Investigations in several states are getting under way intoalleged illegal profit-taking by UtiliCorp United in Missouri,Michigan, Nebraska, Minnesota and Iowa. An anonymous letter fromsomeone who claimed to be a current employee for UtiliCorp was sentto state regulators alleging the company’s Gas Supply ServiceDepartment (GSS) took part in improper actions in reselling naturalgas to customers in these states.

“Personnel are paid bonuses based on the value that can beextracted from managing the assets paid for by the Missouri PublicService (MPS) ratepayers,” the letter said. The anonymous authorsaid that value is extracted in numerous ways that are undetectableto staff audit efforts. One method included in the letter was forUtiliCorp employees to sell a first of the month “put” tosuppliers, invoicing the put premium on a separate invoice thatwould 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 doingbuy-sells with MPS capacity, instead of doing a posted release,”said the letter. “They look at the lowest credit amount possible toreport, instead of maximizing the capacity release credit.” Theanonymous author speculated that these actions are taken to reachthe unit’s lofty profit goal of $10 million. “Due to the emphasison earnings, GSS’s top priority is earnings, not providingefficient, reliable, economic gas supplies,” the author concluded.

Jerry Cosley, a UtiliCorp United spokesperson said, “We can saywithout qualification, that in no way would we approve of anyimproper behavior or business practice, so we are conducting ourown review.”

Missouri appears to be the first state out of the gate on theinvestigation trail as the staff of the Missouri Public ServiceCommission has recommended an investigation be conducted into theallegations. An MPS representative said that UtiliCorp denied theallegations of impropriety, but supports the staff’s request toopen an investigation.

Iowa’s Consumer Advocate is investigating the UtiliCorp chargesin that state, said Chuck Seel, a spokesman for the Iowa UtilitiesBoard. Seel said the Iowa and Minnesota letters, and the Michiganand Missouri letters, appeared to be similar to one another. Headded that an observer from the IUB and a representative of theConsumer Advocate will attend a meeting next week with UtiliCorp todiscuss the situation.

Cosley said UtiliCorp intends to conduct its own internalreview, and would stay in touch with all of the affected regulatorycommissions and report its findings to them.

Alex Steis

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