Rate Recovery, Reporting, and Accounting Treatment of Industry Association Dues and Certain Civic, Political, and Related Expenses, 72958-72964 [2021-27784]

Agencies

• DEPARTMENT OF ENERGY
• Federal Energy Regulatory Commission

[Federal Register Volume 86, Number 244 (Thursday, December 23, 2021)]
[Notices]
[Pages 72958-72964]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-27784]


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

DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM22-5-000]


Rate Recovery, Reporting, and Accounting Treatment of Industry 
Association Dues and Certain Civic, Political, and Related Expenses

AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of inquiry.

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

SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory 
Commission (Commission) seeks comments on the rate recovery, reporting, 
and accounting treatment of industry association dues and certain 
civic, political, and related expenses. In addition, the Commission 
seeks comments on the ratemaking implications of potential accounting 
and reporting changes. The Commission also seeks comments on whether 
additional transparency or guidance is needed with respect to defining 
donations for charitable, social, or community welfare purposes.

DATES: Initial Comments are due February 22, 2022, and Reply Comments 
are due March 23, 2022.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways. Electronic filing through https://www.ferc.gov, is 
preferred.
     Electronic Filing: Documents must be filed in acceptable 
native applications and print-to-PDF, but not in scanned or picture 
format.
     For those unable to file electronically, comments may be 
filed by USPS mail or by hand (including courier) delivery.
    [cir] Mail via U.S. Postal Service Only: Addressed to: Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street NE, Washington, DC 20426.
    [cir] Hand (including courier) delivery: Deliver to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.
    The Comment Procedures Section of this document contains more 
detailed filing procedures.

FOR FURTHER INFORMATION CONTACT: 
Adam Pollock, (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8458, [email protected].
Neal Anderson, (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-8760, [email protected].
Daniel Birkam, (Technical Information), Office of Enforcement, Federal 
Energy Regulatory Commission, 888 First Street NE, Washington, DC 
20426, (202) 502-8035, [email protected].

SUPPLEMENTARY INFORMATION: 
    1. In this Notice of Inquiry (NOI), the Federal Energy Regulatory 
Commission (Commission) seeks comments on the rate recovery, reporting, 
and accounting treatment of industry association dues and certain 
civic, political, and related expenses. In addition, the Commission 
seeks comment on the ratemaking implications of potential accounting 
and reporting changes. The Commission also seeks comments on whether 
additional transparency or guidance is needed with respect to defining 
donations for charitable, social, or community welfare purposes.
    2. First, we seek comments on the delineation of recoverable and 
nonrecoverable industry association dues for rate purposes. Second, we 
seek comments on increased transparency in

[[Page 72959]]

industry association expenses and segments of industry association dues 
charged to utilities, in addition to comments on utilities' and 
industry associations' expenses from civic, political, and related 
activities. Finally, we seek comments on a framework for guidance 
should the Commission determine action is necessary to further define 
the recoverability of industry association dues charged to utilities 
and/or utilities' expenses from civic, political, and related 
activities.

I. Background

    3. The Commission has authority pursuant to the Federal Power Act 
(FPA) and the Natural Gas Act (NGA) to determine whether a rate is 
unjust, unreasonable, unduly discriminatory or preferential, and if the 
Commission determines that the rate is unlawful, to establish a just 
and reasonable replacement rate.\1\ The Commission also has the 
authority to prescribe and maintain systems of accounts entitled 
``Uniform System of Accounts'' for public utilities and licensees 
subject to the provisions of the FPA, and natural gas companies under 
the NGA,\2\ and the rules and regulations contained therein.\3\
---------------------------------------------------------------------------

    \1\ 16 U.S.C. 824e(a); 15 U.S.C. 717d(a).
    \2\ 16 U.S.C. 825; 15 U.S.C. 717g; 18 CFR 101, 201 (2021).
    \3\ ``Utilities'' is used hereinafter to refer to both public 
utilities as defined by FPA section 201(e) and natural gas companies 
as defined by NGA section 2(6). This NOI does not contemplate any 
changes to oil pipeline regulation under the Uniform System of 
Accounts (USofA), because the instructions for oil pipelines differ 
from those for utilities. The Uniform Systems of Accounts Prescribed 
for Oil Pipeline Companies Subject to the Provisions of the 
Interstate Commerce Act, 18 CFR 352 (2021), does not address 
industry association dues or civic and political expenses.
---------------------------------------------------------------------------

    4. The regulatory authority to modify rates, terms, and conditions 
rests with the Commission where any rate, charge, or classification, 
collected by any utility for any transmission, transportation, or sale 
subject to the Commission's jurisdiction is unjust, unreasonable, 
unduly discriminatory or preferential.\4\ The USofA contains accounts 
to record the portions of industry association dues paid by utilities 
as either operating or nonoperating in nature.\5\ The USofA gives 
instructions on the separation of the expenses paid by utilities that 
industry associations incur and bill to utilities into the appropriate 
above the line (operating) and below the line (nonoperating) 
accounts.\6\ For example, Account 930.2 (Miscellaneous and general 
expenses), which includes the cost of labor and expenses incurred in 
connection with the general management of the utility not provided for 
elsewhere in the USofA, is considered above the line (i.e., generally 
included in rate recovery) and covers industry association dues for 
company memberships.\7\ Account 426.4 (Expenditures for certain civic, 
political and related activities), which is used for costs for the 
purpose of influencing public opinion with respect to the election or 
appointment of public officials, referenda, legislation, or ordinances 
or for the purpose of influencing the decisions of public officials, is 
considered below the line (i.e., generally excluded from rate 
recovery).\8\
---------------------------------------------------------------------------

    \4\ 16 U.S.C. 824e(a); 15 U.S.C. 717d(a).
    \5\ 18 CFR 101, 201. Hereinafter, citations are made only to 
part 101 of the Commission's regulations because they reflect the 
same provisions as part 201 for the accounts discussed herein. 
References to the USofA are to both part 101 and part 201 of the 
Commission's regulations.
    \6\ See Delmarva Power & Light Co., 58 FERC ] 61,169, at 61,509 
(1992) (The Commission ``has allowed utilities to allocate [Edison 
Electric Institute (EEI)] contributions to wholesale customers only 
to the extent the contributions are for research and development 
programs to which wholesale customers themselves could not 
contribute. However, that portion of EEI contributions used for 
lobbying activities may not, under any circumstances, be included in 
the utility's cost-of-service.'') (emphasis added). Typically, the 
``line'' refers to the break between operating and nonoperating 
income and expenses on the Statements of Income for the year. For 
ratemaking purposes, the Commission has found that expenses above 
the line are usually chargeable to the ratepayer because they 
pertain solely to supplying a regulated utility service and are used 
in determining rates. Expenses usually chargeable to the utility, 
rather than ratepayers, appear below the line.
    \7\ 18 CFR 101, Account 930.2.
    \8\ 18 CFR 101, Account 426.4.
---------------------------------------------------------------------------

    5. The Commission has not previously adopted a bright line rule or 
specific guidelines that delineate between above the line and below the 
line expenses for informing and influencing the public, including 
industry association dues for such activities, instead allowing 
utilities to determine the portion of their industry association dues 
to include in above the line and below the line accounts, respectively, 
based on information provided by the industry associations about their 
activities and associated costs. The Commission relies on the principle 
that the ``intended use and the reason behind the payment[ ]'' to 
inform and influence the public dictates its accounting assignment.\9\ 
Although the Commission applies this principle to the accounting 
treatment of utility expenditures, ``where the line between public 
outreach and educational expenses and lobbying expenses is drawn has 
not been clearly delineated.'' \10\ The Commission generally considers 
the appropriate delineation between above the line and below the line 
expenditures on a case-by-case basis given the facts presented.\11\ The 
Commission's case-by-case application of the ``intended use'' and 
``reason behind'' tests on expenditures incurred by industry 
associations and borne by their utility members may have led to 
stakeholder confusion as to what expenses are properly recoverable in 
rates.\12\
---------------------------------------------------------------------------

    \9\ Alaskan Nw. Nat. Gas Transp. Co., 19 FERC ] 61,218, at 
61,429 (1982).
    \10\ Potomac-Appalachian Transmission Highline, LLC, Opinion No. 
554, 158 FERC ] 61,050 (2017), order on compliance, 166 FERC ] 
61,035 (2019), order on reh'g, Opinion 554-A, 170 FERC ] 61,050, at 
P 79 (2020) (PATH) (citing ISO New England Inc., 117 FERC ] 61,070, 
at P 40 (2006) (ISO New England), order on reh'g, 118 FERC ] 61,105 
(2007) (ISO New England Rehearing), aff'd sub nom. Braintree Elec. 
Light Dep't v. FERC, 550 F.3d 6 (D.C. Cir. 2008)).
    \11\ See, e.g., ISO New England, 117 FERC ] 61,070 at P 47 (``On 
a number of occasions the Commission has found `lobbying' expenses 
of any type to be non-recoverable, while on other occasions the 
Commission has determined that even if the costs are related to 
lobbying and should be recorded in Account 426.4, they are 
appropriately recoverable from ratepayers, upon sufficient showing 
that they were undertaken for the benefit of ratepayers.'').
    \12\ See N. Border Pipeline Co., 23 FERC ] 61,213, at 61,439 
(1983) (``the distinction between influencing public opinion and 
public relations activities lies in the intended use and reason 
behind these payments''); see also PATH, 170 FERC ] 61,050 at P 79 
(citing Potomac-Appalachian Transmission Highline, LLC, 152 FERC ] 
63,025, at PP 30, 40 (2015)).
---------------------------------------------------------------------------

    6. The Commission presumes that expenses recorded in above the 
line, operating accounts may be recovered through rates, unless a 
showing is made that the expense is nonoperating in nature and the 
utility fails to rebut this showing. The Commission presumes that 
expenses recorded in below the line, nonoperating accounts may not be 
recovered in rates, without a further showing justifying such recovery 
for ratemaking purposes. Thus, if a utility records amounts in Account 
930.2, those expenses are presumptively recoverable, while costs 
recorded in Account 426.4 are presumptively nonrecoverable.
    7. The Commission, as a part of its Office of Enforcement audit 
program, and if within the scope of an audit, evaluates whether a 
utility's classification of expenses between Accounts 930.2 and 426.4 
complies with the USofA. Such audits of the classification of industry 
association costs between above the line and below the line accounts 
are limited to examination by the Commission of the recordkeeping and 
accounting of industry association dues by member

[[Page 72960]]

utilities.\13\ Typically, the information available to audit staff 
lacks detailed descriptions of the industry association's activities 
for which members are charged. Also, a party to a utility's FPA section 
205 rate case or NGA section 4 rate case may challenge the utility's 
accounting classification and/or recovery of expenses by protesting the 
utility's proposed rates. In addition, a complainant may file an FPA 
section 206 complaint or an NGA section 5 complaint alleging that the 
current rate treatment is unjust and unreasonable. For transmission 
formula rates and certain other formula rates, stakeholders also have 
the ability to file formal challenges before the Commission concerning 
utilities' implementation of their formula rates following review of 
annual updates.\14\
---------------------------------------------------------------------------

    \13\ Unlike utilities, industry associations are not 
jurisdictional entities and thus are not subject to the Commission's 
accounting, record keeping, or reporting requirements. Moreover, 
industry associations are not subject to the Commission audits 
program.
    \14\ See, e.g., Pacific Gas & Elec. Co., 176 FERC ] 61,196, at P 
15 (2021) (recognizing protest of the Cities of Anaheim, Azusa, 
Banning, Colton, Pasadena, and Riverside, California). Utilities 
with formula rates are required to demonstrate that amounts are 
appropriately recorded through discovery (as part of an annual 
update information sharing process) and upon request.
---------------------------------------------------------------------------

    8. In a typical rate proceeding, opposing parties bear the burden 
of raising an initial challenge of whether the company properly 
designated expenses between above the line and below the line accounts, 
or whether recovery of expenses appropriately booked to above the line 
accounts is reasonable.\15\ A challenge with reviewing the accounting 
of industry association dues--whether through the Commission's Office 
of Enforcement audit program, or pursuant to a utility's rate case, 
complaint proceedings, or formula rate challenges--is that utilities 
typically have not required their industry association to provide more 
than simple invoices and thus lack detailed information on the nature 
of the association's activities for purposes of determining the 
appropriate classification of costs into above the line and below the 
line accounts.
---------------------------------------------------------------------------

    \15\ See, e.g., PATH, 170 FERC ] 61,050 at PP 25-26 (noting that 
PATH, in an FPA section 205 filing, booked certain costs to an above 
the line account, but that certain participants subsequently argued 
that the costs should instead be booked to Account 426.4).
---------------------------------------------------------------------------

    9. On March 17, 2021, the Center for Biological Diversity filed a 
petition for rulemaking, requesting that the Commission amend USofA 
requirements relating to utility payments to industry associations 
engaged in lobbying or other influence-related expenses.\16\ The CBD 
Petition requested that the Commission amend the USofA to allocate all 
industry association dues paid by utilities to Account 426.4 which 
would highlight them for scrutiny, where ``the utility, not the 
consumer, must bear the burden of proof to demonstrate an entitlement 
to recover expenses from ratepayers.'' \17\ In response to the CBD 
Petition, some commenters recommended that the Commission remove all 
industry association dues from rates, whereas others suggested that 
such a move was unnecessary because industry association dues were 
properly allocated between recoverable and non-recoverable accounts and 
contrary to the fundamental principles of accounting.
---------------------------------------------------------------------------

    \16\ Center for Biological Diversity, Petition for Rulemaking to 
Amend the Uniform System of Accounts' Treatment of Industry 
Association Dues, Docket No. RM21-15-000, at 1 (filed Mar. 17, 2021) 
(CBD Petition). The CBD Petition requested changes to the USofA for 
both public utilities and natural gas companies. See id. at 4 n.9.
    \17\ Id. at 8 (quoting Potomac-Appalachian Transmission Highline 
LLC, 152 FERC ] 63,025 at P 29); id. at 16 (citing 16 U.S.C. 
824d(e)).
---------------------------------------------------------------------------

II. Discussion

    10. We find it appropriate to initiate this NOI to: (i) Examine the 
Commission's current policies and regulations governing the rate 
recovery, reporting, and accounting treatment of industry association 
dues and certain civic, political, and related expenses; and (ii) 
identify potential changes that may be necessary to ensure that such 
expenditures are appropriately accounted for under the USofA and that 
recovery of these expenditures through Commission jurisdictional rates 
is just and reasonable. First, the NOI outlines the accounts utilities 
use to recover industry association dues. Second, we seek comments on 
the delineation of recoverable and nonrecoverable industry association 
dues for rate purposes. Third, we seek comments on increased 
transparency on industry association activities and expenses; comments 
on utilities' and industry associations' expenses from civic, 
political, and related activities; and what, if any, steps to increase 
transparency would assist the Commission in determining whether 
recovery of industry association dues in rates is just and 
reasonable.\18\ Finally, we seek comments on a framework for guidance 
should we determine action is necessary to further define the 
recoverability of industry association dues charged to utilities and/or 
utilities' expenses from civic, political, and related activities.
---------------------------------------------------------------------------

    \18\ Although the Commission has well-established precedent 
disallowing the cost recovery of donations for charitable, social, 
or community welfare purposes included in Account 426.1, we also 
seek comment on whether additional transparency or guidance is 
necessary to ensure such costs are appropriately treated for 
accounting and rate recovery purposes. See, e.g., Ameren Ill. Co., 
169 FERC ] 61,147, at P 81 (2019).
---------------------------------------------------------------------------

A. Cost Recovery and Current Accounting

    11. As discussed above, utilities record industry association dues 
in two distinct accounts--Account 930.2 (Miscellaneous and general 
expenses) for above the line expenses and Account 426.4 (Expenditures 
for certain civic, political and related activities) for below the line 
expenses.\19\ Account 930.2 captures industry association dues that are 
operating in nature and therefore presumptively recoverable by 
utilities. The account states that ``this account shall include the 
cost of labor and expenses incurred in connection with the general 
management of the utility not provided for elsewhere.'' \20\ The 
illustrative list of expenses included in Account 930.2 includes 
``industry association dues for company memberships.'' \21\
---------------------------------------------------------------------------

    \19\ See supra notes 5, 7-8 and accompanying text.
    \20\ 18 CFR 101, Account 930.2.
    \21\ Id., Item 2.
---------------------------------------------------------------------------

    12. Utilities may include certain portions of industry association 
dues in Account 426.4, even though the definition of Account 426.4 does 
not specifically reference industry association dues.\22\ This is 
because Account 426.4 is defined to include ``miscellaneous expense 
items which are nonoperating in nature but which are properly 
deductible before determining total income before interest charges.'' 
\23\ Whereas a certain proportion of industry association dues may fall 
under the operating cost category for miscellaneous general expenses, 
the proportion of an industry association's costs for nonoperating 
expenses is properly allocated to accounts in the Account 426 series. 
Namely, Account 426.4 includes:
---------------------------------------------------------------------------

    \22\ See Expenditures for Political Purposes--Amendment of 
Account 426, Other Income Deductions, Unif. Sys. of Accounts, and 
Report Forms Prescribed for Elec. Utils. and Licensees and Nat. Gas 
Cos.--FPC Forms Nos. 1 and 2, Order No. 276, 30 FPC 1539 (1963).
    \23\ 18 CFR 101, Special Instructions--Accounts 426.1, 426.2, 
426.3, 426.4, and 426.5.

expenditures for the purpose of influencing public opinion with 
respect to the election or appointment of public officials, 
referenda, legislation, or ordinances (either with respect to the 
possible adoption of new referenda, legislation or ordinances or 
repeal or modification of existing referenda, legislation or 
ordinances) or approval, modification, or revocation of franchises; 
or for the purpose of influencing the decisions of public

[[Page 72961]]

officials, but shall not include such expenditures which are 
directly related to appearances before regulatory or other 
governmental bodies in connection with the reporting utility's 
---------------------------------------------------------------------------
existing or proposed operations.\24\

    \24\ 18 CFR 101, Account 426.4.
---------------------------------------------------------------------------

    As described above, while recording costs in certain accounts 
provides useful information to regulators, it is not necessarily 
dispositive regarding recoverability.\25\ The Commission employs the 
``intended use'' and ``reason behind'' the payment standard to 
delineate costs incurred to inform or influence public opinion as 
either operating or nonoperating.\26\ With regard to rate recovery, the 
Commission has required utilities to record costs for lobbying, civic 
engagement, public information campaigns, and the like to Account 
426.4, except those costs that the utility demonstrates provide a 
benefit to ratepayers, thus determining whether the costs are 
recoverable or nonrecoverable.\27\
---------------------------------------------------------------------------

    \25\ See supra P 6.
    \26\ The Commission has found that
    The distinction lies in the intended use and reason behind the 
payments. Expenditures incurred to influence the opinion of the 
public during the selection process have little or no benefit to the 
ratepayers, and therefore must be borne by stockholders. Just and 
reasonable expenditures incurred to keep the general public informed 
on the progress of the project and other public relations activities 
are proper expenses to be borne by ratepayers after operations 
commence.
    Alaskan Nw. Nat. Gas Transp. Co., 19 FERC at 61,429 (emphasis 
added).
    \27\ See Order No. 276, 30 FPC at 1540; Alaskan Nw. Nat. Gas 
Transp. Co., 19 FERC at 61,428.
---------------------------------------------------------------------------

    13. Questions 1 through 5 seek information regarding how industry 
associations and their member utilities currently classify, record, and 
recover industry association costs, the nature of costs incurred, and 
dues assigned by industry associations. In particular, these questions 
seek to clarify which industry association costs member utilities 
currently book to Account 426.4 and which costs they book to Account 
930.2. The responses to these questions may highlight cost categories 
that utilities include in rate recovery, which may, in turn, require 
further instruction from the Commission to ensure the proper rate 
treatment.
    14. Questions 6 through 14 explore how much transparency for such 
costs exists and potential ways to improve this transparency. Due to 
the lack of transparency of industry association costs and the wide 
variety of activities and their specific contexts, the ``intended use'' 
and ``reason behind'' standard is difficult to apply to industry 
association dues and often requires case-by-case consideration.
    15. Questions 15 to 20 below are intended to inform whether 
modifications to Commission regulations or additional guidance are 
needed to ensure the proper classification of utility and industry 
association costs between Accounts 426.4 and 930.2. The Commission has 
noted that recording expenses in Account 426.4 ``simply means that 
those costs are not presumed to be recoverable, shifting the burden on 
the filing entity to demonstrate why such costs should be 
recoverable.'' \28\ Further Commission instruction may reduce the 
frequency of rate proceedings that review industry association dues and 
help ensure that industry association dues are appropriately 
categorized for recovery purposes.
---------------------------------------------------------------------------

    \28\ ISO New England Rehearing, 118 FERC ] 61,105 at P 46.
---------------------------------------------------------------------------

B. Industry Association Dues

    16. We are considering whether to clarify the delineation of 
recoverable and nonrecoverable industry association dues for rate 
purposes.
    (Q1) The CBD Petition, in an example it argues is emblematic of 
practices among other industry associations, asserts that during the 
period when the EEI budget was subject to audits by the National 
Association of Regulatory Utility Commissioners (NARUC), ``EEI was 
spending up to 50% of its income on advocacy and lobbying efforts.'' 
\29\ The Solar Energy Industries Association contends that in at least 
one instance, an investor owned utility's EEI invoice noted only 7% of 
its membership dues related to influencing legislation. The investor-
owned utility therefore recorded 93% of its EEI dues to Account 
930.2.\30\
---------------------------------------------------------------------------

    \29\ CBD Petition at 11 (citing Ex. A, David Anderson et al., 
Paying for Utility Politics: How Utility Ratepayers are Forced to 
Fund the Edison Electric Institute and Other Political 
Organizations, Energy and Policy Institute, at 6 (2017) (``One of 
the final audits from NARUC revealed that 50% of EEI's expenditures 
went to the following categories: Legislative advocacy; regulatory 
advocacy; advertising; marketing; public relations; legislative 
policy research; regulatory policy research.'')). NARUC ended its 
EEI budget audits over 10 years ago. See id.
    \30\ Solar Energy Industries Association, Comments in Support of 
Petition, Docket No. RM21-15-000, at 4-5 (filed Apr. 26, 2021). A 
copy of the 2006 invoice was attached to a pleading in Docket No. 
ER18-1122-001. Ameren Services Company, Motion for Leave to Answer 
and Answer, Docket No. ER18-1122-001, attach. EEI Invoice (filed 
Feb. 11, 2020).
---------------------------------------------------------------------------

    (a) For the three most recent fiscal years, what are the annual 
dues charged to individual utilities for their membership in each 
industry association for which utilities seek recovery in rates?
    (b) What percentage of industry association dues did industry 
association utility members classify and book as operating and 
nonoperating for the three most recent fiscal years?
    (c) What percentage of EEI dues did members classify as operating 
and nonoperating in the last three years subject to a NARUC audit? What 
are the reasons for any difference between these amounts and the 
percentages in question 1?
    (Q2) What methodologies do industry associations use to apportion 
industry association operating budgets into dues among member 
companies? To what extent are industry association expenses assigned 
and apportioned based on member classes or sectors and/or directly 
assigned to specific members, and if so, what are the bases for such 
assignment/apportionment and/or direct assignment?
    (Q3) What internal controls and accounting methodologies are used 
by industry associations to track their costs generally and 
specifically to determine how costs are billed to members? In addition:
    (a) What cost categories are used in budgetary and accounting 
processes internal to industry associations to account for industry 
association dues? What were the budgets by cost category for the three 
most recent fiscal years?
    (b) What processes do industry associations use to derive and 
inform utilities of their categorization of programs to allow the 
utilities to apportion their dues among various accounting 
classifications?
    (c) How do industry associations derive and inform all 
jurisdictional companies of the portion of the total invoice payments 
associated with lobbying, public outreach on legislative and regulatory 
issues, and other categories of costs not recovered through rates?
    (d) To what extent is information of any such methodologies or the 
underlying budgetary information shared with industry association 
members?
    (Q4) To what extent do industry associations provide utilities with 
estimated itemized expenses in dues invoices? To what extent do the 
associations conduct reviews or other activities to determine and 
evaluate the actual level of cost incurred related to influencing 
legislation and lobbying expenses, and compare such actual levels to 
the estimated percentages of such activities provided to jurisdictional 
companies? What is the frequency and scope of such reviews or 
activities and how were the results used? Please identify and explain 
any substantial

[[Page 72962]]

impediments to, or industry association concerns with, providing 
utilities detailed information on the percentage of the association's 
charges attributable to civic, political, public outreach on 
legislative and regulatory issues, and similar activities.
    (Q5) For industry associations, what is the nature of the 
activities and associated costs that fall into the following 
categories, and for each item, what percentage of the associated costs 
is classified as operating expense by the utility members:
    (a) Engineering or reliability standards development;
    (b) Legislative affairs including: (i) Political contributions; 
(ii) following legislative events and informing members; (iii) 
preparation and research in connection with correspondence with 
legislators, their staff, or legislative committees; and (iv) 
correspondence with legislators, their staff, or legislative 
committees;
    (c) Financial support of other organizations (list organizations 
with corresponding contributions);
    (d) Public information or outreach related to: (i) Safety; (ii) 
promotion of utilities; (iii) existing or potential state or federal 
environmental regulations and/or laws; (iv) proceedings at FERC or 
before other administrative agencies; or (iv) other subjects (describe 
each element with corresponding expenditures);
    (e) Training for: (i) Employee safety; (ii) accounting; (iv) 
planning; (v); reliability/resilience; (vi) market participation; and 
(vii) other (describe each element with corresponding expenditure);
    (f) Regulatory affairs including: (i) Participation in regulatory 
proceedings including listing each proceeding and its primary issue(s); 
(ii) research conducted for regulatory proceedings; (iii) following 
regulatory proceedings; (iv) informing members of regulatory 
proceedings;
    (g) Meetings/conferences (to the extent not covered in the other 
categories listed here);
    (h) Administrative costs including rents and other overhead; and
    (i) Other (describe each element with corresponding expenditure).

C. Increased Transparency

    17. We are considering whether increased transparency into industry 
association costs may improve public knowledge into industry 
association dues and therefore ensure the just and reasonable recovery 
of industry association dues.
    (Q6) What mechanisms currently exist for stakeholders to examine 
the costs and activities of industry associations?
    (Q7) Do industry associations disclose the nature of their costs 
and activities in any state regulatory proceedings? If yes, please 
provide citations.
    (Q8) Have any industry associations been the subject of audits by 
any regulatory bodies? If yes, please provide a summary of the purpose 
and findings of the audit(s).
    (Q9) What, if any, additional transparency is needed for 
stakeholders to evaluate the reasonableness of industry association 
costs that are recovered through rates?
    (Q10) If additional transparency is needed for stakeholders, should 
any transparency requirements for industry association costs be limited 
to certain rates, such as electric transmission and natural gas 
transportation rates, in light of the potentially larger costs 
involved, or should they apply to all types of rates (e.g., power sales 
agreements, reactive power, and sale of electricity)?
    (Q11) Specific to the electric industry, should any transparency 
requirements for industry association costs be limited to investor-
owned utilities or should they also apply to municipal utilities and 
rural electric cooperatives who recover costs for Commission-
jurisdictional service?
    (Q12) Industry associations rely on certain cost categories to 
enable utilities to determine what portion of their industry 
association dues are properly recovered from ratepayers and what costs 
are borne by shareholders. Please describe any additional or 
alternative cost categories to those in Question 5, above, that 
industry associations or their members should disclose to provide 
sufficient transparency.
    (Q13) What specific methods to enhance transparency of industry 
association costs should the Commission consider? For each of the 
following methods to enhance transparency, as well as others you may 
identify, please explain whether and how much would they (a) improve 
transparency; (b) impose burdens on industry associations and/or their 
members; (c) help ensure that utility rates are just and reasonable:
    (a) Utilities that seek to recover dues must possess detailed data 
that sufficiently explains such costs within their books and records, 
and such amounts must be subject to Commission audits, similar to that 
requested in Question 5, above;
    (b) limit a utility's ability to seek and obtain recovery of 
industry association dues to industry associations that publicly 
disclose detailed cost data, similar to that requested in Question 5, 
above; and/or
    (c) utilities must include in their FPA section 205 stated rate 
filings and their supporting workpapers to their formula rate annual 
updates, information similar to that requested in Question 5, above?
    (Q14) If the Commission imposed a requirement, such as one of those 
discussed in Question 13, above, should that requirement be limited to 
associations whose dues per utility exceed a certain minimum monetary 
threshold and, if so, what threshold?
    18. We also seek comments on whether increased transparency into 
donations for charitable, social, or community welfare purposes is 
needed to improve public knowledge of such costs and therefore ensure 
just and reasonable treatment of donations or other charitable 
contributions.
    (Q15) What, if any, additional transparency is needed for 
stakeholders to evaluate whether donations for charitable, social, or 
community welfare purposes are treated appropriately for ratemaking 
purposes?

D. Guidance

    19. We are considering whether the Commission should provide 
further guidance related to: (i) Defining recoverable/nonrecoverable 
industry association costs for rate purposes; (ii) clarifying how 
certain ``grey area'' costs should be booked to accounts and treated in 
rates; and/or (iii) modifying Commission policies and instituting 
potential regulations with respect to costs that may currently be 
recoverable, but that the Commission may find should no longer be 
recovered.
    (Q16) Do utilities currently base the amount of their costs 
recoverable through rates on (i) the USofA, specifically the 
definitions in Accounts 930.2 and 426.4, (ii) the Internal Revenue 
Service (IRS) definition of lobbying, (iii) some other basis, or (iv) 
some combination thereof? What percentage of dues would be considered 
recoverable for each the four options for the most recent fiscal year?
    (Q17) What material differences, if any, are there between industry 
association costs considered nonoperating per the definition of Account 
426.4 and industry association costs that may be deducted for tax 
purposes based on the Internal Revenue Code or IRS regulations? What 
are examples of such activities and expenditures?
    (Q18) For what, if any, industry association costs is the 
classification as operating or nonoperating through utility rates 
unclear and ambiguous? Please describe any such ``gray areas.''

[[Page 72963]]

    (Q19) The Commission currently allows all costs related to 
regulatory interventions and litigation by both utilities and industry 
associations to be recorded to above the line accounts. Further, 
Account 426.4 provides as an exception to the political advocacy 
activities utilities are required to report in that below the line 
account, namely, ``expenditures which are directly related to 
appearances before regulatory or other governmental bodies in 
connection with the reporting utility's existing or proposed 
operations.'' \31\ What is the appropriate scope of this exemption for 
utilities and, by extension, their industry associations? Are there 
types of appearances before regulatory or governmental bodies for which 
the related expenditures should be excluded from rates, and if so, on 
what basis?
---------------------------------------------------------------------------

    \31\ 18 CFR 101, Account 426.4 (stating that this subaccount 
``shall not include . . . expenditures which are directly related to 
appearances before regulatory or other governmental bodies in 
connection with the reporting utility's existing or proposed 
operations.'').
---------------------------------------------------------------------------

    (Q20) Please provide examples as to what, if any, costs for
    (a) information campaigns carried out by industry associations are 
currently recoverable in utility member rates;
    (b) information campaigns carried out by industry associations are 
currently recoverable in rates that the Commission should exclude from 
recovery in rates either by clarifying or revising its existing 
regulations;
    (c) gifts, grants, donations, payments, dues, or contributions to 
other organizations by either utilities or industry associations are 
currently recoverable and should not be recoverable in utility member 
rates; and
    (d) conferences or trainings are carried out by industry 
associations for which the Commission should prohibit from recovery in 
rates, and on what basis.
    (Q21) Please describe any other guidance that the Commission should 
provide with respect to the rate recovery of industry association dues 
or utilities' civic, political, and related expenses.
    (Q22) Please indicate whether there are any above the line, 
operating accounts other than Account 930.2 in which expenses related 
to civic, political, public outreach, and similar activities may be 
recorded (e.g., accounts pertaining to advertising costs) and, if so, 
what issues the Commission should consider with respect to those 
accounts.

III. Comment Procedures

    20. 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 commenters may wish 
to discuss. Comments are due February 22, 2022, and Reply Comments are 
due March 23, 2022. Comments must refer to Docket No. RM22-5-000, and 
must include the commenter's name, the organization they represent, if 
applicable, and their address in their comments. 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. Commenters on this proposal are not required to serve copies of 
their comments on other commenters.
    21. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at https://www.ferc.gov. The Commission accepts most standard word processing 
formats. Documents created electronically using word processing 
software must be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    22. Commenters that are not able to file comments electronically 
may file an original of their comment by USPS mail or by courier-or 
other delivery services. For submission sent via USPS only, filings 
should be mailed to: Federal Energy Regulatory Commission, Office of 
the Secretary, 888 First Street NE, Washington, DC 20426. Submission of 
filings other than by USPS should be delivered to: Federal Energy 
Regulatory Commission, 12225 Wilkins Avenue, Rockville, MD 20852.

IV. Document Availability

    23. 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). At 
this time, the Commission has suspended access to the Commission's 
Public Reference Room due to the President's March 13, 2020 
proclamation declaring a National Emergency concerning the Novel 
Coronavirus Disease (COVID-19).
    24. From the Commission's Home Page on the internet, this 
information is available on eLibrary. 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 eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    25. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the Commission's Online 
Support at 202-502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].
    By direction of the Commission. Commissioner Danly is dissenting 
with a separate statement to be issued at a later date. Commissioner 
Christie is concurring with a separate statement attached. Commissioner 
Phillips is not participating.

    Issued: December 16, 2021.
Kimberly D. Bose,
Secretary.

United States of America Federal Energy Regulatory Commission

Rate Recovery, Reporting, and Accounting Treatment of Industry 
Association Dues and Certain Civic, Political, and Related Expenses
Docket No. RM22-5-000
(Issued December 16, 2021)

Christie, Commissioner, concurring:

    1. I concur with today's order instituting a Notice of Inquiry 
(NOI) related to the treatment of industry association dues and certain 
civic, political, and related expenses. The NOI asks a number of 
important questions regarding transparency and current accounting 
practices that will assist this Commission in ensuring that rates paid 
by consumers are just and reasonable. I write separately because I 
respectfully disagree with any suggestion that First Amendment rights 
are implicated, much less threatened, by this inquiry.
    2. The Supreme Court of the United States has ruled that commercial 
speech by corporations and other business entities is protected by the 
First Amendment,\1\ and that political speech by such entities is 
likewise protected.\2\ It is also true that spending on protected 
speech is inextricably part of such speech and is thus protected as 
well.\3\
---------------------------------------------------------------------------

    \1\ See 44 Liquormart v. Rhode Island, 517 U.S. 484 (1996).
    \2\ See Citizens United v. Federal Election Commission, 558 U.S. 
310 (2010).
    \3\ Id.; see also Buckley v. Valeo, 424 U.S. 1 (1976).
---------------------------------------------------------------------------

    3. That said, the questions raised in this NOI are not related to 
whether a corporation or other business entity is allowed to spend 
money in the exercise of its First Amendment right to free speech or 
``to petition the government

[[Page 72964]]

for a redress of grievances'' \4\ (a/k/a ``lobbying''). They can. 
Neither is it aimed at suppressing or burdening the protected speech of 
some limited subset of trade associations. Rather, the central question 
here is the same one present in so many of the cases before an economic 
regulator such as FERC, and that is the less headline-grabbing, albeit 
critically important, question: Who pays?
---------------------------------------------------------------------------

    \4\ U.S. Const. Adt. 1.
---------------------------------------------------------------------------

    4. Relevant to the ``who pays?'' question is the type of business. 
A business in a competitive market has a First Amendment right to spend 
its own money on speech, including lobbying the legislators who pass 
laws that affect it. These activities may be aimed at rent-seeking 
through regulation or subsidies (or seeking protection from other 
special interests' rent-seeking). James Madison made it clear in The 
Federalist No. 10 that special interests (``factions'') would always 
seek to gain advantage at the expense of others through the political 
process; but it was also Madison who authored the First Amendment that 
protected the freedom of all to pursue their interests in the public 
arena, and left it up to (hopefully) public-spirited legislators--
elected by the public--to protect the public interest from the special 
interests (including those claiming to represent the public interest) 
and their rent-seeking behavior.
    5. Privately-owned businesses get funds from two primary sources: 
(i) Investors who put up capital; and (ii) customers who purchase its 
goods and/or services. A company that holds a state-granted and state-
protected monopoly franchise is fundamentally different, however, from 
a business in a competitive market, not in its First Amendment rights, 
but in how it can pay for certain activities. Unlike the business in a 
competitive market whose customers voluntarily choose to purchase its 
products over the products of its competitors, the state-protected 
monopoly gets its money from captive customers who have no choice but 
to purchase, for example, electrical power, a vital necessity of modern 
life, from the monopoly. The state-protected monopoly is also 
guaranteed recovery of its prudent costs incurred to serve the public 
(hence the term ``public service company,'' or ``public service 
corporation,'' defined terms typically applicable to public utilities 
under many state laws).\5\ The question asked herein, therefore, is 
which of its costs should be charged to investors, who have voluntarily 
invested in the company, and which to captive customers, who have no 
choice but to purchase an essential product such as electricity from 
it.\6\
---------------------------------------------------------------------------

    \5\ See, e.g., Va. Code Sec.  56-1 et seq.
    \6\ This analysis applies to privately-owned companies, not 
publicly-owned or government-owned providers or co-operatives.
---------------------------------------------------------------------------

    6. Nothing keeps the monopoly from spending money on First 
Amendment protected speech, including lobbying legislators and related 
public-relations activities, but its investors should pay those costs, 
not captive customers.\7\ That is the issue implicated by this NOI, 
which seeks to better understand whether costs permitted to be ``above 
the line'' (chargeable to customers) and those required to be ``below 
the line'' (chargeable to investors) for privately-owned companies are 
being treated as such on a transparent and consistent basis.
---------------------------------------------------------------------------

    \7\ Legal fees are a more complicated matter.
---------------------------------------------------------------------------

    7. While in a typical rate proceeding, the opposing parties bear 
the initial burden of challenging the accounting or rate treatment of 
``above the line'' or ``below the line'' expenses, under section 205 of 
the Federal Power Act, the ultimate burden has always been on the 
regulated public utility to demonstrate the justness and reasonableness 
of its proposed rate. Based on the record before us, and the Commission 
audit staff's own experience, it may be that the Commission, customers, 
and other interested parties are not able to access the information 
necessary to determine whether the costs included in a jurisdictional 
utility's rates are appropriately classified. The questions raised in 
the NOI relate to issues squarely within, and essential to, the 
Commission's jurisdictional responsibilities to ensure just and 
reasonable rates.
    8. Let me also emphasize: It may well be that the Commission's 
existing rules, regulations and precedent are sufficient to ensure the 
just and reasonable allocation of such costs, but it is worth 
reviewing. As always with energy regulation, the devil is in the 
details.
    9. On a more specific topic, I also support asking whether it is 
time to clarify our regulations or further codify what is now 
established primarily through Commission precedent, i.e., not allowing 
a monopoly to recover from customers the costs of its contributions and 
grants to charitable and civic organizations. Giving away other 
people's money is not altruism.
    For these reasons, I respectfully concur.

Mark C. Christie,
Commissioner.

[FR Doc. 2021-27784 Filed 12-22-21; 8:45 am]
BILLING CODE 6717-01-P