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Thursday, April 7, 2011 08:17 pm

State’s power buyer under fire

Audit shows problems at Illinois Power Agency

The state agency responsible for buying Illinois’ electricity is under fire after an annual audit showed numerous problems with accounting and transparency.

A March 24 report by Illinois Auditor General William Holland says the Illinois Power Agency (IPA) needs to correct 35 “weaknesses” in financial transparency, rulemaking and more. The report admonishes IPA for storing money outside the state treasury, failing to create an annual budget and even lacking basic office supplies.

Among the more major issues identified in the audit is a lack of financial reporting and accounting records maintained by IPA.

“... [F]or the second year in a row, the agency did not provide accurate and complete financial information,” the audit states. “Specifically, the financial information provided did not contain all the necessary information regarding funds held outside of the state treasury.”

One of the most unusual problems identified by the audit was a lack of adequate staff. IPA director Mark Pruitt is one of only two employees in the entire agency, and the second employee, chief financial officer Kristene Callanta, was only hired in January 2011 – after the period covered in the audit. The lack of staffing coincides with the agency’s failure to create specialized bureaus to handle certain tasks, the audit shows.

“Failure to create these required bureaus is a violation of state statute,” the audit says. “In addition, because these bureaus were not created, the director had the sole responsibility for scoring all proposals and selecting winners for the procurement process, which could result in an abuse of power.”

IPA was created in 2008 to arrange the purchase of electricity from power companies by utilities through a bidding process. The electricity industry in Illinois is split into two types of companies; power companies generate electricity and sell it to utilities, who own the transmission lines and deliver the electricity to consumers for a fee. Prior to 2008, the State of Illinois allowed utilities to bid directly for electricity, but that often resulted in higher prices because utilities tended to buy power from their own parent companies. For example, a 2007 complaint filed with the Federal Energy Regulatory Commission by Illinois Attorney General Lisa Madigan says prices produced by auctions were “almost 40 percent higher than prices in bilateral electricity markets... and they were produced in a highly concentrated market in which there is evidence of price manipulation.”

With the exception of municipalities like Springfield that have their own power plants, most residential and small commercial consumers in Illinois receive electricity generated by two dominant companies: Exelon Generation and Ameren. Much of that electricity is delivered by ComEd, which is owned by Exelon, and Ameren Illinois, which is owned by Ameren. IPA acts as a middle man to prevent collusion and ensure price stability.

Through a state spokesperson, Pruitt declined to comment to Illinois Times, but he indicated within the audit that the agency’s new CFO is working to remedy many of the problems identified. More staff will be hired, Pruitt says, and IPA is working with other state agencies to establish administrative rules and procedures.

But in light of the poor audit results, Republican Sen. Chris Lauzen of Aurora, co-chair of the Legislative Audit Commission, wants to see Pruitt replaced. “In 19 years of serving on the audit commission, I’ve never seen the auditor general have such a damning report,” Lauzen says. “It’s my position, on behalf of 300,000 people back home, that if – after nearly three years – if any person is unable or unwilling to complete the most basic management responsibility of accounting for funds … I asked him why he had not resigned.”

To view the IPA audit and others, visit www.auditor.illinois.gov


Contact Patrick Yeagle at pyeagle@illinoistimes.com.

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