EnergyNewswatch

Utility Accounting 101

Live Streaming Online April 5-6, 2023

An EUCI Program

Click Here to register $1295

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

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.

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 interesting accounting treatment.

Our expert instructor will guide attendees through a wide range of accounting concepts best suited to the peculiarities of the utility industry, including:

• 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
• State and federal environmental regulatory requirements
• The need to maintain multiple sets of books in order to stay compliant with GAAP, State and Federal Commissions and the SEC

Learning Outcomes  

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

• 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
• Navigate the requirements of ASC 980: Regulated Operations
• Identify financial reporting tools common to the Utility industry

WEDNESDAY, APRIL 5, 2023

Course Introductions and Objectives

• Benchmark Course Participants’ Utility and Accounting Knowledge

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
• Public Power – Compare and Contrast Business Structures that Provide Public Power
  • Investor-Owned Utilities (IOU)
  • Cooperatives
  • Municipalities
  • Public Utility Districts (PUD)
  • Public Power District (PPD)
  • Independent Service Operators (ISO)
• 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

Morning Break

Regulatory Accounting, A Deeper Dive

• Federal Energy Regulatory Commission (FERC) System of Accounts and Financial Statement Introduction
• 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 – 12:30 p.m. :: Lunch Break

Utility Financial Statements Fundamentals

• Identify Utility Specific Accounts and Disclosures
  • What accounts are listed first on the Balance Sheet?
  • Why are long-term assets listed before current assets?
  • Define and compare rate tariffs and contribution in aid of construction (CIAC)
  • 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?

Afternoon Break

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)
• Impact and Considerations of the Infrastructure Investment and Jobs Act
• 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

THURSDAY, APRIL 6, 2023

CASE STUDY – The Interaction Between Rates, Accounting, and the Finances

• Rate Design vs. Revenue Requirement
• Definition of Terms
• Correlate Accounting and Finance Information to Rate Design
• Tariffs, Riders, and Charges that Impact Customer Billing
• Rate Impact of Financing Infrastructure
• 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/governance approved recovery period
• Other Provisions
  • Merger considerations
    • Ratepayer protection
    • 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 ratepayer inequities 

Morning Break

Navigating Industry Websites and Common Accounting Tools

• Polling Questions
  • Accounting system used
  • Familiarity with Industry websites
  • Company auditor
• Key Information on ACC, FASB, FERC and SEC Websites
• Auditor Accounting Resources – Deloitte Focus
  • 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

Terilyn Wallis, Founder and Owner, Terilyn Wallis Consulting

Terilyn (Teri) Wallis is the founder and owner of Terilyn Wallis Consulting, specializing in the financial, work order processes, and strategic needs of electric utilities. Teri is highly skilled in the areas of accounting and finance, strategy development and execution, building trusted and respected relationships and making sound business decisions. Her background includes experience in diversified businesses including propane, natural gas, security, and fiber. 

Throughout her career, Teri has worked for 2 electric cooperatives, both having propane gas subsidiaries. She was responsible for all the forecasting and planning, accounting, and ratemaking for all of those businesses, in addition to the electric business. Additionally, as a regional employee for CFC, Teri has provided both consultative services, forecasting, and training and education for more than 350 electric cooperatives. Since 2018, she has provided consultative services and training and education for and an additional 150 electric cooperatives, which includes several Generation and Transmission Cooperatives, and approximately 15 PUD’s and PPD’s on their work order processes between the pacific northwest and Nebraska.