Utility Accounting takes fundamental accounting concepts around financial reporting and adds a layer of complexity through regulatory and compliance requirements.  Public Utilities have rates set by State and Federal commissions to ensure that they recover prudently incurred costs and earn a reasonable rate of return that does not overly burden the ratepayer.

However, state and federal environmental regulations put the electric and gas industries in the unenviable position of encouraging their customers to reduce power usage creating loss of traditional revenues.  These regulatory and compliance nuances result in some very interesting accounting treatment.

This course will introduce you to these regulatory requirements, the generally accepted accounting principles (GAAP) unique to regulated entities, the capital intensive nature of the industry, which may result in an unconventional balance sheet presentation, and the challenge of complying with GAAP, State and Federal Commission rulings, and the Securities and Exchange Commission (SEC), effectively requiring maintenance of multiple sets of books to address variations in reporting requirements.

Learning Outcomes  

Upon completion of this course, participants will be able to successfully:

• Navigate the requirements of ASC 980: Regulated Operations
• Identify utility specific accounts in a set of financial statements
• Recognize utility specific disclosures in an annual 10-K filing with the SEC
• Define terms such as CWIP, CIAC, AFUDC, REC, DSM, REST, PPA and PPFAC
• Discuss accounting treatment for unbilled revenue, net-metering tariffs and cost recovery mechanisms
• Explain the difference between shareholder and ratepayer expenses
• Explain the concept of designing rates to recover prudently incurred costs and a reasonable return
• Review a FERC rate order for accounting implications
• List key differences between accounting for regulated and non-regulated entities
• Define the reporting variations between FERC, GAAP and SEC.
• Navigate FASB, FERC, FPSC (as an example of a State Commission) and SEC websites
• Discuss the changing outlook for the Utility industry and the possible accounting implications
• Identify financial reporting tools common to the Utility industry

MONDAY, OCTOBER 17, 2022, 2022

9:00 – 9:15 a.m. :: Course Introductions and Objectives

• Benchmark Course Participants’ Utility and Accounting Knowledge

9:15 – 10:15 a.m. :: Utility Accounting in a Nutshell

• Capital Intensive Industry
  • Property, Plant and Equipment (PP&E) largest asset balance
  • PP&E is the primary driver when determining rates
• Typical Revenue Streams – Vertically Integrated Utility
  • Define vertically integrated
  • Define “above the line”, “below the line”
  • Retail revenue
  • Wholesale revenue
  • Other operating revenue
  • Non-operating revenue
• Unbilled Revenue – Retail Rates
  • Estimating revenue for usage since last bill date
• Net Metering
• Common Utility Terms
  • Construction Work in Progress (CWIP)
  • Contributions in Aid of Construction (CIAC)
  • Allowance for Funds Used During Construction (AFUDC)
  • Renewable Energy Credits (REC)
  • Demand Side Management (DSM)
  • Renewable Energy Standards Tariff (REST)
  • Purchased Power Agreement (PPA)
  • Purchased Power and Fuel Adjuster Clause (PPFAC)
• FERC vs. GAAP vs. SEC

10:15 – 10:30 a.m. :: Morning Break

10:30 a.m. – 12:00 p.m. :: Regulatory Accounting, A Deeper Dive – Focus on GAAP

• Review ASC 980 Provisions
  • Requirements that allow application of guidance
  • Regular evaluation of compliance
• Accounting for Regulatory Assets and Liabilities
  • Cost deferral unique to regulatory accounting
  • Deferral of gains and losses when retiring certain debt
• If recovery is Probable but not Currently Approved in Base Rates
  • “Return of” and “return on”

12:00 – 1:00 p.m. :: Lunch break

1:00 – 2:45 p.m. :: Review SEC Form 10-K Financial Statements

• Identify Utility Specific Accounts and Disclosures
  • What accounts are listed first on the Balance Sheet?
  • Why are long-term assets listed before current assets?
  • What is “the line” on the Income Statement?
  • What is the primary information disclosed in the Regulatory footnote?
  • What utility specific accounting treatment is referenced in the Accounts Receivable footnote
  • Where are AROs disclosed?

2:45 – 3:00 p.m. :: Afternoon Break

3:00 – 4:30 p.m. :: Environmental Compliance Changing the Industry

• Clean Energy Regulations
  • Critics of coal-fired generation
    • State requirements may differ from Federal regulation
    • Renewable energy mandates
    • Energy Efficiency programs – required to encourage less power usage through efficiency incentives, energy efficient appliances, SMART homes
• Customers Purchasing Solar Panels (Generating Portions of Their Own Power, Reducing Traditional Consumption Based Revenues)
• Accounting Consequences
  • Early retirement of plant assets
    • Change in rate structure to include more fixed charges
    • Recovery mechanisms to address lost revenues
    • Pursuing more non-traditional revenues, possibly requiring FERC approval, and creating accounting research

TUESDAY, OCTOBER 18, 2022

9:00 – 10:15 a.m. :: CASE STUDY – Review Accounting Impacts from a Rate Order

• Rate Design vs. Revenue Requirement
  • New tariffs or riders impacting customer billing
  • Approval of new recovery mechanisms or amendments to existing mechanisms
  • Requirements to defer recognition/recovery of certain costs
    • Significant one-time costs recovered over time (minimizes rate shock)
      • Amortize over Commission approved recovery period
    • Commission tables/defers approval to recover certain costs until the next rate case
      • No amortization
  • Other Provision
    • Merger conditions
      • Primary concern of State Commission is protecting the ratepayer
      • Merger costs, as one-time expenses, are typically not recoverable through based rates and not FERC recoverable – excluded when calculating transmission rates
      • Other provisions to limit inequitable benefit between shareholders/executives and ratepayers

10:15 – 10:30 a.m. :: Morning Break

10:30 a.m. – 12:00 p.m. :: Navigating Industry Websites and Common Accounting Tools

• Kahoot! Survey Questions
  • Accounting system used
  • Familiarity with Industry websites
  • Company auditor
• Key Information on ACC, FASB, FERC and SEC Websites
• Auditor Accounting Resources – Deloitte Focus
  • Deloitte Accounting Research Tool (DART)
    • GAAP guidance organized by the Accounting Standards Codification (ASC) topics
    • SEC reporting requirements
    • Roadmaps – interpretive guidance on specific topics

Wrapping Up: Questions and Concluding Remarks