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									 ERM & Internal Controls




Case Study: Alaska Utility Gets SOX Compliant
By Todd Neff                                     tified Security Solutions, a consulting                   “A lot of times organizations still have
                                                 firm based in Portland, Oreg. About 20                 too many key controls,” says Klein (who

D     oing business as an electric utility
      in Alaska has its special challenges,
such as bad weather and sometimes un-
                                                 Chugach employees did most of the pro-
                                                 cess documentation, with the consultant
                                                 focusing on strategy and program man-
                                                                                                        has since set up her own shop as GRC
                                                                                                        Consulting Services). “It’s not to say [all
                                                                                                        controls] are not important—or that Sally
certain fuel supplies. But as the leaders of     agement.                                               or Joe or whoever performs them aren’t
Chugach Electric Association, Alaska’s               “The only full-time people were the                important. It’s that for enterprise risk and
largest electric utility, will tell you, regu-   two people from the consulting firm who                compliance, we don’t have to, as auditors,
latory compliance is much the same there         provided oversight, guidance, and the kick             test them.”
as in the Lower 48.                              in the butt we needed,” Smith said.                       Remember that Chugach began its ef-
    Chugach (pronounced chew-gatch),                 The first step was to identify the trans-          fort in 2007, when companies and their
based in Anchorage with $288 million             actions KPMG would want to test, which                 audit firms still labored under the exact-
in revenue and 330 employees, provides           were then classified into nine “cycles.”               ing language of Auditing Standard No.
electricity to 70,000 retail customers in        Those cycles included revenue, supply                  2 from the Public Company Accounting
and around Alaska’s largest city. It also        chain, payroll, financial reporting, treasury,         Oversight Board. Total number of key
sells wholesale energy to smaller utilities      and cash management, among others.                     controls Chugach tallied up that first
stretching around the “Rail Belt” con-               Once those processes were identified,              year: 230. Ouch.
necting Homer, Anchorage, Fairbanks,             the definition of key controls could be-                  “It was like going to the doctor and
and points between.                              gin. Like many companies circa 2007, says              they say you need 10 tests,” Smith says.
    Technically the business is a coopera-       Cheryl Klein, the certified security con-                 By 2008, however, the fog around
tive, owned by its members rather than           sultant who worked with Chugach, the                   SOX compliance had lifted. The PCAOB
stockholders of the sort that Sarbanes-          business had too many of them.                         scrapped AS2 in favor of the much more
Oxley Act aims to protect. But Chugach
issued publicly traded bonds in the 1990s
that first brought it under the purview of                ABOUT THE COMPANY
the Securities and Exchange Commission,
and in 2007 its outside auditor KPMG de-           Company
livered another dose of reality: The util-         Chugach Electric Association
ity had to submit to SOX compliance as
a small filer.                                     Headquarters
    Dave Smith, senior vice president of           Anchorage, Alaska
administration for Chugach, knew Sar-
banes compliance wouldn’t be an easy               Employees
feat, especially with the unique challenges        330
Chugach faces. One
								
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