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Vectren Energy Delivery of Ohio

Liberty conducted the 2002 Gas Cost Recovery management/performance audit of Vectren Energy Delivery of Ohio (VEDO) for the Public Utilities Commission of Ohio.  The overall mission of the audit was to investigate VEDO’s management policies and operational procedures in order to determine VEDO’s effectiveness in fuel procurement to achieve an adequate and reliable supply of gas at minimum prices.  In addition, the audit evaluated steps being taken by VEDO to encourage competitive alternatives to traditional utility services, while at the same time minimizing any negative impact to its sales customers.  The focus areas included supply planning; organization, staffing and controls; gas supply management; gas transportation; and operational issues.

Liberty specifically evaluated whether the Company’s purchasing policies were designed to meet the Company’s service requirements.  A review was conducted of the Company’s audit period, and planned, supply and capacity portfolios, with an assessment of whether the portfolios were reasonable in light of the Company’s audit period and anticipated service requirements and obligations.  Also, the procurement (capacity and supply) planning process was examined to ensure the appropriate allocation of services between sales and non-sales customers.

Other specific issues of interest to the Commission were examined, and were as follows:

  • Review of VEDO’s plan to procure a material portion of its gas supply at pricings established more than one month prior to delivery.  The purpose of the plan was to reduce price volatility;

  • Ensure that VEDO had incorporated in it’s tariffs a code of conduct for nondiscriminatory application of its tariff provisions and rules for the transfer of information to its marketing affiliate;

  • Examine the forecasting methodology contained in a previous PUCO Case and compare it to the forecast utilized in the development of the Company’s contractual entitlement strategy;

  • Examine the reasonableness of the level of compensation received by VEDO from its Asset Manager for VEDO’s capacity; 

  • Review the commodity reservation charges for base load and swing volumes of natural gas.

The final report for this project contained a number of recommendations for improvement in VEDO operations, and the report was used in the Commissions GCR hearing process. 

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