FERC Accounting 101

The overriding purpose of the Uniform System of Accounts (USofA) is to ensure uniformity and consistency in the reporting of the accounting transactions in the books and records of electric and gas utilities. Uniformity and consistency are important not only for regulators, but also for other parties requiring accounting information, such as utility management, shareholders, creditors and other parties to rate proceedings. Therefore, it is beneficial to anyone whose work involves public utilities to have a basic understanding of the FERC USofA since it is applicable both at the federal and state level.

This training in the basics of the FERC USofA will contain several modules, each one capsulizing a key component of the USofA. The course will highlight the development of the accounting system prescribed by FERC for electric and gas utilities. It will focus on the role of the USofA, the components of the USofA, and the role of USofA in the ratemaking (setting utility prices) process. To provide the attendees hands-on experience with the USofA, the final module in the course will contain classroom problems for the attendees to calculate a utility’s revenue requirement from USofA account balances.

Agenda

MONDAY, AUGUST 8, 2022 : CENTRAL TIME

9:00 a.m. – 4:00 p.m. Central Time

Short breaks will be taken during each session

Reviewing Public Utilities Regulations

Development of Public Utility Regulation
What is a Public Utility and What Makes their Accounting System Unique?
Regulating Public Utilities and the Impact on their Accounting Systems
- Books and records
- Accounting entries for requested transactions
  - Sales
  - Acquisitions
  - Gains
  - Losses
  - Refunds
  - Cost assignment and allocation (CAAM)
The Role of Accounting in Public Utilities
- Transparency
- Uniformity between utilities for regulatory review

Understanding FERC Uniform System of Accounts (USofA): Electric and Gas Utilities

Development of the USofA
FERC USofA
Definitions
Instructions
- General instructions
- Plant instructions
- Operating expense instructions

Differentiating between USofA Accounting and Generally Accepted Accounting Principles (GAAP)

Schedule M Timing – Temporary and Permanent Differences

USofA Balance Sheet Accounts

What are the Balance Sheet Accounts?
Balance Sheet Accounts Classifications
Major Categories of Utility Plant
- Electric plant
  - Intangible plant
  - Generation
  - Transmission
  - Distribution
  - General plant
- Gas plant
  - Intangible plant
  - Production plant
  - Natural gas storage and processing plant
  - Transmission
  - Distribution
  - General plant

USofA Income Statement Accounts

Creating Income Statement Accounts
- What are the Income Statement Accounts?
- How are revenue and expenses accounts classified?
- Above-the- line expenses
- Below-the-line expenses

FERC Form No. 1 and No. 2

Balance Sheets
Income Statements

Accounting for Utility Plant

Work Order Systems
- What is a work order?
- Work order content
- Initiating the work order
- Closing out the work order
Records and Progress
- Continuing property records
  - What are Continuing Property Records (CPRs)?
  - What information is provided by a CPR system?
  - What are the uses of CPRs

The Role of the USofA and the Ratemaking Process

Historical Cost and Ratemaking
Revenue Requirements
Problem-solving Using USofA
- Using USofA account balances, we will calculate a utility’s revenue requirements (how much should a utility earn?).

Questions and Concluding Remarks

Workshop

FERC Form 1 Accounting

TUESDAY, AUGUST 9, 2022 : CENTRAL TIME

1:00 – 5:00 p.m. Central Time

FERC Form 1 is an annual regulatory reporting requirement for electric utilities, licensees, and others who are subject to the jurisdiction of the Federal Energy Regulatory Commission. The report is designed to collect financial and operational information based on the details contained in the Uniform System of Accounts. FERC Form 1 provides a standardized reporting format, that prioritizes transparency, uniformity, and consistency in reporting, that may be used by regulators, consumer advocates, utility management, shareholders, creditors, and other interested entities. In addition, many state public utilities commissions have adopted the FERC Form 1 with modifications for state-specific reporting requirements.

This workshop will build on top of the fundamental principles reviewed in the FERC Accounting 101 course, and deep dive into the key accounting schedules contained in the FERC Form 1 using group discussions and hands-on problems (i.e., utilizing FERC Form 1 schedule to calculate key ratemaking statements, such as capital structure rate base and operation and maintenance expenses).

Learning Outcomes

Explain what is the Federal Energy Regulatory Commission‘s (FERC) Form No. 1
Describe and discuss the key component of the general instructions for filing the FERC Form No. 1
Discuss Key USofA Accounting Reference Schedules
Develop Ratemaking Accounting Statements Using FERC Form 1 Schedules

Agenda

1:00 – 1:15 p.m. :: Course Introduction and Objectives

1:15 – 2:15 p.m. :: What is the Federal Energy Regulatory Commission‘s (FERC) Form No. 1?

2:15 – 2:30 p.m. Afternoon Break

2:30 p.m. – 3:30 p.m. Key USofA Accounting Reference Schedules

Comparative Balance Sheet and its associated schedules
Statement of Income and its associated schedules
Statement of Retained Earnings and its associated schedules
Statement of Cash Flows and its associated schedules Notes to Financial Statements and its associated schedules

3:30 – 4:30 p.m. :: Hands-on Exercise Using FERC Form 1 Schedules to Develop Ratemaking Accounting Statements

Rate Base
Capital Structure
Operations and Maintenance (O&M) Expenses

4:30 – 5:00 p.m. Wrap up questions and closing remarks