An independent audit of RG&E and NYSEG paints a picture of ineffective governance that prioritizes parent company Avangrid’s corporate earnings over the interests of New York ratepayers.
While not surprising to critics, auditors detailed a surprising dearth of local planning and controls — including when it comes to compliance with state regulations — and a near-total absence of local decision making.
At one point, auditors inquired about New York regulatory matters and was told by Avangrid that those are discussed by the utilities’ leadership "via the monthly Regulatory, Planning, Operations and Customer Council meetings for New York.”
“In fact,” auditors determined, “this committee does not exist.”
And while Avangrid allegedly claimed top leadership was involved in a collaborative strategic plan development for the two utilities, auditors found that “NYSEG and RG&E do not have a strategic planning process or produce strategic plans, respectively.”
Billing irregularities and a spike in customer complaints prompted state regulators to commission the third-party audit of the utilities' management and operations back in September 2023.
The utilities blamed the problems on staffing shortages and lingering disruption stemming from the pandemic but claim to have made significant progress since. The audit — conducted by NorthStar Consulting Group and covering 2018 through 2023 — would appear to show otherwise.
New York State Electric and Gas Corp. serves more than 40% of Upstate New York, while Rochester Gas & Electric is focused on a nine-county region centered around Rochester. Combined, the two companies provide electric service to 1.3 million customers and gas service to 591,000 customers.
The two companies now must file a plan for implementing auditors’ 128 separate recommendations. And they must respond to a list of alleged violations, ranging from billing procedures to the reliability and safety of its electric and gas operations. Both require responses to the state Public Service Commission within the next month.
In their initial response to the audit findings, filed with the Public Service Commission, the utilities wrote that auditors’ data requests were “excessively broad or vague,” and there was limited follow-up even when company officials reached out with concerns about “misunderstandings and ... erroneous conclusions.”
"The Auditor’s negative tone throughout the report and their reliance on incomplete data, mischaracterized processes, and subjective judgements undermines the credibility of the report and creates the risk of presenting an inaccurate picture to customers and stakeholders,” the response stated.
The utilities insist they have fully complied with all laws, commission orders and regulations, and tout their ongoing investments in infrastructure and added staffing that has put additional focus on New York operations and "slashed (call) wait times to less than 30 seconds."
Billing has been a concern, and one way that's measured is adjusted bills, meaning the utility sends out a second or subsequent bill in the same period because of some correction.
The utilities highlight that “less than one percent of the 3 million bills issued require any adjustments.”
But auditors found that, “Avangrid withholds issuance of certain monthly customer bills, thereby avoiding inclusion within the “Adjusted Bill” metric — over 70,000 customer bills per month are excluded from the metric.”
There is no metric for bill delay, which can be caused by staffing shortages, inaccurate meter reads, or a high number of bills requiring manual intervention.
Neither state-regulated utility governs nor manages its finance, planning, engineering, customer service, operation, maintenance or resource allocation, auditors found. Rather, “these utilities are operated by two unregulated Avangrid service companies: Avangrid Networks’ subsidiary, Avangrid Service Company, and Avangrid Management Company.”
The company, in its response, referred to its “strong parent company structure” that provides advantages in cost-sharing, purchasing efficiencies and reduced administrative overhead.
But auditors argued that priority goes to Avangrid’s corporate-level objectives and metrics, resulting in a lack of management focus on local infrastructure needs and “undermining NYSEG's and RG&E's ability to meet regulatory and state policy goals,” the audit states.
The utilities’ boards are “typically in listening mode, not decision-making mode,” auditors found. And “incentive compensation is paid based on combined performance results across Avangrid entities. This practice allows for payouts when NYSEG and RG&E underperform, resulting in New York customers funding compensation for non-performance ... and leads to rate payers bearing the costs for achievements outside the New York service area.”
On the regulatory side, and the assertion of a non-existent compliance committee, Avangrid reportedly clarified that those matters are discussed in the New York President’s Leadership Meeting, auditors wrote, continuing: “However, no meeting materials or meeting minutes exist for this forum.”
