STATE OF MAINE April 23, 2020

PUBLIC UTILITIES COMMISSION

ORDER ON LIBERTY AUDIT
COSTS
PUBLIC UTILITIES COMMISSION Docket No. 2018-00194
Investigation into Rates and Revenue
Requirements of Central Maine Power
Company

PUBLIC UTILITIES COMMISSION Docket No. 2019-00015

Investigation into Central Maine Power
Company Metering and Billing Issues

BARTLETT, Chair; WILLIAMSON and DAVIS, Commissioners

I. SUMMARY

With this Order on Liberty Audit Costs, under 35-A M.R.S. § 113(3) the
Commission directs that 100% of the costs of The Liberty Consulting Group’s audit of
Central Maine Power Company’s (CMP) metering, billing, and customer-service
practices be borne by CMP’s shareholders.

II. BACKGROUND

A. Liberty’s Audit of CMP and the Commission’s Findings

In Docket No. 2018-00052, the Commission authorized The Liberty Consulting

Group (Liberty) to conduct a forensic audit of the metering, billing, and customer-service
practices of CMP. See Public Utilities Commission, Investigation of Central Maine Power
Company Metering, Billing, and Customer Communication Issues, Docket
No. 2018-00052, Order Initiating Audit (Mar. 22, 2018) (initiating audit under 35-A
M.R.S. § 113). Liberty published its findings in its December 20, 2018 Final Report –
Forensic Audit of CMP’s Metering and Billing Systems.1 The issues Liberty audited and
addressed in its report included CMP’s:

• metering accuracy (including the accuracy of its meters at large and the
question of anomalous meters);
• metering and billing systems (including data collection, storage, and
transmission; accuracy of billings; and analysis of customer usage);
• implementation of SmartCare; and
• customer service (including CMP’s responses to customer inquiries and
complaints).

1Liberty’s report was added to the electronic case files for Docket Nos. 2018-00194 and
2019-00015 on February 22, 2019.
Order on Liberty Audit Costs 2 Docket Nos. 2018-00194, 2019-00015

These issues were then explored in two adjudicatory investigations—the above-

captioned Docket Nos. 2018-00194 and 2019-00015.

1. Docket No. 2019-00015

In its final order in Docket No. 2019-00015, the Commission found (in part as a
result of the findings in Liberty’s report) that: (a) there was no pervasive, systemwide
flaw in CMP’s metering or billing apparatus that led to erroneously high billed usage,
(b) CMP was imprudent in its handling of an issue concerning anomalous meters in its
service territory, and (c) CMP imprudently managed its implementation of SmartCare.
Public Utilities Commission, Investigation into Central Maine Power Company Metering
and Billing Issues, Docket No. 2019-00015, Order at 53–54, 57, 71 (Feb. 26, 2020).

2. Docket No. 2018-00194

In its final order in Docket No. 2018-00194, the Commission found (in part as a
result of the findings in Liberty’s report) that CMP’s customer service was substandard
and imprudently managed both before and after the rollout of SmartCare. Public Utilities
Commission, Investigation into Rates and Revenue Requirements of Central Maine
Power Company, Docket No. 2018-00194, Order at 111–12 (Feb. 19, 2020).

B. Request for Comments and Reply Comments

Having issued the final orders in Docket Nos. 2018-00194 and 2019-00015, this
case is now in a post-adjudicatory compliance phase, one aspect of which is the
decision on the narrow question of who bears the costs of Liberty’s audit. In its final
orders in Docket Nos. 2018-00194 and 2019-00015, the Commission elected to create
an opportunity for comments on this issue before deciding it. Public Utilities
Commission, Investigation into Central Maine Power Company Metering and Billing
Issues, Docket No. 2019-00015, Order at 83 (Feb. 26, 2020); Public Utilities
Commission, Investigation into Rates and Revenue Requirements of Central Maine
Power Company, Docket No. 2018-00194, Order at 71 (Feb. 19, 2020).

At the Commission’s direction, the Hearing Examiner: (1) made available the
contract for Liberty’s services, Liberty’s invoices, and a summary of costs of Liberty’s
audit organized by section of the audit report; and (2) set deadlines for comments and
reply comments on this issue. Mar. 9, 2020 Procedural Order Requesting Comment on
Liberty Audit Costs.

CMP and the OPA each filed comments by the deadline of March 26, 2020, and
reply comments by the deadline of April 2, 2020.

III. LEGAL STANDARD

The 128th Legislature amended the statute that governs the recovery of costs for
management audits. P.L. 2017, ch. 448, § 1. That statute now reads:
Order on Liberty Audit Costs 3 Docket Nos. 2018-00194, 2019-00015

The full cost of the management audit must be recovered from ratepayers,
except that if the audit of an investor-owned public utility contributes to a
commission finding of imprudence that results in a cost disallowance, the
commission shall determine how to fairly allocate the cost of the
management audit to ratepayers or the shareholders of the investor-
owned public utility. In ordering an audit, the commission shall consider
the impact of the cost of the audit upon the ratepayers and other
alternatives that are available.

35-A M.R.S. § 113(3). Thus, when, as in these dockets, an audit contributed to a finding
of imprudence and a cost disallowance, the Commission has the discretion to allocate
the costs of the audit in a way it deems fair.

IV. DESCRIPTION OF COSTS OF LIBERTY’S AUDIT

The total cost of Liberty’s audit and subsequent work was approximately
$580,000. Liberty estimated the breakdown of these costs among the different parts of
its audit as follows:

Category Costs
Meter Accuracy:
Base $ 108,057
Fast Clock $ 110,019
Meter and Billing Systems $ 200,953
SmartCare $ 102,546
Customer Service $ 58,008
Total $ 579,582

This breakdown is based on Liberty’s estimate of the proportion of time each of its
auditors spent on the different aspects of the audit.

V. POSITIONS OF THE COMMENTERS

A. Initial Comments

1. Office of the Public Advocate

In its March 18, 2020 comments, the OPA argued that all the costs of Liberty’s
audit should be borne by CMP. The OPA pointed to the legislative history of 35-A M.R.S.
§ 113(3), which, prior to its recent amendment, required that all the costs of an audit be
borne by ratepayers. According to the OPA, the “express intent of the Legislature now is
that ratepayers will not bear all the costs when, as here, there is a Commission finding
of imprudence.”
Order on Liberty Audit Costs 4 Docket Nos. 2018-00194, 2019-00015

The OPA argued that ratepayers should not bear any responsibility for paying for
the audit because they are captive customers with no control over the management
failures that ultimately led to the audit. As several examples of these management
failures over which ratepayers had no control, the OPA lists various failures of CMP’s
implementation, rollout, and response to errors with SmartCare; anomalies with certain
meters; and poor customer service. In the OPA’s view, “[h]ad CMP managed the rollout
of SmartCare effectively, no audit would have been necessary. It is thus CMP’s
responsibility to pay the costs of the management audit that” its own actions caused.

2. Central Maine Power Company

In its March 25, 2020 comments, CMP argued that 28% of Liberty’s audit costs
should be borne by CMP’s shareholders and 72% by its ratepayers. CMP reasoned that
its shareholders should bear the costs of the audit related to the implementation of
SmartCare and customer service, because the Commission found imprudence in these
areas. But, CMP argued, its shareholders should not assume the costs of portions of
Liberty’s audit where the Commission did not find imprudence, including those costs
related to confirming the accuracy of CMP’s metering systems and SmartCare billing
calculations. CMP also argued that its shareholders should not bear the costs of the
portion of the audit exploring anomalous meters because the Commission did not
directly disallow costs on that issue, though it did require CMP to correct any estimated
overbilling attributable to the meter anomaly and complete upgrades to meter firmware
by March 31, 2020.

With this breakdown, CMP argued that under the plain language of the statute
CMP’s shareholders would be responsible for about $160,554 of the costs and
ratepayers $419,028.

B. Reply Comments

1. Office of the Public Advocate

In its April 2, 2020 reply comments, the OPA argued that CMP’s comments were
an attempt to deflect responsibility. The OPA restated its position that CMP’s
shareholders should bear all of the costs of Liberty’s audit because “CMP’s
mismanagement of SmartCare was the impetus for the Liberty audit.” The OPA added
that it did not have standing to intervene when the audit was initiated in Docket No.
2018-00052, thus depriving the OPA of a chance to contribute to the design of the audit
or interview witnesses. The OPA had standing to intervene only once the adjudicatory
investigation began in Docket No. 2019-00015.

2. Central Maine Power Company

In its April 2, 2020 reply comments, CMP argued that the OPA’s discussion of the
legal standard is invalid; the statute is not ambiguous, according to CMP, and thus
resort to legislative intent or legislative history is not appropriate.
Order on Liberty Audit Costs 5 Docket Nos. 2018-00194, 2019-00015

VI. DISCUSSION AND DECISION

There is no question that Liberty’s audit led to findings of CMP’s imprudence,

resulting in disallowances of costs, in different areas. The OPA argues that CMP’s
shareholders should thus be charged the full cost of the audit. CMP, by contrast, argues
that each audit category should be looked at discretely, and that shareholders should be
charged only that portion of costs from specific categories where the Commission found
imprudence and disallowed costs.

CMP is asking the Commission to read the statute too narrowly. All of the issues
in Liberty’s audit arose out of a common set of facts, as laid out in detail in our final
orders. It was the significant billing errors that arose in the transition to SmartCare and
CMP’s abysmal customer-service response that led to the audit. And it was CMP’s
failings that made it so difficult to discern whether the problems related to SmartCare
exclusively or to the billing and metering system more broadly.

The statute requires the Commission to fairly allocate the costs of the audit
between shareholders and ratepayers. Given the circumstances that led to the audit
and the magnitude of harm to ratepayers from the imprudence it uncovered, it would be
unfair to expect ratepayers to absorb any of the costs of the audit. Thus, under 35-A
M.R.S. § 113(3), the Commission decides that CMP’s shareholders shall bear 100% of
the costs of Liberty’s audit.

VII. CONCLUSION

Accordingly, the Commission

ORDERS

That CMP’s shareholders bear the full costs of Liberty’s audit.

Dated at Hallowell, Maine, this 23rd day of April, 2020.

/s/ Harry Lanphear

Harry Lanphear
Administrative Director

COMMISSIONERS VOTING FOR: Bartlett

Williamson
Davis
Order on Liberty Audit Costs 6 Docket Nos. 2018-00194, 2019-00015

NOTICE OF RIGHTS TO REVIEW OR APPEAL

5 M.R.S. § 9061 requires the Public Utilities Commission to give each party at the
conclusion of an adjudicatory proceeding written notice of the party’s rights to seek
review of or to appeal of the Commission’s decision. The methods of review or appeal
of PUC decisions at the conclusion of an adjudicatory proceeding are as follows:

1. Reconsideration of the Commission’s Order may be requested under Section

11(D) of the Commission’s Rules of Practice and Procedure (65-407 C.M.R. ch. 110)
within 20 days of the date of the Order by filing a petition with the Commission stating
the grounds upon which reconsideration is sought. Any petition not granted within 20
days from the date of filing is denied.

2. Appeal of a final decision of the Commission may be taken to the Law Court by
filing, within 21 days of the date of the Order, a Notice of Appeal with the Administrative
Director of the Commission, pursuant to 35-A M.R.S. § 1320(1)–(4) and the Maine
Rules of Appellate Procedure.

3. Additional court review of constitutional issues or issues involving the justness or

reasonableness of rates may be had by the filing of an appeal with the Law Court,
pursuant to 35-A M.R.S. § 1320(5).

Note: The attachment of this Notice to a document does not indicate the Commission’s
view that the particular document may be subject to review or appeal. Similarly, the
failure of the Commission to attach a copy of this Notice to a document does not
indicate the Commission’s view that the document is not subject to review or appeal.