METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...

Follow-up Finding and Conclusion No. V-1 – FirstEnergy has completed itsanalysis of the FERC account mapping verification processes for Administrative& General (A&G) accounts, reduced the threshold for reviewing variances inthese accounts to $500,000, and conducted an internal audit of FERC Form No. 1report mapping.GAD’s Desktop Procedure, known as SAP FERC Module Navigation, providesinstructions for using the regulatory reporting module in FirstEnergy’s SAP systems.The goal of the SAP regulatory reporting process module is to assign all amounts in theSAP accounts to the FERC accounts. In June 2006, a verification of the FERC accountmappings for FERC A&G Account Nos. 920 through 935 was completed. Mappingchanges and true-up adjustments for FERC Account No. 925 - Injuries and Damages;FERC Account No. 926 - Employee Pensions and Benefits; and FERC Account No. 928- Regulatory Commission Expenses was made. The analysis confirmed that all otherFERC mappings for the A&G accounts were accurate.The threshold for reviewing variances in FERC A&G accounts was reduced, asrecommended, from $1 million to $500,000. As discussed below, variances of$500,000 or more are analyzed, with an explanation of each variance provided. A flux(i.e., variation) analysis of operations and maintenance (O&M) accounts is conductedquarterly. This analysis compares the current quarterly balance of an account (e.g., thebalance of an account as of March 31, 2010) with the balance in that account in thesame quarter in the previous year (i.e., March 31, 2009). The flux analysis is used toidentify mapping errors and trace errors (i.e., it provides an on-going FERC mappingverification). Explanations for variances of $500,000 or more are prepared by theemployee responsible for that account and the supervisor/team lead must approve theexplanation of the variance provided. For example, in the first quarter 2010 fluxanalysis, Met-Ed’s Other Power Supply-Other Expenses increased from approximately$16.0 million to $41.5 million, an increase of $25.5 million or 160%. The explanation forthe increase was due to an increase of $80 per Megawatt (MW) in capacity prices from2009 to 2010. FirstEnergy also prepared an explanation of trends in O&M expenses byFERC Account for the period 2000 through 2005. For Met-Ed’s Other Power Supply-Other Expenses, an explanation was provided for each of the years 2001 through 2005.In 2001, the 2000-2001 variance was due to implementation of a Provider Of LastResort Deferral per PUC Merger Stipulation. Other explanations are listed for each ofthe years 2002 through 2005 for this particular account and none of the explanationswere the same.IAD performed an audit of the FERC Form No. 1 report mapping which wascompleted on March 6, 2009. The internal audit report states that the FERC accountmapping process is necessary because the SEC chart of accounts is different from theFERC Uniform System of Accounts. The mapping from the SEC chart of accounts tothe FERC Uniform System of Accounts is configured in the FERC SAP software. TheRegulatory Accounting team in General Accounting processes the data monthly toallocate costs to the FERC accounts and gathers the data for the quarterly and yearlyFERC reporting. The FERC Form No. 3-Q report is filed for quarters 1, 2, and 3, andthe FERC Form No. 1 report is filed annually as the 4 th quarter filing. The objective of- 29 -