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CPUC Comes Under Scrutiny For Ineffective Financial Management

The California Public Utilities Commission is holding its first public hearing on the problems at the San Onofre nuclear power plant today in Costa Mesa.

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The California Public Utilities Commission.

The agency that is holding a public hearing this afternoon on the San Onofre nuclear power plant is itself coming under scrutiny from the state’s nonpartisan Legislative Analyst .

Unlike the Federal Nuclear Regulatory meetings, this hearing will focus on costs rather than safety. The CPUC is responsible for making sure utility companies are producing energy cost-effectively for the ratepayer.

Meanwhile, the State Legislative Analyst this week recommended an audit of the CPUC’s oversight of hundreds of millions of dollars of ratepayer funds managed by the utilities.

Tiffany Roberts, senior analyst with the LAO, said an earlier audit of the CPUC, released last month, uncovered “significant weaknesses” in their budgeting practices.

“One of the things that the audit uncovered,“ Roberts said, “were cases of fiscal mismanagement in which transactions were not being recorded. The range of these transactions are from $40,00 per transaction up to $275 million.”

Roberts said the audit was prompted by the scandal that broke when it was discovered the State Parks Department had under-reported its assets to the tune of tens of millions of dollars.

Roberts said the results of the audit of the CPUC ’s internal books raised concerns about how the agency is managing its external auditing functions. She said the agency is responsible for auditing “balancing accounts” of hundreds of millions of ratepayer dollars, set up by the utilities to pay for activities required by the CPUC.

The LAO’s report does not suggest ratepayers have been over or undercharged, simply that the CPUC oversight of how these funds are spent may be subject to the same kind of ineffective management as their own internal budgetary functions.

The Legislative Analyst’s Office audit of the CPUC identifies ineffective organizational structure, poor communication and insufficient staff training as leading to a break down of fiscal controls at the CPUC.

CPUC Public Hearing

Today's public hearing is part of a CPUC investigation into whether ratepayers should continue to pay for faulty steam generators that led to the shutdown of the San Onofre nuclear power plant last year.

Southern California Edison is documenting the costs it has incurred since faulty steam generators forced the plant to be shut down soon after they were installed in 2011. The company argues it is justifiable to continue to bill ratepayers for these costs.

But many ratepayers from around Southern California, including San Diego, argued they should not have to continue to pay for steam generators in reactors that have not produced any power for more than a year. Some argue ratepayers should be reimbursed for the $200 million they have already paid toward the $680 million cost of the faulty generators.

Ray Lutz was one of those who spoke at the hearing. He said Southern California Edison determined back in 2005 that it would not be cost effective to run the plant with only one of its two reactors operating.

"What they’re proposing now is to run the plant with only one reactor unit in operation and that one only runs at 70 per cent capacity." he said. "They’ve already made that finding so they shouldn’t have to go back and research this for months and years and possible let the NRC say, 'start it back up before they pull the plug.'"

San Diego Assemblywoman Toni Atkins also sent a letter to the commission. She wrote, "Customers of SCE and SG&E are currently paying $54 million per month for shareholder returns, operation and maintenance for a non-functioning power plant." Atkins’ letter asks that San Onofre be removed from the rate base for utility customers.

A motion filed by San Diego attorney Mike Aguirre as part of the CPUC investigation suggests Edison should not have been allowed to start using ratepayer money to pay for the steam generators in the first place, because the utility did not fulfill procedures set by the CPUC.

His motion could carry added weight in view of the LAO's concerns.

The CPUC issued a response to the LAO's recommendation late today:

"The CPUC oversees approximately 170 utility balancing accounts for the major energy utilities tracking $29.4 billion. Those accounts are scrutinized by CPUC staff and ratepayer advocate groups – dozens of the county’s leading experts – in public and on the record. The balancing accounts fall into broad categories: General Rate Case, Energy Resource Recovery Account, Public Purpose Programs, California Solar Initiative, Procurement, Demand Response, and Miscellaneous. The accounts are audited by the CPUC’s Audit Division and the Division of Ratepayer Advocates to verify that proper amounts are recorded in the various balancing accounts. The amounts are tested by reviewing utility accounting entries and verifying source documents, including purchase orders, contracts, invoices, and other pertinent information."

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