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REQUEST FOR PROPOSAL NO. U 09-GCR-1
A Management/Performance Audit
of the Gas Purchasing
Practices and Policies of a Regulated
Gas Distribution Company
THE
PUBLIC UTILITIES COMMISSION OF OHIO
180 East Broad Street
Columbus, Ohio
43215-3793
PROPOSAL DUE: April 17, 2009
I. INTRODUCTION
The Public Utilities Commission of Ohio (PUCO or Commission), by Entry
journalized March 18, 2009 has ordered a management/performance (M/P)
audit of the gas purchasing practices and policies of Duke Energy Ohio (Duke
or Company). Rule 4901:1-14-07(D), Ohio Administrative Code, specifies that
the Commission has the sole responsibility for selecting the Company's
management/performance auditor. The Commission is now seeking an
auditor through a request for proposals (RFP) to conduct this
management/performance audit. Duke’s management/performance auditor
will be required to conduct such an audit and will be responsible for
submitting a report which identifies and evaluates the management policies
and procedures and assessing the Company’s progress in advancing
competitive retail supply services and ultimately achieving an unregulated
commodity service.
II. THE PROJECT
(A) Purpose of Management Performance Audit
The management/performance audit is designed to investigate the
Company’s management policies and operational procedures. The audit
should determine the Company's effectiveness in fuel procurement to
achieve an adequate and reliable supply of natural gas at minimum prices.
The audit also will examine the Company’s transportation programs,
along with capacity and commodity arrangements utilizing contracts
recoverable through the Company’s purchase gas adjustment - Gas Cost
Recovery (GCR) Mechanism.
(B) Role of Auditor
Any auditor who is chosen by the Commission to perform the audit
expressly agrees to perform the audit as an independent contractor. Any
conclusions, results or recommendations formulated by the auditor may
be examined by any participant to the proceeding for which the audit
report was generated. Further, it shall be understood that the
Commission and/or its Staff shall not be liable for any acts committed by
the auditor or its agents in the preparation and presentation of the audit
report.
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(C) PUCO Staff
The Staff’s involvement in the audit process will be to ensure that the
audit requirements are addressed. Staff personnel shall be copied and
informed of all correspondence between the auditor and the Company
and shall be given five working days’ notice of all meetings and
interviews with the Company, so as to allow Staff the opportunity to
attend. The auditor shall notify the Staff of such meetings and interviews.
The auditor will submit to Staff a list of the individuals being interviewed
and topics to be discussed. This list shall be sent to Roger Sarver at the
following Email address: roger.sarver@puc.state.oh.us. All interviews of
Company personnel and on-site reviews of Company documents must be
conducted at the Company's Ohio offices.
(D) Cost of Audit and Quotation of Charges
The bid for the audit of Duke shall not exceed $75,000.
The maximum expenditure quoted above represents a ceiling price that
takes into account all costs associated with the audit project. Expenses
associated with the preparation and presentation of expert testimony
regarding the findings of the management/performance audit are not part
of the above quoted ceiling prices. These expenses will be billed
separately from the cost of the audit and will be reimbursed up to $35,000
per audit.
The winning proposal will be selected based on expertise in natural gas
procurement, knowledge of the changing natural gas industry, lead
auditor and team member qualifications, audit approach, proposal content
and cost.
III. SCOPE OF WORK
In order to fulfill the purpose described above, the designated auditor will be
expected to analyze, interpret and make specific recommendations with respect
to the audit requirements identified below.
(A) AUDIT REQUIREMENTS
(1) Examine the Company’s peak day and winter season forecasting
methodology for both sales and choice customers. Compare the
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forecast results to actual send-outs to access the accuracy of the
forecasting methodology. Verify that the forecasting methodologies
are consistent between and sales and choice customers and if any
differences between them assess the rational for such differences.
(2) Compare the Company’s forecasted peak day and seasonal demands
to the portfolio of commodity and capacity entitlements under
contract.
(3) Determine if the Company’s strategy of contracting for capacity
entitlements has minimized unutilized capacity and costs.
(4) Review Duke’s plan that assesses the needs of the Gas Commercial
Operation’s department over the near term.
(5) Examine the Company’s descriptions of the relationships and
interactions between the forecasting and planning models and tools
developed, shared and utilized by Duke’s gas commercial operations
department for demand forecasting and supply planning.
(6) Review the Company’s analysis of the reasons for the long-term
declining consumption.
(7) Verify that the Company monitored developing pipeline projects and
other changes in the natural gas industry to evaluate opportunities to
further diversify Duke’s natural gas supply portfolio.
(8) Examine the Company’s revised asset manager procedures for the
inclusion of events and action timelines.
(9) Assess the Company’s FERC monitoring procedures including the
tracking of cases and refunds.
(10) Document the Company’s efforts to improve the documentation of
its commodity supplier selection process.
(11) Examine the objectives of Duke’s hedging program and impact on
price volatility. Also ensure that the Company’s physical hedging
program does not extend beyond 36 months without Commission-
approval.
(12) Review the Company compilation of monthly results of its hedging
program on an aggregated basis and explore the use of a
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combination of training, outside assistance, and commercially
available tools in order to assure the effectiveness of its hedging
program.
(13) Review the Company’s written procedures for negotiating flex-rate
contracts.
(14) Verify that the Company has developed a plan for the times when
only one gas controller is on duty in gas control.
(15) Examine Duke’s monitoring and management of lost and
unaccounted for gas program, in part through the development of a
plan to address any identified problem areas.
(16) Assess the Company’s utilization of its propane facilities for
economic dispatch purposes, in situations other than emergency or
peak operating conditions, without jeopardizing the operational
integrity of the propane facilities.
(17) Determine if the Company evaluated its asset management
agreement with respect to developments at FERC which may allow
the Company to assign assets to an asset manager instead of entering
into an agency agreement. As part of the evaluation, Duke will also
consider the alternative of retaining the capacity and generating
revenue in the secondary market via off-system sales and capacity
release transactions.
IV. DELIVERABLES AND DEADLINES
(A) Duke shall be ordered by the Commission to enter into a contract, which
shall incorporate by reference all provisions of this proposal, with the
auditor chosen by the Commission to perform the
management/performance audits. Auditors will submit a copy of the
contract agreement between the auditor and Company to Staff.
(B) Availability of Documents - Upon request of the auditor or Staff, the
Company shall provide any and all documents or information requested.
The Company may conspicuously mark such documents or information as
being "confidential" if this data is closely held. In no event, however, shall
the company refuse or delay to provide such documents or information.
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The Staff or the Auditor/Contractor shall not publicly disclose any
document marked "confidential" by the Company, except upon three
days' prior notice of intent to disclose served upon the Company's
counsel. Three days after such notice, the Staff or Auditor may disclose or
otherwise make use of such documents or information for any purpose,
unless the Company moves the Commission for a protective order
pertaining to such documents or information within the three-day notice
period.
The three-day notice period will be computed according to Section 4901-1-
07 of the Ohio Administrative Code. Service shall be complete upon
mailing or delivery in person.
(C) Fiscal Reports - The auditor shall submit invoices when work is 50%
complete and when work is 100% complete to Staff. The invoices shall
include hours expended by project personnel, hourly rates and includable
billed expenses which are sufficiently detailed to allow Staff to identify the
work completed and its corresponding charges. All reasonable and
justified expenses will be forwarded to the Company for payment. Failure
to follow this procedure may result in delayed or reduced payments.
(D) Presentations - The auditor may meet with the PUCO Staff prior to start of
the audit. Upon the request of Staff, the auditor will meet to present its
findings, conclusions and recommendations.
(E) Draft Report – Four copies of a draft of the final report will be delivered to
the Staff fourteen days prior to the due date of the final report, as shown
in Attachment A.
(F) Final Report - Eleven (10) copies of the final report, plus one reproducible
original will be delivered to Staff by the date specified in Attachment A.
The final report shall include an Executive Summary of Recommendations
and an index to show where Audit Requirements are addressed. The Staff
may request that certain statistical information be provided in a specified
format on computer disk.
(G) Working Papers - The auditor shall deliver to Staff one complete set of
working papers, indexed and in orderly form, supporting the
development of all calculations and recommendations by the auditor and
summarizing the procedures used in analyzing and evaluating all data.
These working papers must be delivered to Staff concurrent with the
delivery of the final report. For the purposes of this project, audit
interview notes shall be deemed part of the auditor's work papers.
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(H) Production of Documents - Upon request of the Commission or its Staff at
any time, the auditor shall immediately produce any document or
information obtained or produced within the scope of the audit.
(I) Testimony - The auditor shall present expert testimony during the course
of the hearing at which the audit report is considered.
V. MINIMUM CONTENTS OF PROPOSAL
(A) General Requirements
Each proposal shall contain page numbers and a Table of Contents. In a
separate numbered section, reflected in the Table of Contents, the
following information shall be provided:
(1) The name, mailing address, telephone, Email address and fax
number of the individual to contact if further information about the
proposal is desired.
(2) A description of the proposed Scope of the Work to be performed
including a workplan, expected deliverable products, and task
timing. The maximum contract price quoted by the proposer shall
include all items of work defined in the proposal. The consultant
will be expected to deliver the performance described in its
proposal within the agreed price.
(3) Identification, by name, of the Lead Personnel to be employed, the
extent of their involvement in the project. Contract terms will not
permit substitution of lead personnel without prior written
approval of the assigned Staff member. Identification of lead
personnel in the cost proposal will not constitute satisfactory
compliance with this requirement.
(4) Identification by name and title, and the hourly rate of pay and all
other related costs, of the individual or individuals who will
present expert testimony before the Commission during the
appropriate hearing.
(5) A description of the qualifications, experience, and proven results
achieved by all audit team members to be employed on the project
with a summary of work performed on projects similar to the one
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contemplated by this RFP. The Commission reserves the right to
request samples of prior relevant work from any proposer prior to
making its final consultant selection.
(6) A listing of the proposer's and subcontractor's clients which may
have any financial interest in or litigation with Duke or its
affiliates. Proposers maintaining any present or ongoing contracts
or agreements with the aforementioned company and affiliates
may, at the discretion of the PUCO, be disqualified by reason of
possible conflict of interest. In the proposal, such contracts should
be described in sufficient detail that the PUCO can determine
whether such a conflict of interest exists. A response indicating
that this information will be provided on request or that such
contracts are too numerous to enumerate will be cause for
disqualification of the proposer.
(7) A listing of all the proposer's offices and facilities in Ohio. If none,
state - none.
(8) A statement of financial responsibility including certification that
the proposer, joint partners if the proposer is a conglomerate
operation and any subcontractors have no outstanding liens or
claims against them.
(9) References that may be contacted to obtain an assessment of the
auditor's work performance. References should be provided for
the company and for designated principals for the project to be
undertaken. The information required for each reference is as
follows:
- Name of individual to contact
- Company at which the individual is located City and State
Telephone number
- Company or principal for whom the reference is given
- Project or work for which reference is given
(10) The name(s) of all subcontractors to be used in performance of the
proposed work, identification of the specific items to be
performed/provided by the subcontractor, and the cost of the
proposed subcontracted work; or if no subcontractors are to be
used, the entry should be "Subcontractors - none". (All such
subcontracts indicated in the proposal will be acknowledged as
accepted by the Commission upon selection of the proposal for
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contract award unless the proposer is previously notified of the
contrary. No addition, deletion, or substitution of subcontractors
will be permitted during the course of the contract unless approved
in advance by the Commission in writing.) If subcontractors are
proposed, all information required in this section shall be supplied
for each subcontractor proposed. Such information shall be
supplied in a format parallel to the overall format specified for
proposers.
(B) EEO Data
THE PUCO IS AN EQUAL OPPORTUNITY EMPLOYER AND SERVICE
PROVIDER.
The following required Equal Employment Opportunity data must be provided for
the proposer and each subcontractor:
(1) The proposer's total number of employees.
(2) The percentage of the total which are women.
(3) The percentage of the total which are Black or African American, Hispanic
or Latino, Asian, Native Hawaiian or Other Pacific Islander, American
Indian or Alaska Native, or Two or More Races. (Please specify.)
(4) The proposer's total number of employees located in Ohio offices.
(5) The percentage of the Ohio total which are women.
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(6) The percentage of the Ohio total which are Black or African American,
Hispanic or Latino, Asian, Native Hawaiian or Other Pacific Islander,
American Indian or Alaska Native, or Two or More Races. (Please
specify.)
(7) The number of individuals to be assigned to the project.
(8) The percentage of the total assigned which are women.
(9) The percentage of the total assigned which are Black or African American,
Hispanic or Latino, Asian, Native Hawaiian or Other Pacific Islander,
American Indian or Alaska Native, or Two or More Races. (Please specify.)
(C) Current Contracts
The number of contracts the proposer currently has with the State of Ohio and:
(1) The name of the state agency(s) for each contract.
(2) The cost of each contract.
(3) The duration of each contract.
(4) A brief description of each contract.
VI. REVIEW CRITERIA
Proposals will be evaluated on the basis of the following criteria:
(A) Understanding of Project - The proposal shall demonstrate that the
Proposer has grasped the intent of the project, is knowledgeable of the
technical aspects required and has an understanding of potential problems
and regulatory issues, trends, and perspectives; and the proposed work
plan shall indicate appropriate phasing. The Proposal shall be responsive
to the RFP.
(B) Experience of organization and the personnel assigned to the Project and
Related Organizational Experience - Relevant experience in field, qualified
to undertake assignment. References of previous clients/projects
provided.
(C) Cost - The total proposed contract price as specified in the Proposal.
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(D) Timeliness - Demonstrated ability to meet stated deadline; realistic
timeline; demonstrated proven results of lead personnel, appropriate
methodology.
(E) Compliance with Minimum Contents Requirements - Lack of satisfactory
response to the Minimum Contents Requirements will be grounds for
elimination of any proposal from further consideration.
VII. OTHER PROPOSAL CRITERIA
(A) Proprietary Data in Proposal
Submissions to the Public Utilities Commission of Ohio become public
documents available for open inspection. Proprietary data in a proposal
will also assume this status; therefore, discretionary action is
recommended for any proprietary data contemplated for submittal in
proposals.
(B) Due Date and Submittal Address
Proposals must be received at the following address no later than
5:00 p.m., April 17, 2009. The proposal should be sent in a sealed
container, clearly marked and addressed to:
Public Utilities Commission of Ohio
Attn: Mr. Roger Sarver
Response to RFP No. U09-GCR-1
180 East Broad Street, 3rd floor
Columbus, Ohio 43215-3793.
NOTE: By responding to this request for proposal, the proposer expressly
accepts and is bound by all the terms thereof including all attachments,
exhibits, and schedules.
Five (5) copies of the proposal are to be submitted to the Commission.
(C) Required Response
All firms wishing to remain on the Commission’s bidder list must
subscribe to the PUCO RFP list by clicking on the “RFP – Requests for
Proposals” link at: http://www.puco.ohio.gov/PUCO/Docketing
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Pending RFPs and further information will be posted at the above
website.
All bidders submitting proposals will be notified by mail of the companies
with the successful bids.
(D) Auditor Requirements and Minority Participation
(1) The PUCO in awarding the contracts will give preference to Ohio
auditors. Ohio auditors include not only established domestic
companies actively doing business in Ohio, but also encompass
multi-state companies with headquarters outside of Ohio, but with
substantial commitments of offices, divisions, and facilities within
this State.
(2) The Commission will give preference to proposers demonstrating
compliance with Minority and women EEO criteria.
(E) Late Proposals
A proposal is considered late if it is received after the exact time set for
receipt of proposals. A late proposal will be considered along with other
proposals only if it is received before the evaluation of proposals has, in
the sole opinion of the Commission, substantially progressed and then
only if one of the three following conditions exists:
(1) Mail Delay - The lateness is due solely to a delay in the mail when
the response has been sent by registered or certified mail for which
an official dated postmark on the original receipt has been obtained.
(2) Commission Error - If it is received by any reasonable means at the
Commission in sufficient time to be delivered at the office designated
for the opening and would have been received at such office except
for delay due to mishandling at the Commission. Only an
appropriate date or time stamp showing the time of receipt will be
accepted as evidence of timely receipt of the proposal.
(3) Exceptions - Any other late proposal will not be considered, unless it
is the only proposal received or in the sole judgment of the
Commission it offers some important technical advantage and is of
benefit to the Commission.
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(F) Modification or Withdrawal of Proposal
Any proposal may be withdrawn or modified by written request of the
proposer if the request is received by the Commission at the above
address before the date set for receipt of original proposals
(G) Modification or Withdrawal of this RFP
This RFP may be modified or withdrawn at any time prior to the time set
for receipt of proposals and thereafter as long as no proposal has been
opened. Upon any such modification or withdrawal, all proposers will be
notified and any person or firm who has expressly requested such notice
in writing will also be notified of such changes at the discretion of the
Commission.
(H) Right to Reject any and all Proposals
The Commission reserves the right, without limitation or discussions with
those submitting proposals, to reject any and all proposals.
(I) Relevance
The proposer shall include only relevant information and pertinent
exhibits in the proposal. Duplication of materials provided in the RFP,
exhaustive resumes, inclusion of standard company promotional
materials, etc. will not garner additional points in the evaluation process
and may detract from the clarity and conciseness of the proposal.
(J) Statutory Scope of the Audit
Any Auditor/Contractor who is chosen by the Commission or the
company to perform an audit shall execute its duties pursuant to the
Public Utilities Commission's statutory authority to investigate and
acquire records, contracts, reports and other documentation under
Sections 4903.02, 4903.03, 4905.06, 4905.15 and 4905.16, Revised Code.
(K) Disclosure
Any Auditor/Contractor shall abide by all provisions of Sec. 4901.16 of
the Ohio Revised Code which states:
Except in his report to the Public Utilities Commission or when
called on to testify in any court or proceeding of the Public Utilities
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Commission, no employee or agent referred to in Section 4905.13 of
the Revised Code shall divulge any information acquired by him in
respect to the transaction, property, or business of any public
utility, while acting or claiming to act as such employee or agent.
Whoever violates this section shall be disqualified from acting as
agent, or acting in any other capacity under the appointment or
employment of the Commission.
Once disclosure is permitted by Section 4901.16, Revised Code, the
following process applies to the release of any document or information
marked as confidential. Three days’ prior notice of intent to disclose shall
be provided to the party claiming confidentiality. Three days after such
notice, staff or the auditor may disclose or otherwise make use of such
documents or information for any lawful purpose, unless the Commission
is moved for a protective order pertaining to such documents or
information within the three-day notice period. The three-day notice
period will be computed according to Rule 4901-1-07, Ohio Administrative
Code.
VIII. OTHER PROPOSAL CRITERIA
Administrative or technical questions regarding this RFP should be directed to
Roger Sarver at (614) 466-7647.
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