9. Ensuring Accurate and Fair Incentives
We note that another utility, SCE, recently informed the Commission that it had determined there was an internal breakdown of controls which permitted employees to falsify data and this in turn led to the company receiving unwarranted incentives.29 No one alleged here that either SDG&E or SoCalGas received unwarranted incentives in the past (distinct from objecting to incentives in principle or the adopted incentives in detail). Nevertheless, we would remiss if we did not, as a matter of good regulatory oversight, impose an increased vigilance over all incentives authorized by the Commission. We believe that SDG&E and SoCalGas already have a competent internal audit department as an integral part of internal controls and that department is adequately funded by the test year revenue requirement. Therefore, we will impose the following requirements:
· SDG&E and SoCalGas shall undertake annual internal audits to ensure that the incentive mechanisms are implemented, operated, and are calculated correctly and fairly.
· The internal audits shall specifically examine for indications of deception, falsification, or any manipulation of data.
· The internal audits shall specifically examine the internal controls and management oversight of the calculations for the incentive mechanisms. The internal audit reports shall disclose all audit findings and recommended remediation, as appropriate.
· The internal audits shall be held confidential and submitted to the Director of the Energy Division, Director of the Consumer Protection and Safety Division, and the Director of the Division of Ratepayer Advocates pursuant to the Commission's General Order (GO) 66-C and Pub. Util. Code § 583.
· Executive management of SDG&E and SoCalGas shall report all remedial actions taken in response to the internal audits. This report shall be an attachment to the internal audit reports submitted to the Commission staff.
The reports on a calendar-year basis are due May 1st of the following year. This audit and reporting requirement applies to every incentive mechanism adopted in this decision for safety, customer service, and reliability.
29 Investigation 06-06-014, filed June 15, 2006: Investigation on the Commission's Own Motion into the Practices of the SCE to Determine the Violations of the Laws, Rules, and Regulations Governing Performance Based Ratemaking, its Monitoring and Reporting to the Commission, Refunds to Customers and other Relief, and Future Performance Based Ratemaking for this Utility.
