1. (1) The audit of prudence of gas purchases shall apply to Class A gas companies only. Class A gas company shall mean a local gas distribution company having annual gas operating revenues of two million five hundred thousand dollars ($2,500,000) or more.

   1. (a) Unless otherwise ordered by the Commission, the Staff and the LDCs shall prepare and issue a request for proposals and after reviewing the proposals, recommend to the Commission a qualified consultant to evaluate and report annually on the prudence of any Gas Costs included in the PGA. Subject to the approval of the Commission, a contract to perform the audit shall be awarded to the consultant to cover at least two (2) consecutive annual audits.

      1. 1. The scope of the evaluation shall be agreed to by the Staff and the LDCs and shall include guidelines to be used by the consultant in performing any such prudence review.
      2. 2. Before selecting a consultant, the Staff and the LDCs shall determine the maximum amount to be paid for the audits that will be included in thc contract. Each LDC shall pay to the consultant an equal portion of the cost of the audit(s).
      3. 3. The amount paid to the consultant by an LDC shall be recorded in the LDC’s Deferred Gas Cost Account and shall be recovered through the procedures set forth in these PGA rules.

   2. (b) Each LDC shall file a non-binding gas purchase plan with the Commission at least annually.

      1. 1. An LDC may, at its option, update the plan whenever it deems appropriate.
      2. 2. The gas purchase plan shall include a general statement of the Company’s gas purchasing policies (e.q., the consideration given by the Company to the cost of gas, the security of the gas supply, the ability to obtain deliverability of the gas and other factors deemed relevant by the Company) which are established under the guidelines adopted under subsection (1)(a) of this rule.
      3. 3. All such plans shall be confidential and may be filed under appropriate protective orders.

   3. (c) In connection with the filing of the annual report of transactions in the Deferred Gas Cost Account required by Rule 1220-04-07-.03(2), each Class A LDC shall file a summary report detailing its gas purchasing practice during the period covered by the annual report. This requirement may be satisfied by the inclusion of such summary report information in the consultant’s report that is required under section (1) of this rule.

      1. 1. Within ninety (90) days after receipt of the gas purchase practices report information and the consultant’s report, the Commission, in its discretion, may order a hearing to review the prudence of an LDC’s gas purchasing practices and subject to the hearing, order the LDC to refund any imprudent gas costs collected under the provisions of the PGA Rules during the annual period under review. Any such order shall be subject to appeal in accordance with applicable law.
2. (2) If the Commission does not order a hearing within the ninety (90) day period, the LDC’s gas purchasing practices shall be deemed prudent.

Authority: T.C.A. §§ 65-2-102 and 65-4-104. Administrative History: Original rule filed October 29, 1993; effective March 1, 1994. Editorial changes made by the Secretary of State pursuant to Public Chapter 305 of 1995; “Commission” and references to the “Commission” were changed to “Authority” and references to the “Authority”; effective March 28, 2003. Administrative changes made to this chapter on April 27, 2018 pursuant to Public Chapter 94 of 2017; “Tennessee Regulatory Authority” references were changed to “Tennessee Public Utility Commission,” “Authority” references were changed to “Commission,” “Authority Director” references were changed to “Commissioner,” and “Chief” references were changed to “Director.”