Audit: Grid computer system cost nearly $1B

National Grid's problem-plagued rollout of a new computer system on the eve of superstorm Sandy could wind up costing the company nearly $1 billion -- more than double the anticipated price tag.

The finding came in an audit released Thursday by the state Department of Public Service in which regulators also found an executive and senior management culture of "fraternal agreement," a lack of effective governance, and "insufficient" control by the company's New York president.

"These management themes and their impacts were evidenced throughout the organization in every area reviewed as part of the audit," the agency found.

The report, which focuses on National Grid's natural gas operations, says the fall 2012 rollout of a new finance, accounting and human resources software system from developer SAP just as Sandy was pounding the Northeast had a total cost of $945 million. That's well above the anticipated price tag of $384 million. The state agency said National Grid shareholders, not ratepayers, will pay the additional costs.

In the storm's aftermath, National Grid faced an outcry and even lawsuits from employees over errors in paychecks, time reporting and benefits. The company also was working for the Long Island Power Authority at the time, and unionized line workers were frequent critics.

"It soon became apparent that the level of errors in payroll was far greater than expected," the audit found. " . . . Errors continued to occur for almost a year after the go-live date," requiring the company to request a 30-day extension from the IRS for filing of W-2s. "Even with this extension, some W-2s were still late."

In September 2013, the attorneys general of New York and Massachusetts and employee unions reached a $12 million settlement that included fines, back pay and a lump sum amount to each employee.

"The company's efforts to remediate and stabilize the software system have been extensive and costly, the costs for which the company shareholders will pay," the state agency said in a release.

The department has requested that National Grid fully document the costs related to "stabilizing the software system so ratepayers are protected from inappropriately excessive costs."

Steve Brady, a spokesman for National Grid, noted that the SAP system "has been stabilized, we are monitoring and measuring its performance." Customers, he noted, won't pay those costs.

"Overall," he said, "we believe the report was a fair and balanced assessment of the business. We're pleased that they recognized that we run a safe and reliable gas operation. We accept the recommendations included in the audit as opportunities to improve our performance, and that will be our focus going forward."