KRS 278.5085: Presumption of reasonableness of supply contract for natural gas

produced from coal through gasification process.

If a gas distribution utility as defined in KRS 278.010(3)(b) enters into a twenty (20) year

supply contract with any person for pipelin e quality synthetic natural gas produced from

coal through a gasification process, the commission shall find the transaction reasonable

and shall allow the utility to recover the cost of the synthetic natural gas if:

(1) The only coal used in the gasificat ion process is coal subject to the tax imposed

under KRS 143.020;

(2) The price per million British thermal units (BTU) is no greater than the long -term

market price derived from the simple average of the Henry Hub monthly futures

prices for natural gas as reported by the New York Mercantile Exchange (NYMEX)

for the sixty (60) months immediately following the effective date of the contract,

adjusted annually based upon the change in the Annual Consumer Price Index for

All Urban Consumers for the Midwest Reg ion as published in April by the United

States Department of Labor, Bureau of Labor Statistics, or a suitable Consumer

Price Index calculation if this Consumer Price Index is not available. The total price

adjustment over the life of the contract shall not exceed one dollar and fifty cents

($1.50) per million BTU; and

(3) The utility's aggregate long -term supply contracts for the purchase of synthetic

natural gas produced from coal through the gasification process do not exceed

twenty five-percent (25%) of the annual system supply requirements of the utility,

by volume, as measured in thousand cubic foot units (Mcf) at the time the utility

enters into the contract.