State law mandates the GCR be passed to customers on a dollar-for-dollar basis. The PUCO monitors and audits each change in the GCR to ensure that the LDC is not making a profit through the GCR on the cost of natural gas. The LDC is authorized, by law, to make adjustments (increases or decreases) to the GCR as long as the LDC can show that no profit is included in the adjustments.
The PUCO also audits each LDC’s management policies and performance to determine whether it has purchased reliable gas supplies at the lowest possible price. The GCR audit process is necessary because natural gas is a commodity that is bought and sold in the marketplace. The price is determined by the supply and demand of the product, thus requiring a constant review of the process.
To ensure the accuracy of GCR calculations, financial audits are conducted every year. Errors are reconciled thorough the refund and reconciliation adjustment in subsequent periods. Every two years, a management performance audit is also conducted for the largest LDCs. These audits are conducted with the assistance of qualified professional auditing firms. Any costs that are determined not to be prudent are disallowed and are refunded to the customers through the refund and reconciliation adjustment in future periods.