Accounting and Financial Reporting for Public Utilities Including RTOs, 36865-36899 [05-12626]

Download as PDF Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules it is determined that this proposal would not have federalism implications under Executive Order 13132. For the reasons discussed above, I certify that this proposed regulation (1) is not a ‘‘significant regulatory action’’ under Executive Order 12866; (2) is not a ‘‘significant rule’’ under the DOT Regulatory Policies and Procedures (44 FR 11034, February 26, 1979); and (3) if promulgated, will not have a significant economic impact, positive or negative, on a substantial number of small entities under the criteria of the Regulatory Flexibility Act. A copy of the draft regulatory evaluation prepared for this action is contained in the Rules Docket. A copy of it may be obtained by contacting the Rules Docket at the location provided under the caption ADDRESSES. List of Subjects in 14 CFR Part 39 Air transportation, Aircraft, Aviation safety, Safety. The Proposed Amendment Accordingly, pursuant to the authority delegated to me by the Administrator, the Federal Aviation Administration proposes to amend part 39 of the Federal Aviation Regulations (14 CFR part 39) as follows: PART 39—AIRWORTHINESS DIRECTIVES Authority: 49 U.S.C. 106(g), 40113, 44701. [Amended] 2. Section 39.13 is amended by adding the following new airworthiness directive: Bombardier, Inc. (Formerly Canadair): Docket 2003–NM–163–AD. Applicability: Model CL–600–2B19 (Regional Jet Series 100 & 440) airplanes, serial numbers 7003 through 7067 inclusive, and 7069 through 7947 inclusive, certificated in any category. Compliance: Required as indicated, unless accomplished previously. To detect and correct chafing of the electrical cables of the spoiler and brake pressure sensor unit (BPSU) on both sides of the wing root, which could result in loss of flight control system and consequent reduced controllability of the airplane, accomplish the following: Initial Inspections (a) Within 500 flight hours after the effective date of this AD, do a general visual inspection for chafing or wire damage of the electrical harnesses of the spoiler and the BPSU on both sides of the wing root, in accordance with Part A of the Accomplishment Instructions of Bombardier Alert Service Bulletin A601R–27–133, Revision ‘A,’ dated September 16, 2004. VerDate jul<14>2003 18:25 Jun 24, 2005 Jkt 205001 Corrective Actions (b) If any damaged or chafed electrical harness or wire is found during any inspection required by paragraph (a) of this AD, before further flight, do either paragraph (b)(1) or (b)(2) of this AD. (1) Replace any damaged or chafed harness or wire with a new harness, in accordance with Part C or Part D of the Accomplishment Instructions of Bombardier Alert Service Bulletin A601R–27–133, Revision ‘A,’ dated September 16, 2004, as applicable. (2) Repair any damaged or chafed electrical harness in accordance with Part B of the Accomplishment Instructions of Bombardier Alert Service Bulletin A601R–27–133, Revision ‘A,’ dated September 16, 2004. Within 3,500 flight hours after the repair is done, do paragraph (b)(1) of this AD. Credit for Earlier Service Bulletins 1. The authority citation for part 39 continues to read as follows: § 39.13 Note 1: For the purposes of this AD, a general visual inspection is defined as: ‘‘A visual examination of an interior or exterior area, installation, or assembly to detect obvious damage, failure, or irregularity. This level of inspection is made from within touching distance unless otherwise specified. A mirror may be necessary to enhance visual access to all exposed surfaces in the inspection area. This level of inspection is made under normally available lighting conditions such as daylight, hangar lighting, flashlight, or droplight and may require removal or opening of access panels or doors. Stands, ladders, or platforms may be required to gain proximity to the area being checked.’’ (c) Inspections, replacements, and repairs accomplished before the effective date of this AD in accordance with Bombardier Alert Service Bulletin A601R–27–101, Initial Issue, dated April 17, 2000; or Revision ‘A,’ dated October 26, 2001; or Bombardier Alert Service Bulletin A601R–27–133, Initial Issue, dated July 12, 2004; are acceptable for compliance with the corresponding requirements of this AD. Terminating Modification (d) Within 4,000 flight hours after the effective date of this AD, modify the routing and support of the electrical harnesses of the spoiler and the BPSU on both sides of the wing root by accomplishing all the actions specified in Part E or F, as applicable, of the Accomplishment Instructions of Bombardier Alert Service Bulletin A601R–27–133, Revision ‘A,’ dated September 16, 2004. Accomplishing the modification constitutes compliance with the requirements of this AD. Exception to Service Bulletin (e) Although Bombardier Alert Service Bulletin A601R–27–133, Revision ‘A,’ dated September 16, 2004, specifies to submit certain information to the manufacturer, this AD does not include such a requirement. Alternative Methods of Compliance (f) In accordance with 14 CFR 39.19, the Manager, New York Aircraft Certification Office, FAA, is authorized to approve alternative methods of compliance for this AD. PO 00000 Frm 00007 Fmt 4702 Sfmt 4702 36865 Note 2: The subject of this AD is addressed in Canadiar airworthiness directive CF– 2003–14R1, effective February 26, 2005. Issued in Renton, Washington, on June 21, 2005. Ali Bahrami, Manager, Transport Airplane Directorate, Aircraft Certification Service. [FR Doc. 05–12637 Filed 6–24–05; 8:45 am] BILLING CODE 4910–13–P DEPARTMENT OF ENERGY Federal Energy Regulatory Commission 18 CFR Part 101 [Docket No. RM04–12–000] Accounting and Financial Reporting for Public Utilities Including RTOs June 2, 2005. Federal Energy Regulatory Commission, DOE. ACTION: Notice of proposed rulemaking. AGENCY: SUMMARY: The Federal Energy Regulatory Commission (Commission) is proposing to amend its regulations to update the accounting requirements for public utilities and licensees, including independent system operators and regional transmission organizations (collectively referred to as RTOs). The Commission is also proposing to amend its financial reporting requirements for the quarterly and annual financial reporting forms for these entities. These updates to the Commission’s Uniform System of Accounts (USofA) and the financial reporting requirements are being proposed to accommodate the evolving electric industry due to the availability of open-access transmission service and the increasing competition in wholesale bulk power markets. These proposed updates to the Commission’s accounting and reporting requirements will allow the Commission and the public to be better informed with respect to transactions and events affecting public utilities, including RTOs, subject to the Commission’s accounting and reporting regulations. As a result of improved transparency of financial information, the Commission and the public will also be better able to understand the costs of RTOs. DATES: Comments on the proposed rulemaking are due on or before August 26, 2005. ADDRESSES: Comments may be filed electronically via the eFiling link on the Commission’s Web site at https:// www.ferc.gov. Commentors unable to E:\FR\FM\27JNP1.SGM 27JNP1 36866 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules file comments electronically must send an original and 14 copies of their comments to: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street, NE., Washington, DC 20426. Refer to the Comment Procedures section of the preamble for additional information on how to file comments. FOR FURTHER INFORMATION CONTACT: John Okrak (Technical Information), Office of Markets, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502–8280. Julie Kuhns (Technical Information), Office of Markets, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502–6287. Lodie White (Legal Information), Office of the General Council, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 502–6193. SUPPLEMENTARY INFORMATION: I. Introduction II. Background A. General B. NOI Comments on Accounting and Financial Reporting III. Discussion A. General B. Proposed Regional Transmission and Market Operation Asset Function 1. Proposed Accounts for Land, Buildings and Improvements 2. Proposed Accounts for Computer Hardware and Software Costs 3. Proposed Account for Communication Equipment Costs 4. Proposed Account for Other Property and Equipment Costs 5. Proposed Account for Asset Retirement Obligation Costs C. Proposed RTO Revenue Accounts D. Proposed Regional Market Expense Function 1. Proposed Accounts for Regional Market Expenses 2. Proposed Accounts for Maintenance Expenses 3. Customer Service and Administrative and General Expenses 4. Additional Disclosures E. Proposed Accounting by Public Utilities for Computer Hardware, Software and Communication Equipment F. Proposed Accounting and Financial Reporting by Public Utilities, Including RTOs 1. Proposed Accounts for Load Dispatching, Scheduling and System Control Expenses 2. Proposed Accounts for System Planning and Standards Development 3. Proposed Accounts for Study Costs 4. Proposed Accounts for RTO Billings 5. Proposed Accounts for Maintenance Expenses 6. Proposed Account for Revenue From Transmission of Electricity 7. Accounting for Settlement Amounts VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 8. Other Matter G. Conclusion IV. Proposed Effective Date V. Proposed Changes to the FERC Quarterly and Annual Report Forms VI. Information Collection Statement VII. Environmental Analysis VIII. Regulatory Flexibility Act IX. Comment Procedures X. Document Availability I. Introduction 1. In this Notice of Proposed Rulemaking (NOPR), the Commission is proposing to amend Part 101 of its regulations to revise its Uniform System of Accounts (USofA) 1 and to revise its quarterly and annual financial reporting forms for public utilities and licensees. In brief, the Commission proposes to update its USofA to accommodate the restructuring changes that are occurring in the electric industry due to the availability of open-access transmission service and increasing competition in wholesale bulk power markets. These revisions will also necessitate corresponding changes to the FERC Form No. 1, Annual Report for Major Electric Utilities, Licensees and Others (Form 1); FERC Form No. 1–F, Annual Report for Nonmajor Public Utilities and Licensees (Form 1–F); and FERC Form No. 3–Q, Quarterly Financial Report of Electric Utilities, Licensees, and Natural Gas Companies (Form 3–Q). 2. The financial statements and related detailed schedules reported in the Commission’s quarterly and annual financial reports provide information about each respondent’s financial position, financial performance, its source and uses of cash, its operating statistics, and other information necessary to understand transactions and events affecting the entity. Because it is important that the data reported in their quarterly and annual financial reports are relevant, reliable, understandable, and comparable among reporting entities, the Commission requires these statements and reports to be prepared directly from the accounting records maintained in accordance with the USofA. 3. An important objective of this proposed rule is to provide sound and uniform accounting and financial reporting for transactions and events affecting public utilities and licensees, including independent system operators and regional transmission organizations (collectively referred to as RTOs), that file financial reports with the Commission.2 The Commission is of the CFR part 101. Commission has explained that RTOs are public utilities, and as such, they are required to follow the USofA and file Form No. 1. See PJM PO 00000 1 18 2 The Frm 00008 Fmt 4702 Sfmt 4702 view that updates to the Commission’s accounting and financial reporting regulations are needed because certain RTO activities are not clearly or consistently reported. 4. The proposed accounts and changes to the Commission’s quarterly and annual financial forms will add visibility and uniformity to the accounting and financial reporting for the cost of utility assets, and the expenses the utility incurs in providing services, along with revenues collected from RTO members. These proposed revisions to the Commission’s accounting and reporting regulations will allow the Commission and the public to better understand transactions and events that affect RTOs and their members. II. Background A. General 5. In April 1996, in Order No. 888,3 the Commission established the foundation necessary to develop competitive bulk power markets in the United States: non-discriminatory open access transmission services by public utilities and standard cost recovery rules to provide a fair transition to competitive markets. Public utilities were also required to functionally unbundle, and to provide transmission service separately from generation services. 6. Despite the changes brought about by Order No. 888, reports of discriminatory practices by vertically integrated public utilities persisted. In Order No. 2000,4 the Commission encouraged the formation of independent and regional organizations, to remedy undue discrimination and to foster regional efficiencies and efficient pricing. As a result, a number of RTOs Interconnection, L.L.C., 107 FERC ¶ 61,087 (2004). For purposes of this NOPR, the term RTOs refers to public utilities that are performing regional transmission and independent system operations. 3 See Promoting Wholesale Competition Through Open Access Non-discriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by Public Utilities and Transmitting Utilities, Order No. 888, 61 FR 21,540 (May 10, 1996), FERC Stats. & Regs. ¶ 31,036 (1996), order on reh’g, Order No. 888–A, 62 FR 12,274 (March 14, 1977), FERC Stats. & Regs. ¶ 31,048 (1997), order on reh’g, Order No. 888–B, 81 FERC ¶ 61,248 (1997), order on reh’g, Order No. 888–C, 82 FERC ¶ 61,046 (1998), aff’d in relevant part sub nom. Transmission Access Policy Study Group, v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff’d sub nom. New York v. FERC, 535 U.S. 1 (2002). 4 See Regional Transmission Organizations, Order No. 2000, 65 FR 809 (January 6, 2000), FERC Stats. & Regs. ¶ 31,089 (1999), order on reh’g, Order No. 2000–A, 65 FR 12,088 (March 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), affirmed sub nom. Public Utility District No. 1 of Snohomish County, Washington, v. FERC, 272 F.3d 607 (D.C. Cir. 2001). E:\FR\FM\27JNP1.SGM 27JNP1 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules have formed and are in operation.5 These RTOs perform many of the same activities previously performed by the transmission owners whose transmission systems they now operationally control. In addition, RTOs perform some unique functions; among other functions not traditionally performed by other public utilities, they oversee markets and they conduct longterm system planning on a regional basis. The formation of RTOs has created the need to update the Commission’s accounting and financial reporting requirements to reflect the roles of RTOs and provide more transparent and uniform accounting for and reporting of certain activities not previously addressed in the Commission’s regulations. 7. On September 26, 2004, the Commission issued a Notice of Inquiry (NOI) in this proceeding.6 The NOI invited comments on various matters including the Commission’s accounting and financial reporting requirements for RTOs. The Commission received comments from RTOs, public utilities that are RTO members, state regulatory commissions, and others.7 8. As noted in the NOI, the accounting regulations currently found in the USofA and the related financial reporting requirements were developed to capture financial information along traditional primary business functions— generation, transmission and distribution of electric energy. As a result, the accounting regulations and related financial reporting requirements do not provide sufficient detailed information about RTO-related costs, including the costs incurred by RTOs and other relevant information concerning the types of services RTOs provide to their members. The Commission sought comments on what changes, if any, should be made in accounting and financial reporting. 9. The Commission is issuing this NOPR to address the accounting and financial reporting issues raised in the NOI. The proposed changes to the Commission’s accounting and financial reporting requirements will provide uniformity and transparency in accounting for and reporting of 5 See, e.g., the California Independent System Operator Corporation (CAISO), the Midwest Independent Transmission System Operator, Inc. (Midwest ISO), the ISO New England, Inc. (ISO– NE), the New York Independent System Operator, Inc. (NYISO), PJM Interconnection, L.L.C. (PJM), and the Southwest Power Pool, Inc. (SPP). 6 See Financial Reporting and Cost Accounting and Recovery Practices for Regional Transmission Organizations and Independent System Operators, 69 FR 58,112 (September 29, 2004), FERC Stats. & Regs. ¶ 35,546 (2004). 7 See Appendix A for a list of commentors. VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 transactions and events affecting public utilities, including RTOs. The Commission expects that the proposed changes in the accounting and financial reporting of data will lead to improvements in cost recovery practices by providing details concerning the cost of RTO functions and increased assurance that the costs are a legitimate and reasonable cost of providing service and assigned to the correct period for recovery in rates. B. NOI Comments on Accounting and Financial Reporting 10. The Commission received numerous comments regarding the need for updating the USofA for the accounting and financial reporting public utilities including RTOs. Most commentors are supportive of revising the USofA to reflect changes in the structure of the electric industry. 11. Many commentors state that RTOs do not own generation, transmission, and distribution facilities, and therefore many assets and associated expense accounts are not applicable to RTOs. In their view, RTOs settle transactions among market participants and assign their operating costs to those participants. Thus, they say, there is a need for new functional categories, new accounts and expanded reporting requirements for RTOs and for individual transmission-owning public utilities participating in RTOs.8 12. Commentors further recommend the collection and development of detailed and standardized information and reports in addition to the data the USofA currently requires. In their view, to the extent that all RTOs utilize a standard report format and use consistent cost categories, it will be easier for the Commission and market participants to understand the nature of the expenditures and compare expenditures across RTOs. Commentors believe that standardization also will enhance transparency of costs, and allow better understanding of financial trends and other issues. They further urge the Commission to revise its USofA and reporting formats to properly reflect the business functions of RTOs and to provide more meaningful and transparent financial accounting information.9 13. The Commission also solicited comments on whether RTOs or their 8 See, e.g., American Public Power Association, California Department of Water Resources, Cinergy, Consolidated Edison Company of New York, Inc., Iowa Office of Consumer Advocate and Indiana Office of Utility Consumer Counselor, and NARUC. 9 See, e.g., Connecticut Department of Public Utility Control and Vermont Department of Public Service. PO 00000 Frm 00009 Fmt 4702 Sfmt 4702 36867 members that are public utilities should report data concerning the transmission of electricity for others as required by FERC Forms 1 and 1–F. These commentors stated that because RTOs authorize, control, bill and collect payments for transmission transactions, such transactions should be reported by the RTO.10 They believe that this would be the most efficient solution rather than requiring the RTO to provide the information to its members, who in turn would include the data in their respective filings with the Commission. 14. In addition to seeking comments on RTO accounting and financial reporting, the Commission also sought and received comments on the accounting and financial reporting by public utilities and licensees that are members of an RTO. III. Discussion A. General 15. The Commission’s accounting and financial reporting requirements are designed to provide information about a reporting entity’s financial condition and results of operation. This information is important in developing and examining rates and in making policy decisions. 16. As the electric industry has transitioned from a vertically integrated to an unbundled business model, and as the respective functions of business entities have continued to evolve, the Commission has relied on existing accounting and reporting requirements applicable to existing public utilities (i.e., principally investor-owned utilities) to obtain information about an RTO’s financial condition. The Commission has required public utilities, including RTOs, to continue to prepare their financial statements in accordance with the USofA as it could accommodate most of the transactions and events affecting these entities. During this restructuring, it was difficult to prescribe new accounting rules that could be uniformly applied. While we expect this evolution to continue, sufficient experience has now been gained to make some general observations about RTOs and the adequacy of our existing accounting and reporting requirements for these entities. 17. Over the past 7 years, in reviewing RTO proposals, the Commission has confronted new and different business models, accounting methods, and rate designs. RTOs are largely not-for-profit 10 See, e.g., Allegheny Power, Consolidated Edison Company of New York, Inc., Edison Electric Institute, Long Island Power Authority and NiSource. E:\FR\FM\27JNP1.SGM 27JNP1 36868 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules companies with no shareholder investment. They use different classes or types of assets and deploy these resources in a manner that does not readily lend itself to traditional, functional utility plant classifications (e.g., generation, transmission or distribution plant). RTO assets are largely computer hardware, computer software, and communication equipment. They allow the RTO to ensure reliability, to operate and monitor competitive markets, to control and order dispatch of resources on the system, and to coordinate and plan short and long-term investment and construction. 18. In sum, the services provided by RTOs to their members, the assets used, the costs incurred, and the revenues billed, do not readily lend themselves to the existing accounting classifications established for public utilities as noted by numerous commentors. As a result, the accounting and the financial reporting by RTOs in the Commission’s quarterly and annual financial reports calls into question the relevance, understandability and usefulness of RTO-related financial information submitted to the Commission. 19. While most commentors to the NOI did not recommend a completely new USofA to accommodate the services RTOs perform, the majority of commentors suggest that more accounting detail is needed to better identify assets, costs incurred and revenues earned by RTOs as well as by other public utilities. After studying the comments received, the Commission proposes to revise the existing USofA and financial reporting requirements, as discussed below, rather than creating an entirely new system of accounts exclusively for RTOs. B. Proposed Regional Transmission and Market Operation Asset Function 20. In order to perform many of their primary functions, RTOs must make significant investments in computer hardware, software and communication equipment. The cost of these assets is not explicitly provided for in the existing primary plant accounts, resulting in inconsistent accounting and reporting for these assets. 21. To provide more financial transparency for the costs of hardware, software and communication equipment, as well as to address the inconsistent accounting and reporting noted previously, the Commission proposes to create a new utility plant function to record the cost of assets owned and used by RTOs. The proposed new asset function will be entitled Regional Transmission and Market Operation Plant, and contain the following primary plant accounts, as shown in the table below: Regional Transmission and Market Operation Plant Account Account Account Account Account Account Account Account 380, 381, 382, 383, 384, 385, 386, 387, Land and Land Rights Structures and Improvements Computer Hardware Computer Software Communication Equipment Miscellaneous Regional Transmission and Market Operation Plant Asset Retirement Costs for Regional Transmission and Market Operation Plant Reserved 22. The benefit of establishing a new asset function within the existing accounting and reporting framework is that the cost of property, plant and equipment used by RTOs will now be uniformly reported by these entities. This new functional classification will help provide comparability among RTOs that perform regional control and market operations. The creation of a new RTO asset function will also minimize inconsistent reporting of RTOs’ major technology assets, which include computer hardware, computer software and communication equipment. 1. Proposed Accounts for Land, Buildings and Improvements 23. RTOs may own land, buildings and other long-lived fixed assets. The USofA maintains a set of primary plant accounts to record the cost of these types of assets by plant function. Therefore, the Commission proposes two new accounts (Account 380, Land and Land Rights, and Account 381, Structures and Improvements) to record the cost of land, land rights and buildings within the new functional classification for Regional Transmission VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 and Market Operation Plant. These two new accounts will provide consistent accounting classification for the cost of these fixed assets. 2. Proposed Accounts for Computer Hardware and Software Costs 24. Most commentors identify computer hardware and software as the primary assets used by RTOs and note that the existing USofA does not provide sufficient cost detail concerning computer hardware and software owned and used by public utilities. In particular, commentors indicate that the cost to develop or purchase off-the-shelf software is not readily transparent in the reports. In order to provide more transparency to investments made by RTOs in computer hardware and software, the Commission proposes the creation of new primary plant Account 382, Computer Hardware, and Account 383, Computer Software. 25. RTOs use computer hardware and software to: (1) Manage bulk power interchange contracts and scheduling within neighboring control areas; (2) provide ancillary services; (3) provide data and other information to market participants; (4) monitor markets and PO 00000 Frm 00010 Fmt 4702 Sfmt 4702 manage the transmission system; (5) determine locational marginal prices (LMP); (6) perform short-term and longterm modeling; and (7) provide training on the systems. 26. Computer hardware used by RTOs generally includes servers, workstations and other processors, peripheral equipment, information technology equipment for energy management systems, and personal computers. Computer software generally includes software licenses and internallydeveloped software to perform the above mentioned tasks and activities (e.g., scheduling, system control and dispatching, system planning, standards development, market monitoring and market administration). 27. The Commission proposes to create new primary plant Account No. 382, Computer Hardware. The addition of a new primary plant account for computer hardware will include the cost of computer hardware initially devoted to this function as well as subsequent additions, retirements, adjustments and transfers of these E:\FR\FM\27JNP1.SGM 27JNP1 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules amounts.11 This information will be reported in the Form 1, thereby providing additional transparency concerning computer hardware transactions. Finally, because the computer hardware may perform different activities, the Commission proposes to require RTOs to maintain detailed records identifying these assets by the types of activities they perform to the maximum extent practicable. 28. The Commission also proposes to create new primary Account No. 383, Computer Software, to record the cost of developing and purchasing software used by RTOs. Similar to computer hardware, software may be used by different functions or departments within the organization. Therefore, the Commission proposes to require that RTOs maintain detailed records identifying the cost of software by the types of activities or functions performed to the maximum extent practicable. 3. Proposed Account for Communication Equipment Costs 29. RTOs may own communication equipment such as microwave towers, fiber optic cables, and other communication devices to provide system control and dispatching activities. However, under the existing USofA requirements, no specific primary plant account exists to record the cost of these investments outside of general plant accounts. This has led to respondents inconsistently reporting the cost of these investments in various primary plant accounts. 30. To provide uniform accounting and financial reporting, the Commission proposes to add a new primary plant Account 384, Communication Equipment, to record the cost of communication equipment owned and used by RTOs. 4. Proposed Account for Other Property and Equipment Costs 31. RTOs may also own property, plant and equipment not provided for in the new regional control and market operation function. In order to provide uniform accounting and financial reporting for the cost of miscellaneous property, plant and equipment, the Commission proposes to add a new primary plant Account 385, Miscellaneous Regional Transmission and Market Operation Plant, to record the cost of miscellaneous assets not provided for elsewhere. 5. Proposed Account for Asset Retirement Obligation Costs 32. As noted in Order No. 631, a public utility may incur a liability resulting from a legal obligation to remove or retire a plant asset.12 Entities may also incur a similar type of legal obligation to remove or retire equipment or a plant asset used to provide regional control and market operation services. To provide uniform accounting and reporting for legal obligations associated with the retirement of tangible longlived assets owned and used by entities for these purposes, the Commission proposes to add a new Account 386, Asset Retirement Costs for Regional Transmission and Market Operation Plant, to record the capitalized amount of the liability that becomes part of the asset’s cost. 36869 34. The Commission therefore proposes the creation of two new revenue accounts to record amounts billed by RTOs to their members. The first, Account 457.1, Regional Transmission Service Revenues, will include revenues received by RTOs for services provided.13 This new revenue account will contain instructions requiring the RTO to keep detailed records by type of service provided and the amounts billed under each Commission-approved tariff. Furthermore, the Commission proposes to include a new Form 1 schedule to report the revenue collected by RTOs for services performed pursuant to Commission-approved tariffs. 35. In addition, the Commission proposes a new Account 457.2, Miscellaneous Revenues, to record miscellaneous revenues received from RTO members occurring from incidental transactions and events. This revenue account would include revenues for commissions, profits or losses on sales of miscellaneous materials, rentals, and other miscellaneous sources of income. D. Proposed Regional Market Expense Function 33. RTOs do not buy or sell electricity; instead, they manage transmission assets owned by others and settle transactions among participants in a manner similar to a market clearing house. Similar to the operation of a market clearing house, an RTO’s operational costs consist of the expenses incurred to provide services to its members. The revenues received for the reimbursement of RTO operational costs are not explicitly provided for in the current USofA because the existing revenue accounts were designed to record revenues from electricity sales or transmission or distribution. Therefore, the existing revenue accounts are not entirely applicable. 36. Many commentors indicate that the current USofA does not provide sufficient financial transparency concerning the types of costs incurred by RTOs in market facilitation and market monitoring activities. Furthermore, as noted in Staff’s report on cost ranges for the development of RTOs, the expenses incurred by these entities have not been consistently reported.14 37. In order to give greater transparency to the RTO market functions performed, the Commission proposes to create a separate expense function within the USofA to record the expenses incurred in managing and monitoring market activity.15 This new function, entitled Regional Market Expenses, will contain the following expense accounts as shown in the table below: 14 See Staff Report on Cost Ranges for the Development and Operation of a Day One Regional Transmission Organization (Docket No. PL04–16– 000 October 2004), which states in part: Each organization used Generally Accepted Accounting Principles, but reported investment costs and annual expenses differently. That is, while one organization directly assigned costs to a particular cost element or operational function, another respondent showed no such cost element or operational function. The Uniform System of Accounts, designed for the traditional verticallyintegrated utility, is not always aligned with the functions of an ISO or RTO. Staff recommends review of the reporting requirements and possible standardization to facilitate cost oversight by the public and the Commission. 15 As part of implementing these changes, the Commission proposes to rescind Accounting Release No. 16, Operating and Administering an Electric Power Exchange, issued by the Chief Accountant on October 1, 2001. This Accounting Release requires RTOs to record operation, maintenance and market monitoring expenses in Account 557, Other Expenses. C. Proposed RTO Revenue Accounts Regional Market Expenses Operation 11 See FERC Form 1, Electric Plant In Service Schedule at 204. 12 See Accounting, Financial Reporting, and Rate Filing Requirements for Asset Retirement Obligations, Order No. 631, 68 FR 19,610 (Apr. 21, 2003) and 68 FR 34,795 (June 11, 2003), FERC Stats. & Regs. ¶ 31,142 (2003), order on reh’g, Order No. 631–A, 104 FERC ¶ 61,183 (2003). 13 Such services will include, among other things, system control, dispatching, long-term and shortterm system planning, market facilitation and market compliance activities. VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00011 Fmt 4702 Sfmt 4702 E:\FR\FM\27JNP1.SGM 27JNP1 36870 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules Regional Market Expenses Account 575.1, Account 575.2, Account 575.3, Account 575.4, Account 575.5, Account 575.6, Maintenance Account 576.1, Account 576.2, Account 576.3, Account 576.4, Account 576.5, Operation Supervision Day-Ahead and Real-Time Market Facilitation Transmission Rights Market Facilitation Capacity Market Facilitation Ancillary Services Market Facilitation Market Monitoring and Compliance Maintenance Maintenance Maintenance Maintenance Maintenance of of of of of Structures and Improvements Computer Hardware Computer Software Communication Equipment Miscellaneous Market Operation Plant 1. Proposed Accounts for Regional Market Expenses 38. RTOs perform unique services for their members such as market facilitation, market monitoring and market compliance activities. However, the existing USofA does not provide specific expense accounts to record these types of expenses. The Commission proposes to add new accounts to record the expenses related to these activities. 39. A new Account 575.1, Operation Supervision, will be created to record the labor and expenses incurred in the general supervision and direction of the RTO regional control and market operation center. 40. A new Account 575.2, Day-Ahead and Real-Time Market Facilitation, will be created to record the cost incurred to manage regional Day-Ahead and RealTime markets. These activities include administering markets that allow participants to buy and sell power, arrange transmission service and other energy related activities. 41. Further, a new Account 575.3, Transmission Rights Market Facilitation, will be created to record the cost to manage transmission rights markets. In addition, a new Account 575.4, Capacity Market Facilitation, will be created to record the cost to administer capacity markets. A new Account 575.5, Ancillary Services Market Facilitation, will be created to record the cost to manage ancillary service markets. 42. Finally, Account 575.6, Market Monitoring and Compliance, will be created to record the cost to review market data for compliance with market rules. It will also include the costs incurred to communicate with external market monitors. 2. Proposed Accounts for Maintenance Expenses 43. As previously discussed, the Commission proposes new asset accounts to record the cost of structures, computer hardware and software, and VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 communication equipment. These new asset accounts will require the addition of new maintenance accounts to properly record the routine and periodic expenses incurred to maintain these assets. 44. The Commission proposes new Account 576.1, Maintenance of Structures and Improvements, to record the cost of labor, materials used and expenses incurred to maintain structures used in regional transmission and market operations. 45. Account 576.2, Maintenance of Computer Hardware, will be created to record the cost of labor, materials used and expenses incurred to maintain computer hardware. Account 576.3, Maintenance of Computer Software, will be created to record the cost of labor, materials used and expenses incurred for annual computer software renewals, annual software update services and the cost of ongoing support for software products. 46. The Commission also proposes the creation of Account 576.4, Maintenance of Communication Equipment, to record the cost of labor, materials used and expenses incurred to maintain communication equipment. Finally, Account 576.5, Maintenance of Miscellaneous Market Operation Plant, would record the cost of labor, materials used and expenses incurred to maintain miscellaneous regional transmission and market operation plant. 47. These new accounts when created, will provide greater detail as to the amount of maintenance expenses incurred on computer hardware, software, communication equipment and other assets owned and used by the RTO. 3. Customer Service and Administrative and General Expenses 48. A review of several FERC Form 1s on file indicate that there may be inconsistent accounting and financial reporting for customer service and administrative and general expenses incurred by RTOs. For example, some RTOs are including customer service, PO 00000 Frm 00012 Fmt 4702 Sfmt 4702 administrative and general expenses in the transmission expense accounts as well as in the administrative and general expense accounts. Under existing USofA requirements, customer service and administrative and general expenses are to be recorded in Accounts 903 through 935. The practice of some RTOs, recording these costs in expense accounts within the transmission function, is inconsistent with these requirements. Accordingly we will require RTOs to comply with the existing USofA instructions of recording customer service and administrative and general expenses in Accounts 903 through 935. 49. As noted by some commentors, the above mentioned types of expenses are already provided for in the existing USofA. Therefore, we agree that there is no need to establish new expense accounts for these types of activities or to add a new administrative function for use by RTOs to record customer service and administrative and general expenses. The use of existing accounts by RTOs will maintain comparability to the maximum extent practicable since all reporting entities will use the same administrative and general expense accounts to record these types of costs. 4. Additional Disclosures 50. Under the existing Form 1 and 3– Q requirements, public utilities are required to report detailed financialrelated information concerning the transmission of electricity for others. The Commission sought comments on whether RTOs, in addition to public utilities that file Form 1, should also report the data required by the Transmission of Electricity for Others schedule.16 51. Since RTOs authorize, control, bill and collect payments and distribute revenues for transmission transactions using the transmission system under their control, the Commission proposes that RTOs report the information 16 See Forms 1 and 3–Q, Transmission of Electricity For Others Schedule at 328–330. E:\FR\FM\27JNP1.SGM 27JNP1 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules required by the schedule in their Form 1 filing. In this manner, the Commission will have more complete information concerning the use of the transmission system under the control of the RTO. The data required by the schedule must be organized by the RTO in such a manner so that the information is presented for each member or other entity for whom the service was provided. Finally, the Commission will continue to require public utilities and licensees to report the data required by this schedule in their filing. E. Proposed Accounting by Public Utilities For Computer Hardware, Software and Communication Equipment 52. As previously mentioned, the existing USofA does not provide for computer hardware, software and 36871 communication equipment owned and used by public utilities and licensees, including RTOs. Therefore, in addition to creating asset accounts to the record the cost of this equipment for RTOs, the Commission proposes to add three new sub-accounts to the existing transmission asset function for other public utilities and licensees to record the cost of these types of assets, as shown in the table below: Transmission Plant Account 351.1, Computer Hardware Account 351.2, Computer Software Account 351.3, Communication Equipment 53. Similar to RTOs, other public utilities and licensees will record the cost of computer hardware, software and communication equipment owned and used for transmission related activities in proposed new primary plant accounts. The Commission proposes to create Account 351.1, Computer Hardware, to record the cost of computer equipment owned and used by public utilities and licensees. Additionally, they will record the cost of computer software in Account 351.2, Computer Software, and the cost of communication equipment in Account 351.3, Communication Equipment. The use of these three sub-accounts will provide uniform and consistent accounting and reporting for these types of assets by all public utilities and licensees. F. Proposed Accounting and Financial Reporting by Public Utilities, Including RTOs 54. Most commentors are supportive of revising the USofA to reflect changes in the structure of the electric industry. They are of the view that many of the updates could be accomplished through the addition of new accounts or subaccounts within the existing USofA accounting and reporting framework. The Commission proposes to expand the expense accounts contained in the transmission function to provide more financial details concerning the activities and related costs incurred by public utilities including RTOs in providing transmission service. The Commission proposes to provide more details concerning dispatching, system control and other cost of monitoring the transmission system by providing more detailed expense accounts to record the cost of these types of activities. Additionally, Account 561, Load Dispatching, will be replaced with a series of detailed expense accounts added to the existing transmission expense function as shown in the table below: Transmission Expense Operation Account 561.1, Account 561.2, Account 561.3, Account 561.5, Account 561.6, Account 561.7, Maintenance Account 569.1, Account 569.2, Account 569.3, Account 569.4, Load Dispatch-Reliability Load Dispatch-Monitor and Operate Transmission System Load Dispatch-Transmission Service and Scheduling Long-Term Reliability Planning and Standards Development Transmission Service Studies Generation Interconnection Studies Maintenance Maintenance Maintenance Maintenance of of of of Computer Hardware Computer Software Communication Equipment Miscellaneous Regional Transmission Plant 55. Many commentors indicate that the current system of accounts does not provide sufficient financial transparency concerning the types of costs incurred by RTOs in providing member services. These services may include scheduling, system control and dispatching, long-term system planning, standards development, market facilitation and market monitoring activities. Furthermore, as noted in Staff’s report on cost ranges for the development of RTOs, the expenses VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 incurred by these entities have not been consistently reported.17 17 See Staff Report on Cost Ranges for the Development and Operations of a Day One Regional Transmission Organization, Docket No. PL04–16– 000 (October 2004). This staff report states in part: Each organization used Generally Accepted Accounting Principles, but reported investment costs and annual expenses differently. That is, while one organization directly assigned costs to a particular cost element or operational function, another respondent showed no such cost element or operational function. The USofA, designed for the traditional vertically-integrated utility, is not always aligned with the functions of an ISO or RTO. Staff recommends review of the reporting requirements and possible standardization to PO 00000 Frm 00013 Fmt 4702 Sfmt 4702 1. Proposed Accounts for Load Dispatch, Scheduling and System Control Expenses 56. Public utilities and licensees, including RTOs, provide a variety of transmission services including load dispatching, scheduling and system control. In order to provide consistent and uniform accounting and financial reporting by public utilities and licensees, including RTOs, for these types of costs, the Commission proposes to add new accounts to the transmission facilitate cost oversight by the public and the Commission. E:\FR\FM\27JNP1.SGM 27JNP1 36872 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules expense function for these entities to record these types of expenses. 57. The Commission proposes to add a new Account 561.1, Load DispatchReliability, to include the costs incurred to manage the region-wide reliability coordination function as specified by the North American Electric Reliability Council (NERC) and individual reliability organizations. It will include the costs to perform current and next day reliability analyses including calculating load forecasts, perform contingency analyses, identify unreliable operating conditions, and recommend appropriate solutions. 58. The Commission proposes to add a new Account 561.2, Load DispatchMonitor and Operate Transmission System, in order to include the costs incurred to monitor, assess and operate the transmission system and ensure the system’s reliability. 59. The Commission also proposes to add a new Account 561.3, Load Dispatch-Transmission Service and Scheduling, to include the costs incurred to process hourly, daily, weekly and monthly transmission service requests using an automated system such as an Open Access, SameTime Information System (OASIS). 2. Proposed Accounts for System Planning and Standards Development 60. Another important service that RTOs perform for their members is longterm system planning and development activities. However, the existing USofA does not provide a specific expense account to record these types of expenses. The Commission proposes to add a new Account 561.5, Long-Term Reliability Planning and Standards Development, to record the costs incurred by RTOs for performing longterm system planning and standards development. This new account will include the cost of labor, materials used and expenses incurred by the RTOs for long-term system planning of the interconnected bulk electric transmission system within a planning authority area. It will also include expenses incurred for long-term system reliability and resource planning to develop long-term strategies to meet customer demand and energy requirements. Examples of costs include system modeling to evaluate resource adequacy, simulation of transmission systems for such assessments, and development of expansion planning. 61. Other expenses to be included in Account 561.5 include the costs incurred to develop demand and energy end-use customer forecasts, capacity resources, and demand response programs. Examples of such activities include notifying participants of any planned transmission changes that may impact their facilities. Account 561.5 will also include the cost of developing and reporting on transmission expansion and resource plans for assessment and compliance with reliability standards, and developing reliability standards for the planning and operation of the interconnected bulk electric transmission systems that serve the United States, Canada, and Mexico. 62. To the extent that public utilities and licensees that are not RTOs perform similar activities, they should include the costs that they incur for system planning and standards development in Account 561.5. 3. Proposed Accounts for Study Costs 63. Public utilities and licensees, including RTOs, may incur costs to perform generation interconnect and transmission service studies. The USofA does not specifically provide accounts to record these types of costs. The Commission proposes the creation of Account 561.6, Transmission Service Studies, to record the costs incurred by public utilities and licensees, including RTOs, to conduct studies for transmission service requests. The Commission also proposes to add a new Account 561.7, Generation Interconnection Studies, to record the costs incurred by public utilities and licensees, including RTOs to conduct studies for generator service requests when the costs are not directly reimbursable by a specific customer. The instructions to these accounts will require these entities to maintain detailed cost records for each study performed. 64. Different types of agreements entered into by public utilities and licensees, including RTOs, may necessitate recording the costs of conducting transmission and generation interconnect studies, in Account 186, Miscellaneous Deferred Debits, pending reimbursement by the entity requiring the service. Therefore, in order to provide more disclosure concerning the costs of interconnect study activities being performed by public utilities and licensees, including RTOs, the Commission proposes to add a new schedule to the quarterly and annual financial reports that will provide more specifics concerning the costs of these activities. 4. Proposed Accounts for RTO Billings 65. Public utilities and licensees reimburse RTOs for the RTOs’ operational, administrative and general costs of providing service. Many commentors indicate that these costs are already covered by the existing accounting and reporting requirements. In order to provide greater transparency for the payments made by public utilities and licensees to RTOs, the Commission proposes to create three sub-accounts as shown below: Transmission Expenses Operation Account 561.4, Scheduling, System Control and Dispatch Services Account 561.8, Long-Term Reliability Planning and Standards Development Services Regional Market Expenses Operation Account 575.7, Market Facilitation, Monitoring and Compliance Services 66. These sub-accounts will be used by public utilities and licensees to record their share of costs billed to them by an RTO. Additionally, the Commission proposes that each RTO include in its monthly settlement statements a breakdown of the VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 allocation of that RTO’s operational costs within each of the three subaccounts discussed below. This information will allow each RTO member to then record its share of the RTO’s total monthly operating costs in these new sub-accounts. PO 00000 Frm 00014 Fmt 4702 Sfmt 4702 67. The first new sub-account, Account 561.4, Scheduling, System Control and Dispatching Services, will include scheduling, system control and dispatching services costs billed to the public utility or licensee. The second, Account 561.8, Long-Term Reliability E:\FR\FM\27JNP1.SGM 27JNP1 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules Planning and Standards Development Services, will include the cost of longterm system planning and standards related costs billed to the public utility or licensee. The third, Account 575.7, Market Facilitation, Monitoring and Compliance Services, will include costs for running the various markets and monitoring compliance activities billed to the public utility or licensee. 68. The creation of three new subaccounts will provide greater transparency of RTO operational costs billed to public utilities and licensees as users of the data will see the expenses being recorded in the public utilities’ and licensees’ accounts for activities performed by the RTO. 5. Proposed Accounts for Maintenance Expenses 69. As previously discussed, the Commission proposes new asset accounts to record the cost of computer hardware, computer software and communication equipment. These new asset accounts will require the addition of new maintenance accounts to properly record the routine and periodic expenses incurred to maintain these assets. 70. A new Account 569.1, Maintenance of Computer Hardware, will be created to record the cost to maintain computer hardware for the assets recorded in Account 351.1. Additionally, a new Account 569.2, Maintenance of Computer Software, will be created to record the cost of computer software renewals, annual software update services and the cost of ongoing support for software products. 71. The Commission also proposes the creation of Account 569.3, Maintenance of Communication Equipment, to record the cost to maintain communication equipment for the assets recorded in Account 351.3. Finally, the creation of Account 569.4, Maintenance of Miscellaneous Regional Transmission Plant, is also proposed to record the cost to maintain the assets recorded in Account 385, Miscellaneous Regional Transmission and Market Operation Plant. 72. These new accounts, when created, will provide greater detail as to the amount of maintenance expense incurred on computer hardware, computer software, communication equipment and other assets owned and used to service the transmission function. 6. Proposed Account for Revenue From Transmission of Electricity 73. Many commentors indicate that additional disclosure is necessary by public utility transmission owners for VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 revenues received from RTOs for use of their transmission facilities. Public utilities report revenues received for use of their transmission system in Account 456, Other Electric Revenues, along with other sources of revenues from miscellaneous activities. However, due to the changing nature of the electric industry and open access transmission requirements, the amount of revenue public utility transmission owners receive for this use of their transmission system has been growing significantly over the years. 74. In order to provide greater transparency by public utility transmission owners for the revenues received for use of their transmission facilities, the Commission proposes to add a new sub-account for Account 456, Other Electric Revenues, to record these sources of revenues. A new sub-account entitled Account 456.1, Revenues From Transmission of Electricity of Others, will record revenues the public utility receives for the transmission of electricity over its transmission facilities. 7. Accounting for Settlement Amounts 75. Finally, commentors also provide differing methods as to the best way to provide transparency related to transactions settled through an RTO. According to some commentors, public utilities currently record the net settlement amounts for firm transmission rights, ancillary services, congestion expenses, running markets, and all other costs billed from RTOs in Account 555, Purchased Power. Furthermore, some commentors indicate that public utilities may be including some or all of these amounts in their purchased power or other types of fuel adjustment clause or formula rate calculations and billings. 76. As previously discussed, the Commission proposes that public utilities record their share of RTO operational costs in the new transmission expense Accounts 561.4, 561.8 and 575.7. However, public utilities incur their own costs for energy, transmission rights, ancillary services and other services under transactions that are scheduled and cleared through the RTO settlement process. Some of these costs do not readily lend themselves to any one particular functional classification. For example, ancillary service costs may be generation-related activities but are necessary to keep the transmission grid working; ancillary services may include the cost of maintaining central control over generators to adjust power to deal with power surges or changes in customer demand for energy. Voltage PO 00000 Frm 00015 Fmt 4702 Sfmt 4702 36873 control is another similar example of an ancillary service that is necessary for the operation and reliability of the transmission grid. These activities have characteristics that may arguably fit either the generation or transmission functional expense accounts. 77. The Commission proposes to include a new schedule in the quarterly and annual financial reports that will require the public utility and licensee to report the type of transaction and the related amount of expense that it is being settled through the RTO. This information will assist the Commission in determining the need for future accounting guidance on these matters. 78. Finally, the RTO settlement process may result in a public utility or licensee being unaware of the counterparty to any given power sale or purchase transaction facilitated by the RTO. The process used by the RTO may require a public utility or licensee to bid generation into the market and then buy its generation from the market to serve its native load. Some public utilities may net all of their energy transactions in Account 555, Purchase Power, while others may report their energy transactions as a distinct purchase or a distinct sale. Consequently, inconsistent accounting treatment across public utilities may result from the sale and purchase of power facilitated through an RTO. 79. The Commission proposes that public utilities or licensees that conduct energy transactions through an RTO that requires participants to bid their generation into the market and buy generation to supply their native load report these transactions on a net basis in Account 555, Purchase Power. The Commission invites comment as to under what circumstances would it be appropriate for the public utility or licensee to reflect these types of transactions on a net basis, and under what circumstances would it be appropriate for the public utility or licensee to reflect these types of transactions as distinct purchases and sales. 8. Other Matters 80. The Commission notes that the derivative and asset retirement accounts established under Order Nos. 627 and 631 were not included in the Chart of Account listings contained in the USofA. 18 The Commission will update the account listing to include the accounts established under these orders. 18 See Accounting and Reporting of Financial Instruments, Comprehensive Income, Derivatives and Hedging Activities, Order No. 627, 67 FR 67,691 (Nov. 6, 2002). See also supra note 12. E:\FR\FM\27JNP1.SGM 27JNP1 36874 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules G. Conclusion 81. In conclusion, the comments submitted by public utilities, industry associations, state regulatory bodies and others provided input and detail needed for the Commission to propose the above revisions to its regulations. The proposed changes to the Commission’s accounting and financial reporting requirements reflected in this NOPR include many of the accounting and financial reporting updates offered by commentors. The Commission is of the view that there would be little, if any, impact on existing RTO rate designs from the proposed changes, but seeks comment on this and other related matters raised in this NOPR. IV. Proposed Effective Date 82. The Commission proposes the aforementioned accounting and financial reporting changes and updates to become effective on January 1, 2006. V. Proposed Changes to the FERC Quarterly and Annual Reports 83. The proposed changes, if adopted, will require revising the existing schedules in the FERC Forms 1, 1–F and 3–Q filed with the Commission. Appendix B contains samples of the updated or new schedules that will be included in these reports and will be available on e-Library.19 VI. Information Collection Statement 84. The following collections of information contained in this proposed rule have been submitted to the Office of Management and Budget for review under Section 3507(d) of the Paperwork Reduction Act of 1995.20 OMB’s regulations require OMB to approve certain information collection requirements imposed by agency rule.21 Upon approval of a collection of information, OMB will assign an OMB control number and expiration date. Number of respondents Data collection 1 2 3 4 5 Form Form Form Form Form Respondents subject to the filing requirements of this proposed rule will not be penalized for failing to respond to these collections of information unless the collections of information display a valid OMB control number or the Commission had provided a justification as why the control number should be displayed. 85. Comments are solicited on the need for this information, whether the information will have practical utility, the accuracy of the provided burden estimated, ways to enhance the quality, utility, and clarity of the information to be collected, and any suggested methods for minimizing respondents’ burden, including the use of automated information techniques. The following burden estimates are for complying with this proposed rule as follows: Number of responses Hours per response Total 1 (RTOs) ........................................................................................... 1 (Non-RTOs) ................................................................................... 1–F .................................................................................................... 3–Q (RTOs) ...................................................................................... 3–Q (Non-RTOs) .............................................................................. 6 214 33 6 247 1 1 1 3 3 35 11 11 30 15 210 2,354 363 540 11,115 Totals ........................................................................................................ ........................ ........................ ........................ 14,582 Information Collection Costs: The Commission seeks comments on the cost to comply with these requirements. It has projected the average annualized cost of all respondents to be the following: 14,582 hrs. + (2 hrs. recordkeeping × 253 respondents) = 15,088 hrs. @ $60 per hour = $905,280 for respondents. No capital startup costs are estimated to be incurred by respondents. Annualized Costs (Operations & Maintenance): If adopted, costs for performing the prepared schedules will be rolled into the total costs for completing the Commission’s annual and quarterly financial reports. Title: FERC Form 1, ‘‘Annual Report of Major Electric Utilities, Licensees, and Others’’. FERC Form–1F, ‘‘Annual report for Nonmajor Public Utilities and Licensees’’. FERC Form 3–Q, ‘‘Quarterly financial report of electric utilities, licensees and natural gas companies’’. Action: Proposed information collections. OMB Control Nos.: 1902–0021; 1902– 0029; and 1902–0205. Respondents: Businesses or other for profit. Frequency of responses: Annually and quarterly. Necessity of the Information: The proposed rule would revise the Commission’s regulations to reflect changes that are occurring in the electric industry due to the availability of openaccess transmission service and increasing competition in the wholesale bulk power industry. The addition of these new accounts is intended to provide accounting standards for transactions and events affecting public utilities and licensees, including independent system operators and regional transmission organizations, that file financial reports with the Commission. The accounting regulations currently found in the USofA and related financial reporting requirements capture financial information along traditional primary business functions but do not provide sufficient detailed information concerning RTOs and in particular the costs incurred by these organizations. The addition of these accounts is intended to improve the transparency, completeness and consistency of 20 See 19 Appendix B will not be published in the Federal Register. VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 44 U.S.C. 3507(d). Frm 00016 Fmt 4702 Sfmt 4702 accounting practices for the cost of assets, the expenses incurred in providing services, along with revenues collected. Without specific instructions and accounts for recording and reporting the above transactions and events, inconsistent and incomplete accounting and reporting will result. Internal Review: The Commission has reviewed the requirements pertaining to the USofA and to the financial reports it prescribes and determined that the proposed revisions are necessary because the Commission needs to establish uniform accounting and reporting requirements for the costs of utility assets and the expenses incurred for providing services as part of its operations. 86. These requirements conform to the Commission’s plan for efficient information collection, communication, and management within the electric industry. The Commission has assured itself, by means of internal review, that there is specific, objective support for the burden estimates associated with the information requirements. 21 5 E:\FR\FM\27JNP1.SGM CFR 1320.11. 27JNP1 36875 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 87. Interested persons may obtain information on the reporting requirements by contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426 [Attention: Michael Miller, Office of the Executive Director, Phone (202) 502–8415, fax: (202) 273–0873, e-mail: michael.miller@ferc.gov ] 88. For submitting comments concerning the collection of information(s) and the associated burden estimates, please send your comments to the contact listed above and to the Office of Management and Budget, Office of Information and Regulatory Affairs, Washington, DC 20503, Attention: Desk Officer for the Federal Energy Regulatory Commission; Phone: (202) 395–4650, fax: (202) 395– 7285. VII. Environmental Analysis 89. The Commission is required to prepare an Environmental Assessment or an Environmental Impact Statement for any action that may have a significant adverse effect on the human environment.22 No environmental consideration is necessary for the promulgation of a rule that is clarifying, corrective, or procedural or does not substantially change the effect of legislation or regulations being amended,23 that addresses information gathering, analysis, and dissemination,24 and also that addresses accounting.25 The proposed rule updates Part 101 of the Commission’s regulations and does not substantially change the effect of the underlying legislation or the regulations being revised. In addition, the proposed rule involves information gathering, analysis, and dissemination. Therefore this proposed rule falls within categorical exemptions provided in the Commission’s regulations. Consequently, neither an environmental impact statement nor an environmental assessment is required. VIII. Regulatory Flexibility Act 90. The Regulatory Flexibility Act of 1980 (RFA) 26 generally requires a description and analysis of the effect that the proposed rule will have on small entities or a certification that the rule will not have a significant 22 See Regulations Implementing the National Environmental Policy Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987). 23 See 18 CFR 380.4(a)(2)(ii). 24 See 18 CFR 380.4(a)(5). 25 See 18 CFR 380.4(c)(16). 26 See 5 U.S.C. 601–612. VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 economic impact on a substantial number of small entities. 91. The Commission concludes that this rule would not have such an impact on a substantial number of small entities. Most companies regulated by the Commission do not fall within the RFA’s definition of a small entity.27 The rule applies principally to public utilities that own, control, or operate facilities for transmitting electric energy in interstate commerce and not electric utilities per se. The Commission also concludes that this rule will not impose a significant burden on industry since the information is already being captured by their accounting systems and generally being reported at a consolidated business level. IX. Comment Procedures 92. The Commission invites interested persons to submit comments on the matters and issues proposed in this notice to be adopted, including any related matters or alternative proposals that commentors may wish to discuss. Comments are due August 26, 2005. Comments must refer to Docket No. RM04–12–000, and must include the commentor’s name, the organization they represent, if applicable, and their address in their comments. Comments may be filed either in electronic or paper format. 93. Comments may be filed electronically via the eFiling link on the Commission’s Web site at https:// www.ferc.gov. The Commission accepts most standard word processing formats and commentors may attach additional files with supporting information in certain other file formats. Commentors filing electronically do not need to make a paper filing. Commentors that are not able to file comments electronically must send an original and 14 copies of their comments to: Federal Energy Regulatory Commission, Office of the Secretary, 888 First Street NE., Washington, DC 20426. 94. All comments will be placed in the Commission’s public files and may be viewed, printed, or downloaded remotely as described in the Document Availability section below. Commentors 27 See 5 U.S.C. 601(3) citing to section 3 of the Small Business Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a ‘‘small-business concern’’ as a business which is independently owned and operated and which is not dominant in its field of operation. The Small Business Size Standards component of the North American Industry Classification System defines a small electric utililty as one that, including its affiliates, is primarily engaged in generation, transmission, and/or distribution of electric energy for sale and whose total electric output for the preceding fiscal years did not exceed 4 million MWh. 13 CFR 121.201. PO 00000 Frm 00017 Fmt 4702 Sfmt 4702 on this proposal are not required to serve copies of their comments on other Commentors. X. Document Availability 95. In addition to publishing the full text of this document in the Federal Register, the Commission provides all interested persons an opportunity to view and/or print the contents of this document via the Internet through the Commission’s Home page (https:// www.ferc.gov) and in the Commission’s Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426. 96. From the Commission’s Home page on the Internet, this information is available in the Commission’s management system, e-Library. The full text of this document is available on eLibrary in PDF and Microsoft Word format for viewing, printing, and/or downloading. To access this document in e-Library, type the docket number excluding the last three digits of this document in the docket number field. 97. User assistance is available for eLibrary and the Commission’s Web site during normal business hours from our Help line at (202) 502–8222 or the Public Reference Room at (202) 502– 8371, Press 0, TTY (202) 502–8659. EMail the Public Reference Room at public.referenceroom@ferc.gov. List of Subjects in 18 CFR Part 101 Electric power, Electric utilities, Reporting and recordkeeping requirements, Uniform System of Accounts. By direction of the Commission. Linda Mitry, Deputy Secretary. In consideration of the foregoing, the Commission proposes to amend Part 101, Chapter I, Title 18, Code of Federal Regulations, as follows: PART 101—UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR PUBLIC UTILITIES AND LICENSES SUBJECT TO THE PROVISIONS OF THE FEDERAL POWER ACT 1. The authority citation for Part 101 continues to read as follows: Authority: 16 U.S.C. 791a–825r, 2601– 2645; 31 U.S.C. 9701; 42 U.S.C. 7101–7352, 7651–7651o. 2. In part 101, Balance Sheet Chart of Accounts, Accounts 175, 176, 219, 230, 244, and 245 are added to read as follows: Balance Sheet Chart of Accounts Assets and Other Debits * E:\FR\FM\27JNP1.SGM * 27JNP1 * * * 36876 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 3. Current and Accrued Assets * * * * * 175 Derivative instrument assets. 176 Derivative instrument assetsHedges. * * * * * * * * * * * * * * 317 Asset retirement costs for steam production plant. * * * * * 219 Accumulated other comprehensive income. * * * * * B. Nuclear Production * * * * * 326 Asset retirement costs for nuclear production plant (Major only). 7. Other Noncurrent Liabilities * * * * 230 Asset retirement obligations. C. Hydraulic Production 8. Current and Accrued Liabilities * * * * * 244 Derivatives instrument liabilities. 245 Derivative instrument liabilitiesHedges. * * * * * 3. In part 101, Balance Sheet Accounts, Account 108, paragraph C is revised to read as follows: * * * * * 337 Asset retirement costs for hydraulic production plant. D. Other Production * * * * * 347 Asset retirement costs for other production plant. 3. Transmission Plant * Balance Sheet Accounts * * * * * 108 Accumulated provision for depreciation of electric utility plant (Major only). * * * * * C. For general ledger and balance sheet purposes, this account shall be regarded and treated as a single composite provision for depreciation. For purposes of analysis, however, each utility shall maintain subsidiary records in which this account is segregated according to the following functional classification for electric plant: (1) Steam production, (2) Nuclear production, (3) Hydraulic production, (4) Other production, (5) Transmission, (6) Distribution, (7) Regional Transmission and Market Operation, and (8) General. These subsidiary records shall reflect the current credits and debits to this account in sufficient detail to show separately for each such functional classification (a) the amount of accrual for depreciation, (b) the book cost of property retired, (c) cost of removal, (d) salvage, and (e) other items, including recoveries from insurance. Separate subsidiary records shall be maintained for the amount of accrued cost of removal other than legal obligations for the retirement of plant recorded in Account 108, Accumulated provision for depreciation of electric utility plant (Major only). * * * * * 4. In part 101, Electric Plant Chart of Accounts, Account 351 [Reserved] is 20:58 Jun 24, 2005 * A. Steam Production 5. Proprietary Capital VerDate jul<14>2003 Electric Plant Chart of Accounts 2. Production Plant Liabilities and Other Credits * removed and Accounts 317, 326, 337, 347, 351.1, 351.2, 351.3, 359.1, and 374 are added to read as follows: Jkt 205001 * * * * 351.1 Computer hardware. 351.2 Computer software. 351.3 Computer equipment * * * * * 359.1 Asset retirement costs for transmission plant. 386 Asset Retirement Costs for Regional Transmission and Market Operation Plant. 387 [Reserved] * * * * * 7. In part 101, Electric Plant Accounts, Accounts 351.1, 351.2 and 351.3 are added to read as follows: Electric Plant Accounts * * 351.1 * * * Computer hardware. This account shall include the cost of computer hardware and miscellaneous information technology equipment to provide scheduling, system control and dispatching, and other related activities to support the transmission function. ITEMS 1. Personal computers 2. Servers 3. Workstations 4. Energy Manage System (EMS) hardware 5. Supervisory Control and Data Acquisition (SCADA) system hardware 6. Peripheral equipment 7. Networking components 351.2 Computer software. * * * * 399.1 Asset retirement costs for general plant. 6. In part 101, Electric Plant Chart of Accounts, a new section 5, including accounts 380 through 387, is added to read as follows: This account shall include the cost of off-the-shelf and in-house developed software purchased and used to provide scheduling, system control and dispatching and other related activities to support the transmission function. ITEMS 1. Software licenses 2. User interface software 3. Modeling software 4. Database software 5. Tracking and monitoring software 6. Energy Management System (EMS) software 7. Supervisory Control and Data Acquisition (SCADA) system software 8. Evaluation and assessment system software 9. Operating, planning and transaction scheduling software 10. Reliability applications 11. Market application software Electric Plant Chart of Accounts 351.3 * This account shall include the cost of communication equipment owned and used to acquire or share data and information used to control and dispatch the system. ITEMS 1. Fiber optic cable 2. Remote terminal units 3. Microwave towers 4. Global Positioning System (GPS) equipment 4. Distribution Plant * * * * * 374 Asset retirement costs for distribution plant. * * * * * 5. In part 101, Electric Plant Chart of Accounts, ‘‘5. General Plant’’ is redesignated as ‘‘6. General Plant’’, and a new Account 399.1 is added to read as follows: Electric Plant Chart of Accounts * * * * * 5. Regional Transmission and Market Operation Plant 380 Land and land rights. 381 Structures and improvements. 382 Computer hardware. 383 Computer software. 384 Communication equipment. 385 Miscellaneous Regional Transmission and Market Operation Plant. PO 00000 Frm 00018 Fmt 4702 Sfmt 4702 E:\FR\FM\27JNP1.SGM Communication equipment. 27JNP1 36877 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 5. Servers 6. Workstations 7. Telephones 8. In Part 101, Electric Plant Accounts, a new section 5, including accounts 380, 381, 382, 383, 384, 385, and 386, is added to read as follows: 2. User interface software 3. Modeling software 4. Database software 5. Tracking and monitoring software 6. Energy Management System (EMS) software 7. Supervisory Control and Data Acquisition (SCADA) system software 8. Evaluation and assessment system software 9. Operating, planning and transaction scheduling software 10. Reliability applications 11. Market application software Electric Plant Accounts * * * * * 380 Land and Land Rights This account shall include the cost of land and land rights used in connection with regional transmission and market operations. 381 Structures and improvements This account shall include the cost in place of structures and improvements used for regional transmission and market operations. 382 Computer hardware This account shall include the cost of computer hardware and miscellaneous information technology equipment to provide scheduling, system control and dispatching, system planning, standards development, market monitoring, and market administration activities. Records shall be maintained identifying to the maximum extent practicable computer hardware owned and used for: (1) Scheduling, system control and dispatching, (2) system planning and standards development, and (3) market monitoring and market administration activities. ITEMS 1. Personal computers 2. Servers 3. Workstations 4. Energy Manage System (EMS) hardware 5. Supervisory Control and Data Acquisition (SCADA) system hardware 6. Peripheral equipment 7. Networking components 383 Computer software This account shall include the cost of off-the-shelf and in-house developed software purchased and used to provide scheduling, system control and dispatching, system planning, standards development, market monitoring, and market administration activities. Records shall be maintained identifying to the maximum extent practicable the cost of software used for: (1) Scheduling, system control and dispatching, (2) system planning and standards development, and (3) market monitoring and market administration activities. ITEMS 1. Software licenses VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 384 Communication equipment This account shall include the cost of communication equipment owned and used to acquire or share data and information used to control and dispatch the system. ITEMS 1. Fiber optic cable 2. Remote terminal units 3. Microwave towers 4. Global Positioning System (GPS) equipment 5. Servers 6. Workstations 7. Telephones 385 Miscellaneous regional transmission and market operation plant This account shall include the cost of regional transmission and market operation plant and equipment not provided for elsewhere. 386 Asset retirement costs for regional transmission and market operation plant This account shall include asset retirement costs on regional control and market operation plant and equipment. 387 [Reserved] 9. In part 101, Operating Revenue Chart of Accounts, new Accounts 456.1, 457.1 and 457.2 are added to read as follows: Operating Revenue Chart of Accounts * * * * * 2. OTHER OPERATING REVENUES * * * * * 456.1 Revenues from transmission of electricity of others. 457.1 Regional transmission service revenues. 457.2 Miscellaneous revenues. 10. In part 101, Income Accounts, Account 456 Item 5 is removed, and Item 6 is redesignated as Item 5. 11. In part 101, Operating Revenue Accounts, new revenue accounts 456.1, 457.1, and 457.2 are added to read as follows: PO 00000 Frm 00019 Fmt 4702 Sfmt 4702 Operating Revenue Accounts * * * * * 456.1 Revenues from transmission of electricity of others This account shall include revenues from transmission of electricity of others over transmission facilities of the utility. 457.1 Regional transmission service revenues This account shall include revenues derived from providing scheduling, system control and dispatching services. Include also in this account reimbursements for system planning, standards development, and market monitoring and market compliance activities. Records shall be maintained so as to show: (1) The services supplied and revenues received from each customer and (2) the amounts billed by tariff or specified rates. 457.2 Miscellaneous revenues This account shall include revenues and reimbursements for costs incurred by regional transmission service providers not provided for elsewhere. Records shall be maintained so as to show: (1) The services supplied and revenues received from each customer, and (2) the amounts billed by tariff or specified rates. 12. In part 101, Operation and Maintenance Expense Chart of Accounts, section 2 ‘‘Transmission Expenses’’ is revised to read as follows: Operation and Maintenance Expense Chart of Accounts * * * * * 2. TRANSMISSION EXPENSES Operation 560 Operation supervision and engineering 561.1 Load dispatch-Reliability 561.2 Load dispatch-Monitor and operate transmission system. 561.3 Load dispatch-Transmission service and scheduling. 561.4 Scheduling, system control and dispatch services. 561.5 Long-term reliability planning and standards development. 561.6 Transmission service studies. 561.7 Generation interconnection studies. 561.8 Long-term reliability planning and standards development services 562 Station expenses (Major only). 563 Overhead line expenses (Major only). 564 Underground line expenses (Major only). 565 Transmission of electricity by others (Major only). 566 Miscellaneous transmission E:\FR\FM\27JNP1.SGM 27JNP1 36878 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules expenses (Major only). 567 Rents. 567.1 Operation supplies and expenses (Nonmajor only). Maintenance 568 Maintenance supervision and engineering (Major only). 569 Maintenance of structures (Major only). 569.1 Maintenance of computer hardware. 569.2 Maintenance of computer software. 569.3 Maintenance of communication equipment. 569.4 Maintenance of miscellaneous regional transmission plant. 570 Maintenance of station equipment (Major only). 571 Maintenance of overhead lines (Major only). 572 Maintenance of underground lines (Major only). 573 Maintenance of miscellaneous transmission plant (Major only). 574 Maintenance of transmission plant (Nonmajor only). 13. In part 101, Operation and Maintenance Expense Chart of Accounts, 3. Distribution Expenses, 4. Customer Accounts Expenses, 5. Customer Service and Informational Expenses, 6. Sales Expense, and 7. Administrative and General Expenses, are redesignated as 4. Distribution Expenses, 5. Customer Accounts Expenses, 6. Customer Service and Informational Expenses, 7. Sales Expense, and 8. Administrative and General Expenses, respectively. 14. In part 101, Operation and Maintenance Expense Chart of Accounts, a new section 3, including Accounts 575.1 575.2, 575.3, 575.4, 575.5, 575.6, 575.7, 576.1, 576.2, 576.3, 576.4 and 576.5, is added to read as follows: Operation and Maintenance Expense Chart of Accounts * * * * * 3. REGIONAL MARKET EXPENSES Operation 575.1 Operation Supervision 575.2 Day-ahead and real-time market facilitation. 575.3 Transmission rights market facilitation. 575.4 Capacity market facilitation. 575.5 Ancillary services market facilitation 575.6 Market monitoring and compliance 575.7 Market facilitation, monitoring and compliance services Maintenance 576.1 Maintenance of structures and improvements VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 576.2 software 567.4 Maintenance of communication equipment 567.5 Maintenance of miscellaneous market operation plant 15. In part 101, Operation and Maintenance Expense Accounts, the first paragraph of Account 556 is revised to read as follows: Operation and Maintenance Expense Accounts * * * * * Account 556 System Control and Load Dispatching (Major Only) This account shall include the cost of labor and expenses incurred in load dispatching activities for system control. Utilities having an interconnected electric system or operating under a central authority which controls the production and dispatching of electricity may apportion these costs to this account and transmission expense Accounts 561.1 through 561.4, and Account 581, Load DispatchingDistribution. * * * * * 16. In part 101, Operation and Maintenance Expense Accounts, Account 561, Load Dispatching (Major only) is removed. 17. In part 101, Operation and Maintenance Expense Accounts, new expense accounts 561.1, 561.2, 561.3, 561.4, 561.5, 561.6, 561.7, 561.8, 569.1, 569.2, 569.3, 569.4, 575.1, 575.2, 575.3, 575.4, 575.5, 575.6, 575.7, 576.1, 576.2, 576.3, 576.4 and 576.5 are added to read as follows: Operation and Maintenance Expense Accounts * * * * * 561.1 Load dispatch-Reliability. This account shall include the cost of labor, materials used and expenses incurred by the regional transmission service provider to manage the regionwide reliability coordination function as specified by the North American Electric Reliability Council (NERC) and individual reliability organizations. These activities shall include performing current and next day reliability analysis. This account shall include the costs incurred to calculate load forecasts, and performing contingency analysis. 561.2 Load Dispatch-Monitor and Operate Transmission System. This account shall include the costs of labor, materials used and expenses incurred by the regional transmission service provider to monitor, assess and operate the power system and PO 00000 Frm 00020 Fmt 4702 Sfmt 4702 individual transmission facilities in real-time to maintain safe and reliable operation of the transmission system. This account shall also include the expense incurred to manage transmission facilities to maintain system reliability and to monitor the real-time flows and direct actions according to regional plans and tariffs as necessary. ITEMS 1. Receive and analyze outage requests. 2. Reschedule outage plans. 3. Monitor solution quality field data values, providing model updates to NERC and coordinating network model changes across all systems. 4. Conduct operating training related to NERC certification. 5. Monitor generation resources and communicate with generation owners regarding expected dispatch actions. 6. Ensure ancillary service requirements are met. 561.3 Load Dispatch-Transmission Service and Scheduling This account shall include the costs of labor, materials used and expenses incurred by the regional transmission service provider to process hourly, daily, weekly and monthly transmission service requests using an automated system such as an Open Access SameTime Information System (OASIS). It shall also include the expenses incurred to operate the automated transmission service request system and to monitor the status of all scheduled energy transactions. 561.4 Scheduling, System Control and Dispatching Services This account shall include the costs billed to the transmission owner, load serving entity or generator for scheduling, system control and dispatching service. Include in this account service billings for system control to maintain the reliability of the transmission area in accordance with reliability standards, maintaining defined voltage profiles, and monitoring operations of the transmission facilities. 561.5 Long-Term Reliability, Planning and Standards Development This account shall include the cost of labor, materials used and expenses incurred for the long-term system planning of the interconnected bulk electric transmission systems within a planning authority area. Include also the expenses incurred for long-term system reliability and resource planning to develop long-term strategies to meet E:\FR\FM\27JNP1.SGM 27JNP1 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules customer demand and energy requirements. ITEMS 1. Developing and maintaining transmission and resource (demand and capacity) system models to evaluate transmission system performance and resource adequacy. 2. Maintaining and applying methodologies and tools for the analysis and simulation of the transmission systems for the assessment and development of transmission expansion and resource adequacy plans. 3. Developing demand and energy end-use customer forecasts, capacity resources, and demand response programs. 4. Assessing, developing and document resource and transmission expansion plans. 5. Maintaining transmission system models (steady-state, dynamics, and short circuit). 6. Collecting transmission information and transmission facility characteristics and ratings. 7. Notifying participants of any planned transmission changes that may impact their facilities. 8. Developing and reporting on transmission expansion and resource plans for assessment and compliance with reliability standards. 9. Developing reliability standards for the planning and operation of the interconnected bulk electric transmission systems that serve the United States, Canada, and Mexico. 10. Developing criteria and certification procedures for balancing, interchange, reliability authorities, transmission operators and others. 11. Outside services employed Note: The cost of supervision, customer records and collection expenses, administrative and general salaries, office supplies and expenses, property insurance, injuries and damages, employee pension and benefits, regulatory commission expenses, general advertising, and rents shall be charged to the customer accounts, service, and administrative and general expense accounts contained in the Uniform System of Accounts. 561.6 Transmission service studies. This account shall include the cost of labor, materials used and expenses incurred to conduct transmission services studies for proposed interconnections with the transmission system. Detailed records shall be maintained for each study undertaken and all reimbursements received for conducting such a study. VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 561.7 Generation interconnection studies. This account shall include the cost of labor, materials used and expenses incurred to conduct generation interconnection studies for proposed interconnections with the transmission system. Detailed records shall be maintained for each study undertaken and all reimbursements received for conducting such a study. 561.8 Long-Term Reliability Planning and Standards Development Services. This account shall include the costs billed to the transmission owner, load serving entity, or generator for long-term system planning of the interconnected bulk electric transmission system. Include also the costs billed by the regional transmission service provider for long-term system reliability and resource planning to develop long-term strategies to meet customer demand and energy requirements. This account shall also include fees and expenses for outside services incurred by the regional control service provider and billed to the load serving entity, transmission owner or generator. 569.1 Maintenance of computer hardware. This account shall include the cost of labor, materials used and expenses incurred in the maintenance of computer hardware serving the transmission function. 569.2 Maintenance of computer software. This account shall include the cost of labor, materials used and expenses incurred for annual computer software license renewals, annual software update services and the cost of ongoing support for software products serving the transmission function. ITEMS 1. Telephone support. 2. Onsite support. 3. Software updates and minor revisions. 569.3 Maintenance of communication equipment. This account shall include the cost of labor, materials used and expenses incurred in the maintenance of communication equipment serving the transmission function. 569.4 Maintenance of miscellaneous regional transmission plant. This account shall include the cost of labor, materials used and expenses incurred in the maintenance of miscellaneous regional transmission plant serving the transmission function. PO 00000 Frm 00021 Fmt 4702 Sfmt 4702 575.1 36879 Operation supervision. This account shall include the cost of labor and expenses incurred in the general supervision and direction of the regional energy markets. 575.2 Day-Ahead and real-time market facilitation. This account shall include the cost of labor, materials used and expenses incurred to facilitate the Day-Ahead and Real-Time markets. This account shall also include the costs incurred to manage the real-time deployment of resources to meet generation needs and to provide capacity adequacy verification. Include in this account the costs incurred to maintain related sections of the tariff, market rules, operating procedures, and standards and coordinating with neighboring areas. ITEMS 1. Consultant fees and expenses 2. System record and report forms 3. Meals, traveling and incidental expenses Note: The cost of supervision, customer records and collection expenses, administrative and general salaries, office supplies and expenses, property insurance, injuries and damages, employee pension and benefits, regulatory commission expenses, general advertising, and rents shall be charged to the customer accounts, service, and administrative and general expense accounts contained in the Uniform System of Accounts. 575.3 Transmission rights market facilitation. This account shall include the cost of labor, materials used and expenses incurred to manage the allocation and auction of transmission rights. 575.4 Capacity market facilitation. This account shall include the cost of labor, materials used and expenses incurred to manage the allocation of capacity rights. 575.5 Ancillary services market facilitation. This account shall include the cost of labor, materials used and expenses incurred to manage all other ancillary services market functions. 575.6 Market monitoring and compliance. This account shall include the cost of labor, materials used and expenses incurred to review market data and operational decisions for compliance with market rules. It shall also include the costs incurred to interface with external market monitors. E:\FR\FM\27JNP1.SGM 27JNP1 36880 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 575.7 Market facilitation, monitoring and compliance services. This account shall include the costs billed to the transmission owner, load serving entity or generator for market facilitation, monitoring and compliance services. 576.1 Maintenance of structures and improvements. This account shall include the cost of labor, materials used and expenses incurred in the maintenance of structures, the book cost of which is included in account 381, Structures and Improvements. (See operating expense instruction 2.) 576.2 Maintenance of computer hardware. The account shall include the cost of labor, materials used and expenses incurred in the maintenance of computer hardware, the book cost of which is included in Account 382. 576.3 Maintenance of computer software. This account shall include the cost of labor, materials used and expenses incurred for annual computer software license renewals, annual software update services and the cost of ongoing support for software products. ITEMS 1. Telephone support 2. Onsite support 3. Software updates and minor revisions 576.4 Maintenance of communication equipment. This account shall include the cost of labor, materials used and expenses VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 incurred in the maintenance of communication equipment, the book cost of which is included in Account 384. 18 19 20 576.5 Maintenance of miscellaneous market operation plant. This account shall include the cost of labor, materials used and expenses incurred in the maintenance of miscellaneous market operation plant, the book cost of which is included in Account 386. 21 22 Note: The following Appendices will not appear in the Code of Federal Regulations. Appendix A—List of Commentors 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 PO 00000 Allegheny Energy Parties American Municipal Power-Ohio, Inc. American Public Power Association Braintree Electric Light Department, Reading Municipal Light Department, and Taunton Municipal Lighting Plant California Department of Water Resources State Water Project California Municipal Utilities Association Cinergy Services, Inc. City of Santa Clara California Connecticut Department of Public Utility Control and Vermont Department of Public Service Consolidated Edison Company of New York, Inc., Orange and Rockland Utilities, Inc., Central Hudson Gas & Electric Corporation, New York State Electric & Gas Corporation and Rochester Gas & Electric Corporation Edison Electric Institute EPIC Merchant Energy, LP Electric Consumers Resource Council Electric Power Supply Association Iowa Office of Consumer Advocate and Indiana Office of Utility Consumer Counselor International Transmission Company ISO New England Inc. Frm 00022 Fmt 4702 Sfmt 4702 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 ISO/RTO Council LG&E Energy, LLC Long Island Power Authority, Long Island Power Authority and New York Power Authority Madison Gas & Electric Company Midwest Independent Transmission System Operator, Inc. Midwest ISO Transmission Owners Organization of MISO States Modesto Irrigation District National Grid USA New England Power Pool Participants Committee New York Municipals & Cooperatives NiSource Northern California Power Agency National Rural Electric Cooperative Association PJM Interconnection, L.L.C. Pacific Gas and Electric Company PPL Parties Public Service Electric and Gas Company and PSEG Energy Resources & Trading LLC The Honorable Doug Ose, U.S. House of Representatives The Honorable Paul E. Gillmor, U.S. House of Representatives Sector Elected Representatives of the PJM Finance Committee Southern California Edison Company Transmission Agency of Northern California Transmission Access Policy Study Group Transmission Dependent Utility Systems TXU Portfolio Management Company LP and TXU Pedricktown Cogeneration Company LP Virginia Electric and Power Company Wisconsin Electric Power Company Xcel Energy Services Inc. BILLING CODE 6717–01–P E:\FR\FM\27JNP1.SGM 27JNP1 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00023 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36881 EP27jn05.000</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00024 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.001</GPH> 36882 VerDate jul<14>2003 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00025 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36883 EP27jn05.002</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00026 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.003</GPH> 36884 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00027 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36885 EP27jn05.004</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 21:04 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00028 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.005</GPH> 36886 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00029 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36887 EP27jn05.006</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00030 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.007</GPH> 36888 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00031 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36889 EP27jn05.008</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00032 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.009</GPH> 36890 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00033 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36891 EP27jn05.010</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00034 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.011</GPH> 36892 VerDate jul<14>2003 17:09 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00035 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36893 EP27jn05.012</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00036 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.013</GPH> 36894 VerDate jul<14>2003 20:28 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00037 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36895 EP27jn05.014</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00038 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.015</GPH> 36896 VerDate jul<14>2003 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00039 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 36897 EP27jn05.016</GPH> Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules VerDate jul<14>2003 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules 20:56 Jun 24, 2005 Jkt 205001 PO 00000 Frm 00040 Fmt 4702 Sfmt 4725 E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.017</GPH> 36898 Federal Register / Vol. 70, No. 122 / Monday, June 27, 2005 / Proposed Rules BILLING CODE 6717–01–C DEPARTMENT OF HOMELAND SECURITY Coast Guard 33 CFR Part 100 Request for Comments [CGD13–05–009] RIN 1625–AA08 Special Local Regulations, Strait Thunder Performance, Port Angeles, WA Coast Guard, DHS. Notice of proposed rulemaking. AGENCY: ACTION: SUMMARY: The Coast Guard proposes establishing permanent special local regulations for the Strait Thunder Race held on the waters of Port Angeles Harbor, Port Angeles, Washington. These special local regulations limit the movement of non-participating vessels in the regulated race area and provide for a viewing area for spectator craft. This proposed rule is needed to provide for the safety of life on navigable waters during the event. DATES: Comments and related material must reach the Coast Guard on or before August 26, 2005. ADDRESSES: You may mail comments and related material to Sector Commander, Sector Seattle, 1519 Alaskan Way South, Seattle, Washington 98134. Sector Seattle maintains the public docket [CGD13– 05–009] for this rulemaking. Comments and material received from the public, as well as documents indicated in this preamble as being available in the docket, will become part of this docket VerDate jul<14>2003 17:09 Jun 24, 2005 and will be available for inspection or copying at Sector Seattle between 8 a.m. and 4 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: LTJG J. L. Hagen, c/o Captain of the Port Puget Sound, 1519 Alaskan Way South, Seattle, WA 98134, (206) 217–6232. SUPPLEMENTARY INFORMATION: Jkt 205001 We encourage you to participate in this rulemaking by submitting comments and related material. If you do so, please include your name and address, identify the docket number for this rulemaking (CGD13–05–009), indicate the specific section of this document to which each comment applies, and give the reason for each comment. Please submit all comments and related material in an unbound format, no larger than 8 by 11 inches, suitable for copying. If you would like to know they reached us, please enclose a stamped, self-addressed postcard or envelope. We will consider all comments and material received during the comment period. We may change this proposed rule in view of them. Public Meeting We do not now plan to hold a public meeting. But you may submit a request for a meeting by writing to Sector Seattle at the address under ADDRESSES explaining why one would be beneficial. If we determine that one would aid this rulemaking, we will hold one at a time and place announced by a later notice in the Federal Register. Background and Purpose These hydroplane races pose several dangers to the public including excessive noise, objects falling from any accidents, and hydroplanes racing at PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 high speeds in close proximity to other vessels. Accordingly, regulatory action is needed in order to provide for the safety of spectators and participants during the event. Discussion of Proposed Rule This rule will create two regulated areas, a race area and a spectator area. These regulated areas will assist in minimizing the inherent dangers associated with hydroplane races. These dangers include, but are not limited to, excessive noise, race craft traveling at high speed in close proximity to one another and to spectator craft, and the risk of airborne objects from any accidents associated with hydroplanes. In the event that hydroplanes require emergency assistance, rescuers must have immediate and unencumbered access to the craft. The Coast Guard, through this action, intends to promote the safety of personnel, vessels, and facilities in the area. Due to these concerns, public safety requires these regulations to provide for the safety of life on the navigable waters. This proposed rule is substantially identical to a temporary final rule that was established for the 2004 Strait Thunder race and published in the Federal Register on September 30, 2004 (CGD13–04–039, 69 FR 58053). Regulatory Evaluation This proposed rule is not a ‘‘significant regulatory action’’ under section 3(f) of Executive Order 12866, Regulatory Planning and Review, and does not require an assessment of potential costs and benefits under section 6(a)(3) of that Order. The Office of Management and Budget has not reviewed it under that Order. It is not ‘‘significant’’ under the regulatory policies and procedures of the E:\FR\FM\27JNP1.SGM 27JNP1 EP27jn05.018</GPH> [FR Doc. 05–12626 Filed 6–24–05; 8:45 am] 36899

Agencies

[Federal Register Volume 70, Number 122 (Monday, June 27, 2005)]
[Proposed Rules]
[Pages 36865-36899]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 05-12626]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 101

[Docket No. RM04-12-000]


Accounting and Financial Reporting for Public Utilities Including 
RTOs

June 2, 2005.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
proposing to amend its regulations to update the accounting 
requirements for public utilities and licensees, including independent 
system operators and regional transmission organizations (collectively 
referred to as RTOs). The Commission is also proposing to amend its 
financial reporting requirements for the quarterly and annual financial 
reporting forms for these entities. These updates to the Commission's 
Uniform System of Accounts (USofA) and the financial reporting 
requirements are being proposed to accommodate the evolving electric 
industry due to the availability of open-access transmission service 
and the increasing competition in wholesale bulk power markets.
    These proposed updates to the Commission's accounting and reporting 
requirements will allow the Commission and the public to be better 
informed with respect to transactions and events affecting public 
utilities, including RTOs, subject to the Commission's accounting and 
reporting regulations. As a result of improved transparency of 
financial information, the Commission and the public will also be 
better able to understand the costs of RTOs.

DATES: Comments on the proposed rulemaking are due on or before August 
26, 2005.

ADDRESSES: Comments may be filed electronically via the eFiling link on 
the Commission's Web site at https://www.ferc.gov. Commentors unable to

[[Page 36866]]

file comments electronically must send an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Office of the 
Secretary, 888 First Street, NE., Washington, DC 20426. Refer to the 
Comment Procedures section of the preamble for additional information 
on how to file comments.

FOR FURTHER INFORMATION CONTACT: John Okrak (Technical Information), 
Office of Markets, Tariffs and Rates, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, (202) 502-
8280.
    Julie Kuhns (Technical Information), Office of Markets, Tariffs and 
Rates, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6287.
    Lodie White (Legal Information), Office of the General Council, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6193.

SUPPLEMENTARY INFORMATION: 
I. Introduction
II. Background
    A. General
    B. NOI Comments on Accounting and Financial Reporting
III. Discussion
    A. General
    B. Proposed Regional Transmission and Market Operation Asset 
Function
    1. Proposed Accounts for Land, Buildings and Improvements
    2. Proposed Accounts for Computer Hardware and Software Costs
    3. Proposed Account for Communication Equipment Costs
    4. Proposed Account for Other Property and Equipment Costs
    5. Proposed Account for Asset Retirement Obligation Costs
    C. Proposed RTO Revenue Accounts
    D. Proposed Regional Market Expense Function
    1. Proposed Accounts for Regional Market Expenses
    2. Proposed Accounts for Maintenance Expenses
    3. Customer Service and Administrative and General Expenses
    4. Additional Disclosures
    E. Proposed Accounting by Public Utilities for Computer 
Hardware, Software and Communication Equipment
    F. Proposed Accounting and Financial Reporting by Public 
Utilities, Including RTOs
    1. Proposed Accounts for Load Dispatching, Scheduling and System 
Control Expenses
    2. Proposed Accounts for System Planning and Standards 
Development
    3. Proposed Accounts for Study Costs
    4. Proposed Accounts for RTO Billings
    5. Proposed Accounts for Maintenance Expenses
    6. Proposed Account for Revenue From Transmission of Electricity
    7. Accounting for Settlement Amounts
    8. Other Matter
    G. Conclusion
IV. Proposed Effective Date
V. Proposed Changes to the FERC Quarterly and Annual Report Forms
VI. Information Collection Statement
VII. Environmental Analysis
VIII. Regulatory Flexibility Act
IX. Comment Procedures
X. Document Availability

I. Introduction

    1. In this Notice of Proposed Rulemaking (NOPR), the Commission is 
proposing to amend Part 101 of its regulations to revise its Uniform 
System of Accounts (USofA) \1\ and to revise its quarterly and annual 
financial reporting forms for public utilities and licensees. In brief, 
the Commission proposes to update its USofA to accommodate the 
restructuring changes that are occurring in the electric industry due 
to the availability of open-access transmission service and increasing 
competition in wholesale bulk power markets. These revisions will also 
necessitate corresponding changes to the FERC Form No. 1, Annual Report 
for Major Electric Utilities, Licensees and Others (Form 1); FERC Form 
No. 1-F, Annual Report for Nonmajor Public Utilities and Licensees 
(Form 1-F); and FERC Form No. 3-Q, Quarterly Financial Report of 
Electric Utilities, Licensees, and Natural Gas Companies (Form 3-Q).
---------------------------------------------------------------------------

    \1\ 18 CFR part 101.
---------------------------------------------------------------------------

    2. The financial statements and related detailed schedules reported 
in the Commission's quarterly and annual financial reports provide 
information about each respondent's financial position, financial 
performance, its source and uses of cash, its operating statistics, and 
other information necessary to understand transactions and events 
affecting the entity. Because it is important that the data reported in 
their quarterly and annual financial reports are relevant, reliable, 
understandable, and comparable among reporting entities, the Commission 
requires these statements and reports to be prepared directly from the 
accounting records maintained in accordance with the USofA.
    3. An important objective of this proposed rule is to provide sound 
and uniform accounting and financial reporting for transactions and 
events affecting public utilities and licensees, including independent 
system operators and regional transmission organizations (collectively 
referred to as RTOs), that file financial reports with the 
Commission.\2\ The Commission is of the view that updates to the 
Commission's accounting and financial reporting regulations are needed 
because certain RTO activities are not clearly or consistently 
reported.
---------------------------------------------------------------------------

    \2\ The Commission has explained that RTOs are public utilities, 
and as such, they are required to follow the USofA and file Form No. 
1. See PJM Interconnection, L.L.C., 107 FERC ] 61,087 (2004). For 
purposes of this NOPR, the term RTOs refers to public utilities that 
are performing regional transmission and independent system 
operations.
---------------------------------------------------------------------------

    4. The proposed accounts and changes to the Commission's quarterly 
and annual financial forms will add visibility and uniformity to the 
accounting and financial reporting for the cost of utility assets, and 
the expenses the utility incurs in providing services, along with 
revenues collected from RTO members. These proposed revisions to the 
Commission's accounting and reporting regulations will allow the 
Commission and the public to better understand transactions and events 
that affect RTOs and their members.

II. Background

A. General

    5. In April 1996, in Order No. 888,\3\ the Commission established 
the foundation necessary to develop competitive bulk power markets in 
the United States: non-discriminatory open access transmission services 
by public utilities and standard cost recovery rules to provide a fair 
transition to competitive markets. Public utilities were also required 
to functionally unbundle, and to provide transmission service 
separately from generation services.
---------------------------------------------------------------------------

    \3\ See Promoting Wholesale Competition Through Open Access Non-
discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21,540 (May 10, 1996), FERC Stats. & Regs. ] 
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12,274 (March 
14, 1977), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, 
Order No. 888-B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 
888-C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. 
Transmission Access Policy Study Group, v. FERC, 225 F.3d 667 (D.C. 
Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).
---------------------------------------------------------------------------

    6. Despite the changes brought about by Order No. 888, reports of 
discriminatory practices by vertically integrated public utilities 
persisted. In Order No. 2000,\4\ the Commission encouraged the 
formation of independent and regional organizations, to remedy undue 
discrimination and to foster regional efficiencies and efficient 
pricing. As a result, a number of RTOs

[[Page 36867]]

have formed and are in operation.\5\ These RTOs perform many of the 
same activities previously performed by the transmission owners whose 
transmission systems they now operationally control. In addition, RTOs 
perform some unique functions; among other functions not traditionally 
performed by other public utilities, they oversee markets and they 
conduct long-term system planning on a regional basis. The formation of 
RTOs has created the need to update the Commission's accounting and 
financial reporting requirements to reflect the roles of RTOs and 
provide more transparent and uniform accounting for and reporting of 
certain activities not previously addressed in the Commission's 
regulations.
---------------------------------------------------------------------------

    \4\ See Regional Transmission Organizations, Order No. 2000, 65 
FR 809 (January 6, 2000), FERC Stats. & Regs. ] 31,089 (1999), order 
on reh'g, Order No. 2000-A, 65 FR 12,088 (March 8, 2000), FERC 
Stats. & Regs. ] 31,092 (2000), affirmed sub nom. Public Utility 
District No. 1 of Snohomish County, Washington, v. FERC, 272 F.3d 
607 (D.C. Cir. 2001).
    \5\ See, e.g., the California Independent System Operator 
Corporation (CAISO), the Midwest Independent Transmission System 
Operator, Inc. (Midwest ISO), the ISO New England, Inc. (ISO-NE), 
the New York Independent System Operator, Inc. (NYISO), PJM 
Interconnection, L.L.C. (PJM), and the Southwest Power Pool, Inc. 
(SPP).
---------------------------------------------------------------------------

    7. On September 26, 2004, the Commission issued a Notice of Inquiry 
(NOI) in this proceeding.\6\ The NOI invited comments on various 
matters including the Commission's accounting and financial reporting 
requirements for RTOs. The Commission received comments from RTOs, 
public utilities that are RTO members, state regulatory commissions, 
and others.\7\
---------------------------------------------------------------------------

    \6\ See Financial Reporting and Cost Accounting and Recovery 
Practices for Regional Transmission Organizations and Independent 
System Operators, 69 FR 58,112 (September 29, 2004), FERC Stats. & 
Regs. ] 35,546 (2004).
    \7\ See Appendix A for a list of commentors.
---------------------------------------------------------------------------

    8. As noted in the NOI, the accounting regulations currently found 
in the USofA and the related financial reporting requirements were 
developed to capture financial information along traditional primary 
business functions--generation, transmission and distribution of 
electric energy. As a result, the accounting regulations and related 
financial reporting requirements do not provide sufficient detailed 
information about RTO-related costs, including the costs incurred by 
RTOs and other relevant information concerning the types of services 
RTOs provide to their members. The Commission sought comments on what 
changes, if any, should be made in accounting and financial reporting.
    9. The Commission is issuing this NOPR to address the accounting 
and financial reporting issues raised in the NOI. The proposed changes 
to the Commission's accounting and financial reporting requirements 
will provide uniformity and transparency in accounting for and 
reporting of transactions and events affecting public utilities, 
including RTOs. The Commission expects that the proposed changes in the 
accounting and financial reporting of data will lead to improvements in 
cost recovery practices by providing details concerning the cost of RTO 
functions and increased assurance that the costs are a legitimate and 
reasonable cost of providing service and assigned to the correct period 
for recovery in rates.

B. NOI Comments on Accounting and Financial Reporting

    10. The Commission received numerous comments regarding the need 
for updating the USofA for the accounting and financial reporting 
public utilities including RTOs. Most commentors are supportive of 
revising the USofA to reflect changes in the structure of the electric 
industry.
    11. Many commentors state that RTOs do not own generation, 
transmission, and distribution facilities, and therefore many assets 
and associated expense accounts are not applicable to RTOs. In their 
view, RTOs settle transactions among market participants and assign 
their operating costs to those participants. Thus, they say, there is a 
need for new functional categories, new accounts and expanded reporting 
requirements for RTOs and for individual transmission-owning public 
utilities participating in RTOs.\8\
---------------------------------------------------------------------------

    \8\ See, e.g., American Public Power Association, California 
Department of Water Resources, Cinergy, Consolidated Edison Company 
of New York, Inc., Iowa Office of Consumer Advocate and Indiana 
Office of Utility Consumer Counselor, and NARUC.
---------------------------------------------------------------------------

    12. Commentors further recommend the collection and development of 
detailed and standardized information and reports in addition to the 
data the USofA currently requires. In their view, to the extent that 
all RTOs utilize a standard report format and use consistent cost 
categories, it will be easier for the Commission and market 
participants to understand the nature of the expenditures and compare 
expenditures across RTOs. Commentors believe that standardization also 
will enhance transparency of costs, and allow better understanding of 
financial trends and other issues. They further urge the Commission to 
revise its USofA and reporting formats to properly reflect the business 
functions of RTOs and to provide more meaningful and transparent 
financial accounting information.\9\
---------------------------------------------------------------------------

    \9\ See, e.g., Connecticut Department of Public Utility Control 
and Vermont Department of Public Service.
---------------------------------------------------------------------------

    13. The Commission also solicited comments on whether RTOs or their 
members that are public utilities should report data concerning the 
transmission of electricity for others as required by FERC Forms 1 and 
1-F. These commentors stated that because RTOs authorize, control, bill 
and collect payments for transmission transactions, such transactions 
should be reported by the RTO.\10\ They believe that this would be the 
most efficient solution rather than requiring the RTO to provide the 
information to its members, who in turn would include the data in their 
respective filings with the Commission.
---------------------------------------------------------------------------

    \10\ See, e.g., Allegheny Power, Consolidated Edison Company of 
New York, Inc., Edison Electric Institute, Long Island Power 
Authority and NiSource.
---------------------------------------------------------------------------

    14. In addition to seeking comments on RTO accounting and financial 
reporting, the Commission also sought and received comments on the 
accounting and financial reporting by public utilities and licensees 
that are members of an RTO.

III. Discussion

A. General

    15. The Commission's accounting and financial reporting 
requirements are designed to provide information about a reporting 
entity's financial condition and results of operation. This information 
is important in developing and examining rates and in making policy 
decisions.
    16. As the electric industry has transitioned from a vertically 
integrated to an unbundled business model, and as the respective 
functions of business entities have continued to evolve, the Commission 
has relied on existing accounting and reporting requirements applicable 
to existing public utilities (i.e., principally investor-owned 
utilities) to obtain information about an RTO's financial condition. 
The Commission has required public utilities, including RTOs, to 
continue to prepare their financial statements in accordance with the 
USofA as it could accommodate most of the transactions and events 
affecting these entities. During this restructuring, it was difficult 
to prescribe new accounting rules that could be uniformly applied. 
While we expect this evolution to continue, sufficient experience has 
now been gained to make some general observations about RTOs and the 
adequacy of our existing accounting and reporting requirements for 
these entities.
    17. Over the past 7 years, in reviewing RTO proposals, the 
Commission has confronted new and different business models, accounting 
methods, and rate designs. RTOs are largely not-for-profit

[[Page 36868]]

companies with no shareholder investment. They use different classes or 
types of assets and deploy these resources in a manner that does not 
readily lend itself to traditional, functional utility plant 
classifications (e.g., generation, transmission or distribution plant). 
RTO assets are largely computer hardware, computer software, and 
communication equipment. They allow the RTO to ensure reliability, to 
operate and monitor competitive markets, to control and order dispatch 
of resources on the system, and to coordinate and plan short and long-
term investment and construction.
    18. In sum, the services provided by RTOs to their members, the 
assets used, the costs incurred, and the revenues billed, do not 
readily lend themselves to the existing accounting classifications 
established for public utilities as noted by numerous commentors. As a 
result, the accounting and the financial reporting by RTOs in the 
Commission's quarterly and annual financial reports calls into question 
the relevance, understandability and usefulness of RTO-related 
financial information submitted to the Commission.
    19. While most commentors to the NOI did not recommend a completely 
new USofA to accommodate the services RTOs perform, the majority of 
commentors suggest that more accounting detail is needed to better 
identify assets, costs incurred and revenues earned by RTOs as well as 
by other public utilities. After studying the comments received, the 
Commission proposes to revise the existing USofA and financial 
reporting requirements, as discussed below, rather than creating an 
entirely new system of accounts exclusively for RTOs.

B. Proposed Regional Transmission and Market Operation Asset Function

    20. In order to perform many of their primary functions, RTOs must 
make significant investments in computer hardware, software and 
communication equipment. The cost of these assets is not explicitly 
provided for in the existing primary plant accounts, resulting in 
inconsistent accounting and reporting for these assets.
    21. To provide more financial transparency for the costs of 
hardware, software and communication equipment, as well as to address 
the inconsistent accounting and reporting noted previously, the 
Commission proposes to create a new utility plant function to record 
the cost of assets owned and used by RTOs. The proposed new asset 
function will be entitled Regional Transmission and Market Operation 
Plant, and contain the following primary plant accounts, as shown in 
the table below:

------------------------------------------------------------------------
            Regional Transmission and Market Operation Plant
-------------------------------------------------------------------------
Account 380, Land and Land Rights
Account 381, Structures and Improvements
Account 382, Computer Hardware
Account 383, Computer Software
Account 384, Communication Equipment
Account 385, Miscellaneous Regional Transmission and Market Operation
 Plant
Account 386, Asset Retirement Costs for Regional Transmission and Market
 Operation Plant
Account 387, Reserved
------------------------------------------------------------------------

    22. The benefit of establishing a new asset function within the 
existing accounting and reporting framework is that the cost of 
property, plant and equipment used by RTOs will now be uniformly 
reported by these entities. This new functional classification will 
help provide comparability among RTOs that perform regional control and 
market operations. The creation of a new RTO asset function will also 
minimize inconsistent reporting of RTOs' major technology assets, which 
include computer hardware, computer software and communication 
equipment.
1. Proposed Accounts for Land, Buildings and Improvements
    23. RTOs may own land, buildings and other long-lived fixed assets. 
The USofA maintains a set of primary plant accounts to record the cost 
of these types of assets by plant function. Therefore, the Commission 
proposes two new accounts (Account 380, Land and Land Rights, and 
Account 381, Structures and Improvements) to record the cost of land, 
land rights and buildings within the new functional classification for 
Regional Transmission and Market Operation Plant. These two new 
accounts will provide consistent accounting classification for the cost 
of these fixed assets.
2. Proposed Accounts for Computer Hardware and Software Costs
    24. Most commentors identify computer hardware and software as the 
primary assets used by RTOs and note that the existing USofA does not 
provide sufficient cost detail concerning computer hardware and 
software owned and used by public utilities. In particular, commentors 
indicate that the cost to develop or purchase off-the-shelf software is 
not readily transparent in the reports. In order to provide more 
transparency to investments made by RTOs in computer hardware and 
software, the Commission proposes the creation of new primary plant 
Account 382, Computer Hardware, and Account 383, Computer Software.
    25. RTOs use computer hardware and software to: (1) Manage bulk 
power interchange contracts and scheduling within neighboring control 
areas; (2) provide ancillary services; (3) provide data and other 
information to market participants; (4) monitor markets and manage the 
transmission system; (5) determine locational marginal prices (LMP); 
(6) perform short-term and long-term modeling; and (7) provide training 
on the systems.
    26. Computer hardware used by RTOs generally includes servers, 
workstations and other processors, peripheral equipment, information 
technology equipment for energy management systems, and personal 
computers. Computer software generally includes software licenses and 
internally-developed software to perform the above mentioned tasks and 
activities (e.g., scheduling, system control and dispatching, system 
planning, standards development, market monitoring and market 
administration).
    27. The Commission proposes to create new primary plant Account No. 
382, Computer Hardware. The addition of a new primary plant account for 
computer hardware will include the cost of computer hardware initially 
devoted to this function as well as subsequent additions, retirements, 
adjustments and transfers of these

[[Page 36869]]

amounts.\11\ This information will be reported in the Form 1, thereby 
providing additional transparency concerning computer hardware 
transactions. Finally, because the computer hardware may perform 
different activities, the Commission proposes to require RTOs to 
maintain detailed records identifying these assets by the types of 
activities they perform to the maximum extent practicable.
---------------------------------------------------------------------------

    \11\ See FERC Form 1, Electric Plant In Service Schedule at 204.
---------------------------------------------------------------------------

    28. The Commission also proposes to create new primary Account No. 
383, Computer Software, to record the cost of developing and purchasing 
software used by RTOs. Similar to computer hardware, software may be 
used by different functions or departments within the organization. 
Therefore, the Commission proposes to require that RTOs maintain 
detailed records identifying the cost of software by the types of 
activities or functions performed to the maximum extent practicable.
3. Proposed Account for Communication Equipment Costs
    29. RTOs may own communication equipment such as microwave towers, 
fiber optic cables, and other communication devices to provide system 
control and dispatching activities. However, under the existing USofA 
requirements, no specific primary plant account exists to record the 
cost of these investments outside of general plant accounts. This has 
led to respondents inconsistently reporting the cost of these 
investments in various primary plant accounts.
    30. To provide uniform accounting and financial reporting, the 
Commission proposes to add a new primary plant Account 384, 
Communication Equipment, to record the cost of communication equipment 
owned and used by RTOs.
4. Proposed Account for Other Property and Equipment Costs
    31. RTOs may also own property, plant and equipment not provided 
for in the new regional control and market operation function. In order 
to provide uniform accounting and financial reporting for the cost of 
miscellaneous property, plant and equipment, the Commission proposes to 
add a new primary plant Account 385, Miscellaneous Regional 
Transmission and Market Operation Plant, to record the cost of 
miscellaneous assets not provided for elsewhere.
5. Proposed Account for Asset Retirement Obligation Costs
    32. As noted in Order No. 631, a public utility may incur a 
liability resulting from a legal obligation to remove or retire a plant 
asset.\12\ Entities may also incur a similar type of legal obligation 
to remove or retire equipment or a plant asset used to provide regional 
control and market operation services. To provide uniform accounting 
and reporting for legal obligations associated with the retirement of 
tangible long-lived assets owned and used by entities for these 
purposes, the Commission proposes to add a new Account 386, Asset 
Retirement Costs for Regional Transmission and Market Operation Plant, 
to record the capitalized amount of the liability that becomes part of 
the asset's cost.
---------------------------------------------------------------------------

    \12\ See Accounting, Financial Reporting, and Rate Filing 
Requirements for Asset Retirement Obligations, Order No. 631, 68 FR 
19,610 (Apr. 21, 2003) and 68 FR 34,795 (June 11, 2003), FERC Stats. 
& Regs. ] 31,142 (2003), order on reh'g, Order No. 631-A, 104 FERC ] 
61,183 (2003).
---------------------------------------------------------------------------

C. Proposed RTO Revenue Accounts

    33. RTOs do not buy or sell electricity; instead, they manage 
transmission assets owned by others and settle transactions among 
participants in a manner similar to a market clearing house. Similar to 
the operation of a market clearing house, an RTO's operational costs 
consist of the expenses incurred to provide services to its members. 
The revenues received for the reimbursement of RTO operational costs 
are not explicitly provided for in the current USofA because the 
existing revenue accounts were designed to record revenues from 
electricity sales or transmission or distribution. Therefore, the 
existing revenue accounts are not entirely applicable.
    34. The Commission therefore proposes the creation of two new 
revenue accounts to record amounts billed by RTOs to their members. The 
first, Account 457.1, Regional Transmission Service Revenues, will 
include revenues received by RTOs for services provided.\13\ This new 
revenue account will contain instructions requiring the RTO to keep 
detailed records by type of service provided and the amounts billed 
under each Commission-approved tariff. Furthermore, the Commission 
proposes to include a new Form 1 schedule to report the revenue 
collected by RTOs for services performed pursuant to Commission-
approved tariffs.
---------------------------------------------------------------------------

    \13\ Such services will include, among other things, system 
control, dispatching, long-term and short-term system planning, 
market facilitation and market compliance activities.
---------------------------------------------------------------------------

    35. In addition, the Commission proposes a new Account 457.2, 
Miscellaneous Revenues, to record miscellaneous revenues received from 
RTO members occurring from incidental transactions and events. This 
revenue account would include revenues for commissions, profits or 
losses on sales of miscellaneous materials, rentals, and other 
miscellaneous sources of income.

D. Proposed Regional Market Expense Function

    36. Many commentors indicate that the current USofA does not 
provide sufficient financial transparency concerning the types of costs 
incurred by RTOs in market facilitation and market monitoring 
activities. Furthermore, as noted in Staff's report on cost ranges for 
the development of RTOs, the expenses incurred by these entities have 
not been consistently reported.\14\
---------------------------------------------------------------------------

    \14\ See Staff Report on Cost Ranges for the Development and 
Operation of a Day One Regional Transmission Organization (Docket 
No. PL04-16-000 October 2004), which states in part:
    Each organization used Generally Accepted Accounting Principles, 
but reported investment costs and annual expenses differently. That 
is, while one organization directly assigned costs to a particular 
cost element or operational function, another respondent showed no 
such cost element or operational function. The Uniform System of 
Accounts, designed for the traditional vertically-integrated 
utility, is not always aligned with the functions of an ISO or RTO. 
Staff recommends review of the reporting requirements and possible 
standardization to facilitate cost oversight by the public and the 
Commission.
---------------------------------------------------------------------------

    37. In order to give greater transparency to the RTO market 
functions performed, the Commission proposes to create a separate 
expense function within the USofA to record the expenses incurred in 
managing and monitoring market activity.\15\ This new function, 
entitled Regional Market Expenses, will contain the following expense 
accounts as shown in the table below:
---------------------------------------------------------------------------

    \15\ As part of implementing these changes, the Commission 
proposes to rescind Accounting Release No. 16, Operating and 
Administering an Electric Power Exchange, issued by the Chief 
Accountant on October 1, 2001. This Accounting Release requires RTOs 
to record operation, maintenance and market monitoring expenses in 
Account 557, Other Expenses.

------------------------------------------------------------------------
                        Regional Market Expenses
-------------------------------------------------------------------------
Operation

[[Page 36870]]

 
Account 575.1, Operation Supervision
Account 575.2, Day-Ahead and Real-Time Market Facilitation
Account 575.3, Transmission Rights Market Facilitation
Account 575.4, Capacity Market Facilitation
Account 575.5, Ancillary Services Market Facilitation
Account 575.6, Market Monitoring and Compliance
Maintenance
Account 576.1, Maintenance of Structures and Improvements
Account 576.2, Maintenance of Computer Hardware
Account 576.3, Maintenance of Computer Software
Account 576.4, Maintenance of Communication Equipment
Account 576.5, Maintenance of Miscellaneous Market Operation Plant
------------------------------------------------------------------------

1. Proposed Accounts for Regional Market Expenses
    38. RTOs perform unique services for their members such as market 
facilitation, market monitoring and market compliance activities. 
However, the existing USofA does not provide specific expense accounts 
to record these types of expenses. The Commission proposes to add new 
accounts to record the expenses related to these activities.
    39. A new Account 575.1, Operation Supervision, will be created to 
record the labor and expenses incurred in the general supervision and 
direction of the RTO regional control and market operation center.
    40. A new Account 575.2, Day-Ahead and Real-Time Market 
Facilitation, will be created to record the cost incurred to manage 
regional Day-Ahead and Real-Time markets. These activities include 
administering markets that allow participants to buy and sell power, 
arrange transmission service and other energy related activities.
    41. Further, a new Account 575.3, Transmission Rights Market 
Facilitation, will be created to record the cost to manage transmission 
rights markets. In addition, a new Account 575.4, Capacity Market 
Facilitation, will be created to record the cost to administer capacity 
markets. A new Account 575.5, Ancillary Services Market Facilitation, 
will be created to record the cost to manage ancillary service markets.
    42. Finally, Account 575.6, Market Monitoring and Compliance, will 
be created to record the cost to review market data for compliance with 
market rules. It will also include the costs incurred to communicate 
with external market monitors.
2. Proposed Accounts for Maintenance Expenses
    43. As previously discussed, the Commission proposes new asset 
accounts to record the cost of structures, computer hardware and 
software, and communication equipment. These new asset accounts will 
require the addition of new maintenance accounts to properly record the 
routine and periodic expenses incurred to maintain these assets.
    44. The Commission proposes new Account 576.1, Maintenance of 
Structures and Improvements, to record the cost of labor, materials 
used and expenses incurred to maintain structures used in regional 
transmission and market operations.
    45. Account 576.2, Maintenance of Computer Hardware, will be 
created to record the cost of labor, materials used and expenses 
incurred to maintain computer hardware. Account 576.3, Maintenance of 
Computer Software, will be created to record the cost of labor, 
materials used and expenses incurred for annual computer software 
renewals, annual software update services and the cost of ongoing 
support for software products.
    46. The Commission also proposes the creation of Account 576.4, 
Maintenance of Communication Equipment, to record the cost of labor, 
materials used and expenses incurred to maintain communication 
equipment. Finally, Account 576.5, Maintenance of Miscellaneous Market 
Operation Plant, would record the cost of labor, materials used and 
expenses incurred to maintain miscellaneous regional transmission and 
market operation plant.
    47. These new accounts when created, will provide greater detail as 
to the amount of maintenance expenses incurred on computer hardware, 
software, communication equipment and other assets owned and used by 
the RTO.
3. Customer Service and Administrative and General Expenses
    48. A review of several FERC Form 1s on file indicate that there 
may be inconsistent accounting and financial reporting for customer 
service and administrative and general expenses incurred by RTOs. For 
example, some RTOs are including customer service, administrative and 
general expenses in the transmission expense accounts as well as in the 
administrative and general expense accounts. Under existing USofA 
requirements, customer service and administrative and general expenses 
are to be recorded in Accounts 903 through 935. The practice of some 
RTOs, recording these costs in expense accounts within the transmission 
function, is inconsistent with these requirements. Accordingly we will 
require RTOs to comply with the existing USofA instructions of 
recording customer service and administrative and general expenses in 
Accounts 903 through 935.
    49. As noted by some commentors, the above mentioned types of 
expenses are already provided for in the existing USofA. Therefore, we 
agree that there is no need to establish new expense accounts for these 
types of activities or to add a new administrative function for use by 
RTOs to record customer service and administrative and general 
expenses. The use of existing accounts by RTOs will maintain 
comparability to the maximum extent practicable since all reporting 
entities will use the same administrative and general expense accounts 
to record these types of costs.
4. Additional Disclosures
    50. Under the existing Form 1 and 3-Q requirements, public 
utilities are required to report detailed financial-related information 
concerning the transmission of electricity for others. The Commission 
sought comments on whether RTOs, in addition to public utilities that 
file Form 1, should also report the data required by the Transmission 
of Electricity for Others schedule.\16\
---------------------------------------------------------------------------

    \16\ See Forms 1 and 3-Q, Transmission of Electricity For Others 
Schedule at 328-330.
---------------------------------------------------------------------------

    51. Since RTOs authorize, control, bill and collect payments and 
distribute revenues for transmission transactions using the 
transmission system under their control, the Commission proposes that 
RTOs report the information

[[Page 36871]]

required by the schedule in their Form 1 filing. In this manner, the 
Commission will have more complete information concerning the use of 
the transmission system under the control of the RTO. The data required 
by the schedule must be organized by the RTO in such a manner so that 
the information is presented for each member or other entity for whom 
the service was provided. Finally, the Commission will continue to 
require public utilities and licensees to report the data required by 
this schedule in their filing.

E. Proposed Accounting by Public Utilities For Computer Hardware, 
Software and Communication Equipment

    52. As previously mentioned, the existing USofA does not provide 
for computer hardware, software and communication equipment owned and 
used by public utilities and licensees, including RTOs. Therefore, in 
addition to creating asset accounts to the record the cost of this 
equipment for RTOs, the Commission proposes to add three new sub-
accounts to the existing transmission asset function for other public 
utilities and licensees to record the cost of these types of assets, as 
shown in the table below:

------------------------------------------------------------------------
                           Transmission Plant
-------------------------------------------------------------------------
Account 351.1, Computer Hardware
Account 351.2, Computer Software
Account 351.3, Communication Equipment
------------------------------------------------------------------------

    53. Similar to RTOs, other public utilities and licensees will 
record the cost of computer hardware, software and communication 
equipment owned and used for transmission related activities in 
proposed new primary plant accounts. The Commission proposes to create 
Account 351.1, Computer Hardware, to record the cost of computer 
equipment owned and used by public utilities and licensees. 
Additionally, they will record the cost of computer software in Account 
351.2, Computer Software, and the cost of communication equipment in 
Account 351.3, Communication Equipment. The use of these three sub-
accounts will provide uniform and consistent accounting and reporting 
for these types of assets by all public utilities and licensees.

F. Proposed Accounting and Financial Reporting by Public Utilities, 
Including RTOs

    54. Most commentors are supportive of revising the USofA to reflect 
changes in the structure of the electric industry. They are of the view 
that many of the updates could be accomplished through the addition of 
new accounts or sub-accounts within the existing USofA accounting and 
reporting framework. The Commission proposes to expand the expense 
accounts contained in the transmission function to provide more 
financial details concerning the activities and related costs incurred 
by public utilities including RTOs in providing transmission service. 
The Commission proposes to provide more details concerning dispatching, 
system control and other cost of monitoring the transmission system by 
providing more detailed expense accounts to record the cost of these 
types of activities. Additionally, Account 561, Load Dispatching, will 
be replaced with a series of detailed expense accounts added to the 
existing transmission expense function as shown in the table below:

------------------------------------------------------------------------
                          Transmission Expense
-------------------------------------------------------------------------
Operation
Account 561.1, Load Dispatch-Reliability
Account 561.2, Load Dispatch-Monitor and Operate Transmission System
Account 561.3, Load Dispatch-Transmission Service and Scheduling
Account 561.5, Long-Term Reliability Planning and Standards Development
Account 561.6, Transmission Service Studies
Account 561.7, Generation Interconnection Studies
Maintenance
Account 569.1, Maintenance of Computer Hardware
Account 569.2, Maintenance of Computer Software
Account 569.3, Maintenance of Communication Equipment
Account 569.4, Maintenance of Miscellaneous Regional Transmission Plant
------------------------------------------------------------------------

    55. Many commentors indicate that the current system of accounts 
does not provide sufficient financial transparency concerning the types 
of costs incurred by RTOs in providing member services. These services 
may include scheduling, system control and dispatching, long-term 
system planning, standards development, market facilitation and market 
monitoring activities. Furthermore, as noted in Staff's report on cost 
ranges for the development of RTOs, the expenses incurred by these 
entities have not been consistently reported.\17\
---------------------------------------------------------------------------

    \17\ See Staff Report on Cost Ranges for the Development and 
Operations of a Day One Regional Transmission Organization, Docket 
No. PL04-16-000 (October 2004). This staff report states in part:
    Each organization used Generally Accepted Accounting Principles, 
but reported investment costs and annual expenses differently. That 
is, while one organization directly assigned costs to a particular 
cost element or operational function, another respondent showed no 
such cost element or operational function. The USofA, designed for 
the traditional vertically-integrated utility, is not always aligned 
with the functions of an ISO or RTO. Staff recommends review of the 
reporting requirements and possible standardization to facilitate 
cost oversight by the public and the Commission.
---------------------------------------------------------------------------

1. Proposed Accounts for Load Dispatch, Scheduling and System Control 
Expenses
    56. Public utilities and licensees, including RTOs, provide a 
variety of transmission services including load dispatching, scheduling 
and system control. In order to provide consistent and uniform 
accounting and financial reporting by public utilities and licensees, 
including RTOs, for these types of costs, the Commission proposes to 
add new accounts to the transmission

[[Page 36872]]

expense function for these entities to record these types of expenses.
    57. The Commission proposes to add a new Account 561.1, Load 
Dispatch-Reliability, to include the costs incurred to manage the 
region-wide reliability coordination function as specified by the North 
American Electric Reliability Council (NERC) and individual reliability 
organizations. It will include the costs to perform current and next 
day reliability analyses including calculating load forecasts, perform 
contingency analyses, identify unreliable operating conditions, and 
recommend appropriate solutions.
    58. The Commission proposes to add a new Account 561.2, Load 
Dispatch-Monitor and Operate Transmission System, in order to include 
the costs incurred to monitor, assess and operate the transmission 
system and ensure the system's reliability.
    59. The Commission also proposes to add a new Account 561.3, Load 
Dispatch-Transmission Service and Scheduling, to include the costs 
incurred to process hourly, daily, weekly and monthly transmission 
service requests using an automated system such as an Open Access, 
Same-Time Information System (OASIS).
2. Proposed Accounts for System Planning and Standards Development
    60. Another important service that RTOs perform for their members 
is long-term system planning and development activities. However, the 
existing USofA does not provide a specific expense account to record 
these types of expenses. The Commission proposes to add a new Account 
561.5, Long-Term Reliability Planning and Standards Development, to 
record the costs incurred by RTOs for performing long-term system 
planning and standards development. This new account will include the 
cost of labor, materials used and expenses incurred by the RTOs for 
long-term system planning of the interconnected bulk electric 
transmission system within a planning authority area. It will also 
include expenses incurred for long-term system reliability and resource 
planning to develop long-term strategies to meet customer demand and 
energy requirements. Examples of costs include system modeling to 
evaluate resource adequacy, simulation of transmission systems for such 
assessments, and development of expansion planning.
    61. Other expenses to be included in Account 561.5 include the 
costs incurred to develop demand and energy end-use customer forecasts, 
capacity resources, and demand response programs. Examples of such 
activities include notifying participants of any planned transmission 
changes that may impact their facilities. Account 561.5 will also 
include the cost of developing and reporting on transmission expansion 
and resource plans for assessment and compliance with reliability 
standards, and developing reliability standards for the planning and 
operation of the interconnected bulk electric transmission systems that 
serve the United States, Canada, and Mexico.
    62. To the extent that public utilities and licensees that are not 
RTOs perform similar activities, they should include the costs that 
they incur for system planning and standards development in Account 
561.5.
3. Proposed Accounts for Study Costs
    63. Public utilities and licensees, including RTOs, may incur costs 
to perform generation interconnect and transmission service studies. 
The USofA does not specifically provide accounts to record these types 
of costs. The Commission proposes the creation of Account 561.6, 
Transmission Service Studies, to record the costs incurred by public 
utilities and licensees, including RTOs, to conduct studies for 
transmission service requests. The Commission also proposes to add a 
new Account 561.7, Generation Interconnection Studies, to record the 
costs incurred by public utilities and licensees, including RTOs to 
conduct studies for generator service requests when the costs are not 
directly reimbursable by a specific customer. The instructions to these 
accounts will require these entities to maintain detailed cost records 
for each study performed.
    64. Different types of agreements entered into by public utilities 
and licensees, including RTOs, may necessitate recording the costs of 
conducting transmission and generation interconnect studies, in Account 
186, Miscellaneous Deferred Debits, pending reimbursement by the entity 
requiring the service. Therefore, in order to provide more disclosure 
concerning the costs of interconnect study activities being performed 
by public utilities and licensees, including RTOs, the Commission 
proposes to add a new schedule to the quarterly and annual financial 
reports that will provide more specifics concerning the costs of these 
activities.
4. Proposed Accounts for RTO Billings
    65. Public utilities and licensees reimburse RTOs for the RTOs' 
operational, administrative and general costs of providing service. 
Many commentors indicate that these costs are already covered by the 
existing accounting and reporting requirements. In order to provide 
greater transparency for the payments made by public utilities and 
licensees to RTOs, the Commission proposes to create three sub-accounts 
as shown below:

------------------------------------------------------------------------
                          Transmission Expenses
-------------------------------------------------------------------------
Operation
Account 561.4, Scheduling, System Control and Dispatch Services
Account 561.8, Long-Term Reliability Planning and Standards Development
 Services
------------------------------------------------------------------------
Regional Market Expenses
------------------------------------------------------------------------
Operation
Account 575.7, Market Facilitation, Monitoring and Compliance Services
------------------------------------------------------------------------

    66. These sub-accounts will be used by public utilities and 
licensees to record their share of costs billed to them by an RTO. 
Additionally, the Commission proposes that each RTO include in its 
monthly settlement statements a breakdown of the allocation of that 
RTO's operational costs within each of the three sub-accounts discussed 
below. This information will allow each RTO member to then record its 
share of the RTO's total monthly operating costs in these new sub-
accounts.
    67. The first new sub-account, Account 561.4, Scheduling, System 
Control and Dispatching Services, will include scheduling, system 
control and dispatching services costs billed to the public utility or 
licensee. The second, Account 561.8, Long-Term Reliability

[[Page 36873]]

Planning and Standards Development Services, will include the cost of 
long-term system planning and standards related costs billed to the 
public utility or licensee. The third, Account 575.7, Market 
Facilitation, Monitoring and Compliance Services, will include costs 
for running the various markets and monitoring compliance activities 
billed to the public utility or licensee.
    68. The creation of three new sub-accounts will provide greater 
transparency of RTO operational costs billed to public utilities and 
licensees as users of the data will see the expenses being recorded in 
the public utilities' and licensees' accounts for activities performed 
by the RTO.
5. Proposed Accounts for Maintenance Expenses
    69. As previously discussed, the Commission proposes new asset 
accounts to record the cost of computer hardware, computer software and 
communication equipment. These new asset accounts will require the 
addition of new maintenance accounts to properly record the routine and 
periodic expenses incurred to maintain these assets.
    70. A new Account 569.1, Maintenance of Computer Hardware, will be 
created to record the cost to maintain computer hardware for the assets 
recorded in Account 351.1. Additionally, a new Account 569.2, 
Maintenance of Computer Software, will be created to record the cost of 
computer software renewals, annual software update services and the 
cost of ongoing support for software products.
    71. The Commission also proposes the creation of Account 569.3, 
Maintenance of Communication Equipment, to record the cost to maintain 
communication equipment for the assets recorded in Account 351.3. 
Finally, the creation of Account 569.4, Maintenance of Miscellaneous 
Regional Transmission Plant, is also proposed to record the cost to 
maintain the assets recorded in Account 385, Miscellaneous Regional 
Transmission and Market Operation Plant.
    72. These new accounts, when created, will provide greater detail 
as to the amount of maintenance expense incurred on computer hardware, 
computer software, communication equipment and other assets owned and 
used to service the transmission function.
6. Proposed Account for Revenue From Transmission of Electricity
    73. Many commentors indicate that additional disclosure is 
necessary by public utility transmission owners for revenues received 
from RTOs for use of their transmission facilities. Public utilities 
report revenues received for use of their transmission system in 
Account 456, Other Electric Revenues, along with other sources of 
revenues from miscellaneous activities. However, due to the changing 
nature of the electric industry and open access transmission 
requirements, the amount of revenue public utility transmission owners 
receive for this use of their transmission system has been growing 
significantly over the years.
    74. In order to provide greater transparency by public utility 
transmission owners for the revenues received for use of their 
transmission facilities, the Commission proposes to add a new sub-
account for Account 456, Other Electric Revenues, to record these 
sources of revenues. A new sub-account entitled Account 456.1, Revenues 
From Transmission of Electricity of Others, will record revenues the 
public utility receives for the transmission of electricity over its 
transmission facilities.
7. Accounting for Settlement Amounts
    75. Finally, commentors also provide differing methods as to the 
best way to provide transparency related to transactions settled 
through an RTO. According to some commentors, public utilities 
currently record the net settlement amounts for firm transmission 
rights, ancillary services, congestion expenses, running markets, and 
all other costs billed from RTOs in Account 555, Purchased Power. 
Furthermore, some commentors indicate that public utilities may be 
including some or all of these amounts in their purchased power or 
other types of fuel adjustment clause or formula rate calculations and 
billings.
    76. As previously discussed, the Commission proposes that public 
utilities record their share of RTO operational costs in the new 
transmission expense Accounts 561.4, 561.8 and 575.7. However, public 
utilities incur their own costs for energy, transmission rights, 
ancillary services and other services under transactions that are 
scheduled and cleared through the RTO settlement process. Some of these 
costs do not readily lend themselves to any one particular functional 
classification. For example, ancillary service costs may be generation-
related activities but are necessary to keep the transmission grid 
working; ancillary services may include the cost of maintaining central 
control over generators to adjust power to deal with power surges or 
changes in customer demand for energy. Voltage control is another 
similar example of an ancillary service that is necessary for the 
operation and reliability of the transmission grid. These activities 
have characteristics that may arguably fit either the generation or 
transmission functional expense accounts.
    77. The Commission proposes to include a new schedule in the 
quarterly and annual financial reports that will require the public 
utility and licensee to report the type of transaction and the related 
amount of expense that it is being settled through the RTO. This 
information will assist the Commission in determining the need for 
future accounting guidance on these matters.
    78. Finally, the RTO settlement process may result in a public 
utility or licensee being unaware of the counterparty to any given 
power sale or purchase transaction facilitated by the RTO. The process 
used by the RTO may require a public utility or licensee to bid 
generation into the market and then buy its generation from the market 
to serve its native load. Some public utilities may net all of their 
energy transactions in Account 555, Purchase Power, while others may 
report their energy transactions as a distinct purchase or a distinct 
sale. Consequently, inconsistent accounting treatment across public 
utilities may result from the sale and purchase of power facilitated 
through an RTO.
    79. The Commission proposes that public utilities or licensees that 
conduct energy transactions through an RTO that requires participants 
to bid their generation into the market and buy generation to supply 
their native load report these transactions on a net basis in Account 
555, Purchase Power. The Commission invites comment as to under what 
circumstances would it be appropriate for the public utility or 
licensee to reflect these types of transactions on a net basis, and 
under what circumstances would it be appropriate for the public utility 
or licensee to reflect these types of transactions as distinct 
purchases and sales.
8. Other Matters
    80. The Commission notes that the derivative and asset retirement 
accounts established under Order Nos. 627 and 631 were not included in 
the Chart of Account listings contained in the USofA. \18\ The 
Commission will update the account listing to include the accounts 
established under these orders.
---------------------------------------------------------------------------

    \18\ See Accounting and Reporting of Financial Instruments, 
Comprehensive Income, Derivatives and Hedging Activities, Order No. 
627, 67 FR 67,691 (Nov. 6, 2002). See also supra note 12.

---------------------------------------------------------------------------

[[Page 36874]]

G. Conclusion

    81. In conclusion, the comments submitted by public utilities, 
industry associations, state regulatory bodies and others provided 
input and detail needed for the Commission to propose the above 
revisions to its regulations. The proposed changes to the Commission's 
accounting and financial reporting requirements reflected in this NOPR 
include many of the accounting and financial reporting updates offered 
by commentors. The Commission is of the view that there would be 
little, if any, impact on existing RTO rate designs from the proposed 
changes, but seeks comment on this and other related matters raised in 
this NOPR.

IV. Proposed Effective Date

    82. The Commission proposes the aforementioned accounting and 
financial reporting changes and updates to become effective on January 
1, 2006.

V. Proposed Changes to the FERC Quarterly and Annual Reports

    83. The proposed changes, if adopted, will require revising the 
existing schedules in the FERC Forms 1, 1-F and 3-Q filed with the 
Commission. Appendix B contains samples of the updated or new schedules 
that will be included in these reports and will be available on e-
Library.\19\
---------------------------------------------------------------------------

    \19\ Appendix B will not be published in the Federal Register.
---------------------------------------------------------------------------

VI. Information Collection Statement

    84. The following collections of information contained in this 
proposed rule have been submitted to the Office of Management and 
Budget for review under Section 3507(d) of the Paperwork Reduction Act 
of 1995.\20\ OMB's regulations require OMB to approve certain 
information collection requirements imposed by agency rule.\21\ Upon 
approval of a collection of information, OMB will assign an OMB control 
number and expiration date. Respondents subject to the filing 
requirements of this proposed rule will not be penalized for failing to 
respond to these collections of information unless the collections of 
information display a valid OMB control number or the Commission had 
provided a justification as why the control number should be displayed.
---------------------------------------------------------------------------

    \20\ See 44 U.S.C. 3507(d).
    \21\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    85. Comments are solicited on the need for this information, 
whether the information will have practical utility, the accuracy of 
the provided burden estimated, ways to enhance the quality, utility, 
and clarity of the information to be collected, and any suggested 
methods for minimizing respondents' burden, including the use of 
automated information techniques. The following burden estimates are 
for complying with this proposed rule as follows:

----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hours per
                 Data collection                    respondents      responses       response          Total
----------------------------------------------------------------------------------------------------------------
1 Form 1 (RTOs).................................               6               1              35             210
2 Form 1 (Non-RTOs).............................             214               1              11           2,354
3 Form 1-F......................................              33               1              11             363
4 Form 3-Q (RTOs)...............................               6               3              30             540
5 Form 3-Q (Non-RTOs)...........................             247               3              15          11,115
                                                 -----------------
    Totals......................................  ..............  ..............  ..............          14,582
----------------------------------------------------------------------------------------------------------------

    Information Collection Costs: The Commission seeks comments on the 
cost to comply with these requirements. It has projected the average 
annualized cost of all respondents to be the following: 14,582 hrs. + 
(2 hrs. recordkeeping x 253 respondents) = 15,088 hrs. @ $60 per hour = 
$905,280 for respondents. No capital startup costs are estimated to be 
incurred by respondents.
    Annualized Costs (Operations & Maintenance): If adopted, costs for 
performing the prepared schedules will be rolled into the total costs 
for completing the Commission's annual and quarterly financial reports.
    Title: FERC Form 1, ``Annual Report of Major Electric Utilities, 
Licensees, and Others''. FERC Form-1F, ``Annual report for Nonmajor 
Public Utilities and Licensees''. FERC Form 3-Q, ``Quarterly financial 
report of electric utilities, licensees and natural gas companies''.
    Action: Proposed information collections.
    OMB Control Nos.: 1902-0021; 1902-0029; and 1902-0205.
    Respondents: Businesses or other for profit.
    Frequency of responses: Annually and quarterly.
    Necessity of the Information: The proposed rule would revise the 
Commission's regulations to reflect changes that are occurring in the 
electric industry due to the availability of open-access transmission 
service and increasing competition in the wholesale bulk power 
industry. The addition of these new accounts is intended to provide 
accounting standards for transactions and events affe

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