Press Release

PUC 2009-10 Fiscal Report Announces Management Audits, Efficiency Investigations with Potential Savings of Up to $23.2 Million Annually, $10.3 Million in One –Time Savings

Published on 11/4/2010

Filed under: Electric Gas Water and Wastewater Telecommunications

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today released a 2009-10 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 annual report public.

In Fiscal Year 2009-10, the PUC Bureau of Audits released MAs of Pike County Light & Power Co., PPL Electric Utilities Corp. (PPL) and The Peoples Natural Gas Co. (Peoples). A consultant conducted audit of Equitable Gas Company was also released. These audits resulted in 123 improvement opportunities with 119 of the recommendations being accepted or partially accepted by the companies in their implementation plans.

The quantifiable recurring annual benefits from implementing the recommendations in the four MAs could save the utilities up to $23.1 million.  The potential benefits can mainly be attributed to the recommendations for Peoples, Equitable and PPL.  It was estimated that Peoples could save up to $13.2 million by identifying the major sources of unaccounted for gas (UFG) and implementing programs to reduce the amount of UFG in its system and up to $628,000 by reducing its long-term arrearages and initiating actions to increase collections success.  

The consultant also estimated that Equitable could save up to $3.5 million by placing greater emphasis on controlling UFG levels in its system, $1 million by developing alternate arrangements to replace or reduce upstream transportation gas supply early in 2012; and up to $1 million by performing periodic studies to determine the cost-competiveness of its centralized functions and appropriately addressing the results.  It was also estimated that PPL could save up to $1.8 million by optimizing its inventory levels and increasing its inventory turnover.

The quantifiable one-time savings from implementing recommendations in the four MAs could save the utilities up to $10 million.  Up to $9.8 million of the potential one-time savings are associated with PPL reducing its inventory levels.

Staff also released MEIs of Aqua Pennsylvania Inc. (Aqua), Superior Water Co. (Superior), and the C&T Enterprise Inc.’s regulated utilities – Citizens’ Electric Co., Wellsboro Electric Co. and Valley Energy Inc.  The MEIs showed that 29 of the 50 total recommendations from prior MAs were effectively implemented and that the companies also had taken some action on all of the 21 remaining recommendations. The findings show that Aqua is realizing annual savings of $800,000 and the C&T Companies are realizing annual savings of $2,800 and achieved one-time savings of $800,000 by implementing the previous management audits’ recommendations.  Aqua’s annual savings are primarily attributable to reductions in lost and unaccounted for water and changes to cost allocation procedures.  The C&T Companies’ one-time savings resulted from the elimination of problematic vehicle leases from the corporate support organization and establishing company specific vehicle acquisition programs. 

A total of 27 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 website 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 website at www.puc.state.pa.us.

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Docket No. D-2010-2202941

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