Press Release

PUC Audit Shows PGW Could See Up To $7.5 Million in Annual, and $2 million in One-Time Savings

Published on 2/5/2009

Filed under: Gas

HARRISBURG – According to an audit report released today by the Pennsylvania Public Utility Commission (PUC), Philadelphia Gas Works (PGW) could experience yearly savings of up to $7.5 million and one-time savings of up to $2 million by implementing recommendations contained in the audit report.

The Commission voted 5-0 to make the audit report and PGW’s implementation plan public. The report indicated that PGW has taken positive steps toward improving deficiencies found during a 2001 audit including, slowly improving customer collection issues and the efficiency and effectiveness of its operations despite its financial constraints.

Vice Chairman Tyrone J. Christy and Commissioner Wayne E. Gardner issued statements.

The Stratified Management and Operations Audit was conducted by the consulting firm Shumaker and Co. Inc. on behalf of the Commission. The bulk of the audit fieldwork was completed in 2007 with limited amounts of fieldwork conducted during the first half of 2008. The report, therefore, does not reflect the impact of the recent economic downturn on PGW. The audit analyzed and evaluated management performance in 14 functional areas and resulted in 93 recommendations for improvement. 

In its implementation plan, submitted to the Commission on Jan. 22, 2009, PGW accepted 88 recommendations, partially accepted three recommendations and rejected two recommendations.

The audit recommendations accepted in full or in-part by the company include:

• Undertaking a major study to improve its gas theft prevention program;
• Re-evaluating the use of the soft-off program, whereby technicians are not dispatched to shut off the gas to the premises of customers who discontinue service but instead the gas usage is monitored;
• Changing the focus of its procurement department;
• Developing a program to collect metrics related to the savings or contributions to PGW’s profitability that could be achieved through the procurement department;
• Initiating increased efforts to reduce the level of inventory maintained in the storerooms and number of employees in the Materials Management Department;
• Assessing the root causes of absenteeism and quality of work issues in the call center in conjunction with enforcement of absence policies;
• Implementing management incentive compensation; and
• Strengthening the Board Audit Committee function.

The company has implemented five recommendations and plans to complete implementation of the majority of recommendations by December 2010. PGW rejected recommendations related to streamlining the company’s corporate governance process and working to develop a plan for addressing the high cost of universal service programs on ratepayers. PGW claimed that implementation of these recommendations are beyond its control. The Commission will conduct a follow-up on the Company’s implementation efforts during a future Management Efficiency Investigation.

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-06MGT042

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