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An Audit Report on the System Benefit Fund and the Low-Income Electric Discount Program at the Public Utility Commission

July 2011

Report Number 11-043

Overall Conclusion

The Public Utility Commission (Commission) made expenditures from the System Benefit Fund (SBF) for the Low-Income Electric Discount Program (discount program) in accordance with the Public Utility Regulatory Act (Texas Utilities Code, Title 2), the Texas Administrative Code, and General Appropriations Act requirements. The SBF cash balance was $548,823,167 at the end of fiscal year 2009 and $607,788,713 at the end of fiscal year 2010.

The Commission should strengthen two important aspects of its administration of the SBF. Specifically:

- The Commission should conduct analyses of the SBF fee that utility customers pay to determine whether that fee amount is appropriate. The Commission has approved and set the SBF fee at 65 cents per megawatt hour, the statutory maximum, since fiscal year 2002.

- The Commission should verify whether the total amount of SBF fees the State receives is the amount the State should have received.

The Commission also should strengthen two important aspects of its administration of the discount program. (The discount program enables eligible customers to receive discounts on their utility bills and is funded by the SBF.) Specifically:

- The Commission should monitor the contractor that determines which customers are eligible for the discount program to ensure that the contractor correctly identifies all eligible customers.

- The Commission should verify the accuracy of the amounts of reimbursements that retail electric providers request for providing discounts.

Although the Commission should make certain improvements in its administration of both the SBF and the discount program, the Commission properly accounted for its expenditures from the SBF in accordance with applicable requirements. The Commission also has a reasonable process for setting discount rates, and 97 percent of customers that auditors tested received the correct discount amount.

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