Review of Coal Quality Adjustment Report Payments

We evaluated TVA’s administration of Coal Quality Adjustment Reports (CQAR) to determine if the Coal Quality Adjustment Reports were accurately calculated in accordance with the contract terms. We determined CQARs were not always calculated in accordance with the applicable contractual terms, and as a result, TVA did not accurately adjust the payments made to some coal vendors. The miscalculations were due to incorrect (1) rounding of moisture, ash, and British thermal units (BTU) quality adjustment rates and (2) weighted averages used for moisture, ash, and sulfur calculations. We estimated the incorrect calculations resulted in net underpayments to coal vendors totaling $103,576.