Press Release

PUC Releases Report on Implementation of Management Audit Recommendations to National Fuel Gas Distribution Corporation

Published on 6/11/2015

Filed under: Gas

HARRISBURG – The Pennsylvania Public Utility Commission (PUC) today released a report on its Management Efficiency Investigation (MEI) of National Fuel Gas Distribution Corporation (NFGDC), evaluating the implementation of 12 prior PUC recommendations from a 2012 Focused Management and Operations Audit.

The Commissioners voted 5-0 to make the report and the company’s Implementation Plan public. The MEI report notes that NFGDC has effectively or substantially implemented eight of 12 prior recommendations, and has taken some action on the four remaining recommendations. Among the notable improvements highlighted by the report are:

• NFGDC performed benchmarking of its external audit fees with peer companies prior to reviewing its contract with its external auditor and, after completing an analysis of the costs and benefits of changing firms, plans to formalize a recommended course of action with respect to rebidding by Sept. 30, 2015.
• NFGDC filed an updated affiliated interest agreement with the Commission that includes all affiliates with whom the Company is transacting business.
• NFGDC has successfully reduced the amount of labor dollars allocated since 2010 by approximately 27 percent.
• NFGDC has established a formal dividend policy.
• NFGDC submitted to the Commission, a detailed, written explanation for each dividend payment exceeding 85 percent of net income for Fiscal Years 2006-2011, and provided advance notice and a written explanation in June 2012 for a dividend payment expected to exceed 85 percent of net income to be paid in July 2012.
• NFGDC updated its Emergency Response Plan to include local police, fire, medical services and other local municipality contact information to ensure that all parties are made aware of pipeline emergency activities.

In addition, staff from the PUC’s Audit Bureau made follow-up recommendations for further improvement, some of which included the following:

• Enhance documentation in support of each reporting relationship with a high or low span of control as part of the annual organizational structure review.
• Complete the process to evaluate periodic rotation of the external audit firm and provide a recommendation to the Audit Committee of the Board of Directors.
• Establish a procedure to periodically assess external audit services fees either through a rebidding process or on the basis of a through benchmarking comparison.
• Periodically re-assess ring fencing practices and procedures in place, and, as necessary, strengthen its ring fencing position to insulate it from National Fuel Gas Company and its non-regulated affiliates.

The Pennsylvania Public Utility Commission balances the needs of consumers and utilities; ensures safe and reliable utility service at reasonable rates; protects the public interest; educates consumers to make independent and informed utility choices; furthers economic development; and fosters new technologies and competitive markets in an environmentally sound manner.

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Docket No. D-2014-2427061

 

Contact:

• Nils Hagen-Frederiksen
  Press Secretary
  717-418-2701
  nhagen-fre@pa.gov