Report 2013-109 Recommendations

To ensure proper oversight of balancing accounts to protect ratepayers from unfair rate increases, the Legislature should amend the California Public Utilities Code, Section 792.5, to require the California Public Utilities Commission (commission) to develop a risk-based approach for reviewing all balancing accounts periodically to ensure that the transactions recorded in the balancing accounts are for allowable purposes and are supported by appropriate documentation, such as invoices.

The Legislature should amend California Public Utilities Code, Section 314.5, to remove the requirement that the commission provide audit reports to the California State Board of Equalization.

To further its mission to obtain the lowest possible rates for reliable and safe utility service for ratepayers through its reviews of balancing accounts, Ratepayer Advocates should use the commission's list of balancing accounts to guide its selection of the number, size, and type of balancing accounts to review so that its review coverage is more proportional across all utilities.

To further its mission to obtain the lowest possible rates for reliable and safe utility service for ratepayers through its reviews of balancing accounts, Ratepayer Advocates should document the method used for its selection of balancing accounts to review.

To further its mission to obtain the lowest possible rates for reliable and safe utility service for ratepayers through its reviews of balancing accounts, Ratepayer Advocates should coordinate with the commission's Energy Division to avoid duplicating review efforts.

To ensure that findings and conclusions resulting from the reviews of balancing accounts are appropriate, complete, and supported, Ratepayer Advocates should, within six months, develop policies that clearly describe how analysts are to document their reviews of balancing accounts, including all work reviewed and conclusions reached for each sampled item that supports their conclusions.

To ensure that findings and conclusions resulting from the reviews of balancing accounts are appropriate, complete, and supported, Ratepayer Advocates should, within six months, develop a document retention policy for all documents related to, among other things, balancing account reviews for a minimum of three years after the completion of these reviews.

To ensure that findings and conclusions resulting from the reviews of balancing accounts are appropriate, complete, and supported, Ratepayer Advocates should, within six months, implement a formalized and documented method to ensure that supervisors approve analysts reviews of balancing accounts by checking the accuracy and completeness of the work that analysts prepare to support the conclusions of their reviews, including any proposed reductions in recoveries.

To ensure that it has the necessary information to provide appropriate oversight of the balancing accounts, the commission should maintain accurate and timely information on utility balancing accounts. Specifically, it should review the accuracy and completeness of the data it has obtained from utilities to ensure that it has a complete list of balancing accounts.

To ensure that it has the necessary information to provide appropriate oversight of the balancing accounts, the commission should maintain accurate and timely information on utility balancing accounts. Specifically, it should regularly update its list of balancing accounts when the commission issues decisions authorizing opening new balancing accounts or closing existing balancing accounts, when utilities file balancing account updates, and when the commission performs reviews of balancing accounts.

To ensure that it has the necessary information to provide appropriate oversight of the balancing accounts, the commission should maintain accurate and timely information on utility balancing accounts. Specifically, it should use the list to guide its efforts to oversee balancing accounts more effectively, by using a risk-based approach to select a sufficient number of balancing accounts, as well as those with the most potential impact on ratepayers, for review each year to provide appropriate coverage over all regulated utilities.

To ensure that it efficiently and effectively monitors energy utilities balancing accounts to protect ratepayers from unfair rate increases, the commission should direct its Energy Division to perform in-depth reviews of balancing accounts to verify that account balances contain only allowable transactions and are supported. These reviews should include ensuring that transactions recorded in a balancing account are supported by appropriate documentation, such as invoices.

To ensure that it efficiently and effectively monitors energy utilities' balancing accounts to protect ratepayers from unfair rate increases, the commission should direct its Energy Division to coordinate with the Office of Ratepayer Advocates (Ratepayer Advocates) to identify which balancing accounts Ratepayer Advocates plans to review during the year to avoid duplicating efforts.

To ensure that findings and conclusions resulting from the reviews of balancing accounts are appropriate, complete, and supported, the commission's Division of Water and Audits should remind analysts to document their reviews properly and remind supervisors to formally indicate that they checked the accuracy and completeness of reviews.

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.