V. Random Audit Program

A. Purpose

The purpose of the random audit program is to provide continuing assurance, over time, without total reliance on lagging indicators, that the maintenance programs are being maintained in such a manner as to sustain the generating capability of the Generating Assets.

B. Requirements

1. Following completion of the Initial Audit Program described in Section IV above, the CPUC shall prepare a schedule of audits to be performed annually, during the period beginning on the last day of the month of June, following the completion of the initial audit program. This schedule shall schedule a random selection of the defined audit population, such that up to 10 percent of the population is audited annually.

2. The audit program will be conducted in accordance with audit procedures approved by the CPUC. Audit program procedures shall be developed using guidance contained in American National Standards Institute (ANSI) Guidelines for Auditing Quality Systems, including ANSI/ASQC Q10011-1-1994, Q10011-2-1994, and Q10011-3-1994. The audit procedures shall as a minimum address the following topics:

1. Selection and qualification of audit teams

2. Training of auditors

3. Notification of audits

4. Audit planning

5. Conduct of audits

6. Audit reporting and comment resolution or disposition

7. Corrective action follow-up

8. Confidentiality and code of ethics

9. Audit program improvement

3. Combined audits and use of third party audit/inspection reports may be used as a means to limit impact on the generating asset owners. Examples of these types of activities may include, but necessarily be limited to:

a) Results of regulatory agency audits or inspections, e.g. OSHA, EPA as they may apply to maintenance performance objectives.

b) Authorized inspectors

c) Insurance inspections

It should be noted that the CPUC audit program is intended to be performance based, and results of third party audits may not be sufficient, by themselves, to demonstrate that an objective is being met.