Audit reveals potential violations, prolonged estimated meter readings at RG&E/NYSEG following News10NBC investigations

Jennifer Lewke News10NBC

Audit reveals potential violations, prolonged estimated meter readings at RG&E/NYSEG following News10NBC investigations

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ROCHESTER, N.Y. – The independent audit of RG&E and NYSEG is complete and it backs up years’ worth of News10NBC investigative reporting about major billing issues and customer service problems at the utilities.

Auditors have made 128 recommendations for how RG&E and NYSEG can improve operations and do better for customers.  In addition, the Department of Public Service issued a notice of apparent violations against the utilities stemming from staff’s review of the audit and information concerning the utilities’ recent operations.

For years, News10NBC Investigative Reporter Jennifer Lewke has been exposing billing, customer service and performance issues highlighted in this new audit.

The CEO of RG&E and NYSEG has previously admitted the utilities were understaffed coming out of the pandemic, during a transition to a new billing system and behind on meter reads.  That threw thousands of customers into chaos.

While things have improved over the last few years, auditors say the utilities still have a long way to go.

In September 2023, the NYS Public Service Commission selected an independent, third-party auditor to perform a management and operations audit of NYSEG and RG&E.  In the final report released on Monday which is nearly 500 pages, the auditor makes 128 recommendations to the companies which are both owned by Avangrid. 

Notable audit findings include:  

  • Cost Allocations and Service Level Agreements: The auditor found that Avangrid’s complex corporate structure makes it difficult to determine if the charges it allocates to NYSEG and RG&E are based on cost causation.  The companies receive goods and services from 13 corporate affiliates.  Some of those affiliates are holding companies for multiple utilities, thereby limiting the transparency of the allocations and making it difficult to ascertain whether costs are being allocated appropriately.  The auditor recommends that the companies revise and update the Cost Allocation Manual and simplify the cost allocation process.
  • Performance Management and Incentive Compensation: According to the auditor, all performance management activities occur at the Avangrid level.  Avangrid does not develop operational plans to achieve goals related to NYSEG and RG&E.  The auditor found that incentive payouts for executives are subjective and are not based on attaining goals specific to NYSEG and RG&E.  The audit recommends that Avangrid conduct a third-party review of the NYSEG and RG&E CEO’s individual metrics and discontinue discretionary assessments.
  • Physical and Cyber Security: The auditor noted that physical and cyber security programs are administered at the Avangrid level and that the cyber security program is not maturing as it should, despite cost increases.  The auditor recommended that Avangrid strengthen its cyber security planning documents and metrics used to track performance and improve reporting to staff.
  • Electric Operations: The auditor stated that asset management is also handled at the Avangrid level.  Avangrid has not implemented a formalized and integrated asset management software platform and still relies on spreadsheets.  Avangrid underspends on asset management, contributing to NYSEG’s poor electric reliability performance.  The audit recommends that Avangrid implement an asset management system for NYSEG and RG&E.
  • Customer Operations: The auditor found that Avangrid does not have appropriate controls for customer service outsourcing, augmented staffing invoice review and approval, or contract management.  The auditor recommends that Avangrid determine drivers of call center cost increases and verify whether they are attributable to NYSEG and RG&E.  The auditor also found that the companies’ customer service performance indicator (CSPI) metric reports have been inaccurate and recommends that Avangrid update its CSPI process documentation, create a formal override process, and enhance quality control.  

RG&E and NYSEG must file a plan addressing how they intend to address each issue with the NYS Public Service Commission by June 18. 

In addition to the recommendations, staff at the Department of Public Service believe NYSEG and RG&E may be violating state regulations in the following way: 

  • Board of directors consists of ineligible directors because they also hold positions as officers or directors of unregulated affiliate companies, which would appear to be inconsistent with the Commission’s 2013 order authorizing the insertion of Avangrid Networks, Inc. into the ownership structure of the companies.
  • Potential violations concerning maintaining customer billing records, and its billing procedures that resulted in prolonged estimated meter readings.  
  • On gas safety, DPS staff allege that NYSEG and RG&E have not complied with the regulatory requirements for reporting their response times to gas leaks or emergencies.
  • On electric reliability, DPS staff allege that NYSEG has not met enforceable reliability service standards for six consecutive years, despite paying Negative Revenue Adjustment payments for these failures and despite Commission approval of larger budgets for capital and maintenance programs in the last two rate cases.  

RG&E and NYSEG must file a plan addressing how they intend to address each of those issues with the NYS Public Service Commission by June 18th. 

In a statement, a spokeswoman for RG&E and NYSEG says, “We respect the hard work of the Public Service Commission (PSC). We are currently reviewing and evaluating the Management Audit Report and today’s management audit order issued by the Commission and look forward to responding. NYSEG and RG&E stand by our record of investing millions in upgrading hundreds of gas lines across our service areas supported by rigorous, ongoing inspections performed by our dedicated field crews. We have changed our management structure in NYSEG and RG&E, with staff with only New York responsibilities reporting directly to the New York CEO and President to better serve the specific needs of our operating companies. As a result, our customer service and billing performance has also seen significant improvement. Hundreds of new team members have been added, less than one percent of the 3 million bills issued require any adjustments, and customer service has slashed wait times to less than 30 seconds. Regarding any notice of potential violation, we look forward to responding with clear facts that will show our companies have fully complied with all laws, Commission orders, and regulations.  These are real actions with real positive results for our customers, and we firmly stand behind our record, our people, and our continued commitment to delivering safe, reliable energy to millions of New Yorkers every day.”

News10NBC’s previous coverage of RG&E billing/customer service issues: