Local Power Company Rate Review Process

The Office of the Inspector General audited local rate adjustments processed during fiscal year 2015 to determine if TVA's process for reviewing Local Power Company (LPC) rate change requests complied with the approved Revised Rate Review Process (RRRP) in the TVA regulatory policy. We found TVA's process for reviewing LPC rate change requests did not comply with the approved RRRP in the TVA regulatory policy due to improper and unapproved calculations of the Guideline Amount in two areas. We also noted the method used to initially calculate an LPC's cash ratio excluded loans and investments of electric system funds to third parties. We recommended TVA's Vice President, Operational and Regulatory Assurance calculate the Guideline Amount as stated in the RRRP or obtain approval for the current calculation method and include any loans or investments of electric system funds in the initial calculation to determine the LPC's cash ratio.