METROPOLITAN EDISON COMPANY - Pennsylvania Public Utility ...

I. INTRODUCTIONA. BackgroundAt the public meeting held on July 14, 2005 at D-05MGT002, D-05MGT003, andD-05MGT004, the Pennsylvania Public Utility Commission (PUC or Commission)accepted Barrington-Wellesley Group, Inc.’s (BWG’s) proposal to perform a StratifiedManagement and Operations Audit of Metropolitan Edison Company (Met-Ed),Pennsylvania Electric Company (Penelec), and Pennsylvania Power Company (PennPower) (collectively referred to as the FirstEnergy Pennsylvania Companies or FE-PACompanies). The FE-PA Companies are public utilities subject to regulation by thePUC. All three FE-PA Companies are owned by FirstEnergy Corp. (FirstEnergy), aregistered public utility holding company headquartered in Akron, Ohio. BWGsubsequently completed its work and, in January 2007, issued a final report containing50 recommendations for improvement. The FE-PA Companies submitted theirImplementation Plan on February 14, 2007 indicating that 37 recommendations wereaccepted, 5 recommendations were accepted-in-part, and 8 recommendations wererejected. On March 1, 2007, at D-05MGT002, D-05MGT003, and D-05MGT004, theCommission made both the audit report and the Implementation Plan public anddirected the FE-PA Companies to:• Proceed with their February 14, 2007 Implementation Plan.• Submit progress reports on the implementation annually, by March 1, forthe next three years.Since March 2007, the FE-PA Companies have submitted three ImplementationPlan updates as requested by the Commission to ascertain the FE-PA Companies’progress in implementing the recommendations from the Management Audit report.Based on a review of these updates, the Audit Staff elected to conduct a ManagementEfficiency Investigation (MEI) of the FE-PA Companies’ progress in implementing 26 ofthe original 50 recommendations. Specific items of management effectiveness andoperational efficiency may be investigated pursuant to Title 66 Pa. C.S. § 516(b).B. Objective and ScopeThe objective of this MEI was to review and evaluate the effectiveness of effortsto implement certain recommendations contained in the Stratified Management andOperations Audit report released in March 2007. The scope of this evaluation waslimited to the FE-PA Companies’ efforts in implementing 26 prior management auditrecommendations in the functional areas of:• Affiliate Interests• Corporate Governance• Financial Management• Electric Reliability• Operations• Emergency Preparedness- 1 -