EnergyNewswatch

Introduction to Utility Depreciation

Live Streaming Online April 12-13, 2023

An EUCI Program

Click Here to register $1195

If you are unable to attend at the scheduled date and time, we make recordings available to all registrants for three business days after the event

This course provides a foundation of depreciation concepts, ratemaking implications, and making data collection choices–all factors that determine the quality and content of a depreciation study.  While this course does explore the basics of utility depreciation in a lecture format, the course is primarily intended to help participants become conversant on basic depreciation issues. These include:

• Net salvage analysis
• Ideal data collection
• Accounting concepts and options
• The significance of depreciation within the larger scope

In the interest of achieving a conversant level of understanding, attendee questions are encouraged, and interactive exercises are included.  This course is intended to be introductory and will provide a foundational framework and baseline to prepare attendees more advanced material.

Learning Outcomes

• Explain and distinguish the common definitions of depreciation, the calculation of annual depreciation expense, and the concepts associated with basic plant accounting
• Discuss the social and financial significance of accurately accruing depreciation and net salvage over the lifespan of the plant assets (i.e., the ratemaking perspective)
• Identify and describe the components of a depreciation system with a focus on the most commonly used systems
• Review the content of a depreciation study and the relevance of depreciation studies to attendees’ job duties
• Discuss life analysis, survivor curves, and the concepts behind the methods used to forecast the remaining service life
• Review net salvage analysis and discuss its increasing significance in the development of depreciation accrual rates
• Identify the “ideal” data that should be tracked within continuing property records
• Examine depreciation accounting concepts including capitalization policies, account groupings, individual vs. group (mass) asset accounting methodologies, and the value of tracking contributed plant
• Explore accounting options to record fixed asset retirements and the impact of the choices upon depreciation calculations
• Examine the connection between actual data available in plant records and the choice of life and net salvage analysis methods and the reliability of the resulting analysis

WEDNESDAY, APRIL 12, 2023

What is Depreciation?

• Different Perspectives
• Historical Development
• Defining Terms
  • AICPA Bulletin # 1
  • 1996 NARUC “Public Utility Depreciation Practices”

Why is Depreciation Important?

• Revenue Requirement
  • General accounting view
  • Plant accounting view
• Social Considerations
• Utility Considerations

Depreciation Systems

• Purpose and Function of Depreciation Systems
• Components of Depreciation Systems
• Commonly Used Systems

Property Accounting

• Unit Accounting
• Group Accounting

Depreciation Study

• Purpose of Study
• Content of Study
  • Goals/objectives
  • Study procedures
  • Depreciation database
    • Building a database

Forecasting Plant Retirement Traits

• Relevance of Forecasting to Course Participants
• Types of Forecasting Tools
• Principles of Judgmental Forecasts

Life Analysis

• Defining Terms
• Modeling Real Life with Analytical Tools

THURSDAY, APRIL 13, 2023 : CENTRAL TIME

Net Salvage Analysis

• Net Salvage Analysis
• Gross Salvage
• Cost of Removal
• Inflation

Ideal Continuing Property Records

• Objectives
• Setting up or Modifying CPRs
• Regulatory Requirements
• Ideal Continuing Property Record

Capitalization Policy for Utility Depreciation

• Selecting Retirement Units
• Capitalization Policy
• Capitalization Threshold
• Capitalize or Expense?

Selecting Account Groupings

• Asset Distinctions that Matter
• Pros & Cons of Subaccounts

Dr. Lance Kaufman, Principal Economist, Aegis Insight

Dr. Lance Kaufman has provided statistical and economic expert testimony in regulated utility proceedings and civil litigation. Dr. Kaufman’s experience covers most aspects of utility rate making, including depreciation analysis, revenue requirement, power cost forecasting, prudence analysis, cost of capital, integrated resource planning, decoupling, demand response, special contracts, PURPA filings, cost of service modeling, cost allocations, rate spread, and rate design.

Dr. Kaufman is a Certified Depreciation Professional. He has developed software to conduct actuarial analysis of plant retirement data and to calculate depreciation rates. Dr. Kaufman has performed depreciation studies and participated in numerous depreciation and plant retirement proceedings. His broad utility experience and advanced statistical training contributes to a deep understanding of both the practical applications of depreciation theory and the strengths and weaknesses of modern depreciation analysis.