NARUC Staff Subcommittee on Accounting and Finance Conference

Transcription

1 NARUC Staff Subcommittee on Accounting and Finance Conference FERC Audit and Accounting Update Steven D. Hunt, CPA, CGMA Deputy Chief Accountant Office of Enforcement Division of Audits and Accounting Spring 2016

2 Disclaimer The views expressed in this presentation are those of the presenter and do not necessarily reflect the views of the Federal Energy Regulatory Commission (FERC), its Chairman, or any individual Commissioner. 2

3 FERC Commissioners Chairman Norman C. Bay Cheryl A. LaFleur Tony Clark Colette D. Honorable 3

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5 FERC Strategic Plan Ensure rates, terms, and conditions of jurisdictional energy services are just, reasonable, and not unduly discriminatory or preferential Establish effective rules and policy Increase compliance with FERC rules; detect and deter market manipulation Promote the development of safe, reliable, secure, and efficient infrastructure that serves the public interest 5

6 Division of Audits and Accounting Management Bryan Craig, Director and Chief Accountant Timothy Smith, Deputy Director Steven Hunt, Deputy Chief Accountant Stephen Flanagan, Senior Economist Branch Managers: Brian Harrington Christopher Handy Gerald Williams Sylvia Anderson Nicholas Coughlin Composition of the division (55 staff): Auditors Accountants Energy Industry Analysts Economists An Engineer An Attorney 6

7 Division of Audits and Accounting Administers FERC s audit and accounting programs with the goal exercising appropriate oversight Electric, natural gas, and oil industries Ensure compliance, transparency, and accountability Financial & Non-financial risk-based audits Provides accounting support for all FERC orders, policy statements, rulemakings Inter-office coordination Participates in projects with FASB, SEC, and IASB that may effect the Commission s rules/policies and jurisdictional entities 7

8 Vegetation Management Regulatory Considerations Policy Statement on Matters Related to Bulk Power System Reliability, 107 FERC 61,052, clarified, 108 FERC 61,288 (2004). Assured recovery of prudently incurred vegetation management costs. (See paragraph 27) NERC Reliability Standard FAC Vegetation growing in or adjacent to the power line right-of-way be trimmed to prevent contact with a transmission line. 8

9 Vegetation Management Accounting Treatment Capitalized or expensed based on the nature of the expenditure and, in limited circumstances, deferred. Capitalized Cost of constructing the transmission line Account 365, Overhead Conductors and Devices Initial cost of tree trimming 9

10 Vegetation Management Accounting Treatment Expensed Operating Expense Instruction No. 2 Includes work performed specifically for the purpose of preventing failure, restoring serviceability, or maintaining the life of the plant Account 571, Maintenance of Overhead Line Includes trimming trees and clearing brush 10

11 Vegetation Management Accounting Treatment Deferred Extraordinary vegetation management costs Public Service Co. of Colorado Docket No. AC Arizona Public Service Co. Docket No. AC FirstEnergy Service Company Docket No. AC

12 Vegetation Management Audit Report (Finding No. 3) Docket No. FA Utility s vegetation management accounting policy Capitalized by utility Initial clearing and grading of land Increasing horizontal and vertical corridors Removal of certain trees or tree limbs overhanging 15 or more feet above conductors 1 st time tree trimming around existing poles and lines 115kV and below 12

13 Vegetation Management Audit Report (Finding No. 3) Docket No. FA Utility s rationale Initial corridor clearing was not to a typical width Improved reliability Substantial addition under Electric Plant Instruction No. 10(c)(1) Increased capability of overall transmission system Accommodate demand for greater system power transfer than initially constructed Ensured sufficient conductor clearances and maximum conductor ratings 13

14 Vegetation Management Audit Report (Finding No. 3) Docket No. FA Audit Staff Opinion Corridor expansion is not a substantial addition Does not make asset more useful, more efficient, of a greater durability, or of greater capacity Capitalize the initial clearing of land during construction Expense vegetation management costs incurred for plant in service to ensure the reliability of the transmission system 14

15 Accounting Matters Changes in U.S. GAAP does not automatically change FERC s financial accounting and reporting rules and regulations ASU , Leases (Topic 842) Proposed ASU - Pensions and Other Postretirement Benefit Plans (Topic 715) ASU , Debt Issuance Costs (Subtopic ) ASU , Extraordinary and Unusual Items (Subtopic ) Avoid making accounting changes that have the effect of a rate change without making the appropriate rate filing with the Commission 15

16 FERC Accounting Compliance Issues Formula Rates Consolidation vs. Equity Method Asset Retirement Obligations Below-the-Line Costs Income Tax Prepayments/Overpayments Goodwill & Merger Costs Improper Capitalization Depreciation Rates 16

17 Audit Issuances of Interest Formula Rate Audit Reports PPL Corporation FA Ameren Illinois FA and AC , et al Duquesne Light Company FA Union Electric Company FA Public Service Company of Colorado PA Natural Gas Audit Reports Columbia Gas Transmission FA Southern Natural Gas Company FA Natural Gas Pipeline Co. of America PA

18 FERC eforms Refresh Replacement of current electronic filing format for financial forms submitted by the industry to XML Future technical conference Forms Impacted Form Nos. 1 and 1-F; 2 and 2A; and 6 Form No. 3-Q Form No. 714 Form No. 60 Docket No. AD , 151 FERC 61,025 (2015) 18

19 Proposes Policy Statement on Hold- Harmless Commitments Clarifies several aspects of hold harmless commitments offered by applicants to mitigate adverse rate impacts from certain transactions under section 203 of the FPA No longer accept hold harmless commitments limited in duration Clarifies the scope and definition of the costs subject to hold harmless commitments Internal controls and procedures for tracking costs Docket No. PL , 150 FERC 61,031 (2015) 19

20 Energy Storage Technologies Guidance Letter by Chief Accountant (AI ) Interim financial reporting guidance New accounts for energy storage plant and operation and maintenance expenses must be reported in the existing plant and operation and maintenance accounts based on the function and purpose of the related asset Must disclose the account used and associated cost in the detailed schedules and in the Notes to the Financial Statements 20

21 Compliance Guidance Toolkit Commission Declaratory Order General Counsel Opinion Letter Accounting Interpretations Compliance Help Desk Enforcement Hotline Accounting Inquiries: (202) ; Informal meetings and discussions with staff 21

22 Compliance Guidance FERC Policy Statement on Enforcement, 113 FERC 61,068 (2005) Informal Staff Advice on Regulatory Requirements, 113 FERC 61,174 (2005), modified 117 FERC 61,069 (2006), No-Action Letter Process Revised Policy Statement on Enforcement, 123 FERC 61,156 (2008) Obtain Guidance on Regulatory Compliance, 123 FERC 61,157 (2008) (Interpretative Order Modifying No-Action Letter Process and Reviewing Other Mechanisms for Obtaining Guidance) Policy Statement on Compliance, 125 FERC 61,058 (2008) Policy Statement on Penalty Guidelines, 130 FERC 61,220 (2010), Revised Policy Statement on Penalty Guidelines, 132 FERC 61,216 (2010). 22

23 Other Relevant Information Accounting matters Audit reports and related letter and Commission orders Audits docketed with the FA and PA designations Audit process Reports on Enforcement ( ) Docket No. AD

24 Questions? Steven D. Hunt, CPA, CGMA (202)