Question for the group - do your E&O policies cover you if you have to participate in formal regulatory proceedings? I'm working on a large audit for a steel mill here in Harrisburg, and there's a possibility this could end up before the Pennsylvania PUC if PPL disputes our findings. My current policy with Hartford covers 'professional liability' but I'm not sure if that extends to formal hearings, expert witness testimony, etc. The potential refund is over $180,000 so the stakes are high if this gets messy.
E&O coverage for regulatory proceedings?
Sylvia, that's a great question and one that bit me a few years ago. My old policy didn't cover regulatory defense and I ended up spending $15,000 in legal fees when Duke Energy dragged a rate case before the Ohio PUC. Now I specifically have regulatory coverage as part of my E&O policy. Technology Insurance Company offers it as a standard feature - might be worth getting a quote from them for comparison.
Most standard E&O policies don't automatically include regulatory proceedings. I learned this the hard way when Alabama Power challenged one of my audits before the Alabama PSC. Had to pay out of pocket for an attorney and expert witnesses. The case went on for 18 months and cost me about $22,000 in legal fees, but we eventually won and the client got their $95,000 refund. Now I pay extra for regulatory coverage - about $600/year additional premium but worth every penny.
Sylvia, you definitely want regulatory coverage for a case that size. Entergy Arkansas took one of my audits to the Arkansas PSC a couple years back and the proceeding lasted 8 months. Even though we prevailed, my legal costs were over $18,000. If your current Hartford policy doesn't include it, you might be able to add an endorsement. Otherwise, consider switching carriers before this case heats up further.
I've got regulatory coverage through my Beazley policy. Never had to use it yet (thankfully) but it covers defense costs, expert witness fees, and even potential sanctions if the commission rules against you. The coverage limit is separate from your main E&O limit too, which is important. For a $180K case, you're definitely going to want this protection if PPL decides to fight hard.
What type of overcharges did you find Sylvia? If it's something straightforward like incorrect rate classification, PPL might settle rather than go through a formal proceeding. But if it's more complex like power factor penalties or demand ratchet calculations, they might dig in and fight. LG&E settled a $67,000 case with me last year rather than face a Kentucky PSC hearing, but every utility is different in their approach.
Sylvia, make sure whatever regulatory coverage you get includes appeal rights too. FirstEnergy lost a case at the PUCO level a few years ago but appealed to the Ohio Supreme Court. The client's legal costs doubled during the appeal process. Most utilities won't go that far, but for $180K they might consider it. Also check if your coverage includes any potential refund bond requirements the commission might impose.
I've been through several PUC proceedings over the years, mostly with TVA and Nashville Electric. The key is having excellent documentation from day one of your audit. If your methodology is sound and your calculations are correct, most commissions will side with the customer. But the process can be expensive and time-consuming even when you win. Regulatory coverage is absolutely essential for any auditor doing significant commercial work.
One thing to watch out for - some regulatory coverage policies only kick in after you've exhausted the utility's internal appeals process. Make sure your policy covers you from the first formal filing, not just final commission proceedings. Georgia Power has a multi-step internal process that can take 6-9 months before you ever get to the Georgia PSC. You need coverage for all phases of the dispute.
Sylvia, what's the timeline looking like with PPL? If you've got some lead time, I'd definitely shop around for better coverage. Ohio Edison dragged out a case with me for 2 years and my legal bills were astronomical. The good news is that if your audit work is solid, most commissions are pretty fair in their rulings. But you need the financial protection to get through the process without going broke.
Has anyone dealt with simultaneous state and federal proceedings? I had a case involving a CPS Energy customer that touched both Texas PUC jurisdiction and some FERC issues. The regulatory coverage question gets really complicated when you're dealing with multiple agencies. My carrier initially balked at covering the FERC portion but eventually came around when I showed them it was all part of the same underlying dispute.
I just went through the insurance shopping process myself and found that regulatory coverage varies widely between carriers. Some include it automatically, others charge 20-30% extra, and some don't offer it at all. Travelers quoted me a good rate but excluded regulatory entirely. Ended up with Professional Underwriters - slightly higher premium but comprehensive regulatory coverage including appeals and enforcement actions.
Thanks everyone for all the advice. I ended up adding regulatory coverage to my Hartford policy for an additional $750/year premium. PPL initially pushed back on our findings but ultimately agreed to settle for $165,000 without going to the PUC. The threat of regulatory proceedings probably helped motivate them to negotiate. Still glad I have the coverage now for future cases though.
Great outcome Sylvia! That's exactly why having regulatory coverage is so valuable - even if you never use it, the utilities know you have the resources to fight them if necessary. That changes the whole negotiation dynamic. Here in Idaho, Idaho Power is much more willing to settle disputes when they know you're properly insured and prepared to go the distance if needed.