent news releases, or more information about the PUC, visit our Internet homepage www.puc.state.pa.us.

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Docket No. D-07MEI030

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