California probe recommended into oversight of trillions of dollars in utility ratepayer money

by George Avalos , San Jose Mercury News

The state legislative analyst recommended Tuesday that state auditors probe whether regulators are properly overseeing special accounts for utility projects totaling trillions of dollars, raising the possibility that gas and electric ratepayers may have been overcharged for the programs.

In question is how the California Public Utilities Commission manages and audits “balancing accounts” for California’s three biggest utilities — PG&E, Southern Cal Edison and San Diego Gas & Electric.

The accounts are set up for projects such as procuring and producing electricity, as well as energy conservation and smart meters. The accounts are designed to ensure utility customers pay only the amounts required for the utility to carry out projects mandated by the PUC. The PUC accounts track revenues and expenditures, while the utilities handle the money.

“There is a possibility ratepayers were overcharged,” said Tiffany Roberts, a senior fiscal and policy analyst with the Legislative Analyst’s Office, which issued the recommendations as part of a wide-ranging report. “There is a possibility they were undercharged. We really don’t know.”

The analyst’s office intensified its scrutiny into the PUC balancing accounts after a state Finance Department audit in December that found serious flaws in the PUC’s internal budget and forecasting procedures.

PUC officials offered no immediate comment on the Legislative Analyst Office’s call for a new audit, which would focus specifically on PUC procedures and not on utilities.

As of the end of 2012, the accounts in question represented a combined $14.07 trillion, including $8.92 trillion in the balancing accounts the PUC set up for PG&E.

“If a utility receives more revenue than is needed from ratepayers, then ratepayers receive a credit,” the legislative analyst stated in the report. “Alternatively, if the utility has not received enough revenue, then ratepayers will be required to pay more to make up the difference.”

The accounts include PG&E programs related to the utility’s basic costs of providing electricity, meter reading, hazardous material cleanups, assistance for low-income ratepayers, energy efficiency, power purchases and renewable energy.

The PUC, in the previous audit, was unable to account for a number of fund transactions, and discrepancies as large as $275 million were found, according to the legislative analyst.

“All of these problems raised concerns in our mind,” Roberts said. “If there are these problems with internal funds, what might be the problems with the external funds for the utilities?”

In a preliminary look at the balancing accounts set up for the utilities, the legislative analyst estimated the PG&E accounts undercollected revenue from ratepayers by a total of $463.4 billion as of the end of 2012. That may trigger higher PG&E rates in 2013 due to the undercollection, but no estimates of possible rate increases were offered.

“In some years we give money back to customers,” said Jonathan Marshall, a PG&E spokesman. “In other years, like 2012, we have to charge a little more the next year to make up the difference.”

The report quickly prompted one state lawmaker, Sen. Jerry Hill, a Democrat from San Mateo County, to lambaste the PUC. The commission already is under fire for its regulation and oversight of PG&E before and after a lethal explosion of natural gas in San Bruno in 2010.

“The CPUC has authorized the utilities to open hundreds of balancing accounts, over which the CPUC has oversight authority,” Hill said. “It is not known how much money is in all these accounts. The PUC is supposed to audit them every three years and by our reckoning has not.”

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