KRS 278.255: Periodic management and operation audits.

(1) The commission shall provide for periodic management and operation audits of

each utility with annual intra -Kentucky assessable revenue as of December 31,

1983, under KRS 278.150(1) not less than one hundred million dollars

($100,000,000) to investigate ma nagement effectiveness and operating efficiency.

The commission shall complete or provide for a full and comprehensive audit of

each such utility prior to January 1, 1990. After the initial audit of any utility, the

commission may order a subsequent audit of that utility focusing on issues

disclosed by the initial audit. A full and comprehensive audit of any utility initiated

prior to July 13, 1984, may be deemed to satisfy the requirements of this subsection

if the audit was required and directed by the commission and completed after July 1,

1983.

(2) The commission may provide for management or operations audits, or both, of any

utility under its jurisdiction on a regular or irregular schedule to investigate all or

any portion of the management and operati ng procedures or any other internal

workings of the utility.

(3) Audits provided under this section may, at the discretion of the commission, be

performed by the commission staff or by a competent, qualified and independent

firm. When the commission orders an audit to be performed by an independent

firm, the commission shall select the audit firm, which shall work for and under the

direction of the commission, with the cost to be borne by the utility. The

commission shall include the cost of conducting any audits required in this section

in the cost of service of the utility for ratemaking purposes.

(4) The commission shall adopt rules and regulations setting forth the scope and

application of audits, and procedures for the conduct of management and operations

audits. The audit procedures shall provide the utility being audited the opportunity

to comment at various stages of the audit, including an opportunity to comment on

the initial work plan and the opportunity to review and comment on preliminary

audit drafts prior to issuance of a final document. The results of all audits shall be

filed with the commission and shall be open to public inspection.