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necessary to exercise the Commission’s complaint function, would impose an
administrative burden on the EMCs, and would not protect confidential information.
The Commission considered all of the comments and was ready to adopt a Rule
to implement G.S. 117-18.1(a)(3) when, on May 4, 2001, the North Carolina Propane
Gas Association, Inc. (NCPGA), filed a petition to intervene. The December 5, 2000
Order initiating the rulemaking proceeding had required that all petitions to intervene be
filed by January 16, 2001, and NCPGA did not explain why its petition was late.
NCEMC objected to the petition and moved to strike it. On May 16, 2001, the
Commission denied NCPGA=s petition to intervene as untimely.
Also on May 16, 2001, the Commission issued an Order which discussed and
decided the issues raised by the parties to the rulemaking proceeding, adopted
Commission Rule R19-1, and provided other guidance. A copy of Commission Rule
R19-1 is attached as Appendix B. The major issues decided by the May 16, 2001 Order
were as follows:
 The Commission generally agreed with the Public Staff’s view of the
Commission’s role and authority under G.S. 117-18.1(a)(3). The Commission
concluded that it has some oversight responsibility in addition to its authority to hear
complaints. To that end, the Commission decided to establish annual filing
requirements, including an annual report (on a form prescribed by the Commission and
available from the Chief Clerk of the Commission) on the transactions between the
EMCs and their separate business entities. The Commission stated that an annual
transaction report, in conjunction with the other filing requirements in the new Rule, will
enable the Commission and the Public Staff to monitor the cost allocations and transfer
pricing for goods and services to and from the EMCs that engage in separate business
activities pursuant to G.S. 117-18.1. This annual transaction report is designed to
provide a contextual framework in which the EMCs are required to demonstrate
compliance with the transfer pricing condition.
 The Commission stated in the May 16, 2001 Order that it will rely on the
Public Staff to review the annual transaction reports and to take appropriate action
should it discover problems.
 The Commission concluded that audited financial statements would
provide useful and relevant information regarding an EMC's separate business activities
and that EMCs engaged in separate business activities pursuant to G.S. 117-18.1
should be required to file audited financial statements on an annual basis.
 The Commission concluded that EMCs engaged in separate business
activities pursuant to G.S. 117-18.1 should be required to file a cost allocation manual
and should be required to update it annually or whenever there are significant changes
in cost allocation methodologies. A cost allocation manual describes how an entity has
decided to allocate and record costs between and among itself and its affiliates. A cost
allocation manual is a tool which communicates cost allocation guidelines and