It really is all about that number on a piece of paper, apparently.
FERC issues an annual report of its enforcement activities each November, to let the public know how FERC is protecting them. A big number on the report justifies FERC's activities.
Is it about doing the job, or is it about the number?
In 2014, FERC says its investigations produced $25M in civil penalties against energy market violators, and $4M in disgorgement of unjust profits. Just $4M? What percentage of annual energy market profits is that? How much money was actually made by manipulating markets?
FERC says it saved ratepayers nearly $11.7M by directing refunds and recoveries as a result of its audit activities. What percentage of the total amount of rates is $11.7M?
Audit activities included formula rate audits. FERC found much the same kinds of violations it found last year.
FERC issues an annual report of its enforcement activities each November, to let the public know how FERC is protecting them. A big number on the report justifies FERC's activities.
Is it about doing the job, or is it about the number?
In 2014, FERC says its investigations produced $25M in civil penalties against energy market violators, and $4M in disgorgement of unjust profits. Just $4M? What percentage of annual energy market profits is that? How much money was actually made by manipulating markets?
FERC says it saved ratepayers nearly $11.7M by directing refunds and recoveries as a result of its audit activities. What percentage of the total amount of rates is $11.7M?
Audit activities included formula rate audits. FERC found much the same kinds of violations it found last year.
Formula Rate Matters. DAA continues to examine accounting that populates formula rate recovery mechanisms used in determining billings to wholesale customers. In recent formula rate audits, DAA observed certain patterns of noncompliance in the following areas:
• Merger Goodwill – including goodwill in the equity component of the capital structure absent Commission approval;
• Depreciation Rates – using state-approved or a blended depreciation rate consisting of Commission and state-approved depreciation rates without Commission approval;
• Merger Costs – including any merger-related costs in rates (e.g., third-party advisory fees, internal labor, severance, and other general and administrative costs) without Commission approval;
• Tax Prepayments – incorrectly recording tax overpayments not applied to a future tax year’s obligation as a prepayment leading to excess recovery through working capital;
• Unused Inventory and Equipment – including the cost of materials, supplies, and equipment purchased for a construction project without removing the cost of items unused in whole or in part from the cost of a project;
• Allocated Labor – using labor cost allocators not based on a representative time study to determine the amount of indirect labor costs to distribute to construction projects;
• Asset Retirement Obligation (ARO) – including ARO amounts in formula rates, without explicit Commission approval;
• Below-the-Line Costs – including below-the-line costs in formula rates (e.g., lobbying, charitable contributions, fines and penalties, and compromise settlements arising from discriminatory employment practices) without Commission approval; and
• Improper Capitalization – seeking to include in rate base (and earn a return on) costs that should be expensed.
So, when are utilities going to stop making the same "mistakes" over and over? Maybe when they are sure to be caught, or when "mistakes" come with penalties? Otherwise, it's like playing roulette for utilities. Over time, they can rake in more than they'll ever have to refund if they are caught. Why are there no penalties for continued violations?
During the year, FERC performed 19 audits. What percentage of the total number of formula rates overseen by FERC is this?
Do FERC's investigations promote transparency and encourage entities subject to Commission requirements to develop strong internal compliance programs? If they did, would FERC soon find itself out of a job? Or would utilities continue to play FERC-roulette because it's just so gosh-darn profitable?
During the year, FERC performed 19 audits. What percentage of the total number of formula rates overseen by FERC is this?
Do FERC's investigations promote transparency and encourage entities subject to Commission requirements to develop strong internal compliance programs? If they did, would FERC soon find itself out of a job? Or would utilities continue to play FERC-roulette because it's just so gosh-darn profitable?
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