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March 26, 2015

26
Mar
2015

FMPA Responds to Auditor General’s Final Audit Report

Agency has already taken action steps on several preliminary recommendations, but raises concerns over some of the audit methodology

TALLAHASSEE, Fla., Mar. 26, 2015 – The Florida Municipal Power Agency (FMPA) addressed findings and recommendations included in the Florida Auditor General’s final operational audit report, which was released late yesterday.

Even before the Auditor General released its “preliminary and tentative” version of the audit report in January 2015, FMPA quickly took action on several of the recommendations. FMPA immediately discontinued certain expenses and the FMPA Executive Committee decided to retain an independent management consulting firm to help the agency address findings on the more complex topics.

Additionally, the Agency had already made changes to some of its policies prior to this audit, including a dramatic adjustment to its previous fuel hedging policy. More than five years ago, FMPA changed its fuel hedging policy. Today, natural gas hedging that resulted in nearly all of the losses discussed in the Auditor General’s report is no longer FMPA’s practice and no longer impacts FMPA’s rates.

“The purpose of any audit is to take a look at what you did and what you’re doing and figure out how you can do things better. We take this opportunity to improve very seriously and believe we have demonstrated our commitment to improving by taking swift action based on the preliminary audit recommendations,” said FMPA Board Chairman Bill Conrad. “FMPA has already done much to address issues raised and every recommendation in the audit will be addressed in the coming months. We will put our energy into further enhancements that will increase efficiency, enhance effectiveness and control costs.”

Over the course of the last two months, FMPA has been in frequent communication with the Auditor General providing additional information and the Auditor General has further revised its preliminary audit report. In these discussions, FMPA expressed concerns over comparability of the sample size and the methodology used by the Auditor General and its third-party consultant to determine industry standards. FMPA’s primary concerns with the final audit center on:

  • Comparability of the Sample– the Auditor General used a sample of only one small segment of the electric utility industry – eight or sometimes 17 other Joint Action Agencies (JAAs) – as a policy comparison point. Given that there are approximately 3,000 electric utilities, and many segments of that industry, in the United States, this does not yield a representative sample to compare to FMPA. Therefore, the findings are based on these narrow comparisons and is not representative of common practices in the electric utility industry.
  • Determination of Common Industry Practices – when determining common industry practices for fuel hedging, the Auditor General looked at a small sample of eight JAAs with a much lower risk profile to the price of natural gas than FMPA. FMPA generates 80 percent of its energy from natural gas, the sample was mostly coal-dominated utilities and generates less than 40 percent of their energy from natural gas. A sample of four JAAs that are less dependent on natural gas cannot represent an “industry practice.”

“While we appreciate the valuable service the Auditor General has provided FMPA and the recommendations offered in their final report, we feel it is important to provide context around the methodology used,” said FMPA General Manager and CEO Nick Guarriello. “No matter, FMPA will continue the work it has begun, to address every finding in the audit.”

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Florida Municipal Power Agency (FMPA) is a wholesale power company owned by 31 municipal electric utilities. FMPA provides economies of scale in power generation and related services to support community-owned electric utilities. The members of FMPA serve approximately two million Floridians.

 

 

 

 

 

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