11. Audit
DRA argues that the Commission should order audits of: (1) Suburban's parent company's allocable costs; (2) the Non-Utility Group's four-factor values, specifically the number of customers served under each contract and gross plant value of its clients; and (3) Suburban's Non-Tariff Product Services.
DRA already has the authority to audit Suburban pursuant to Pub. Utilities Code § 314(a),9 including auditing Suburban's parent and affiliates. Affiliate Transaction Rule VIII.B states:
The utility and its affiliated companies shall provide the Commission, its staff, and its agents with access to the relevant books and records of such entities in connection with the exercise by the Commission of its regulatory responsibilities in examining any of the costs sought to be recovered by the utility in rate proceedings or in connection with a transaction or transactions between the utility and its affiliates. The utility shall continue to maintain its books and records in accordance with all Commission rules. The utility's books and records shall be maintained and housed available in California. (D.10-10-019, Appendix A at A-9.)
The affiliate rules adopted in D.10-10-019 also provides in Rule VIII.E for regular audits beginning in 2013.
Independent Audits. Commencing in 2013, and biennially thereafter, the utility shall have an audit performed by independent auditors if the sum of all unregulated affiliates' revenue during the last two calendar years exceeds 5% of the total revenue of the utility and all of its affiliates during that period. The audits shall cover the last two calendar years which end on December 31, and shall verify that the utility is in compliance with these Rules. The utility shall submit the audit report to the Director of the Division of Water and Audits and the Director of the Division of Ratepayer Advocates no later than September 30 of the year in which the audit is performed. The Division of Water and Audits shall post the audit reports on the Commission's web site. The audits shall be at shareholder expense.
We need to be clear about "relevant" books and records as referenced in Rule VIII-B above. Quite simply, all documents (electronic and paper) that apply directly or indirectly to any cost which Suburban seeks to include for recovery in its rate application, or any rate recovery mechanism such as the four-factor allocation, are "relevant." We expect our judges in subsequent proceedings to interpret "relevant" in the most inclusion fashion. Suburban may not recover any cost where it fails to provide full and complete access to all relevant records. If Suburban delegates the performance of any duty or task to an affiliate or parent it cannot hide behind any structural separation between the utility and its parent or affiliates to withhold data or hinder DRA's review.
Despite the clear evidence that Suburban and DRA did not have an amicable or efficient relationship in this proceeding we nevertheless find it is not necessary to order any other audit at this time.
9 314(a) The commission, each commissioner, and each officer and person employed by the commission may, at any time, inspect the accounts, books, papers, and documents of any public utility. The commission, each commissioner, and any officer of the commission or any employee authorized to administer oaths may examine under oath any officer, agent, or employee of a public utility in relation to its business and affairs. Any person, other than a commissioner or an officer of the commission, demanding to make any inspection shall produce, under the hand and seal of the commission, authorization to make the inspection. A written record of the testimony or statement so given under oath shall be made and filed with the commission.
