Press Release

PUC Announces Management Audits, Efficiency Investigations with Potential Savings of Up to $15.5 Million Annually, $800,000 in One-Time Savings for Utilities in FY 2007-08

Published on 12/18/2008

Filed under: Electric Water and Wastewater

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today released a 2007-08 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.

The Commission voted 5-0 to make the audit report public.

In Fiscal Year 2007-08, the PUC Bureau of Audits conducted MAs on West Penn Power Company d/b/a Allegheny Power, as well as Citizens’ Electric Co., Wellsboro Electric Co. and Valley Energy, Inc., which are jointly owned by C&T Enterprises Inc. (C&T Companies).  An audit was also conducted on PECO Energy Co. These audits resulted in 102 improvement opportunities with 95 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 five MAs could save the utilities up to $15.3 million. The potential benefits can mainly be attributed to the recommendations for PECO and West Penn. It was estimated that PECO could save up to $2.4 million by developing a formal program to evaluate services from its affiliates versus outsourcing, and up to $1.3 million by implementing a geographic information system to reduce dispatching costs and improve its main locate process.  An additional savings of up to $2 million is estimated if the company reduces its field operations overtime and up to $800,000 by increasing its vegetation efforts.  It was estimated that West Penn could save approximately $7 million annually by limiting its total dividends paid to Allegheny Energy to 90 percent of net income; up to $1 million in net costs by sufficiently staffing lineman positions and developing a better use of outside contractors to reduce overtime; and up to $390,000 by charging its affiliates the same rate as non-affiliates for pole attachment fees.

The quantifiable one-time savings from implementing recommendations in the five MAs could save the utilities up to $600,000. The potential savings are primarily associated with potential improvements in collection agency performance on West Penn’s finaled accounts and inventory reductions at each of the C&T Companies.

Staff also conducted a MEI for National Fuel Gas Distribution Corporation, Pennsylvania Division (NFG); Newtown Artesian Water Company (Newtown); and United Water Company (United).  The MEIs showed that 11 of the 32 total recommendations from prior MAs were effectively implemented and that the companies also had taken some action on all 21 of the remaining recommendations.

The findings show that Newton is realizing annual savings of $86,000, primarily related to reductions in the size of its Board of Directors, and has achieved a one-time savings of $67,000 by implementing a reduction to its vehicle fleet.  The audit also found that United had improved its effectiveness and efficiencies by implementing four of the 12 prior recommendations and could realize annual savings of $230,000 and a one-time savings of $213,000 if the remaining recommendations are implemented.  It was also found that NFG had effectively implemented two of the seven prior recommendations and had taken some action on five of the other recommendations. 

A total of 28 follow-up recommendations were made, with the companies accepting or partially accepting all of them.   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, audio of select Commission proceedings or more information about the PUC, visit our Web site at www.puc.state.pa.us.

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Docket No. D-2008-2076802

Contact:

• Denise McCracken
  Senior Communications Specialist
  717-787-5722
  demccracken@pa.gov