# Presentation: 692824

## Basic Energy Accounting Principles

- Roger L. Sacquety
- February 2001
- Bangladesh Ministry of Energy and Mineral Resources

## Comparison of Capital Structures 

|  | Percent of Capitalization |  |
| --- | --- | --- |
|  | Utility | Nonutility |
| Common
Equity Stock | 40 | 85 |
| Preferred stock  | 15 | 5 |
| Long-term debt  | 45 | 10 |

## Generally Accepted Accounting Practices

-   National Council on Governmental
-     Accounting
-   Financial Accounting Standards Board
-   American Institute of CPAs

**Generally Accepted ****Accounting Practices**

## Utility Accounting

- Financial Accounting (Stock Price, Bond Yield, Loan Rates)
- Accounting for Income Taxation (Tax Law, Other Laws)
- Accounting for Regulatory Purposes (Setting Rates, Prescribing Accounting Methods)
- Managerial Accounting (Planning, Control, Decision Making)

## Public Utility Accounting Differences 

- Balance Sheet
- Assets – list utility plant first
- Liabilities – list capitalization first
- Income Statement
- Providing utility services
- Nonutility operations and interest charges
- Other Characteristics
- Reporting form
- Fuel costs and charges

## Purpose of Uniform System of Accounts

-    Develop uniformity of accounting
-      treatment
-    Maintain consistency of treatment
-    Distinguish capital expenditures
-      from operating costs
-    Define minimum accounting
-      standards

**Purpose of ****Uniform System of Accounts**

## Components of Uniform System of Accounts

-   Detailed Description of     Each Account
-   Accounting Basis for Recording
-    Amounts
-   General Instructions and     Definitions

**Components of ****Uniform System of Accounts**

## Revisions of Uniform System of Accounts

-   Rule Making Docket
-   Hearings
-   Accounting Order

**Revisions of ****Uniform System of Accounts**

## Table 9: Composite Financial Indicators for Major U.S. Publicly Owned Generator Electric Utilities, 1995-1999

-    Note: Totals may not equal sum of components because of independent rounding. The number of publicly owned generating electric utilities for end of period is 226 for 1999, 227 for 1998, 245 for 1997, 231 for 1996, and 226 for 1995.    Source: Energy Information Administration, Form EIA-412, "Annual Report of Public Electric Utilities." Individual electric utilities report fiscal year data. Appendix B shows the fiscal year for each electric utility.

## Table 20: Composite Financial Indicators for Major U.S. Publicly Owned Nongenerator Electric Utilities, 1995-1999

-    Note: Totals may not equal sum of components because of independent rounding. The number of publicly owned nongenerating electric utilities for end of period is 267 for 1999, 260 for 1998, 299 for 1997, 284 for 1996, and 286 for 1995.    Source: Energy Information Administration, Form EIA-412, "Annual Report of Public Electric Utilities." Individual electric utilities report fiscal year data. Appendix B shows the fiscal year for each electric utility.

## How Utilities Account to Regulators 

- Total Revenue Allowed = Cost of Service
- Cost of Service = E + d + t + (V – D) R
-  	E = Operating and maintenance expenses
- 	d = Depreciation expense
- 	T = Taxes
- 	V = Gross valuation of the utilities’ 	 	property
- 	D = Accumulated depreciation
- 	R = Allowable rate of return

## Regulatory Climate Rankings of State Public Utility Commissions(U.S. Investment Firms, 1998) 

| Very Favorable  | Favorable  | Unfavorable  | Unranked  |
| --- | --- | --- | --- |
| Arizona  | Arkansas  | Alabama  | Alaska  |
| Florida  | Colorado  | California  | Delaware  |
| Hawaii  | Idaho  | Connecticut  | Kentucky  |
| Indiana  | Illinois  | Georgia  | Nebraska  |
| New Mexico  | Kansas  | Iowa  | Tennessee  |
| North Carolina  | Maryland  | Louisiana  |  |
| Texas  | Michigan  | Maine  |  |
| Utah  | Minnesota  | Massachusetts  |  |
| Wisconsin  | Nevada  | Mississippi  |  |
|  | New Hampshire  | Missouri  |  |
|  | New Jersey  | Montana  |  |
|  | New York  | North Dakota  |  |
|  | Ohio  | Rhode Island  |  |
|  | Oklahoma  | South Dakota  |  |
|  | Oregon  | West Virginia  |  |
|  | Pennsylvania  |  |  |
|  | South Carolina  |  |  |
|  | Vermont |  |  |
|  | Virginia  |  |  |
|  | Washington  |  |  |
|  | Wyoming  |  |  |

## Report of Independent Public Accountants

- ... income-regulatory basis
- ...cash flow-regulatory basis
- ...pages 110 through 121 of the accompanying Federal Energy Regulatory Commission Form 1.
- These financial statements were prepared in conformity with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases, which is a comprehensive basis of accounting other than generally accepted accounting principles.
- ... conformity with the accounting requirements of the Federal Energy Regulatory Commission as set forth in its applicable Uniform System of Accounts and published accounting releases.
- This report is intended solely for the information and use of the board of directors and management of ... Company and for filing with the Federal Energy Regulatory Commission and should not be used for any other purpose.

**Report of Independent ****Public Accountants**

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