Report 2013-109 Recommendation 14 Responses

Report 2013-109: California Public Utilities Commission: Improved Monitoring of Balancing Accounts Would Better Ensure That Utility Rates Are Fair and Reasonable (Release Date: March 2014)

Recommendation #14 To: Public Utilities Commission

The commission should follow the requirement in state law to inspect and audit the accounting records of utilities it regulates within required time frames. If the commission chooses to continue to meet this requirement through the general rate case process, it should ensure that all utilities file a general rate case on a regular schedule so as to comply with the state law's audit requirement. However, the commission should follow alternate methods to comply with the audit requirement when a utility will not be filing for its general rate case in time to be audited within three or five years, depending on the timing of the required audit for that utility.

Annual Follow-Up Agency Response From November 2017

In accordance with Public Utilities Code Sec. 792.5, Energy Division completed sixteen balancing account reviews for the 2015/16 fiscal year, and is currently in the process of reviewing another sixteen balancing accounts for the 2016/17 fiscal year, with expected completion in December. When the 2016/17 reviews are complete, Energy Division will have reviewed 68 balancing accounts since the issuance of the State Auditor's report in 2014. These reviews cover accounts for the large and small electric and gas utilities.

  • Completion Date: October 2017

California State Auditor's Assessment of Annual Follow-Up Status: No Action Taken

The commission's response does not address our recommendation. Specifically, the law does not allow the commission to meet the audit requirement through reviews of balancing accounts. The commission did not provide any additional documentation to demonstrate that it has implemented our recommendation.

  • Auditee did not substantiate its claim of full implementation
  • Auditee did not address all aspects of the recommendation

Annual Follow-Up Agency Response From October 2016

With the four 3-year limited term positions granted in 2015/16 fiscal year to UAFCB, the Commission began to address the audit concern of the State Auditor. Two of the four filled positions focus on balancing account audits of energy utilities. Four audits were completed in August and four are underway. The other two filled positions are auditing the annual reports of small water companies that are on a five year audit requirement. Two audits were completed in September and three will done by December. The Commission will request that the limited term positions be made permanent starting July 1, 2018 and make a case for more positions to fully comply with the law's audit requirement.

  • Estimated Completion Date: 6/30/2017

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented


Annual Follow-Up Agency Response From September 2015

All of the large energy utilities currently are on a 3 year GRC cycle and get audited as part of the general rate case (GRC) process. The smaller utilities have been on a longer than 3-year GRC cycle. The CPUC received budgetary authority for FY 15-16 to bring on additional auditing staff in an effort to comply with the audit requirements set forth in Public Utilities Code Section 314.5. We are in the process of filling these positions so that we will be able to comply with this recommendation, but until these incremental staff are online and fully trained, auditing of smaller utilities may still not meet the standards set forth in Section 314.5. We anticipate that full compliance may take five years once new staff are on board.

  • Estimated Completion Date: 1/1/2021

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented


1-Year Agency Response

All of the large energy utilities currently are on a 3 year GRC cycle and get audited as part of the general rate case (GRC) process. The smaller utilities are on a longer than 3-year GRC cycle. The Division of Water and Audits is now actively seeking to augment its staff in an effort to comply with the audit requirements set forth in Public Utilities Code Section 314.5. In the meantime, Energy Division will be performing risk based review of costs booked in smaller utilities' balancing accounts at the invoice level.

  • Estimated Completion Date: Unknown
  • Response Date: March 2015

California State Auditor's Assessment of 1-Year Status: No Action Taken


6-Month Agency Response

The Division of Water and Audits is now actively seeking to augment its staff in an effort to comply with the audit requirements set forth in Public Utilities Code Section 314.5.

  • Estimated Completion Date: December 2015
  • Response Date: December 2014

California State Auditor's Assessment of 6-Month Status: Pending


60-Day Agency Response

The Commission is aware that when a utility has a general rate case cycle longer than the audit interval specified in P.U. Code 314.5 (generally 3 years for larger utilities), and audits are delayed, and P.U. Code 314.5 is not complied with. The same is true of smaller utilities whose general rate case cycles are longer than the audit interval specified in P.U. Code 314.5. The Commission is looking into this problem and will decide whether to keep the utilities to specific general rate case intervals to comply with this requirement or to consider alternate methods. The Commission will seek Budget Change Proposals, as needed, to augment its staff in an effort to comply with the audit requirements.

  • Estimated Completion Date: unknown
  • Response Date: April 2014

California State Auditor's Assessment of 60-Day Status: No Action Taken


All Recommendations in 2013-109

Agency responses received are posted verbatim.


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