FERC issued its findings in the TrAILCo audit yesterday. No big surprises, if you've been following along the FirstEnergy audit trail with us.
As noted in the FirstEnergy merger audit last month, FERC spanked the company for recovering merger costs in its transmission formula rate. But today's audit report contains some details that the other one lacked and is just plain funny in spots.
For instance, here's FERC's description of the TrAIL line.
As noted in the FirstEnergy merger audit last month, FERC spanked the company for recovering merger costs in its transmission formula rate. But today's audit report contains some details that the other one lacked and is just plain funny in spots.
For instance, here's FERC's description of the TrAIL line.
The TrAIL Project originated in 2005 as part of PJM’s Project Mountaineer, whose objective was to enhance west-to-east transfer capability in the PJM transmission system. PJM planned to use its RTEP process to identify a comprehensive plan for the project. Following PJM’s announcement, Allegheny began reviewing transmission enhancement opportunities within the AP Zone of PJM that could expand west-to-east transfer capability and be incorporated in the RTEP. On February 28, 2006, Allegheny formally proposed TrAIL to PJM as an effective solution to long-term reliability needs in the PJM region, and requested that PJM include this proposal in the RTEP as part of a major expansion of the PJM system.
Allegheny’s proposal described TrAIL as a 330-mile, 500-kV line stretching from the Wylie Ridge substation in the western panhandle of West Virginia to a new substation on the eastern side of the AP Zone in Frederick County, MD. The project included installation of a static VAR compensator (SVC) of approximately 500-megavolt-ampere reactive power at Allegheny’s Meadow Brook Substation south of Winchester, VA. The entire line would be in the AP Zone. Allegheny proposed to begin initial engineering and planning in 2007, and to place the first phase in service in 2013.
On May 19, 2006, PJM released the 2006 RTEP Baseline report presenting its first 15-year regional transmission plan. The report identified numerous facility overloads, voltage and thermal violations, and contingency overloads on Allegheny’s transmission system, and recommended enhancements to resolve them. On June 22, 2006, the PJM Board approved the RTEP and directed construction of TrAIL with an in-service date of June 2011.
Allegheny filed its request for incentives for the TrAIL Project, in Docket No. EL06-54-000, concurrently with its proposal to PJM.
Reviewed materials on the Allegheny and FirstEnergy web sites and other key industry and news sources.
Oh, right.
Along those lines, FERC also wanted to find out how the merger cost recovery error was discovered:
Along those lines, FERC also wanted to find out how the merger cost recovery error was discovered:
Analyzed the revised reconciliation that TrAILCo submitted December 19, 2011 to remove certain transaction costs related to the FirstEnergy-Allegheny merger improperly included in its 2011 formula rate. Issued data requests to understand Allegheny’s procedures for tracking, accounting for, and allocating such merger-related costs to TrAILCo. Examined how merger-related costs were improperly included in TrAILCo’s revenue requirement, how the error was detected, how TrAILCo worked with PJM to revise customer billings and refund the costs to customers. Scheduled conference calls and interviewed TrAILCo staff during the site visit to clarify our understanding of these matters.
Imagining how a certain someone must have looked twitching his way through that is a never ending giggle fest. I'm going to enjoy it immensely for a long, long time. :-)
And here's what FERC's audit determined:
And here's what FERC's audit determined:
Audit staff found that TrAILCo included three categories of merger costs in its 2011 formula rate: (1) $14,823 in postage, hotel rooms, security, and other outside services incorrectly charged to operating costs rather than to the special, non-recoverable accounts established for merger costs; (2) $347,654 in executive bonuses charged to recoverable accounts based on an incorrect determination by Allegheny’s accounting department that the bonuses were not merger-related; and (3) $43,718 in 2010 merger integration costs charged to recoverable accounts due to an incorrect interpretation that the Merger Order required only transaction-related costs to be excluded from rates.
Sounds familiar.
Another problem FERC discovered is that TrAILCo was filing erroneous data in its Form 730, Report of Transmission Investment Activity.
Another problem FERC discovered is that TrAILCo was filing erroneous data in its Form 730, Report of Transmission Investment Activity.
Audit staff’s review showed that TrAILCo reported cumulative spending on TrAIL in its FERC-730 reports rather than actual spending in the latest calendar year, as the FERC-730 instructions on the Commission’s web site require. For example, in its first FERC-730, TrAILCo reported spending $2.3 million on TrAIL during 2006. For 2007 through 2011, TrAILCo reported spending $32.9 million, $105.9 million, $546.0 million, $930.6 million, and $1.009 billion, respectively. These figures total $2.63 billion, 2.6 times the amount TrAILCo charged to Project work orders in 2006-2011.
In other words, TrAILCo made a really dumb mistake because they didn't bother to read and follow instructions readily available on FERC's website. I think they've discovered the root cause of FirstEnergy's accounting problems!
And that about sums it up.
And that about sums it up.
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