PUC audit cites progress, gaps at FirstEnergy PA

The Pennsylvania Public Utility Commission recently released a report on a Management Efficiency Investigation of FirstEnergy Pennsylvania Electric Company.   

This most recent investigation focuses on FE PA’s progress in implementing 15 of the 27 original recommendations made as part of a 2022 PUC Management and Operations Audit, along with a review of the company’s compliance with PUC regulations regarding physical security, cybersecurity, emergency response, and business continuity plans. 

 State law requires the PUC to conduct periodic Management and Operations Audits of major jurisdictional utilities, reviewing a wide range of management practices, organizational structures, operations, and financial management. 

PUC auditors found that FE PA implemented seven of the recommendations reviewed and has acted on the remaining eight items. 

Improvements highlighted in the report include: 

•  Realizing approximately $174 million in operating and maintenance expense savings through FirstEnergy’s FE Forward and FE Forward Refresh initiatives, with about $41 million of those savings allocated to FE PA. 

•  Cooperating with investigations and meeting settlement agreement obligations while enhancing the company’s ethics and compliance culture. 

• Implementing new internal controls over financial reporting, resulting in unmodified audit opinions throughout the review period. 

• Establishing a new process for engaging with third-party collections agencies to improve collections performance. 

 However, the report also found things that still need addressing including: 

• Maintaining focus on compliance with ongoing settlement agreements. 

• Enhancing transparency in base rate filings by disclosing cost increases linked to prior executive misconduct. 

• Strengthening corporate governance through timely review and updating of affiliated interest agreements. 

• Improving electric reliability by addressing the top outage causes with remedial programs and best practices. 

• Developing workforce planning models to better manage overtime and storm response, with potential savings of approximately $4.3 million annually. 

• Expanding penetration testing of Pennsylvania facilities to strengthen cybersecurity defenses. 

• Addressing persistent inventory turnover challenges at distribution centers, with potential carrying cost savings between $147,000 and $1.1 million annually. 

• Implementing enhanced safety training and performance targets to reduce accidents, potentially saving up to $575,000 annually. 

In total, the MEI resulted in 12 follow-up recommendations related to prior audit findings and three new recommendations for improvement.  

According to the company’s implementation plan, FE PA has committed to address these items, with many targeted for completion within the next year.