Choctaw Generation LTD

The OIG audited the costs billed to TVA by Choctaw Generation Limited Partnership (CGLP) for power purchases. TVA and Choctaw Generation, Inc., entered into a contract with an effective date of February 20, 1997. Choctaw Generation, Inc. became CGLP through an assignment agreed to by TVA, effective April 30, 1998. The contract obligated TVA to buy 92 percent of the annual power generated for 30 years from a coal generation plant to be built by CGLP in Choctaw County, Mississippi.CGLP constructed the Red Hills Generation Facility (RH) to burn lignite coal in two fluidized-bed combustion boilers generating a combined 440 megawatts of power. The facility's fuel is supplied by Mississippi Lignite Mining Company's lignite mine located adjacent to RH. TVA's 30-year obligation to buy power from CGLP started when RH began commercial operation April 1, 2002. Our audit included $400.3 million in costs billed by CGLP associated with the period October 1, 2010, through September 30, 2013. Our objective was to determine if the costs billed were in accordance with the contract's terms and conditions.In summary, we found:TVA's electronic workbook used to calculate the invoice amount does not contain a formula needed to account for unexcused hours when TVA directs RH to provide less energy than at full capacity (derated) and RH cannot produce any power.TVA needs to improve documentation and communication of adjustments to the RH meter data.CGLP billed TVA $12,674 in costs for meter readings not supported by actual meter data on the October 2011 invoice.CGLP overbilled TVA a net $5,135 due to data entry errors made by TVA in the electronic workbook used to calculate the invoice amount.We recommended TVA management take action to (1) revise the electronic workbook to include a formula to address time periods when TVA directs RH to provide derated capacity and RH cannot produce any power; (2) recover $12,674 in unsupported costs; (3) establish a procedure for documenting and communicating adjustments to the RH meter data; and (4) recover $5,135 in overbilled costs. Summary Only