Press Release

PUC Audit Shows Equitable Could Realize Between $4.3 and $7.1 Million in Annual, and $50,000 in One-Time Savings

Published on 6/16/2010

Filed under: Gas

HARRISBURG – According to an audit report released today by the Pennsylvania Public Utility Commission (PUC), Equitable Gas Co. could see yearly savings of between $4.3 and $7.1 million and one-time savings of up to $50,000 by implementing recommendations contained in the audit report.

The Commission voted 4-0 to make the audit report and Equitable’s implementation plan public.

The Stratified Management and Operations Audit was conducted by the consulting firm Shumaker & Company on behalf of the Commission. The bulk of the audit fieldwork was completed in 2009.

The audit analyzed and evaluated management performance in 15 areas and resulted in 72 recommendations for improvement including 11 in the Affiliated Interest area which was rated as needing major improvement.  The recommendations for improvement in this area included:

• Enhancing and updating the company’s affiliated interest agreements and submitting to the PUC for review and approval;
• Developing a formal internal dividend policy; and
• Performing periodic studies to determine the cost of competitiveness of centralized functions and developing plans to address the results of these studies.

In its implementation plan, submitted to the Commission on May 21, 2010, Equitable accepted 58 recommendations, partially accepted 10 recommendations and rejected four recommendations.

The audit’s other functional areas included recommendations accepted in full or in-part by the company to:

• Expand the focus of disaster recovery planning efforts, expand and formalize business continuity planning efforts, develop a formal cyber-security plan, use an outside firm during some emergency response tabletop planning exercises; and perform annual testing of the physical security, cyber-security, business continuity and emergency response plans;
• Implement certain efforts to ensure safe and reliable service through effective operations and maintenance practices such as striving for best-in-class performance in damage prevention, placing greater emphasis on the monitoring and management of unaccounted-for gas, re-evaluating distribution capital and maintenance spending levels, enhancing the main replacement decision-making model by explicitly including other parameters, and placing a greater emphasis on reducing the number of outstanding class 1, 2 and 3 leaks;
• Complete implementation of new workforce management technologies within the field force areas; and
• Regularly conduct formal information technology (IT) long-range planning and implement a process for prioritization of IT projects and allocation of resources which overarches views among business units.

According to the company, it has implemented 20 recommendations and plans to complete implementation of an additional 24 recommendations by December 2010. Equitable rejected recommendations related to developing an HR service level agreement; providing at least two controllers on all shifts for the gas control center; recruiting a board of directors member with experience in gas distribution utilities and/or state regulatory agencies; evaluating and implementing policies and procedures to address situation in which a significant number of employees might leave to go to affiliates. 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-2008-2072063

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