Press Release

PUC Management Efficiency Investigation Shows FirstEnergy Companies Could Realize an Additional $3.2 Million in Annual Savings

Published on 7/14/2011

Filed under: Electric

HARRISBURG – According to an audit report released today by the Pennsylvania Public Utility Commission (PUC), the three Pennsylvania FirstEnergy companies, Metropolitan-Edison Company (Met-Ed), Pennsylvania Electric Company (Penelec) and Pennsylvania Power Company (Penn Power) (collectively referred to as the FE-PA Companies) could realize combined annual savings of up to $3.2 million by implementing the recommendations contained in the report.  These savings are in addition to the annual savings of approximately $1.2 million and one-time savings of $7.4 million that the FE-PA Companies have already realized by implementing recommendations from a Stratified Management and Operations Audit report released by the Commission in March 2007.

The Commission voted 5-0 to approve the motion by Commissioner James H. Cawley requiring the companies to file periodic reports on further improvements to allow the Commission to better track progress on the remaining recommendations.  The PUC Bureau of Audits’ Management Efficiency Investigation (MEI) examined the FE-PA Companies’ progress in implementing 26 of the 50 original recommendations from the prior management audit report and its emergency preparedness efforts.  

According to the MEI, the FE-PA Companies have effectively implemented 8 of the 26 prior recommendations reviewed and taken some action on 16 of the 18 remaining recommendations.  Some of the changes made by the FE-PA Companies include: 

• Developing a Federal Energy Regulatory Commission and Regional Transmission Organization policy department for dealing with transmission related issues and becoming an active participant in PJM’s Planning Committee and the regional Transmission Expansion Planning process.
• Improving inventory turnover rates and reducing total inventory levels by a combined $7.4 million resulting in annual savings of approximately $740,000.
• Developing and implementing reliability improvement plans which have helped each of the FE-PA Companies improve their reliability performance.
• Developing a work management initiative group to plan, schedule and manage work across their system and determine current and future staffing levels.
• Rerouting meter reader routes that resulted in reduced annual meter reading costs for Met-Ed and Penn Power.

In addition, the Audit Staff made 17 recommendations for further improvement.  In its Implementation Plan the FE-PA Companies accepted 13 recommendations, partially accepted 2 recommendations and rejected 2 recommendations.  The recommendations accepted in full or in-part by the FE-PA Companies include:

• Conduct an analysis of overtime hours for each FE-PA Company and strive to maintain overtime levels at less than 15% of straight time hours.  Placing linemen on different shifts and/or hiring additional line workers to offset the overtime could result in a combined net annual savings of approximately $2.2 million.
• Develop a process to track and trend historical budgeted staffing levels and compare them to actual staffing levels while continuing to enhance the Forecasting and Planning Process.
• Strive to consistently achieve injury incidence rate goals by continuing to provide and improve effective safety training to all employees. 
• Strive to answer at least 80% of calls within 30 seconds by fully leveraging the technology investments made at the Reading Contact Center.
• Complete the implementation of the revenue protection strategy or devise a new strategy and plan accordingly. 
• Strive to correct all major deficiencies identified during infrared scans of substations within 7 days and all deficiencies identified with 30 days.
• Take additional actions on circuits that stay on the 5% worst performing circuit list for more than a year.
• Complete the rerouting of the FE-PA Companies’ meter reading routes and explore the benefits of expediting large scale deployment of smart meter technology.  Upon completion of the rerouting project, Penelec should be able to achieve reductions in meter reading costs per residential meter similar to Met-Ed’s experience from 2005 to 2009, and therefore save approximately $971,000 annually.
• Reduce the number of meters not read within 6 and 12 months to achieve levels comparable to other Pennsylvania electric distribution companies.
• Revise the Amended & Restated Mutual Assistance Agreement to include all affiliates with whom the FE-PA Companies transact business and submit it to the Commission for review and approval.
• Ensure that all employees that have access to cyber assets complete required annual training related to security awareness and procedures by maintaining appropriate training records.

The FE-PA Companies indicated that they have begun to implement some of the recommendations and plan to complete implementation of the accepted recommendations by mid-2012.  The FE-PA Companies rejected recommendations related to submitting written explanations to the Commission each time one of the Pennsylvania electric utilities make dividend payments to their parent corporation that exceed 85% of their annual net income and to modify the Internal Audit Department’s reporting structure so that it no longer administratively reports to the Chief Financial Officer.

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 Nos. D-2009-2143263; D-2009-2143264 and D-2009-2143265

Contact:

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