KRS 278.274: Review of natural gas utility's purchasing practices in determining

reasonableness of proposed rates -- Reduction of rates by commission.

(1) In determining whether proposed natural gas utility rates are just and reasonable, the

commission shall review the utility's gas purchasing practices. The commission may

disallow any costs or rates which are deemed to result from imprudent purchasing

practices on the part of the utility.

(2) When proposing new rates, the utility shall be required to prove that th e proposal is

just and reasonable in accordance with the requirements of this section.

(3) It shall be presumed that natural gas purchases from affiliated companies are not

conducted at arm's length.

(a) For purposes of this subsection, affiliated companie s shall be defined as those

in which one (1) or more of the owners control or have the right to control the

business affairs of all affected companies.

(b) In instances in which a utility purchases natural gas from an intrastate affiliate,

the commission s hall assume jurisdiction of the affiliated company as though

it were a utility as defined in KRS 278.010. The commission's jurisdiction

shall extend to that extent necessary to ensure that the rates charged the utility

and ultimately to the consumer are just and reasonable.

(c) If the commission determines that the rates charged by the utility are not just

and reasonable in that the cost of natural gas purchased from the affiliated

company is unjust or unreasonable, the commission may reduce the purchased

gas component of the utility's rates by the amount deemed to be unjust or

unreasonable.

(d) The commission may also reduce the rate charged by the affiliated company

by the same amount.