Anonymous Letters Put UtiliCorp in Hot Water

Investigations in several states are getting under way into alleged illegal profit-taking by UtiliCorp United in Missouri, Michigan, Nebraska, Minnesota and Iowa. An anonymous letter from someone who claimed to be a current employee for UtiliCorp was sent to state regulators alleging the company's Gas Supply Service Department (GSS) took part in improper actions in reselling natural gas to customers in these states.

"Personnel are paid bonuses based on the value that can be extracted from managing the assets paid for by the Missouri Public Service (MPS) ratepayers," the letter said. The anonymous author said that value is extracted in numerous ways that are undetectable to staff audit efforts. One method included in the letter was for UtiliCorp employees to sell a first of the month "put" to suppliers, invoicing the put premium on a separate invoice that would never be included in audited documentation. If prices drop, the supplier puts first of the month gas to MPS.

Another scheme alleged in the letter includes capacity releases. "Operations personnel extract one-to-two cents per release by doing buy-sells with MPS capacity, instead of doing a posted release," said the letter. "They look at the lowest credit amount possible to report, instead of maximizing the capacity release credit." The anonymous author speculated that these actions are taken to reach the unit's lofty profit goal of $10 million. "Due to the emphasis on earnings, GSS's top priority is earnings, not providing efficient, reliable, economic gas supplies," the author concluded.

Jerry Cosley, a UtiliCorp United spokesperson said, "We can say without qualification, that in no way would we approve of any improper behavior or business practice, so we are conducting our own review."

Missouri appears to be the first state out of the gate on the investigation trail as the staff of the Missouri Public Service Commission has recommended an investigation be conducted into the allegations. An MPS representative said that UtiliCorp denied the allegations of impropriety, but supports the staff's request to open an investigation.

Iowa's Consumer Advocate is investigating the UtiliCorp charges in that state, said Chuck Seel, a spokesman for the Iowa Utilities Board. Seel said the Iowa and Minnesota letters, and the Michigan and Missouri letters, appeared to be similar to one another. He added that an observer from the IUB and a representative of the Consumer Advocate will attend a meeting next week with UtiliCorp to discuss the situation.

Cosley said UtiliCorp intends to conduct its own internal review, and would stay in touch with all of the affected regulatory commissions and report its findings to them.

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