65200 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

1 71 FR 28464 (May 16, 2006), FERC Stats. & Regs. 

¶ 32,600 (2006). 

DEPARTMENT OF ENERGY 

Federal Energy Regulatory 

Commission 

18 CFR Parts 366, 367, 368, 369, and 

375 

[Docket No. RM06–11–000; Order No. 684] 

Financial Accounting, Reporting and 

Records Retention Requirements 

Under the Public Utility Holding 

Company Act of 2005 

Issued October 19, 2006. 

AGENCY: Federal Energy Regulatory 

Commission, DOE. 

ACTION: Final rule. 

SUMMARY: In this Final Rule, the Federal 

Energy Regulatory Commission 

(Commission) is amending its 

regulations to further implement the 

Public Utility Holding Company Act of 

2005 (PUHCA 2005). Specifically, the 

Commission is adding a Uniform 

System of Accounts (USofA) for 

Centralized Service Companies, adding 

preservation of records requirements for 

holding companies and service 

companies, revising FERC Form No. 60, 

Annual Report of Centralized Service 

Companies, to provide for financial 

reporting consistent with the new 

USofA and providing for electronic 

filing of the revised FERC Form No. 60. 

The Final Rule will provide for greater 

accounting transparency for centralized 

service company operations, and 

uniform records retention by holding 

companies and service companies 

subject to PUHCA 2005. This 

transparency will protect ratepayers 

from pass-through of improper service 

company costs. 

EFFECTIVE DATE: The rule will become 

effective January 8, 2007. 

FOR FURTHER INFORMATION CONTACT: 

James K. Guest (Technical Information), 

Division of Financial Regulation, Office 

of Enforcement, Federal Energy 

Regulatory Commission, 888 First 

Street, NE., Washington, DC 20426, 

telephone (202) 502–6614, e-mail: 

james.guest@ferc.gov. 

Lawrence Greenfield (Legal 

Information), Office of the General 

Counsel—Energy Markets, Federal 

Energy Regulatory Commission, 888 

First Street, NE., Washington, DC 20426, 

telephone (202) 502–6415, e-mail: 

lawrence.greenfield@ferc.gov. 

Julia A. Lake (Legal Information), 

Office of the General Counsel—Energy 

Markets, Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426, telephone (202) 

502–8370, e-mail: julia.lake@ferc.gov. 

SUPPLEMENTARY INFORMATION: 

Table of Contents 

I. Introduction 

II. Background 

III. Overview of Final Rule 

IV. Discussion 

1. Adoption of the Proposed Uniform 

System of Accounts 

2. Implementation Date 

3. FERC Form No. 60 Filing Deadline 

4. Definitions 

(a) ‘‘Direct cost’’ and ‘‘Indirect cost’’ 

(b) ‘‘Work order system’’ 

5. Instructions 

(a) Section 367.2—Companies for which 

this system of accounts is prescribed 

(b) Section 367.8—Extraordinary items 

(c) Section 367.10—Unaudited Items 

(d) Section 367.20(b)—Depreciation 

accounting 

(e) Section 367.23—Transactions with nonassociate companies 

(f) Section 367.24—Construction and 

service contracts for other companies 

(g) Section 367.25—Determination of 

service cost 

(h) Section 367.27—Billing procedures 

(i) Section 367.51(a)(17)—Allowance for 

funds used during construction 

(j) Section 367.53—Service company 

property purchased or sold 

(k) Section 367.54—Expenditures on leased 

property 

(l) Section 367.59— Additions and 

retirements of property 

(m) Sections 367.103–.104—Current & 

Deferred Income Taxes 

(n) Section 367.23—Transactions with nonassociate companies; § 367.25— 

Determination of service cost; § 367.27— 

Billing procedures; § 367.28—Methods of 

allocation; § 367.29—Compensation for 

use of capital 

6. Balance Sheet Accounts 

7. Income Statement Accounts 

(a) Sections 367.4570–.4594—Revenue 

accounts for services rendered 

(b) Sections 367.5000 and 367.8000— 

Operation and maintenance expense 

accounts 

(c) Sections 367.9220 and 367.4171— 

Account 922, Administrative expenses 

transferred—Credit, and Account 417.1, 

Expenses of non-utility company 

(d) Section 367.4160—Costs and expenses 

of merchandising, jobbing and contract 

work; § 367.9120—Demonstrating and 

selling expenses; § 367.9130— 

Advertising expenses; § 367.9301— 

General advertising expenses 

(e) Sections 367.4263, 367.4117, 

367.4180—Miscellaneous Income 

Statement Issues 

8. Records Retention Requirements 

9. FERC Form No. 60 

(a) Use of GAAP Financial Statement 

instead of Structured FERC Form No. 60 

(b) FERC Form No. 60 Schedules 

(1) Schedule II, Service Company Property 

(2) Schedule III–A, Summary of Service 

Company Property and Accumulated 

Provisions for Depreciation and 

Amortization 

(3) Schedule IV, Investments and Schedule 

XII, Long-Term Debt 

(4) Schedule V, Accounts Receivable from 

Associate Companies 

(5) Schedule VI, Fuel Stock Expenses 

Undistributed 

(6) Schedule X, Research, Development or 

Demonstration Expenses 

(7) Schedule XI, Proprietary Capital 

(8) Schedule XIV, Notes to Financial 

Statements 

(9) Schedule XV, Comparative Income 

Statement 

(10) Schedule XV–A, Schedule of Utility 

Operating Expenses; Schedule XVI, 

Analysis of Charges for Service; 

Schedule XVII, Schedule of Expense 

Distribution by Department or Service 

Function 

(11) Analysis of Billing Schedules 

(12) Departmental Analysis of Salaries 

Schedule; Methods of Allocation 

Schedule; and Organizational Chart 

Schedule 

(13) Annual Statement of Compensation for 

Use of Capital Billed 

(14) Miscellaneous General Expenses 

Schedule (Account 930.2) 

(c) General Instruction IX 

(d) Raising the Threshold for Individually 

Itemized Items 

(e) Reporting in Whole Dollars or 

Alternatively in Thousands 

(f) Comparative Information 

(g) Request to Expand Data Collection in 

FERC Form No. 60 

(h) Schedule Numbering 

(i) Chief Accountant’s delegated authority 

V. Information Collection Statement 

VI. Environmental Analysis 

VII. Regulatory Flexibility Act 

VIII. Document Availability 

IX. Effective Date and Congressional 

Notification 

Before Commissioners: Joseph T. Kelliher, 

Chairman; Suedeen G. Kelly, Marc Spitzer, 

Philip D. Moeller, and Jon Wellinghoff. 

I. Introduction 

1. On April 24, 2006, the Commission 

issued a notice of proposed rulemaking 

(NOPR) that proposed to add a new 

Uniform System of Accounts (USofA) 

for centralized service companies, i.e., 

service companies that are not special 

purpose companies, and new 

preservation of records requirements for 

holding companies and service 

companies as new parts 367 and 368 of 

Title 18 of the Code of Federal 

Regulations.1 The NOPR also proposed 

to revise FERC Form No. 60, Annual 

Report of Centralized Service 

Companies, to be codified in new part 

369, to provide for financial reporting 

by centralized service companies 

consistent with the new USofA; to 

provide for electronic filing of Form No. 

60; and to make conforming changes to 

the Commission’s regulations in part 

366 and corresponding changes to the 

Commission’s Chief Accountant’s 

delegation of authority in part 375. The 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65201 

2Energy Policy Act of 2005, Pub. L. No. 109–58, 

119 Stat. 594 (2005). 

3 15 U.S.C. 79a et seq. 

4EPAct 2005 at 1261 et seq. 

5Repeal of the Public Utility Holding Company 

Act of 1935 and Enactment of the Public Utility 

Holding Company Act of 2005, Order No. 667, 70 

FR 75592 (Dec. 20, 2005), FERC Stats. & Regs. 

¶ 31,197 (2005), order on reh’g, Order No. 667–A, 

71 FR 28446 (May 16, 2006), FERC Stats. & Regs. 

¶ 31,213 (2006), order on reh’g, Order No. 667–B, 

71 FR 42750 (July 28, 2006), FERC Stats. & Regs. 

¶ 31,224 (2006). 

6As defined in 18 CFR 366.1, a holding company 

is (i) any company that directly or indirectly owns, 

controls, or holds, with power to vote, 10 percent 

or more of the outstanding voting securities of a 

public-utility company or of a holding company of 

any public-utility company; and (ii) any person, 

determined by the Commission, after notice and 

opportunity for hearing, to exercise directly or 

indirectly (either alone or pursuant to an 

arrangement or understanding with one or more 

persons) such a controlling influence over the 

management or policies of any public-utility 

company or holding company as to make it 

necessary or appropriate for the rate protection of 

utility customers with respect to rates that such 

person be subject to the obligations, duties, and 

liabilities imposed by this subtitle upon holding 

companies. 

7As defined in 18 CFR 366.1, a service company 

is any associate company within a holding 

company system organized specifically for the 

purpose of providing non-power goods or services 

or the sale of goods or construction work to any 

public utility in the same holding company system. 

‘‘Centralized service companies’’ are defined in 18 

CFR 367.1(a)(7) as a service company that provides 

services such as administrative, managerial, 

financial, accounting, recordkeeping, legal or 

engineering services, which are sold, furnished, or 

otherwise provided (typically for a charge) to other 

companies in the same holding company system. 

Centralized service companies are different from 

other service companies that only provide a discrete 

good or service. 

8Order No. 667 also required centralized service 

companies to file the newly created FERC Form No. 

60, Annual Report of Centralized Service 

Companies. 

9 18 CFR parts 101, 125, 201 and 225 (2006). 

10Supra note 1. 

NOPR proposed to make the changes 

effective January 1, 2007. 

2. As directed by the Commission in 

the NOPR, the Commission staff held a 

technical conference on July 18, 2006, to 

provide interested persons an 

opportunity to discuss the regulations 

proposed in the NOPR. At the 

conclusion of the technical conference, 

staff announced that the record in this 

docket would remain open until August 

8, 2006, to provide interested persons 

additional time to submit specific 

recommendations on how the 

Commission’s proposed regulations 

could be modified to accommodate their 

concerns. 

3. This Final Rule adopts, in many 

respects, the proposals contained in the 

NOPR, but with certain noted changes 

to minimize any unnecessary burden. 

Chief among them, the Commission 

defers the implementation date by an 

additional year, to January 1, 2008. 

II. Background 

4. On August 8, 2005, the Energy 

Policy Act of 2005 (EPAct 2005) 2 was 

signed into law. In relevant part, it 

repealed the Public Utility Holding 

Company Act of 1935 (PUHCA 1935) 3

and enacted the Public Utility Holding 

Company Act of 2005 (PUHCA 2005),4

which, with one exception not relevant 

here, became effective on February 8, 

2006 (six months from the date of 

enactment). On December 8, 2005, the 

Commission issued Order No. 667, 

adding a new Subchapter U and part 

366 to Title 18 of the Code of Federal 

Regulations to implement PUHCA 

2005.5

5. Order No. 667 required that, unless 

otherwise exempted by Commission 

rule or order, holding companies 6 and 

service companies 7 must maintain and 

make available to the Commission their 

books and records.8 In addition, Order 

No. 667 allowed holding companies and 

service companies that did not currently 

follow the Commission’s records 

retention requirements to transition to 

the Commission’s requirements by 

January 1, 2007. Order No. 667 further 

provided that holding companies would 

not be required to comply with a 

Uniform System of Accounts, but that 

centralized service companies would be 

required to do so as of January 1, 2007. 

The Commission also indicated in Order 

No. 667 that it would initiate a separate 

rulemaking proceeding to address how 

the Commission’s Uniform Systems of 

Accounts and records retention 

requirements in Parts 101, 125, 201 and 

225 of its regulations 9 should be 

modified to adopt or otherwise integrate 

the relevant parts of the Securities and 

Exchange Commission’s (SEC) Uniform 

System of Accounts and records 

retention rules. 

6. In the April 24, 2006 NOPR,10 the 

Commission recognized that the range 

of changes that would be needed to 

Parts 101, 125, 201 and 225 of its 

regulations to allow for application of 

those requirements to holding 

companies and service companies 

would make understanding and 

applying them difficult for all entities. 

Therefore, the Commission proposed to 

adopt separate accounting, records 

retention, and reporting requirements 

for holding companies and service 

companies in new Parts 367, 368 and 

369. 

7. After consideration of the 

discussion during the technical 

conference and the comments received, 

the Commission is adopting this Final 

Rule which is generally consistent with 

the NOPR, but with several significant 

changes to reduce the compliance 

burden on affected entities. The 

Commission received nine comments on 

the proposed NOPR and ten 

supplemental comments submitted 

following the July 18, 2006 staff 

technical conference. A list of the 

commenters is attached as Appendix B. 

Comments received on specific aspects 

of the Commission’s proposal are 

discussed in greater detail below. 

III. Overview of Final Rule 

8. As an initial matter, the 

Commission in this Final Rule has been 

guided by the clear intent of Congress to 

repeal the regulatory regime established 

by PUHCA 1935 and to rely on this 

Commission and state regulatory 

authorities to protect energy customers. 

Throughout, we have attempted to strike 

a balance between the Commission’s 

need for information to carry out its 

regulatory responsibilities and the 

burden that gathering and reporting 

information imposes on industry. 

Therefore, as described below, we have 

modified our proposal in several key 

respects to reduce any unnecessary 

burden. The modifications include 

deleting and modifying certain accounts 

and instructions in the originally 

proposed USofA, providing flexibility in 

the work order system requirements, 

streamlining and eliminating certain 

schedules in the FERC Form No. 60, 

retaining the May 1 filing date for the 

FERC Form No. 60, and postponing the 

implementation date of the Final Rule 

until January 1, 2008. These 

modifications balance the Commission’s 

need for information to fulfill its 

regulatory responsibilities with 

minimizing any unnecessary burden. 

9. Specifically, in the NOPR, the 

Commission proposed to add, as Part 

367 of its regulations, a new USofA for 

centralized service companies that 

conforms, to the maximum extent 

practicable, to the existing USofA for 

public utilities and licensees and for 

natural gas companies as set forth in 

Parts 101 and 201, respectively, of the 

Commission’s regulations. The Final 

Rule adopts the new USofA for 

centralized service companies, but with 

the following modifications to reduce 

the burden on respondents: 

• Centralized service companies will 

not be required to adopt a formal work 

order system. Instead, the Commission 

will permit centralized service 

companies to use a variety of cost 

accumulation systems, provided such 

systems support the allocation of 

expenses to the services performed and 

readily identify the source of the 

expenses and the basis for their 

allocation. 


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65202 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

11EEI at 19–20; FirstEnergy Service Company 

(FirstEnergy) Supplemental Comments at 2; Pepco 

Holdings, Inc. and PHI Service Company (PHI 

Companies) jointly-filed Supplemental Comments 

at 4–5; Progress Energy, Inc. (Progress Energy) at 2; 

Public Service Enterprise Group Incorporated 

(PSEG Companies) at 9–10; Xcel Energy Services, 

Inc. (XES) at 2–3. 

12EEI at 20–21; FirstEnergy Supplemental 

Comments at 2; XES at 2–3. 

13EEI at 18. 

14Progress Energy at 3. 

15PSEG Companies at 3. 

• Centralized service companies will 

not be required to obtain Commission 

approval to account for an item as 

extraordinary. Instead, the Commission 

will only require extraordinary items to 

be disclosed in footnotes to the financial 

statements. 

• Centralized service companies will 

not be required to conduct extensive 

mortality studies to support the useful 

lives of all depreciable assets, but can 

exercise judgment in determining the 

evidence needed to support the lives of 

depreciable assets. 

• Centralized service companies will 

not be required to prepare paper 

invoices each month for services 

rendered to associate utility companies. 

Instead, the Commission will permit 

centralized service companies to use a 

variety of accounting mechanisms, 

provided that associate utilities are 

receiving accurate information about the 

work being done for them and the 

related costs on a monthly basis. 

• Centralized service companies will 

not be required to capitalize an 

allowance for funds used during 

construction (AFUDC) as a component 

of construction cost but will instead be 

allowed to capitalize interest. 

• Centralized services companies will 

not be required to calculate income 

taxes for individual departments. 

• Centralized service companies will 

not be required to recognize revenues 

received for, or expenses incurred in, 

providing services to non-utility 

companies in separate accounts. 

• Centralized service companies will 

not be required to record revenues 

received for services provided in 

support of merchandising, jobbing and 

contract work in a separate account. 

Instead, revenues from such services 

will be included in the accounts 

provided for other service company 

revenues. Proposed Account 415, 

Revenues from merchandising, jobbing 

and contract work, will be eliminated. 

10. In the NOPR, the Commission also 

proposed to add, as new part 368 of its 

regulations, preservation of records 

requirements for holding companies and 

service companies, that conform to the 

preservation of records requirements for 

public utilities and natural gas 

companies contained in §§ 125.3 and 

225.3 of the Commission’s regulations, 

with certain modifications appropriate 

for holding companies and service 

companies. The Final Rule adopts the 

new requirements, with certain 

modifications to the Schedule of 

Records and Periods of Retention in 

§ 368.3. In order to reduce any 

unnecessary burden, the Commission 

will revise the retention period for 

certain depreciation records from 25 

years to 3 years after retirement or 

disposition of the property. 

11. Additionally, the NOPR proposed 

to revise FERC Form No. 60 to permit 

reporting consistent with the proposed 

USofA for centralized service 

companies, and to codify it in new part 

369. The Final Rule adopts the revised 

FERC Form No. 60 in part 369, but 

deletes or modifies the following 

schedules in the Form itself to reduce 

the compliance burden: 

• Schedule XV–A, Schedule of Utility 

Operating Expenses, will be deleted 

because similar information is available 

on Schedule XVI, Analysis of Charges 

for Service. 

• Schedule XVI will be modified to 

reflect the Commission’s decision not to 

require a separate account for recording 

expenses attributable to services 

provided to non-utility companies. 

• The Analysis of Billing Non-utility 

Companies—Account 459 Schedule, 

will be deleted to reflect the 

Commission’s decision to eliminate 

Account 459. 

• The schedules for analysis of 

service company billings will eliminate 

the need to separately report billings to 

utility customers and non-utility 

customers. 

• The departmental analysis of 

salaries schedule will be eliminated 

because the reported data is not 

comparable across companies. 

12. In addition, the Final Rule delays 

the implementation date of the new 

requirements until January 1, 2008, and 

makes conforming changes to the 

transition provisions contained in 

§§ 366.21, 366.22 and 366.23 of the 

Commission’s regulations. The delay in 

the implementation date and the 

transition periods will allow for a more 

orderly implementation of the new 

requirements and further reduce the 

compliance burden on affected entities. 

13. The Final Rule, therefore, adopts 

new parts 367, 368 and 369 and 

corresponding changes to parts 366 and 

375 of the Commission’s regulations. 

IV. Discussion 

14. In general, the National 

Association of Regulatory Utility 

Commissioners (NARUC), the American 

Public Power Association (APPA), the 

Florida Municipal Power Authority 

(FMPA), and National Rural Electric 

Cooperative Association (NRECA) 

supported the NOPR while Edison 

Electric Institute (EEI) and individual 

service companies opposed the NOPR. 

1. Adoption of the Proposed Uniform 

System of Accounts 

15. The Commission proposed to 

adopt a new USofA for Centralized 

Service Companies that generally 

mirrors the Commission’s existing 

USofA for public utilities and licensees 

and for natural gas companies, with 

certain modifications to reflect the 

unique business characteristics of 

centralized service companies. 

Comments 

16. Several industry commenters urge 

the Commission to allow centralized 

service companies to continue to use 

their existing systems of accounts.11

These commenters contend that 

centralized service companies should 

not be required to adopt the USofA as 

proposed in the NOPR. EEI, First 

Energy, and XES also argue that 

centralized service companies should be 

permitted to continue to maintain their 

financial records in conformance with 

Generally Accepted Accounting 

Principles (GAAP) and Sarbanes-Oxley 

requirements.12

17. EEI argues that, to the extent there 

is some detail the Commission does not 

currently have, but wants to obtain, 

rather than requiring centralized service 

companies to restructure their 

accounting systems, the Commission 

could simply add items to FERC Form 

No. 60 to obtain that information.13

18. Progress Energy contends that 

instituting reporting requirements that 

are more complicated and timeconsuming runs counter to the spirit 

that prompted the repeal of PUHCA 

1935.14

19. PSEG Companies maintain that 

the Commission has substantially 

underestimated the costs of complying 

with the NOPR and that it failed to 

balance the costs associated with 

implementing the NOPR against the 

benefits expected to result from 

implementation.15 PSEG Companies 

state that the proposals in the NOPR, if 

adopted, would impose more regulatory 

burdens than was required under 

PUHCA 1935. They state this would be 

inconsistent with the intent of Congress. 

PSEG Companies express their concern 

that the increased cost of compliance 

will be much higher than the 

Commission has estimated and that the 

benefits of the rule are non-existent and 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65203 

16 Id. at 6–7. 

17 Id. at 12. 

18 XES at 3–4. 

19Southern at 1. 

20Southern Supplemental Comments at 1. 

21EEI at 17–19; Progress Energy at 2; PSEG 

Companies at 9–10; XES at 3–4. 

22 XES at 3. 

23EEI at 23; XES at 3. 

24APPA at 5. 

25NRECA Supplemental Comments at 2. 

26See Technical Conference Tr. 111–115 (Mr. 

Steven Ruppel). 

27See Technical Conference Tr. 90 (Mr. Thomas 

Ferris). 

may be counter-productive.16 PSEG 

Companies request the Commission to 

withdraw the requirement that the 

centralized service companies must 

adopt the USofA, or, at a minimum, 

modify the NOPR in such a manner that 

provides net public benefits.17

20. XES claims that conversion to the 

new USofA proposed by the 

Commission would be expensive and 

time consuming, and is unnecessary 

because the current accounts and 

accounting systems comply with SEC’s 

requirements and state regulations. 

Additionally, XES asserts that it does 

not foresee any additional benefit to 

federal and state regulatory agencies by 

conversion to the USofA proposed by 

the Commission.18

21. Southern Company Services and 

Southern Nuclear Operating Company 

(Southern) state that the accounting and 

work order systems now in place allow 

the public utility company receiving 

service company billings to report these 

expenses using the USofA. They state, 

further, that the Commission’s proposal 

for the centralized service companies to 

use a modified USofA does nothing to 

enhance that process. They suggest that, 

if the Commission concludes there must 

be a conversion to its USofA, there be 

flexibility.19 In their supplemental 

comments, Southern notes that the 

Commission receives detailed FERC 

Form No. 1 information from all public 

utility companies, which is where the 

service company charges are ultimately 

placed in the appropriate USofA 

classification.20

22. Some commenters express their 

belief that compliance with existing 

reporting requirements, including 

GAAP and SEC requirements, along 

with the Sarbanes-Oxley and state 

regulatory requirements, will provide 

adequate information in sufficient detail 

to ensure transparency and facilitate 

review of centralized service company 

charges.21 XES adds, further, that 

existing federal and state requirements 

ensure the accuracy of records and the 

adequacy of internal accounting 

controls.22 As such, these commenters 

believe the Commission’s proposal to 

adopt the proposed conversion to a 

USofA is unnecessary.23

23. Conversely, APPA supports the 

Commission’s effort to develop a 

comprehensive chart of accounts for 

centralized service companies. APPA 

believes that the Commission generally 

has done an admirable and 

workmanlike job of developing a 

comprehensive chart of accounts for 

centralized service companies. APPA 

states that such companies are likely to 

perform many operations and 

maintenance services for their public 

utility affiliates. The costs of these 

functions should be recorded and 

accounted for in the same way, 

regardless of exactly what entity 

performs them. APPA reports that some 

of its members that have had to deal 

with allocations of costs from 

centralized service companies to their 

public utility affiliates in the past have 

reported that accounting for such 

service company costs was often vague 

and opaque, recorded in accounts such 

as ‘‘Administrative and General.’’

According to APPA, these accounts 

could lead to improper allocation of 

such costs to utility customers. The new 

chart of accounts should be of material 

assistance in this regard. Indeed, APPA 

states that the Commission should make 

clear its intent to use the greater 

transparency achieved by the proposed 

service company accounting 

requirements to protect ratepayers from 

the pass-through of improper service 

company costs—i.e., costs that would 

not be chargeable to ratepayers 

consistent with Commission policy if 

incurred at the operating company 

level.24

24. NRECA shares APPA’s comments 

and concerns, and urges the 

Commission to adopt regulations 

ensuring just and reasonable rates by 

prohibiting the pass-through of 

improper service company costs to 

jurisdictional public utilities.25

25. FMPA supports the NOPR and 

compliments the Commission on the 

proposed standards, accounting 

requirements, and new accounts for 

centralized service companies. FMPA 

states that the rule provides long-needed 

transparency and consistency for 

centralized service companies’

accounting. FMPA is of the view that 

the current method is broken, and there 

would not have been a need for a staff 

technical conference on this topic if it 

were otherwise. FMPA states that the 

current accounting method undermines 

the Commission’s ability to insure just 

and reasonable rates and, that without 

the proposed reforms, the problem will 

only get worse. FMPA points out that 

with consolidation and mergers likely to 

follow the PUHCA repeal, inadequacies 

in the current accounting systems will 

face increasing stress leading to 

consumer harm. FMPA adds that there 

is growing reliance on formula rates at 

the Commission that heightens the need 

for greater transparency and consistency 

which also aids in their ability to audit 

and intervene in rate cases. FMPA states 

that the new USofA should facilitate 

scrutiny of costs passed through to 

customers, particularly as they need 

proper functionalization of costs under 

formula rates. FMPA indicates that there 

are centralized service companies that 

they deal with and have extreme 

difficulty getting the information 

needed to see the transparency. FMPA 

indicates also that, when they do get 

access to the information, it is very time 

consuming to ferret out, purge and find 

the information needed because there is 

not consistency of accounting between 

utilities. FMPA cautions that the 

Commission should not be swayed by 

the GAAP argument. FMPA states that 

financial reporting under GAAP is 

oriented toward investors, and that it 

does not provide sufficient regulatory 

scrutiny to protect the wholesale and 

retail ratepayers or to prevent crosssubsidization. FMPA asks that the 

Commission not water down the NOPR 

because it would only undermine the 

transparency and consistency that is 

needed.26

26. NARUC and the Wisconsin 

Commission state that service company 

costs are an important piece to the 

ratemaking responsibilities at the state 

regulatory level. They state that, 

typically, costs originating at the service 

company make up a large and 

increasing percentage of the operating 

expenses of the regulated utilities. They 

point out that, as affiliated companies, 

these transactions are not made on an 

arms-length basis and, therefore, require 

additional controls. Therefore, NARUC 

supports the Commission’s effort in 

attempting to increase transparency in 

bringing uniformity of these costs.27

Commission Determination 

27. The Commission concludes that a 

structured USofA as proposed under 

new part 367 of the Commission’s 

regulations is necessary to ensure 

consistency across the centralized 

service companies and, equally 

important, to ensure the Commission 

has the information necessary to carry 

out its obligations under PUHCA 2005, 

the Federal Power Act (FPA), and the 


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28 42 U.S.C. 16451 et seq.; 16 U.S.C. 824 et seq.; 

15 U.S.C. 717 et seq. 

29EEI at 45–48; XES at 5; Southern at 2; Progress 

Energy at 12; National Grid USA (National Grid) at 

14–15; NiSource Inc. (NiSource) Supplemental 

Comments at 3; FirstEnergy Supplemental 

Comments at 4; PHI Companies Supplemental 

Comments at 5–6. 

30Progress Energy at 12. 

31See Technical Conference Tr. 97–98 (Mr. 

Thomas Ferris); Technical Conference Tr. 101 (Mr. 

Joseph Buckley); Technical Conference Tr. 109 (Mr. 

James Mitchell). 

32The currently effective FERC Form No. 60 due 

on May 1, 2007 and May 1, 2008 will be the FERC 

Form No. 60 adopted in Order Nos. 667, 667–A and 

667–B. See Repeal of the Public Utility Holding 

Company Act of 1935 and Enactment of the Public 

Utility Holding Company Act of 2005, Order No. 

667, 70 FR 75592 (December 20, 2005), FERC Stats. 

& Regs. ¶ 31,197 (2005), order on reh’g, Order No. 

667–A, 71 FR 28446 (May 16, 2006), FERC Stats. 

& Regs. ¶ 31,213 (2006), order on reh’g, Order No. 

667–B, 71 FR 42750 (July 28, 2006), FERC Stats. & 

Regs. ¶ 31,224 (2006). 

33 In Order No. 667, the Commission established 

transition periods for holding companies formerly 

‘‘registered’’ under PUHCA 1935 to comply with the 

Commission’s record retention requirements, and 

for service companies in such holding company 

systems to comply with the Commission’s 

accounting, records retention, and reporting 

requirements. See 18 CFR 366.21(b), 366.22(a)(2), 

366.22(b)(2) and 366.23(b). 

Natural Gas Act (NGA).28 In reaching 

this conclusion, the Commission is 

mindful that one of Congress’ goals in 

repealing PUHCA 1935 was to reduce 

the regulatory burden on holding 

companies. The Commission, 

nevertheless, finds that the absence of a 

structured USofA would impede the 

Commission’s ability to carry out the 

new regulatory responsibilities imposed 

by Congress when it adopted PUHCA 

2005. Without a structured USofA, the 

Commission would not have adequate 

information to be able to ensure just and 

reasonable jurisdictional rates, discern 

potential or actual cross-subsidization, 

or be able to approve cost allocations 

between holding company affiliates. 

28. Although GAAP and the SEC’s 

accounting rules may be sufficient for 

some purposes, they alone are not 

sufficient for fulfilling the Commission’s 

new regulatory responsibilities under 

PUHCA 2005. In order to carry out its 

regulatory responsibilities, the 

Commission needs accounting 

information that is more ‘‘granular,’’ i.e., 

more detailed, than what is required 

under GAAP. For example, reporting a 

single figure for total operation and 

maintenance expense on an income 

statement would satisfy GAAP 

requirements. However, the 

Commission needs information, among 

other things, about how much was spent 

on operations compared to 

maintenance, how much was spent on 

transmission compared to distribution, 

and what one company spent on an 

activity compared to another for that 

same activity in order to ensure, for 

example, just and reasonable 

jurisdictional rates. 

29. Although flexibility in accounting 

rules may have enabled the SEC to meet 

its regulatory responsibilities, such 

flexibility will not allow the 

Commission to accomplish its 

regulatory mandate to ensure just and 

reasonable rates. There are hundreds of 

entities subject to the Commission’s 

jurisdiction. The only way the 

Commission can efficiently carry out 

this mandate is by requiring these 

entities to account for transactions in a 

structured and uniform manner. That is 

why the Commission adopted and still 

maintains USofAs for public utilities 

and licensees and for natural gas 

companies. A structured USofA for 

centralized service companies is an 

equally essential tool that the 

Commission needs to carry out its 

regulatory responsibilities. 

30. Upon further consideration, 

however, the Commission finds that the 

USofA proposed in the NOPR for 

centralized service companies may 

include some requirements that, in 

retrospect, may not be needed. 

Therefore, consistent with the overall 

objective of not imposing unnecessarily 

burdensome regulatory requirements 

under PUHCA 2005, we are adopting 

the following modifications suggested 

by the commenters to the proposed 

USofA to reduce that burden, as 

discussed below. 

2. Implementation Date 

31. The NOPR proposed to require 

holding companies and service 

companies to implement the new 

accounting, records retention, and 

reporting requirements on January 1, 

2007. 

Comments 

32. Several commenters argue that the 

January 1, 2007 implementation date 

does not allow sufficient time to 

implement the Final Rule.29 They argue 

that compliance with the Final Rule, if 

adopted as proposed, would require 

time, man hours and company resources 

to implement software changes, train 

personnel, to update Sarbanes-Oxley 

controls, and to receive sign off from 

internal and external auditors. In 

addition, Progress Energy argues that 

reengineering of company processes, 

procedures and software, remapping of 

thousands of projects to new 

Commission accounts, and testing and 

auditing (internal and external) of 

revised systems would take many 

months to ensure error-free 

implementation.30 The commenters 

suggest, therefore, that the Commission 

defer compliance with the Final Rule 

until January 1, 2008. According to 

commenters, this deferral also would 

provide time to issue a Final Rule and 

an order on rehearing. NARUC and 

other state commissions had no 

objections to extension of the 

implementation date as long as there 

was no gap between the SEC’s 

regulations and implementation of the 

Commission’s regulations.31

Commission Determination 

33. The Commission agrees with the 

commenters, and will move the 

implementation date of this Final Rule 

from January 1, 2007 to January 1, 2008. 

As a result, the revised FERC Form No. 

60 prescribed in this Final Rule will 

first be due on May 1, 2009 (reporting 

data for the 2008 reporting year).32 This 

change will provide companies 

sufficient time to implement software 

changes, train personnel, update 

Sarbanes-Oxley controls, and receive 

sign off from internal and external 

auditors. The change in implementation 

date will reduce the burden and cost to 

service companies impacted by the 

Final Rule. Additionally, the 

Commission will extend the transition 

periods for holding companies and 

service companies to comply with the 

Commission’s accounting and 

recordkeeping requirements.33

3. FERC Form No. 60 Filing Deadline 

34. In the NOPR, the Commission 

proposed to change the filing deadline 

for the FERC Form No. 60 from May 1 

to April 18. The proposed April 18 

filing date is consistent with the filing 

date for most of the Commission’s other 

annual report forms that contain 

financial information. 

Comments 

35. EEI proposes that the Commission 

retain the current FERC Form No. 60 

filing deadline of May 1 because 

companies have a number of financial 

reporting requirements with spring due 

dates affecting the same staff. EEI claims 

accelerating the filing date to April 18 

would increase the cost of compliance, 

and increase company staffing needs. 

Commission Determination 

36. We will retain the current FERC 

Form No. 60 filing date of May 1. 

Retention of the May 1 date will 

minimize the burden on service 

companies that may also be responsible 

for filing FERC Form Nos. 1, 2 or 6 on 

behalf of regulated public utility 

companies and licensees, natural gas 

pipelines, or oil pipelines. The 


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34We note that, contemporaneously with this 

Final Rule, we are issuing, in Docket No. RM06–25–

000, a Final Rule providing for the electronic filing 

of the currently-effective FERC Form No. 60 for 

2006 and 2007 reporting years, to be filed on May 

1, 2007 and May 1, 2008, respectively. See 

Electronic Filing of FERC Form No. 60, Order No. 

685, published elsewhere in this issue of the 

Federal Register, FERC Stats. & Regs. ¶ (2006). 

35See 17 CFR part 256 (Uniform System of 

Accounts for Mutual Service Companies; 

Subsidiary Companies, Public Utility Holding 

Company Act of 1935). 

36Southern at 4; Southern Supplemental 

Comments at 2. 

37EEI Supplemental Comments at 15; FirstEnergy 

Supplemental Comments at 4; XES Supplemental 

Comments at 2. 

38EEI Supplemental Comments at 15. 

39 Id. at 16. 

40EEI at 40; National Grid at 4; XES at 4. 

Commission will also make submission 

software available to companies, 

allowing for electronic filing of the 

revised FERC Form No. 60 for the 2008 

reporting year and subsequent reporting 

years, similar to the submission 

software used for electronic filing of 

Form Nos. 1, 2, 2–A, 3–Q, 6, and 6–Q.34

4. Definitions 

(a) ‘‘Direct cost’’ and ‘‘Indirect cost’’

37. In the NOPR, the Commission 

proposed to define ‘‘direct cost’’ to 

include ‘‘the labor costs and expenses 

which can be identified through a work 

order system as being applicable to 

services performed for a single or group 

of associate and non-associate 

companies. Costs incidental to or 

related to a directly charged item must 

be classified as a direct cost.’’ ‘‘Indirect 

cost’’ was defined to include ‘‘the costs 

of a general overhead nature such as 

general services, housekeeping costs, 

and other support costs which cannot be 

separately identified to a single or group 

of associate and non-associate 

companies and, therefore, must be 

allocated. Indirect costs must be 

accumulated on a departmental basis.’’

These are the same definitions that were 

contained in the SEC’s former USofA for 

service companies.35

Comments 

38. Southern recommends redefining 

the terms ‘‘direct cost’’ and ‘‘indirect 

cost’’ because it believes the definitions 

of these terms in the NOPR require costs 

it views as direct costs to be 

recharacterized as indirect costs. 

Southern explains that billings for direct 

costs should include overhead costs, 

such as employee benefits, as an adder 

to those direct costs, which otherwise 

would be characterized as indirect costs 

based on the definition in the NOPR. 

Southern suggests the Commission 

define ‘‘direct cost’’ as ‘‘those costs 

which are applicable to services 

performed for a single client company. 

Costs incidental to, or related to, a 

directly charged item also should be 

classified as a direct cost.’’ Likewise, 

Southern suggests ‘‘indirect cost’’ be 

defined as ‘‘those costs which are not 

applicable to services performed for a 

single client company and which must 

be allocated.’’ Costs incidental to, or 

related to, indirect items should also be 

classified as an indirect cost.36

Commission Determination 

39. We do not agree with Southern’s 

assertion that costs such as employee 

benefit costs must be recharacterized as 

indirect costs. The definition for ‘‘direct 

cost’’ includes labor costs and expenses 

applicable to services performed for a 

single or group of associate and nonassociate companies and any cost 

incremental to or related to a directly 

charged item. Based on that definition, 

employee labor costs that are applicable 

to a service performed for a single or 

group of companies are a ‘‘direct cost’’

together with the related employee 

benefit costs. 

40. We also will not adopt Southern’s 

proposal to define ‘‘direct cost’’ as those 

applicable to services performed for a 

single client company, and ‘‘indirect 

cost’’ as those not applicable to services 

performed for a single client company. 

We do not believe Southern’s proposed 

definition would be workable in all 

situations. For example, a centralized 

service company could provide 

engineering services for a construction 

project that is jointly owned by two 

associated public utilities. In that 

instance, the labor costs of providing the 

engineering services are a direct cost of 

the project but the services are provided 

for more than a single client company. 

Therefore, we will adopt the definitions 

set forth in the NOPR. 

(b) ‘‘Work Order System’’

41. In the NOPR, the Commission 

proposed to adopt the definition and 

requirements of ‘‘work order system’’

from the SEC’s former USofA for service 

companies. The NOPR, therefore, 

defined ‘‘work order system’’ as a 

system for the accumulation of service 

company costs on a job, project, or 

functional basis. It includes schedules 

and worksheets used to account for 

charges billed to single and groups of 

associate and non-associate companies. 

The requirements of a ‘‘work order 

system,’’ in turn, were provided as a 

General Instruction in § 367.30. This 

instruction provides that a service 

company must maintain a detailed 

classification of service costs that 

permits costs to be identified with the 

functional processes of the associate 

companies served and also various other 

accounting and cost allocation records 

needed to support work order charges. 

Comments 

42. Commenters suggest that the 

Commission clarify and redefine the 

term ‘‘work order system’’ to 

incorporate a broader use of the term.37

XES believes the focus of the 

Commission, as it relates to a work 

order system, should be on complete 

and accurate reporting to enable it, state 

commissions, and other interested 

persons to monitor service company 

activities. XES states that variation in 

work order procedures should not affect 

the accuracy of reporting, and holding 

company systems should have the 

flexibility to rely on the systems that 

they have previously developed and 

implemented. 

43. EEI notes that, at the technical 

conference, industry panelists suggested 

that work order systems could include 

the use of a variety of systems.38 EEI 

recommends that the Commission 

replace the current definition of ‘‘work 

order system’’ with the following 

broader definition: ‘‘Work order system 

means a system for the accumulation of 

service company costs on a job, project, 

or functional basis. It includes any 

method used to account clearly for 

charges billed to single and groups of 

associate and non-associate companies, 

including, but not limited to, use of 

actual work orders, electronic 

notifications, bills, ledger entries, or 

activity-based accounting software 

systems.’’ 39 EEI encourages the 

Commission to reflect this broad 

meaning of the term ‘‘work order 

system’’ throughout this Final Rule, by 

conforming the regulatory text and 

preamble to this broadly defined 

concept. To do this, EEI states the 

following sections should be revised to 

avoid implying that work orders are 

required: §§ 367.24(a), 367.27, 367.28, 

367.58(a), 367.4571, 367.4581, 367.4591, 

367.50(d), 367.52(c), 367.1070(b), 

367.1080(c), 367.1520, 367.1850, and 

367.9240(d); and Records Retention 

Requirements Nos. 13, 15, 16, 17, and 

19. 

44. Commenters also argue that, while 

the SEC previously had regulations on 

work order systems, the SEC never 

formally required formal work order 

systems and allowed significant 

flexibility in how to account for interaffiliate transactions.40 They state that, 

for the Commission to impose a formal 

work order system, centralized service 

companies would incur substantial 


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41EEI at 41; National Grid at 5–6; XES at 4. 

42National Grid at 5. 

43NARUC Supplemental Comments at 6; codified 

at 18 CFR parts 101 and 201. 

44NARUC at 3–5. 45EEI at 38; EEI Supplemental Comments at 19; 

CMS Energy Corporation and Consumers Energy 

Company (CMS Energy) Supplemental Comments at 

3. 

costs to update accounting systems and 

train workers and their companies 

would decrease operating efficiency 

would suffer because routine and 

recurring work would now need to be 

reorganized around specific work 

orders.41 National Grid also explains 

that its current practice accomplishes all 

of the goals sought by the Commission’s 

proposed work order system.42

Accordingly, the commenters believe 

the Commission should not require the 

use of a formal work order system, but 

should allow centralized service 

companies to continue to use their prior 

SEC-approved practices for tracking and 

assigning service costs. 

45. NARUC states that if the 

Commission determines that a formal 

work order system would be too 

burdensome, an alternative would be for 

the Commission to use the proposed 

definition and describe the minimum 

requirements of a work order system. 

NARUC adds that each centralized 

service company would then be 

required to file information describing 

its system and how it complies with the 

Commission’s definition and minimum 

requirements. NARUC suggests 

minimum requirements could include a 

written agreement on the types of work 

that will be performed by the service 

company for the utility, identification of 

the work to be completed by functional 

area, and the ability to track the costs to 

the services provided. NARUC states the 

work order system should separately 

break down costs related to one-time/ 

nonrecurring expenditures. Further, if 

the service company incurs direct costs 

relating to construction work for a 

utility, NARUC believes the service 

company should have a work order 

system identical to the one that is 

required under parts 101 and 201 of the 

Commission’s regulations.43

Commission Determination 

46. While the Commission would 

prefer centralized service companies to 

utilize formal work order systems, the 

Commission also recognizes that the 

goals and purposes of a formal work 

order system can be met through other 

means, as several commenters suggest. 

The Commission also recognizes that 

there are increased costs associated with 

implementing a formal work order 

system. Accordingly, the Commission 

will replace the term ‘‘work order 

system’’ with ‘‘cost accumulation 

system,’’ and will modify the 

instructions in § 367.30 so that the 

instructions do not mandate centralized 

service companies to implement a 

formal work order system. The 

Commission, further, will allow 

centralized service companies to use a 

variety of cost accumulation systems, 

provided any cost accumulation system 

adopted meets the requirements 

provided in the definition for ‘‘cost 

accumulation system’’ and the 

requirements contained in § 367.30. 

Also, we will modify the regulations to 

remove language that suggests a formal 

or uniform work order system is 

required. 

47. The definition for ‘‘cost 

accumulation system’’ in § 367.1(a)(12) 

will be 

‘‘a system for the accumulation of service 

company costs on a job, project, or functional 

basis. It includes schedules and worksheets 

used to account for charges billed to single 

and groups of associate and non-associate 

companies. It can be a variety of systems, 

including but not limited to, a work order 

system or an activity-based accounting 

software system.’’

While the instructions in § 367.30 will 

remain the same, we will revise all 

references to a work order system in the 

regulations. 

48. In making the changes discussed 

above, the Commission affords 

centralized service companies flexibility 

in the type of cost accumulation system 

they use to reflect their costs, and 

reduces any unnecessary burden that 

may be associated with changing their 

current system for accounting for these 

costs to a formal ‘‘work order system.’’

5. Instructions 

49. In the NOPR, the Commission 

proposed to adopt four categories of 

instructions: General Instructions, 

Service Company Property Instructions, 

Operating Expense Instructions, and 

Special Instructions. The proposed 

instructions included most of the 

instructions contained in parts 101 and 

201 of the Commission’s regulations 

modified to meet the needs of 

centralized service companies and 

certain additional instructions 

contained in the SEC’s USofA relevant 

to centralized service companies. The 

specific comments received on these 

instructions are discussed below. 

(a) Section 367.2—Companies for Which 

This System of Accounts Is Prescribed 

50. The Commission proposed that 

the USofA apply to any centralized 

service company operating, or organized 

specifically to operate, within a holding 

company system for the purpose of 

providing non-power services to any 

public utility in the same holding 

company system. However, we also 

proposed to continue the existing SEC 

exemptions from the USofA, including: 

Special-purpose service companies, 

electric or gas utility companies, 

companies primarily engaged in the 

production of goods, and service 

companies that provide services 

exclusively to a local gas distribution 

company. 

Comments 

51. NARUC states that § 367.2 does 

not adequately ensure the existence of 

proper controls in the event of certain 

possible organization changes. For 

example, NARUC explains that, in the 

event that a service company is 

eliminated, the utility may transfer 

relevant service company functions to 

the holding company, a utility within 

the holding company, or another 

company within the holding company 

system. NARUC claims there is a risk 

that such transfers will result in the 

elimination of needed accounting 

controls relating to these functions, 

because under the proposed rules 

holding companies and special purpose 

companies would not be required to 

comply with the new USofA. NARUC 

argues that, in order to assure all service 

companies that provide goods and 

services to utilities are subject to proper 

controls, § 367.2 should be revised to (1) 

eliminate the special purpose service 

company exemption; (2) clarify that the 

new USofA applies to the entity that 

performs service company functions, 

even if it is a holding company or a 

company providing electric or gas 

utility services; and (3) prohibit service 

company functions from being 

transferred to a utility in the holding 

company system. NARUC states that, in 

the absence of such modifications the 

purpose of the Commission’s proposed 

regulations may be thwarted.44

52. Certain commenters, on the other 

hand, argue that the Commission should 

maintain its requirement that the new 

recordkeeping and reporting 

requirements apply to centralized 

service companies only.45 EEI states that 

parent holding companies and their 

subsidiaries may own a variety of assets 

and undertake a variety of activities. 

Thus, EEI argues, if the Commission 

were to extend the requirements beyond 

centralized service companies, the 

Commission would need to address a 

variety of potential scenarios in order to 

define the circumstances in which the 

requirements would apply to other 

companies—which would complicate 


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46EEI Supplemental Comments at 21–22. 

47EEI Supplemental Comments at 20. 

48Holding companies that meet the definition of 

a holding company as defined by § 366.1 must 

notify the Commission of this status by submitting 

FERC–65. See 18 CFR366.4(a). 

49Every service company in a holding company 

system, including a special-purpose company, 

which does not file a FERC Form No. 60 must 

instead file a narrative description of the service 

company’s function during the prior calendar year. 

See 18 CFR 366.23(a)(2). 

50Supra note 5. 

51CMS Energy Supplemental Comments at 8. 

52See Order No. 667 at P 38. 

53See Order No. 667 at P 37. 

54EEI at 32; Progress Energy at 10. 

55Progress Energy at 10. 

56 Id. 

57EEI at 32. 

58Southern at 5. 

and increase the accounting and 

recordkeeping burden.46 EEI also argues 

that the Commission should not adopt 

requests to impose constraints on 

whether and how holding companies 

establish service companies to provide 

services to their subsidiaries. EEI states 

that neither the FPA nor PUHCA 2005 

gives the Commission authority to 

regulate holding company structure and 

operations in such a manner. 

Additionally, EEI urges the Commission 

to adopt a new definition for centralized 

service companies that would limit 

application of the Final Rule’s 

accounting and reporting requirements 

to service companies, and to preclude 

holding companies from being classified 

as service companies. EEI also suggests 

the Commission specify that only parts 

367 and 368 apply to service 

companies.47

53. For its part, CMS Energy argues 

that the Commission already has put 

into place the ability to monitor and 

respond to any concentration of utility 

functions within special purpose 

companies through the FERC–65 48 and 

FERC–61 49 reporting requirements 

established in Order No. 667.50 CMS 

Energy states these reporting 

requirements require identification of 

special purpose service companies and 

annual reporting on the functions of 

each special purpose company. CMS 

Energy adds that special purpose service 

companies have a simpler, smaller, 

more focused nature and the FERC–65 

and FERC–61 reporting requirements 

are well suited to monitor them, without 

imposing the USofA and FERC Form 

No. 60 requirements.51

Commission Determination 

54. We have decided that the USofA 

we are adopting herein will apply to 

centralized service companies only, 

consistent with Order No. 667.52 We 

agree with EEI that extending the 

requirements beyond centralized service 

companies would be a difficult 

definitional exercise that could lead to 

unnecessary regulatory uncertainty. 

While the Commission shares NARUC’s 

concerns that holding company systems 

could potentially circumvent the 

Commission’s accounting and reporting 

requirements for centralized service 

companies, the Commission does not 

believe NARUC’s recommendations are 

the best way to address the potential 

issue. At this time it is preferable to 

monitor developments in the industry 

and assess whether the instructions we 

are adopting lead to circumvention of 

our rules. If centralized service 

companies begin to decentralize their 

service functions in an effort to 

circumvent the Commission’s 

accounting and reporting regulations, 

the Commission will take the necessary 

actions to ensure the Commission has 

the information necessary to carryout its 

obligations under PUCHA 2005, the 

FPA, and the NGA. The Commission 

also will not impose restrictions on 

holding company systems which 

prevent centralized service company 

functions from being transferred to other 

companies in the same holding 

company system. Such restrictions are 

outside the Commission’s statutory 

authority under the PUCHA 2005, the 

FPA, and the NGA. 

55. We also clarify that holding 

companies are not subject to the rules of 

this USofA, and we will amend the 

instructions to § 367.2 to provide for 

this exemption. Further, we will adopt 

in § 367.1(a) of the regulations a 

definition for the term ‘‘centralized 

service company’’ based on our 

discussions in Order No. 667.53

(b) Section 367.8—Extraordinary Items 

56. In the NOPR, we proposed that 

centralized service companies must 

obtain Commission approval to record 

all extraordinary items. Extraordinary 

items are items related to the effects of 

events and transactions that have 

occurred during the current period and 

that are of an unusual nature and 

infrequent occurrence. 

Comments 

57. EEI and Progress Energy disagree 

with the Commission’s proposed 

requirement that Commission approval 

is required for an item to be accounted 

for as extraordinary.54 They state that 

this requirement is unnecessary and 

burdensome. Further, they contend, it 

should be sufficient for centralized 

service companies to follow the GAAP 

requirement for reporting extraordinary 

items. Progress Energy also argues that, 

to the extent the Commission does not 

approve an item that is a required 

disclosure for SEC reporting, the 

Commission runs the risk of promoting 

inconsistent treatment of extraordinary 

items across holding company 

systems.55 Progress Energy adds that 

such a requirement would be an 

unnecessary burden on Commission 

staff to perform the reviews.56 EEI 

suggests that the Commission should 

require centralized service companies to 

provide a footnote describing any 

amounts included in Accounts 434, 

Extraordinary income and Account 435, 

Extraordinary deductions.57

Commission Determination 

58. Upon further consideration, we 

agree that requiring Commission 

approval for any item to be recognized 

as extraordinary may impose an 

unnecessary burden on centralized 

service companies. EEI’s suggested 

alternative strikes a balance between the 

need for disclosure of such items and 

the desire to reduce unnecessary 

regulatory burden. Accordingly, the 

Commission will not require centralized 

service companies to seek Commission 

approval for all extraordinary items. 

Rather, as suggested by EEI, the 

Commission will require centralized 

service companies to include disclosure 

in the Notes to the Financial Statements 

of the FERC Form No. 60 identifying 

and describing any amounts included in 

Account 434, Extraordinary income, and 

Account 435, Extraordinary deductions. 

Accordingly, we will add an instruction 

to Schedule XIV, Notes to Financial 

Statements, to require disclosure of 

extraordinary items. 

(c) Section 367.10—Unaudited Items 

59. Proposed § 367.10 states that, 

when preparing a financial statement 

required by the Commission, if it is 

known that a transaction has occurred 

that affects the accounts but the amount 

involved in the transaction and the 

effect upon the accounts cannot be 

determined with absolute accuracy, the 

amount must be estimated and the 

estimated amount included in the 

proper accounts. 

Comments 

60. Southern questions the purpose of 

§ 367.10 because its financial statements 

are audited and include all estimable 

liabilities in accordance with GAAP.58

Commission Determination 

61. Southern’s comments are 

misplaced. The Commission does not at 

this time require the centralized service 

company financial statements, 


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59Southern at 5. 

60See, e.g., American Electric Power Service 

Company’s 2005 FERC Form No. 60. 

61NARUC at 8. 

62Pursuant to Order No. 667–A, service 

companies that do not file the FERC Form No. 60 

must file annually a narrative description of their 

functions, as identified in FERC–61. See 18 CFR 

366.23(a)(2). 

63Southern at 5. 

64EEI at 25. 

65National Grid at 7–9. 

contained in the FERC Form No. 60, to 

be audited by independent public 

accountants. The purpose of § 367.10 is 

simply to instruct a centralized service 

company, in preparing such statements, 

that it must use estimates if a 

transaction occurs that affects a 

company’s accounts even if the amount 

involved in the transaction and its effect 

upon the accounts cannot be 

determined with absolute accuracy and 

the estimates have not been audited. 

(d) Section 367.20(b)—Depreciation 

Accounting 

62. The NOPR at § 367.20(b) required 

service companies to support the 

estimated useful service lives of 

depreciable property with engineering, 

economic, or other depreciation studies. 

Comments 

63. Southern recommends the 

Commission eliminate § 367.20(b) or use 

a more restrictive definition of when a 

study is needed. Southern states that a 

service company would not typically 

need ‘‘engineering, economic, or other 

depreciation studies’’ to support the 

useful lives of depreciable property, 

which consists primarily of computer 

equipment, furniture, and other 

fixtures.59

Commission Determination 

64. Service companies own a variety 

of assets. Some centralized service 

companies primarily own office 

furniture and computers while others 

own more significant assets such as 

office buildings.60 Accordingly, some 

centralized service companies may need 

to conduct a more sophisticated 

engineering, economic, or other type of 

depreciation study than would others 

based on the complexity and 

characteristic of the depreciable assets 

that they own. The intent of the 

instruction is to require service lives of 

depreciable assets to be supported by 

evidence and analysis. It is not intended 

to require unnecessarily extensive 

mortality studies to be conducted when 

the cost of doing so cannot be supported 

by the improved accuracy in 

depreciation estimates. The 

Commission, therefore, will revise the 

instructions in § 367.20(b) to state that 

the ‘‘estimated useful service lives of 

depreciable property must be supported 

by objective evidence and analysis, 

including where appropriate 

engineering, economic, or other 

depreciation studies.’’

(e) Section 367.23—Transactions With 

Non-Associate Companies 

65. Proposed § 367.23 was carried 

over from the SEC’s former USofA and 

requires profits and losses on 

transactions with non-associate 

companies to be recorded in Account 

458.4, Excess or deficiency on servicing 

non-associate utility companies 

(§ 367.4584), and Account 459.4, Excess 

or deficiency on servicing non-associate 

non-utility companies (§ 367.4594), as 

appropriate. It also requires centralized 

service companies to use net profits 

received outside of the holding 

company system to reduce the cost of 

providing service to associate 

companies within the holding company 

system. 

Comments 

66. NARUC supports the provisions; 

however, it explains that, if a service 

provided outside the corporate umbrella 

becomes profitable, a utility might form 

a new affiliate to provide the service so 

that profits associated with that service 

will no longer flow back to regulated 

operations.61 In that circumstance, it 

points out, the excess profits that would 

otherwise be available to reduce the 

costs of associate companies may 

decline. Therefore, NARUC suggests 

that services should not be transferred 

to a new affiliate if, and when, they 

become profitable. Additionally, 

NARUC suggests the Final Rule could 

require the centralized service company 

to report yearly which services it 

provides to outside entities, including 

an explanation of why any services were 

dropped from one year to the next. 

Commission Determination 

67. It is beyond the scope of the 

Commission’s authority under PUHCA 

2005 to set regulations which prohibit 

the transfer of services performed from 

one associate company in a holding 

company system to another associate 

company. Therefore, we will not adopt 

NARUC’s suggestion to prohibit services 

provided outside the corporate umbrella 

by a service company from being 

transferred to another associate 

company. Nor will we adopt the 

suggestion that service companies 

provide a yearly report on changes to 

services provided. A separate report is 

unnecessary because the Commission 

and others will be able to monitor such 

transfers because they will be reported 

annually either through FERC Form No. 

60 or in FERC–61.62

(f) Section 367.24—Construction and 

Service Contracts for Other Companies 

68. Proposed § 367.24 was carried 

over from the SEC’s former USofA for 

service companies. Section 367.24(b) 

requires centralized service companies 

to exclude from their accounting system 

the cost of materials, construction 

payrolls, outside services, and other 

expenses directly attributable to the 

construction of physical property for 

other companies, and requires that these 

costs must be charged directly by the 

vendor or supplier to the construction 

project. Additionally, § 367.24(c) 

requires the cost of goods procured (as 

opposed to services) to be excluded 

from the accounting system of the 

service company and charged directly 

by the vendor or supplier to the 

associate company concerned. 

Comments 

69. Southern states it does not 

understand the purpose behind 

§ 367.24(b) and (c), and recommends 

their elimination as it requires the 

exclusion of certain direct costs and cost 

of goods procured from the accounting 

system of the service company.63

Southern explains that its service 

companies contract for such expenses 

on behalf of its affiliate companies, as 

well as incur costs directly that are 

related to construction projects, that are 

then billed to a utility or other affiliate 

company. EEI requests the Commission 

clarify to whom § 367.24(b) applies.64

70. National Grid believes § 367.24 

requires that expenses associated with 

the construction services performed by 

service company employees will not be 

accounted for separately but treated as 

part of the capital investment in assets 

being constructed. This will cause, in 

National Grid’s view, an inconsistency 

with proposals by the Commission to 

create incentives for transmission 

construction by allowing expense 

treatment of pre-commercial costs 

incurred in relation to new transmission 

builds.65

Commission Determination 

71. We agree with Southern that the 

purpose and intent of § 367.24(b) and (c) 

are somewhat unclear. We believe the 

ambiguity is due in part to the fact that 

§ 367.24(a) does not prescribe specific 

accounts for recording costs incurred in 

connection with construction or service 

contracts under which the service 

company undertakes projects to 


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66NARUC at 13–14. 

67EEI at 41–42; National Grid at 9–10; Southern 

at 5. 

68EEI at 41, National Grid at 10. 

69Southern at 5. 

70EEI Supplemental Comments at 18, FirstEnergy 

Supplemental Comments at 4. 

71FirstEnergy Supplemental Comments at 4. 

72EEI at 42; National Grid at 10; Southern at 5. 

73National Grid at 10. 

74EEI at 42; National Grid at 10; Southern at 5. 

75EEI at 42; National Grid at 10. 

76EEI at 25. 

77 Id. 

construct physical property for others. 

Therefore, we will amend § 367.24(a) to 

require that costs incurred for this 

purpose, as well as any other purpose 

not provided for elsewhere in the 

expense accounts, are to be charged to 

new Account 412, Costs and expenses of 

construction or other services, adopted 

in this Final Rule. We also will 

eliminate the ambiguous language 

contained in § 367.24(b) and (c). 

(g) Section 367.25—Determination of 

Service Cost 

72. In the NOPR, the Commission 

proposed to adopt § 367.25 to state that 

the total amounts included in the 

expense accounts during any period 

plus the amount that appropriately may 

be added as compensation for the use of 

capital, if paid, constitute cost during 

that period. 

Comments 

73. NARUC requests that the 

Commission clarify the meaning of the 

phrase ‘‘if paid’’ in § 367.25 because the 

language renders the meaning of the 

section unclear.66

Commission Determination 

74. The Commission agrees that the 

phrase ‘‘if paid’’ in § 367.25 is unclear. 

This instruction is intended to state that 

the cost of services provided equals the 

total amounts included in the expense 

accounts plus an appropriate amount for 

the compensation for the use of capital. 

Furthermore, the meaning of 

compensation for the use of capital is 

explained in § 367.29, Compensation for 

use of capital. Therefore, the 

Commission finds that the phrase ‘‘if 

paid’’ is unnecessary and will modify 

§ 367.25 to remove the phrase. 

(h) Section 367.27—Billing Procedures 

75. Proposed § 367.27 requires service 

companies to bill monthly for their 

services and to include sufficient 

information in such billings to permit 

any company to properly classify the 

amount billed according to the 

accounting system prescribed by the 

regulatory authority of such company. 

This section was carried over from the 

SEC’s former USofA for service 

companies. 

Comments 

76. Several commenters disagree with 

the Commission’s proposed regulation 

in § 367.27 on monthly billing 

procedures.67 EEI and National Grid 

argue that generating paper invoices for 

billings of services rendered to associate 

utility companies on a monthly basis is 

largely unnecessary as the specific 

charges and their accounting are 

obtainable through the holding 

company’s accounting system.68

Southern also argues that it does not 

currently provide the level of detail 

required in § 367.27 to its affiliate 

companies but that the information it 

does provide is sufficient in detail.69

77. EEI and FirstEnergy encourage the 

Commission to clarify in the regulatory 

text and preamble to the Final Rule that 

service companies can bill their clients 

using a variety of mechanisms as long 

as the service company clients are 

receiving accurate, timely information 

about the work being done for them and 

the cost of the work.70 FirstEnergy notes 

that it has a fully integrated accounting 

system which provides full access to the 

information contained within the 

system as it relates to their company. 

Therefore, FirstEnergy argues that there 

is no need for a formal bill due to the 

available technology.71

78. With respect to billing of services 

rendered to non-associated utility 

companies, these commenters state 

service companies often provide a de 

minimis amount of services.72 Thus, 

according to National Grid, it makes 

little business sense to undertake the 

costs of establishing a detailed monthly 

invoicing for non-associated companies 

for services rendered.73 The 

commenters add that those 

arrangements are largely negotiated on 

an arms-length basis without reference 

to specific costs and would potentially 

provide sensitive competitive 

information that is not required by any 

contract between the service company 

and the unrelated party.74

Consequently, they contend, the 

Commission’s mandated monthly 

invoice scheme would force the service 

company into a cost of service business, 

even for non-jurisdictional services.75

Commission Determination 

79. The commenters misunderstood 

the purpose of this section. It was not 

intended to require the use of paper 

invoices as some commenters 

concluded. Rather, the intent of this 

instruction is to require centralized 

service companies to charge their 

associate public-utility companies for 

services provided each month, together 

with enough information to allow these 

companies to properly classify the 

amount in the accounts prescribed by 

their regulatory authorities. However, in 

order to eliminate any confusion, we 

will remove the reference to ‘‘invoices’’

in § 367.27, and clarify it is only 

intended for billings to associate publicutility companies. 

(i) Section 367.51(a)(17)—Allowance for 

Funds Used During Construction 

80. Proposed § 367.51 provided 

instructions on the cost of construction 

properly included in the service 

company property accounts. These 

instructions were taken from the 

Electric and Gas Plant Instructions in 

parts 101 and 201 of the Commission’s 

regulations, and include an allowance 

for funds used during construction 

(AFUDC). 

Comments 

81. EEI believes that AFUDC, as 

described in § 367.51(a)(17), only has 

relevance to jurisdictional entities that 

have been granted this provision by 

regulators.76 For service companies, EEI 

contends, a more appropriate approach 

would be to calculate capitalized 

interest based on GAAP. EEI 

recommends that the section on AFUDC 

be removed from the proposed rule and 

that service companies be allowed to 

capitalize interest based on GAAP.77

Commission Determination 

82. Based on a review of the record in 

this proceeding, the construction 

projects for service company property 

do not appear to be large and the related 

interest charges will be relatively 

insignificant. In such circumstances, the 

Commission agrees the use of the 

proposed AFUDC formula would be 

unnecessarily complex. Therefore, the 

Commission will modify § 367.51(a)(17) 

to allow centralized service companies 

to capitalize interest in accordance with 

GAAP. 

(j) Section 367.53—Service Company 

Property Purchased or Sold 

83. In § 367.53, we proposed to 

modify Electric and Gas Plant 

Instructions No. 5 in parts 101 and 201 

of the Commission’s regulations to 

require centralized service company 

property to be recorded at the cost of 

acquisition rather than its original cost. 

Section § 367.53 also requires 

centralized service companies to file 

journal entries with the Commission 

when they acquire property at a 

purchase price of $10 million or more 


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78The $10 million threshold is consistent with 

the threshold for certain transactions subject to 

section 203 of the FPA, as amended by section 1289 

of EPAct 2005. See Order No. 669, 71 FR 1348 (Jan. 

6, 2006), FERC Stats. & Regs. ¶ 31,200 (2005). 

79NARUC at 6. 

80 Id. at 6–7. 

81NARUC at 11–12. 

82See, e.g., 18 CFR part 101, Account No. 102. 83Southern at 5. 

that has been previously devoted to 

public service.78 This filing requirement 

was intended to provide the 

Commission and others the opportunity 

to monitor transactions involving 

property previously devoted to public 

service. 

Comments 

84. NARUC states that the regulations 

on service company property purchased 

or sold could be used as a vehicle to 

inflate rate base.79 For example, it 

posits, a service company may have 

bought an asset at a premium over 

original cost to the party that previously 

owned it and recorded the asset on the 

service company’s books at the total 

acquisition cost, after which a public 

utility may have purchased the asset 

from the service company. To avoid 

such problems, NARUC suggests, the 

new USofA should require that any 

asset purchased by a service company 

not be transferred at an amount higher 

than the original purchase price or the 

remaining original cost, whichever is 

lower. Specifically, NARUC suggests 

that the following language (italicized 

below) should be incorporated into 

§ 367.53(e), Service company property 

purchased or sold: 

In connection with the acquisition of 

property previously devoted to service 

company operations or acquired from an 

associate company, the service company 

must procure, if possible, all existing records 

relating to the property acquired or related 

certified copies, and must preserve the 

records in conformity with regulations or 

practices governing the preservation of 

records of its own construction. If the 

property was previously devoted to utility 

service, the service company must preserve 

the original cost of the property in the 

records of the service company.80

85. NARUC also states that, in order 

for state commissions to monitor the 

acquisition of property from affiliates, a 

copy of the journal entries also should 

be filed with the relevant state 

commissions and suggests the following 

language changes (stricken language in 

brackets or new language italicized 

below) to incorporate this concept. 

(c) Unless otherwise authorized by the 

Commission, all service company property 

acquired from an affiliate company must be 

at its book value. Additionally, if property is 

acquired that is in excess of $10 million and 

has been previously devoted to public service 

[at a price above book value], the service 

company must file with the Commission the 

proposed journal entries associated with the 

acquisition within six months from the date 

of acquisition of the property. In addition, a 

copy of the proposed journal entries filed 

with the Commission must be sent to the 

state regulatory commissions having 

jurisdiction in the states in which associated 

utility companies provide utility service.81

Commission Determination 

86. The Commission will not adopt 

NARUC’s proposed language changes to 

§ 367.53. The regulations which are 

already in place for public utilities and 

licensees, and natural gas companies 

adequately prevent rate base from being 

artificially inflated. The Commission’s 

regulations in parts 101 and 201 require 

all electric and gas plant purchased by 

a public utility or a natural gas company 

to be recorded at its original cost and 

the related journal entries must be filed 

with the Commission.82 Further, 

proposed § 367.53(c) requires that 

property acquired from affiliates must 

be at book value and journal entries 

must be filed with the Commission for 

purchases of property previously 

devoted to public service in excess of 

$10 million. Therefore, NARUC’s 

proposed language is not necessary, nor 

do we believe it is necessary for the 

Commission to require copies of journal 

entries to be filed with State 

commissions. All filings of this nature 

are docketed by the Commission and 

can be viewed electronically by all 

interested parties. Accordingly, state 

commissions will be able to monitor the 

acquisition of property from affiliates 

without imposing an additional 

reporting burden on service companies. 

We also note that our determination 

here is consistent with the filing 

requirements applied to public utilities, 

licensees, and natural gas companies for 

similar transactions under the 

Commission’s regulations in parts 101 

and 201. 

(k) Section 367.54—Expenditures on 

Leased Property 

87. Proposed § 367.54 requires the 

cost of improvements made to leased 

property to be used for more than one 

year to be charged to the appropriate 

service company property account. It 

also requires that amounts charged to 

service company property be amortized 

to Account 404, Amortization of 

limited-term service property, over the 

lease term if the service life of the 

improvement is terminable by the action 

of the lease. Otherwise, the 

improvement is subject to depreciation 

practices normally followed for amounts 

recorded in the account to which the 

improvement was charged. The forgoing 

requirements are essentially the same 

requirements for public utilities, 

licensees and natural gas companies for 

leasehold improvements in Electric and 

Gas Plant Instructions No. 6 of parts 101 

and 201 of the Commission’s 

regulations. 

Comments 

88. Southern notes that GAAP 

requires that the life of a leasehold 

improvement be co-terminus with the 

lease; thus, there would not be a 

leasehold improvement whose ‘‘service 

life is not terminated by action of the 

lease but by depreciation proper.’’ 83 By 

this section’s definition, according to 

the company, all leasehold 

improvement amortization would have 

to be accounted for as ‘‘amortization of 

limited term property.’’ Southern asks 

what value this information is to the 

Commission. 

Commission Determination 

89. This instruction provides 

important guidance on how the costs of 

leasehold improvements are to be 

recorded and depreciated or amortized 

under the USofA. We, therefore, will 

retain this instruction. Further, we do 

not believe this instruction prohibits a 

centralized service company from 

following GAAP as it relates to 

leasehold improvements. 

(l) Section 367.59—Additions and 

Retirements of Property 

90. Proposed § 367.59 requires 

centralized service companies to adopt 

and maintain a list of retirement units. 

The list forms the basis for determining 

whether the cost of property-related 

work should be capitalized or charged 

to expense. In general, if the work 

involves adding or replacing an item of 

property appearing on the list, the cost 

of the work is capitalized. If the work 

involves adding or replacing an item of 

property that is not on the list and, 

therefore, constitutes a minor item of 

property, the cost of the work is charged 

to expense. 

Comments 

91. Southern states it does not believe 

that retirement units are applicable to 

service company property. Southern 

states that each service company 

purchase is a discrete unit of property 

and service companies would not be 

able to maintain a written property units 


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84Southern at 5. 

85EEI at 39; Progress Energy at 8–9. 

86Progress Energy at 9. 

87EEI at 39. 

88Section 1275 of PUHCA 2005 provides that in 

the case of non-power goods or administrative or 

management services provided by an associate 

company organized specifically for the purpose of 

providing such goods or services to any public 

utility in the same holding company system, at the 

election of the system or a State commission having 

jurisdiction over the public utility, the Commission, 

must review and authorize the allocation of costs 

for those goods or services to the extent relevant to 

that associate company. See 42 U.S.C. 16462. 

listing for use in accounting for 

additions and retirements of property.84

Commission Determination 

92. We do not agree with Southern 

that retirement units are not applicable 

to service company property. 

Establishing a retirement unit is 

necessary to determine whether 

property-related expenditures should be 

capitalized or expensed. It is the same 

requirement that is followed by public 

utilities and licensees and by natural gas 

companies under parts 101 and 201 of 

the Commission’s regulations. We see 

no reason service companies should not 

follow the same practice because they 

have the same assets that an electric or 

gas company would have if the service 

company did not exist. Therefore, 

service companies should maintain 

property unit listings. 

(m) Sections 367.103–.104—Current and 

Deferred Income Taxes 

93. Proposed §§ 367.103–.104 contain 

special accounting instructions for 

recognizing income tax expense. Among 

other things, they require the accruals 

for income taxes to be apportioned 

among service company departments 

and other income and deductions. 

These requirements were carried over 

from the Special Instructions for the 

current and deferred tax expense 

accounts in parts 101 and 201 of the 

Commission’s regulations. 

Comments 

94. EEI and Progress Energy 

recommend that there be no 

requirement to calculate or allocate 

taxes on a department level because 

income taxes are generally computed at 

a legal entity level, not to individual 

departments.85 Progress Energy notes 

that service companies are not incomeproducing; rather, they are cost centers 

required to bill all of their expenses at 

cost and their income statements net to 

zero. The only income taxes that are 

computed for service companies are due 

to timing differences between GAAP 

and tax accounting, which, according to 

Progress Energy, cannot, in any 

meaningful way, be associated with 

individual departments. Therefore, 

Progress Energy states it does not have 

actual income tax accruals for its 

individual service company 

departments and could not 

meaningfully apportion the limited 

timing-related income tax accruals to 

the individual departments.86

Commission Determination 

95. Upon further consideration, the 

Commission agrees that it is not 

practical or necessary for centralized 

service companies to calculate income 

taxes for individual departments. 

Therefore, the regulations will be 

revised to eliminate this requirement. 

(n) Section 367.23—Transactions With 

Non-Associate Companies; § 367.25—

Determination of Service Cost; 

§ 367.27—Billing Procedures; § 367.28—

Methods of Allocation; § 367.29—

Compensation for Use of Capital 

96. The proposed sections of the 

Commission’s regulations listed above 

specify rules or standards that must be 

applied in accounting for certain 

transactions or events. The rules are 

fairly broad in their application and 

were carried over from the SEC’s USofA 

for service companies. 

97. More specifically, § 367.23 

requires that the excess or deficiencies 

in providing services to non-associated 

companies to be recorded in Account 

458.4, and that the net excess be used 

to reduce charges to associate 

companies. Section 367.25 states that a 

service must be deemed at cost and the 

total amounts included in the expense 

accounts during any period plus the 

amount that appropriately may be 

added as compensation for the use of 

capital constitutes cost during that 

period. Section 367.27 provides that 

charges for services to associate publicutility companies be made monthly 

with sufficient information and in 

sufficient detail to permit such 

company, where applicable, to identify 

and classify the charge in terms of the 

system of accounts prescribed by the 

regulatory authorities to which it is 

subject. Section 367.28 requires that 

indirect costs and compensation for use 

of capital must be allocated to projects 

in accordance with the service 

company’s applicable and currently 

effective methods of allocation. Section 

367.29 states that interest on borrowed 

capital and compensation for the use of 

capital must represent a reasonable 

return on the amount of capital 

reasonably necessary for the 

performance of services or construction 

work for associate companies. It also 

requires that the amount of 

compensation be separately stated on 

each billing to associate companies and 

an annual statement to support the 

amount of compensation for the use of 

capital billed for the previous 12 

months be supplied to each associate 

company at the end of the calendar year. 

Comments 

98. EEI argues that the proposed rule 

goes beyond accounting regulations and 

adopts cost allocation and billing 

practice principles in the definition of 

‘‘indirect cost’’ and in §§ 367.23, 367.25, 

367.27, 367.28, and 367.29.87 EEI states 

these cost allocation and billing 

principles should be made applicable 

only in the context of service company 

cost allocations the Commission is 

asked to review under section 1275 of 

PUHCA 2005.88

Commission Determination 

99. The Commission disagrees with 

EEI’s assertion that the matters 

addressed in these sections of the 

regulations are only applicable in the 

context of cost allocation reviews under 

section 1275 of PUHCA 2005. Costs are 

incurred continually and on an on-going 

basis by centralized service companies 

and these costs must be accounted for 

and eventually reported to the 

Commission in the FERC Form No. 60. 

The noted regulations provide 

important guidance to centralized 

service companies as to how the items 

covered by those regulations should be 

accounted for as the transactions or 

events occur. For example, § 367.23 

requires excesses or deficiencies in 

providing services to non-associate 

companies to be recorded in Account 

458.4, and § 367.25 provides that ‘‘cost’’

includes reasonable compensation for 

the use of capital. The guidance that 

these instructions provide promotes 

uniformity in accounting practices. 

100. As it relates to the portions of 

these sections which relate to cost 

allocation and billing requirements, we 

note that such regulations are necessary 

to carry out the Commission’s 

obligations and duties under PUCHA 

2005, the FPA and the NGA. These 

instructions assist the Commission in 

ensuring just and reasonable 

jurisdictional rates, discerning potential 

or actual cross-subsidization, and 

approving cost allocations between 

holding company affiliates. Therefore, 

these instructions are needed beyond 

the review required under section 1275 

of PUCHA 2005 and are adopted as 

proposed. 


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89EEI at 26. 

90 17 CFR part 256. 

91See, e.g., Schedule I Comparative Balance Sheet 

contained in 2005 FERC Form No. 60 of American 

Electric Power Service Corporation, E. ON U.S. 

Services INC, PHI Service Company, and Progress 

Energy Service Company, LLC. 

92EEI at 26; Southern at 6. 

93EEI at 26. 

94Southern at 6. 

95NARUC at 14. 

96NARUC at 14. 

97NiSource at 3. 

98See, e.g., Schedule I Comparative Balance Sheet 

contained in 2005 FERC Form No. 60 of American 

Electric Power Service Corporation, E. ON U.S. 

Services INC, PHI Service Company, and Progress 

Energy Service Company, LLC. 

99Account 306 was contained in the SEC USofA 

for service companies. We will permit continued 

use of this account and not require reclassification 

of amounts recorded therein for leasehold 

improvements placed in service prior to January 1, 

2008. 

100 17 CFR part 256. 

6. Balance Sheet Accounts 

101. In the NOPR, the Commission 

proposed to adopt in the new USofA for 

centralized service companies many, 

but not all, of the balance sheet accounts 

contained in parts 101 and 201 of the 

Commission’s regulations, as well as the 

primary property Accounts 301 

(§ 367.3010), 303 (§ 367.3030) and 389 

to 399.1 (§§ 367.3890 to 367.3991). 

Comments 

102. EEI suggests that the Commission 

add the following balance sheet 

accounts to part 367 subpart F: 

Account 106—Completed construction not 

classified 

Account 182.3—Other regulatory assets 

Account 189—Unamortized loss on 

reacquired debt 

Account 228.2—Accumulated provision for 

injuries and damages 

Account 228.3—Accumulated provision for 

pensions and benefits 

Account 254—Other regulatory liabilities 89

103. These accounts were not 

included in the SEC’s Uniform System 

of Accounts.90 However, a review of 

2005 FERC Form No. 60s indicates that 

some companies are using these 

accounts.91

104. In addition, EEI and Southern 

suggest that the Commission make 

improvements to Account 146, 

Accounts receivable from associate 

companies, and Account 123, 

Investment in associate companies.92

EEI argues that the requirement to 

classify long-term receivables as 

investments in associate companies is 

contrary to GAAP, and recommends 

elimination of this requirement.93

Southern asserts that, on occasion, 

operating companies do not have to 

submit payment immediately. The 

company argues that the delay in 

payment could exceed 12 months, 

which, according to Southern, would be 

appropriately classified as long-term 

receivables and not as investments in 

associate companies.94

105. NARUC asks that the 

Commission clarify the meaning of 

‘‘common expenditures’’ in § 367.1070, 

Construction work in progress, because, 

in its opinion, the proposed language 

renders the section unclear.95 NARUC 

also believes proposed § 367.1070 

includes language that may not be 

appropriate for a service company doing 

work for more than an associate public 

utility company. Accordingly, it 

requests that the Commission clarify the 

language (italicized below) in 

§ 367.1070 as follows: 

(b) Work orders must be cleared from this 

account as soon as practicable after 

completion of the job. Further, if a project is 

designed to consist of two or more units that 

may be placed in service at different dates, 

any expenditures that are common to and 

that will be used in the operation of the 

project as a whole must be included in 

service company property upon the 

completion and the readiness for service of 

the first unit...96

106. NiSource states that the 

definitions of proposed Accounts 233, 

Notes payable to associate companies 

(§ 367.2330) and 234, Accounts payable 

to associate companies (§ 367.2340) 

appear to be identical. The language of 

the definitions, it suggests, should be 

clarified to indicate that Account 233 

applies to notes payable, whereas 

Account 234 applies to accounts 

payable.97

Commission Determination 

107. EEI did not explain in its 

comments why it suggests that the 

Commission add the recommended 

accounts. However, our review of a 

number of the FERC Form No. 60s filed 

with the Commission for calendar year 

2005 indicates that some of the 

recommended accounts are already 

being used by service companies.98 For 

other recommended accounts it appears 

reasonably possible that service 

companies either already have or could 

enter into transactions in the future 

requiring use of those accounts. 

Therefore, the Commission will add the 

following balance sheet accounts 

recommended by EEI to part 367 

subpart F: 

Account 106, Completed construction not 

classified 

Account 182.3, Other regulatory assets 

Account 189, Unamortized loss on 

reacquired debt 

Account 228.2, Accumulated provision for 

injuries and damages 

Account 228.3, Accumulated provision for 

pensions and benefits 

Account 254, Other regulatory liabilities 

108. The Commission also will add 

Account 306, Leasehold improvements, 

as a transitional accommodation only.99

Account 306 was included in the SEC’s 

Uniform System of Accounts.100 Use of 

this account will be restricted to 

leasehold improvements placed in 

service prior to January 1, 2008. 

Effective January 1, 2008, leasehold 

improvements must be charged to the 

appropriate primary plant account 

consistent with § 367.54. Conforming 

changes to Schedules II and III of the 

FERC Form No. 60 will be made to 

permit reporting of amounts related to 

Account 306. 

109. In response to EEI and 

Southern’s comments concerning 

Account 123, Investment in associate 

companies, we note that, in the NOPR, 

the Commission proposed to adopt 

Account 146, Accounts receivable from 

associate companies, (§ 367.1460) as 

contained in parts 101 and 201 of the 

Commission’s regulations. The text to 

Account 146 requires that items which 

do not bear a specified due date, but 

which have been carried for more than 

12 months and items which are not paid 

within 12 months from the due date be 

transferred to Account 123, Investment 

in associate companies. This 

requirement results in classifying 

receivables that are long-term in nature 

to a long-term asset account (Account 

123) and facilitates preparation of a 

classified balance sheet directly from 

the accounts. Although the Commission 

could prescribe a new account created 

specifically for recording long-term 

accounts receivables held by service 

companies, as Southern suggests, it 

would create an inconsistency between 

the accounts prescribed for service 

companies and those prescribed for 

public utilities and licensees and for 

natural gas companies. To ensure 

consistency between the service 

companies and the public utilities and 

natural gas companies, the Commission 

will continue to require long-term 

accounts receivables to be recorded in 

Account 123, Investment in associate 

companies. 

110. In response to NARUC’s 

comments concerning Account 107, 

Construction work in progress, we agree 

that the instructions contained in 

§ 367.1070 that address construction 

projects consisting of multiple units 

with different in-service dates are 

unclear. Therefore, the Commission will 

modify that section and adopt NARUC’s 

recommended clarifying language. 


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101National Grid at 11–12; at 2–3. 

102NiSource at 2–3. 

103Southern at 4. 

104EEI at 27–28. 

105Progress Energy at 6–9. 

106 2005 FERC Form No. 60, Analysis of Billing—

Associate Companies Schedule and Analysis of 

Billing—Non-associate Companies Schedule. 

111. Additionally, in response to 

NiSource’s comments we will revise the 

language in Account 234 (§ 367.2340) to 

indicate that Account 234 applies to 

accounts payable. The language is 

revised to read, ‘‘This account must 

include all amounts payable to associate 

companies by the service company 

within one year, which are not provided 

for in other accounts.’’

7. Income Statement Accounts 

112. In the NOPR, the Commission 

proposed to incorporate some of the 

income statement accounts contained in 

parts 101 and 201 of the Commission’s 

regulations and some of the income 

statement accounts contained in the 

SEC’s USofA for service companies. The 

specific comments received on these 

accounts are discussed below. 

(a) Sections 367.4570–.4594—Revenue 

Accounts for Services Rendered 

113. In the NOPR, we proposed to 

adopt new revenue control Accounts 

457, Services rendered to associate 

utility companies; Account 458, 

Services rendered to non-associate 

utility companies; and Account 459, 

Services rendered to non-utility 

companies. We proposed that each of 

these new revenue control accounts 

have corresponding subaccounts for 

direct labor (Accounts 457.1, 458.1 and 

459.1) and indirect labor (Accounts 

457.2, 458.2 and 459.2), and 

compensation for use of capital 

(Accounts 457.3, 458.3 and 459.3). We 

also proposed to include revenue 

Accounts 458.4, Excess or deficiency on 

servicing non-associate utility 

companies, and 459.4, Excess or 

deficiency on servicing non-associate 

non-utility companies. Our proposal 

differed slightly from the SEC’s USofA 

for service companies, which provided 

control accounts for revenues from 

services provided to associate 

companies and revenues from services 

provided to non-associate companies. 

Comments 

114. National Grid and NiSource 

believe that the Commission should 

provide for separate revenue control 

accounts for services to associate 

companies and to non-associate 

companies, and that these accounts 

should each be further subdivided into 

separate accounts or subaccounts 

tracking services to utility and nonutility companies in order to satisfy the 

Commission’s stated goals and to 

provide a more detailed picture of 

service company revenues.101 These 

commenters believe that this added 

detail (i.e., separately identifying 

revenues associated with services to 

associate, non-utility companies and 

non-associate, non-utility companies) 

would not impose a significant burden 

over the status quo, but would provide 

a more detailed picture of service 

company services rendered for nonutility companies than the 

Commission’s proposed regulations 

would require. As an alternative, 

NiSource requests that the Commission 

clarify that all service company 

revenues received from non-utility 

companies are to be charged to Account 

459.4, whether or not they are derived 

from companies that are part of the 

same holding company system.102

Southern believes that subaccounts 

should be added for all direct and 

indirect charges including the non-labor 

components of billings.103

115. In contrast, EEI believes most 

service companies will not have 

information needed to distinguish 

between direct labor, indirect labor, and 

use of capital costs for services provided 

to associate utilities, non-associate 

utilities and non-utilities. Instead, EEI 

encourages the Commission to retain the 

current breakdown into services 

rendered to associate and non-associate 

companies, at most subdividing the 

associate company information by 

utility and non-utility if necessary to 

address cross subsidization concerns. 

EEI also recommends that the 

Commission delete the requirement for 

tracking revenue related to the use of 

capital, and states that it is a minor 

aspect of service company activities 

already reflected elsewhere in company 

accounts.104

116. Progress Energy expresses 

concerns that requiring the redesign of 

allocation processes and systems to 

capture and disaggregate expense and 

revenue data to distinguish utility and 

non-utility services would impose a 

significant and unjustified burden on 

company resources without any 

appreciable benefit. Progress Energy 

points out that service companies 

already have procedures in place to 

prevent inappropriate costs shifts and 

other cross subsidization, and that the 

separation of costs as proposed by the 

Commission is not necessary.105

Commission Determination 

117. In response to commenters’

concerns, the Commission will adopt 

revenue accounts that will provide a 

breakdown by services rendered to 

associate and non-associate companies, 

but eliminate the requirement to record 

revenues from services provided to 

utilities and non-utilities in separate 

accounts. The Commission believes this 

modification to the NOPR is appropriate 

because this information can be 

obtained in the FERC Form No. 60, 

Analysis of Billing Schedule, which 

requires reporting amounts billed by 

customer for the year. Therefore, this 

modification will reduce burden 

without loss of important data. More 

specifically, we will adopt the following 

revenue control accounts and 

corresponding subaccounts: Account 

457, Services rendered to associate 

companies; Account 457.1, Direct costs 

charged to associate companies; 

Account 457.2, Indirect costs charged to 

associate companies; Account 457.3, 

Compensation for use of capitalassociate companies; Account 458, 

Services rendered to non-associate 

companies; Account 458.1, Direct costs 

charged to non-associate companies; 

Account 458.2, Indirect costs charged to 

non-associate companies; Account 

458.3, Compensation for use of capitalnon-associate companies; Account 

458.4, Excess or deficiency on servicing 

non-associate companies. Consistent 

with the discussion above, we will not 

adopt proposed Accounts 459, 459.1, 

459.2, 459.3, and 459.4. Use of Accounts 

457, 457.1, 457.2, 457.3, 458, 458.1, 

458.2, 458.3, and 458.4 is consistent 

with the requirements that existed 

under the SEC’s USofA for service 

companies. Contrary to EEI’s assertion, 

our review of 2005 FERC Form No. 60s 

indicates that service companies are 

capable of breaking down amounts 

billed between direct costs, indirect 

costs and compensation for capital.106

(b) Sections 367.5000 and 367.8000—

Operation and Maintenance Expense 

Accounts 

118. In the NOPR, the Commission 

proposed to require centralized service 

companies to use the 500 and 800 series 

of accounts contained in parts 101 and 

201 of the Commission’s regulations for 

recording the expenses related to 

generation, transmission and 

distribution operation and maintenance 

services they provide to associate 

public-utilities and licensees and, where 

applicable, associate natural gas 

companies. 

Comments 

119. NARUC initially indicated that it 

was unclear how the 500 and 800 series 


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107NARUC at 8–9. 

108NARUC Supplemental Comments at 3–6. 

109NARUC Supplemental Comments at 3–5. 

110See Technical Conference Tr. 101–102 (Joseph 

Buckley). 

111See Technical Conference Tr. 120–121 (Joseph 

Buckley). 

112NARUC at 8–9; Progress Energy at 3; EEI at 

22–24; NiSource Supplemental Comments at 4–6; 

FirstEnergy Supplemental Comments at 3. 

113National Grid at 7–8. 

114Progress Energy at 6; EEI at 22–24. 

115Progress Energy at 6. 

116EEI at 5–6; NARUC at 8–9. 

accounts will be impacted by the types 

of services that centralized service 

companies provide.107 In supplemental 

comments filed following the staff 

technical conference, NARUC explains 

that, at the July 18, 2006 Technical 

Conference, it became clear that because 

some service companies currently use 

the 500 and 800 series accounts, it could 

be reasonable to include the accounts in 

the centralized service company’s 

USofA.108 NARUC believes the question 

the Commission needs to determine is 

whether these accounts should be 

mandatory. NARUC believes that if the 

Commission determines that use of the 

500 and 800 series accounts should not 

be mandatory for all service companies, 

then the Commission needs to identify 

the accounting methods that best reflect 

the financial position of the service 

companies and associate companies 

within a holding company system. 

NARUC suggests that one approach 

would be to establish a threshold for 

when the use of the 500 and 800 series 

accounts would become mandatory. 

NARUC suggests that a possible 

threshold could be a percentage, such as 

10 percent or less, of utility costs or of 

service company expenses. Another 

option, NARUC suggests, is to require 

the use of the 500 and 800 series 

accounts whenever a service company 

starts performing utility functions that 

should be recorded in the 500 and 800 

series accounts. NARUC also suggests 

that the Commission prohibit the 

recording of charges classified in 

Account 923, Outside services on the 

utility’s records, and, instead, it suggests 

that the Commission mandate that 

service company charges be classified in 

accordance with the utility account or 

function to which they relate because, 

in some cases, all costs are classified in 

Account 923. NARUC explains that 

adoption of this recommendation is 

necessary if the Commission adopts a 

threshold.109

120. Mr. Buckley, a participant at the 

technical conference, indicates that in 

Ohio they have experienced an 

explosion of service company costs 

recently. Mr. Buckley states that service 

company costs make up a large and 

increasing percentage of the costs that 

are ultimately passed on to ratepayers. 

Mr. Buckley points out that mergers and 

consolidations are moving the physical 

records and altering the existing 

relationships that state regulators have 

with the companies they regulate. 

According to Mr. Buckley, this makes it 

harder to know to whom to go to get 

information and, therefore, any increase 

in transparency is a positive step.110 Mr. 

Buckley adds that, if the service 

companies become more centralized, 

citing American Electric Power as an 

example and noting that consolidation 

in the industry could lead to things 

becoming more centralized, the 500 and 

800 accounts will provide for growth.111

121. In contrast, several commenters 

do not believe that the 500 and 800 

series accounts accurately portray the 

majority of service company costs.112

While National Grid recognizes that 

some companies already record costs 

and revenues to match the accounting 

accorded to such costs and revenues by 

the ultimate service recipients, it asserts 

there is no reason to require wholesale 

reclassification of costs and revenues by 

all service companies. National Grid 

also believes this may lead to an 

inaccurate picture of a service 

company’s financial position, and 

explains that using the 500 and 800 

series accounts implies that the service 

company owns the assets that it is 

operating and maintaining.113

122. EEI and Progress Energy assert 

that requiring the use of the 500 and 800 

series of accounts would cause service 

companies to be out-of-compliance with 

GAAP principles.114 Progress Energy 

explains that GAAP principles presume 

that each company reports its financial 

information as if it were a stand-alone 

(non-affiliated) company. It explains 

that force-fitting a centralized service 

company’s financials into the format 

reported by a public utility would result 

in books that do not properly reflect the 

work conducted by a centralized service 

company and would over-complicate 

the accounting, increase the risk of 

errors inherent in any process or system 

change and violate GAAP principles.115

In addition, EEI and NARUC contend 

that the burden associated with the 500 

and 800 series accounts is greater than 

the benefit.116

Commission Determination 

123. We will require centralized 

service companies to use the 500 and 

800 series of accounts as proposed. It is 

evident from the July 18, 2006 

Technical Conference and from a review 

of the 2005 FERC Form No. 60s that a 

number of service companies use the 

500 and 800 series accounts. These 

centralized service companies perform 

operation and maintenance services 

related to generation, distribution, 

transmission, and customer services for 

associate electric and gas companies. 

The expenses incurred from providing 

these types of services are most 

accurately reported in the 500 and 800 

series accounts. 

124. We do not agree with National 

Grid that use of these accounts by 

centralized service companies 

performing the types of services for 

which costs are properly included in 

these accounts would result in an 

inaccurate picture of the service 

company’s financial position. To the 

contrary, we believe the use of these 

accounts will add transparency to 

centralized service company costs and 

will facilitate comparison across such 

companies. Centralized service 

companies that offer operation and 

maintenance services related to 

generation, distribution, transmission, 

and services perform the same type of 

work and incur the same costs that a 

public utility would incur if that public 

utility performed the work itself. 

Therefore, we will require centralized 

service companies to record the 

expenses it incurs for conducting 

operation and maintenance activities 

related to generation, transmission, 

distribution and customer services in 

the same expense accounts public 

utilities are required to use to record 

these costs. Using the 500 and 800 series 

of accounts also provides better 

assurance that costs are properly 

assigned because like items will be 

identified and measured in the same 

way regardless of the entity performing 

the work. Although EEI and Progress 

Energy suggest that this is somehow in 

violation of GAAP principles, they offer 

nothing in the way of concrete evidence 

or reference to specific accounting 

standards to support this allegation. 

Furthermore, even if such evidence did 

exist, and we do not believe it does, the 

Commission’s need for comparability 

and transparency of service company 

expenses provided by use of the 500 and 

800 series of accounts would outweigh 

concerns about conformity with GAAP 

principles. 

125. In responding to NARUC’s 

concern, we will not prohibit the 

recording of charges in Account 923, 

Outside services. Prohibiting the use of 

this account would be overly 

prescriptive. It is possible that some 

service company costs would be 

accurately reported in Account 923. 

However, we believe that it is 

appropriate for utilities that receive bills 


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117Progress Energy at 9–10; EEI at 24–26. 

118Progress Energy at 9–10. 

119EEI at 24–25. 120NARUC at 9–12. 

from service companies to classify those 

costs in the appropriate accounts. 

Utilities would not be in compliance 

with part 101, General Instruction 14, if 

they do otherwise. Specifically, General 

Instruction 14 requires that transactions 

with associated companies be recorded 

in the appropriate accounts for 

transactions of the same nature. We will 

require that centralized service 

companies performing services such as 

operation and maintenance services 

related to generation, distribution, 

transmission, and customer service on 

behalf of service companies to use the 

appropriate accounts for those services 

performed. 

126. We do not agree with NARUC 

that the use of thresholds is an option 

for determining when centralized 

service companies must use the 500 and 

800 accounts. As discussed above, the 

use of the 500 and 800 accounts 

provides clarity about the types of 

services performed by centralized 

service companies and the costs of 

providing those services. Proper 

classification of service company costs 

facilitates proper classification of the 

costs at the utility. Therefore, we will 

require centralized service companies to 

use the 500 and 800 series of accounts 

as proposed. 

(c) Sections 367.9220 and 367.4171—

Account 922, Administrative Expenses 

Transferred—Credit, and Account 417.1, 

Expenses of Non-Utility Company 

127. In the NOPR, the Commission 

proposed that the portion of 

administrative, general, and customer 

expenses recorded in the 900 series of 

expense accounts, but attributable to 

services provided to non-utility 

companies, be transferred to proposed 

Account 417.1, Expenses of non-utility 

company related operations, with a 

contra-credit to Account 922, 

Administrative expenses transferredcredit. 

Comments 

128. EEI and Progress Energy request 

clarification regarding the adoption of 

Account 922 since most service 

company expenses are recorded in 

Accounts 920, Administrative and 

general salaries, and 921, Office 

supplies and expenses.117 Progress 

Energy states that service companies are 

labor intensive, so most of their 

expenses are currently charged to 

Accounts 920 and 921. Progress Energy 

also states that the Commission should 

not adopt its proposal to credit Account 

922 with administrative expenses 

recorded in Accounts 920 and 921 that 

are transferred to construction costs or 

to other accounts or with the amount of 

operating expenses related to services 

provided to non-utility companies and 

Account 417.1, Expenses of non-utility 

company related operations. In 

addition, Progress Energy points out 

that its accounts are mapped to the 

appropriate associate company accounts 

in compliance with the Federal (e.g., 

Commission and SEC) and state 

regulatory reporting requirements 

imposed on the affiliated companies. 

Further, Progress Energy explains that 

its cost allocation methodology and 

charging practices have been approved 

by state regulatory commissions and are 

currently consistent with inter-company 

service agreements. If required to 

comply with this proposal, Progress 

Energy asserts its processes, systems 

and legal documents will have to be 

changed even though the associate 

companies already accurately report 

their allocations in compliance with 

Federal and state requirements.118

129. EEI states there is confusion 

related to the credit posted in Account 

922. EEI states that many of these costs 

are administrative and general costs that 

are allocated based on service agreement 

methodologies and that the proposed 

process would require service 

companies to keep track of a dollar 

spent on administrative and general 

labor so the dollar could be recorded 

partly in the administrative and general 

series and partly ‘‘below the line’’ in 

Account 417.1. EEI states this would 

result in a process to build a ‘‘clump’’

of expenses in Account 417.1 that 

would be essentially useless to the 

service company. EEI recommends that 

the Commission not implement, or 

require companies to use, the proposed 

accounting treatment for new Account 

417.1.119

Commission Determination 

130. Upon further consideration, the 

Commission has concluded that it is not 

necessary at this time for centralized 

service companies to record expenses 

attributable to services provided to nonutility companies in a separate account 

because the information reported in the 

Analysis of Billing Schedule should be 

sufficient to identify such amounts. The 

Analysis of Billing Schedule requires 

centralized service companies to report 

all amounts billed for services during 

the year on a company by company 

basis. Since services are billed at cost, 

it will be possible to determine the 

expenses attributable to services 

provided to non-utilities from the 

schedule. Therefore, Accounts 417.1, 

Expenses of non-utility company, and 

Account 922, Administrative expenses 

transferred—credit, will be deleted from 

§§ 367.9220 and 367.4171. 

(d) Section 367.4160—Costs and 

Expenses of Merchandising, Jobbing and 

Contract Work; § 367.9120—

Demonstrating and Selling Expenses; 

§ 367.9130—Advertising Expenses; 

§ 367.9301—General Advertising 

Expenses 

131. In the NOPR, the Commission 

proposed to adopt Account 416, Costs 

and expenses of merchandising, jobbing 

and contract work; Account 912, 

Demonstrating and selling expenses; 

Account 913, Advertising expenses; and 

Account 930.1, General advertising 

expenses as they presently appear in 

parts 101 and 201 of the Commission’s 

regulation into the USofA for 

centralized service companies. 

Comments 

132. NARUC states that it is difficult 

to determine in which accounts 

different types of advertising costs 

should be recorded. It also states that 

the Commission should anticipate 

service companies providing 

promotional services to non-utility 

affiliates. To address these concerns 

NARUC suggests: Revising § 367.4160 to 

clarify that only the cost of 

merchandising and contract work 

performed for associated utility 

companies is recorded in Account 416, 

Costs and expenses of merchandizing, 

jobbing and contract work for associate 

companies; revising § 367.9120 and 

§ 367.9130 to clarify that demonstrating, 

selling and advertising costs incurred to 

promote/retain either the service 

companies services/customers or 

associate companies services/customers 

are recorded in these accounts; and 

revising § 367.9301 to clarify that only 

general advertising costs incurred on 

behalf of associated utility companies 

are recorded in this account.120

Commission Determination 

133. The Commission agrees that 

§§ 367.416, 367.912 and 367.913 should 

be clarified. We will adopt the revisions 

suggested by NARUC for §§ 367.912 and 

367.913 and incorporate others that will 

clarify what amounts are properly 

included in these accounts. In 

considering the suggested revisions to 

§ 367.416, the Commission has 

determined that services related to 

merchandising, jobbing and contract 

work could be performed on behalf of 

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121EEI at 26. 

122 Id. at 27. 

123See, 2005 FERC Form No. 60, Schedule XV, 

Comparative Income Statement for American 

Electric Power Service Corporation. 

124See 18 CFR 125.3 and 225.3. 

125EEI at 39. 

126NARUC at 12. 

127Southern at 6. 

128See 18 CFR 125.2(a)(3) and 225.2(a)(3). 

utility companies. Consequently, we do 

not believe the use of Account 416 

should be limited to costs of 

merchandising, jobbing and contract 

work performed for associate utility 

companies. Additionally, we have 

concluded that it is inappropriate to 

place Account 416 within the Other 

Income section of FERC Form No. 60, 

Schedule XV—Comparative Income 

Statement, as proposed in the NOPR. 

Services performed related to 

merchandising, jobbing and contract 

work are an operating activity of a 

service company and the cost of those 

services should be included in an 

account that enters into the 

determination of net operating income 

of the service company. Therefore, we 

will revise Schedule XV to reflect 

Account 416, Costs and expenses of 

merchandizing, jobbing and contract 

work, as an operating expense account 

and require revenues related to 

merchandising, jobbing and contract 

work to be recorded in Accounts 457, 

Services rendered to associate 

companies and 458, Services rendered 

to non-associate companies, as 

appropriate. Account 415, Revenues for 

merchandising, jobbing and contract 

work, will be eliminated from the 

USofA for centralized service 

companies. Finally, we consider 

Account 930.1 to be a general ‘‘catch 

all’’ account for recording advertising 

costs not provided for elsewhere in the 

accounts. Therefore, we will not adopt 

NARUC’s recommendation to limit its 

use to advertising related to associate 

utility companies. 

(e) Sections 367.4263, 367.4117, 

367.4180—Miscellaneous Income 

Statement Issues 

Comments 

134. EEI states that the numbering 

appears to be incorrect in § 367.4263.121

EEI also states the following accounts 

should be added to subpart H: Account 

411.7, Losses from disposition of service 

company plant; and Account 418, Nonoperating rental income.122

Commission Determination 

135. EEI did not explain in its 

comments why the numbering should 

be corrected in § 367.4263 or why the 

Commission should add the 

recommended accounts. However, our 

review of a number of the FERC Form 

No. 60s filed with the Commission for 

calendar year 2005 indicates that these 

accounts are used by some service 

companies.123 Therefore, we will correct 

the numbering in § 367.4263, and add 

Account 411.7, Losses from disposition 

of service company plant, and Account 

418, Non-operating rental income. 

8. Records Retention Requirements 

136. Order No. 667 required all 

holding companies and all service 

companies, which were not granted a 

waiver or otherwise exempted by the 

Commission, to follow the 

Commission’s records retention 

requirements in parts 125 and 225. The 

NOPR proposed to establish, as new 

part 368 of the Commission’s 

regulations, records retention 

requirements for all holding companies 

and all service companies. The records 

retention requirements proposed were 

based on the requirements contained in 

§§ 125.3 and 225.3 of the Commission’s 

regulations,124 with certain 

modifications considered appropriate 

for holding companies and service 

companies. 

Comments 

137. EEI notes that the NOPR is 

unclear as to whether a holding 

company that also is a public utility 

would be subject to both the 

Commission’s holding company and 

public utility records retention 

requirements. EEI requests that the 

Commission specify that only one set of 

records retention requirements apply 

and allow the company involved to 

select the most appropriate set to apply. 

Furthermore, if the holding company is 

already following the public utility 

records retention requirements, it 

should be able to continue to do so 

without also having to follow the new 

holding company records retention 

requirements.125

138. NARUC requests that the records 

retention general instruction at 

§ 368.2(g) be amended to include the 

requirement for companies to file a copy 

of a certified statement of records 

prematurely lost or destroyed with state 

commissions to facilitate the state 

commissions’ ability to monitor the 

activities of service companies.126

139. Southern requests that the 

records retention requirements be better 

tailored for a service company. 

Specifically, Southern proposes that the 

retention period for accumulated 

depreciation records should be reduced 

because the majority of service company 

property has useful lives significantly 

less than the 25-year retention period 

proposed in the NOPR.127

Commission Determination 

140. The records retention 

requirements originally proposed, and 

as adopted here, generally are based on 

the requirements contained in parts 125 

and 225 of the Commission’s 

regulations,128 with certain minor 

modifications appropriate for holding 

companies and service companies. As a 

result, most retention periods proposed 

for holding companies and service 

companies are identical to the retention 

periods required for public utilities and 

licensees and natural gas pipelines. 

Additionally, the general instructions 

for parts 125 and 225 and proposed 

§ 368.2(a)(5) make clear that ‘‘To the 

extent that any Commission regulations 

may provide for a different records 

retention period, the records must be 

retained for the longer of the retention 

periods.’’ If a holding company that is 

also a public utility has a conflict 

between the retention period specified 

for a public utility and the retention 

period specified for a holding company, 

the longer of the retention periods must 

be observed. Therefore, we do not 

believe it is appropriate to specify that 

only one set of records retention 

requirements apply. 

141. We deny NARUC’s request to 

amend the records retention instruction 

at § 368.2(g) to include a requirement for 

companies to file a copy of a certified 

statement of records prematurely lost or 

destroyed with state commissions. We 

do not believe it is necessary for the 

Commission to establish filing 

requirements for state commissions. All 

filings of this nature are docketed by the 

Commission and can be viewed 

electronically by all interested parties. 

Accordingly, state commissions will be 

able to monitor the report of 

prematurely lost or destroyed records 

without imposing an additional 

reporting burden on companies. We 

note that this is the same treatment 

applied to public utilities, licensees, 

and natural gas companies under the 

Commission’s regulations in parts 125 

and 225. 

142. We agree with Southern’s 

observation related to holding and 

service company property, and will 

tailor the schedule of records retention 

periods. Specifically, we will reduce the 

retention period for accumulated 

depreciation records reflecting the 

service life of property at § 368.3—Item 

24, Records of accumulated provisions 

for depreciation and depletion from 25 


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129Most holding and service company property 

typically has a useful life significantly less than 25 

years, for example office furniture and equipment 

and computer software have shorter useful lives 

than generating facilities or transmission towers. 

Therefore, establishing a shorter retention period 

for accumulated depreciation records that closely 

corresponds to the expected useful life of the 

related property is more reasonable. 130 In its initial comments to the NOPR, EEI 

proposed the Commission rely on information 

provided in the SEC Forms 10–K and 10–Q 

supplemented by selected additional information 

the Commission may need instead of the new FERC 

Form No. 60. 

131See 18 CFR part 33. 

132EEI Supplemental Comments at 2. 

133 Id. 

134Southern at 2. 

135APPA at 3. 

136Supra note 5. 

137 Instruction 2 requires a breakdown of each 

equipment subaccount for each class of equipment 

property owned. Instruction 3 requires a 

description of other company property. Instruction 

3 requires a listing of construction work-in-progress 

projects and the beginning, additions and end-ofyear balance for each. 

138Southern at 2. 

139The December 2005 FERC Form No. 60 

requires this information to be reported in a 

footnote. 

140EEI at 29. 

141FirstEnergy Supplemental Comments at 3. 

years to 3 years after retirement or 

disposition of property.129

9. FERC Form No. 60 

(a) Use of GAAP Financial Statement 

Instead of Structured FERC Form No. 60 

143. The Commission proposed a 

structured reporting format in proposed 

FERC Form No. 60 in the NOPR. Under 

the structured format, a centralized 

service company must report in 

specified data fields the financial 

information called for in the report. 

Comments 

144. In its supplemental comments, in 

contrast to its initial comments,130 EEI 

suggests the FERC Form No. 60 be based 

on the original FERC Form No. 60 set 

out in the Commission’s December 8, 

2005 Order No. 667 Final Rule 

(December 2005 FERC Form No. 60), 

with additional changes EEI requests to 

streamline the form. EEI believes a 

streamlined version of the December 

2005 FERC Form No. 60, together with 

data the Commission receives directly 

from public utilities and the 

Commission’s new FPA section 203 

regulations,131 should suffice to enable 

the Commission to perform its 

regulatory responsibilities.132 In its 

supplemental comments, EEI further 

encourages the Commission to work 

with a streamlined version of the 

December 2005 FERC Form No. 60 with 

changes EEI has requested to further 

streamline the form.133 Southern, PHI 

Companies, and FirstEnergy support 

EEI’s comments that the FERC Form No. 

60 be a streamlined version of the 

December 2005 FERC Form No. 60. 

These commenters, together with EEI, 

believe this streamlined FERC Form No. 

60 provides the transparency and 

uniformity that the Commission desires 

without imposing undue burden. 

However, Southern also suggests that 

the Commission should allow 

companies the option of submitting 

their audited GAAP financial statements 

instead of FERC Form No. 60.134

145. Conversely, APPA thinks that the 

revised FERC Form No. 60 will be very 

useful in auditing and understanding 

centralized service company cost 

allocations to public utility operating 

companies.135

Commission Determination 

146. The December 2005 FERC Form 

No. 60 is essentially the SEC’s old Form 

U13–60 for service companies with 

certain streamlining changes adopted in 

Order No. 667. The December 2005 

FERC Form No. 60, like the old SEC 

Form U13–60, is a non-structured 

reporting format that permits filers wide 

latitude and flexibility in how they 

report required financial information. 

While the Commission understands the 

centralized service companies’’ desire to 

have flexibility in reporting, the 

Commission believes that it is necessary 

to have a structured reporting system. A 

structured report format results in 

disclosure and display of predetermined 

financial information in a uniform 

manner by all centralized service 

companies. This promotes 

comparability of the data not only 

between entities but also between 

accounts prescribed. Increasing the 

comparability of the data makes the 

information inherently more useful. 

Moreover, a structured report format 

allows for the creation of a financial 

database that can be used for more 

complex and sophisticated analysis of 

the information. These items are 

important to allow the Commission to 

perform its duties. It also will facilitate 

electronic submission using 

Commission-supplied software. This 

system will help ensure the integrity of 

the data and make completing the FERC 

Form No. 60 easier. 

147. In response to Southern’s 

suggestion, we do not believe that 

audited GAAP financial statements 

would be sufficient for carrying out the 

Commission’s regulatory 

responsibilities. GAAP financial 

statements are prepared primarily for 

investors, and do not provide 

information in enough detail to ensure 

that jurisdictional rates charged are just 

and reasonable or to review cost 

allocations under section 1275 of 

PUHCA 2005 136 if called upon to do so. 

Therefore, the Commission will not 

modify the proposed requirement for a 

structured FERC Form No. 60. 

(b) FERC Form No. 60 Schedules 

(1) Schedule II, Service Company 

Property 

148. Proposed Schedule II requires 

centralized service companies to report 

the amounts recorded in the service 

company primary property accounts 

and construction work in progress at the 

beginning of the year, changes to the 

accounts during the year, and the 

balance at the end of the year. 

Comments 

149. Southern does not see the added 

value of the supplemental information 

provided in Instructions 2–4 137 and 

proposes their elimination. Southern 

comments the break out of the property 

by account gives sufficient 

information.138

Commission Determination 

150. The Commission agrees that the 

information required by Instructions 2 

and 3 is of little value to the 

Commission and will be deleted. 

However, we will continue to require 

centralized service companies to 

provide information about construction 

projects similar to the December 2005 

current FERC Form No. 60, Instruction 

4. Instead of providing the information 

in a footnote format, we are revising the 

schedule to provide for additional lines 

on the schedule for reporting this 

information.139

(2) Schedule III–A, Summary of Service 

Company Property and Accumulated 

Provisions for Depreciation and 

Amortization 

151. Schedule III–A would require 

companies to split out property devoted 

to utility versus non-utility services. 

Comments 

152. EEI contends this reporting 

requirement should be deleted because 

company records do not differentiate 

service company property between 

utility related and non-utility 

services.140 FirstEnergy argues that 

assets devoted exclusively to the utility 

are on the books of the utility and not 

on the service company books.141


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142EEI at 29. 

143Convenience payments represent payments 

such as benefits, outside legal, and consulting paid 

by service companies to outside vendors and others 

on behalf of associate companies. 

144EEI at 33; Southern at 2–3. 

145Southern at 3. 

146EEI at 34; Southern at 3. 

147EEI at 34; Southern at 3. 

148EEI at 34. 

149EEI 34; Southern at 3. 

Commission Determination 

153. We agree with EEI and will 

eliminate this schedule from FERC 

Form No. 60. All service company 

property will be reported in Account 

101. 

(3) Schedule IV, Investments and 

Schedule XII, Long-Term Debt 

154. Proposed Schedule IV provides 

detailed information on service 

company investments in associate 

companies and temporary cash 

investments. Proposed Schedule XII 

provides detailed information on longterm debt of the service company. Both 

schedules require the same information 

as in the current FERC Form No. 60. 

Comments 

155. EEI proposes to eliminate 

schedules that include information 

already available on the face of the 

Balance Sheet or within the detailed 

footnotes. Examples include Schedule 

IV, Investments and Schedule XII, Long 

Term Debt.142

Commission Determination 

156. We disagree with EEI that the 

information reported on Schedule IV 

and Schedule XII is available on the 

Balance Sheet. Long-term debt and 

investments are reported on the Balance 

Sheet as aggregate totals. Schedule IV 

and Schedule XII provide significant 

additional details that allow for a greater 

understanding of the aggregate totals 

reported on the Balance Sheet. For 

example, short-term investment 

schedules provide specific details on 

where centralized service companies 

have invested excess cash flows from 

operations and Schedule XII provides 

specific details on service company 

long-term capital. We do not agree that 

footnote disclosure is an adequate 

substitution for these supporting 

schedules because the format for 

footnotes is unstructured and does not 

allow for database archiving and 

retrieval. Therefore, the Commission 

will retain these schedules. 

(4) Schedule V, Accounts Receivable 

From Associate Companies 

157. This schedule identifies accounts 

receivable for each associate company 

and reports convenience payments. 

Comments 

158. EEI and Southern recommend 

the portion of this schedule identifying 

convenience payments 143 should be 

eliminated. If retained, EEI recommends 

the Commission modify the schedule to 

report the total convenience payments 

made during the year, consistent with 

the December 2005 FERC Form No. 60 

reporting. EEI states that service 

companies do not necessarily identify 

convenience payments separately, and 

this information would be time 

consuming to gather. Also, EEI does not 

understand the usefulness of this 

information to the Commission; 

beginning and ending convenience 

payment balances are not meaningful 

because convenience payments are 

Expense accounts, rather than Balance 

Sheet accounts.144

Commission Determination 

159. We agree it is not necessary to 

require beginning and ending 

convenience payment balances. 

Consequently, we will not adopt that 

portion of the proposed Schedule V that 

would require reporting the beginning 

and ending balances of convenience 

payments. Instead, we will retain the 

December 2005 FERC Form No. 60 

requirement of reporting total 

convenience payments by associate 

company. 

(5) Schedule VI, Fuel Stock Expenses 

Undistributed 

160. Proposed Schedule VI requires 

centralized service companies to report 

labor and expenses incurred during the 

year with respect to fuel stock and the 

amounts attributable to each associate 

company. It also requires a summary of 

the fuel functions performed by the 

service company. 

Comments 

161. Southern comments that 

Schedule VI requires extracting data 

from work order billings through an 

annual process to meet the annual 

report requirement. Southern 

recommends elimination of this 

schedule based on its limited value.145

Commission Determination 

162. For centralized service 

companies performing fuel services for 

utilities, this is an important supporting 

schedule. Some companies report large 

amounts of labor and other expenses. 

The reported information includes 

amounts billed to each associate 

company including electric and gas 

utilities, which ultimately could be 

reflected in cost of service. 

Consequently we will retain this 

schedule. 

(6) Schedule X, Research, Development 

or Demonstration Expenses 

163. Proposed Schedule X requires a 

description of all research, development 

and demonstration projects engaged in 

by the centralized service company and 

the related costs incurred during the 

year. 

Comments 

164. EEI and Southern state project 

titles may not provide meaningful 

information to the Commission. EEI and 

Southern recommend that service 

companies have the option instead to 

list account balance by project partner, 

citing the U.S. Department of Energy, as 

an example.146

Commission Determination 

165. The Commission disagrees with 

EEI and Southern that Schedule X 

requires a project title. The schedule 

requires a description of the project, not 

the project title. Knowing the project 

partner alone does not provide useful 

information. More relevant information 

is a description of the nature of the 

project and not just who is the project 

partner. Therefore, the schedule will be 

retained the same as in the FERC Form 

No. 60. 

(7) Schedule XI, Proprietary Capital 

166. Proposed Schedule XI discloses 

common and preferred stock shares 

authorized, outstanding, par or stated 

value, as well as information on 

miscellaneous paid-in capital, 

appropriated retained earnings and 

other comprehensive income. The 

second part of the schedule presents 

information similar to a statement of 

retained earnings. 

Comments 

167. EEI and Southern state the first 

section of this schedule duplicates 

Schedule I, Comparative Balance Sheet 

except for shares outstanding.147 EEI 

argues the second section of this 

schedule is new, and generally not 

applicable to a service company.148 EEI 

and Southern recommend including the 

shares outstanding on Schedule I, 

Comparative Balance Sheet, and 

deleting this schedule.149

Commission Determination 

168. The Commission disagrees with 

commenters regarding what is reported 

on this schedule. Commenters indicate 

only outstanding shares of stock are 

reported. The schedule asks for class of 


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150EEI at 34. 

151EEI at 34 and 35. 

152EEI at 30. 

153EEI at 36. 

154 Id. 

155EEI at 36. 

stock, number of shares authorized, par 

or stated value per share, and 

outstanding shares. Further, the 

schedule requests explanations about 

transactions which gave rise to 

miscellaneous paid-in capital and 

appropriated retained earnings. 

Additionally, the schedule requests 

information on changes in 

unappropriated retained earnings such 

as net income and dividends paid. This 

requirement is not new; it is part of the 

FERC Form No. 60. The requirements 

are not overly burdensome. 

Consequently, we will retain the current 

requirements. A statement of retained 

earnings is a basic financial statement. 

However, we agree with EEI’s 

suggestion that a statement of retained 

earnings is not applicable to a service 

company; so, we will delete that portion 

of the schedule which includes the 

added statement of retained earnings. 

(8) Schedule XIV, Notes to Financial 

Statements 

169. Instruction No. 3 of Schedule 

XIV states ‘‘Furnish particulars as to any 

significant increase in services rendered 

or expenses incurred during the year.’’

Comments 

170. EEI recommends the Commission 

not implement this reporting 

requirement in the notes section.150 EEI 

states this introduces an element of 

Management’s Discussion and Analysis 

(MD&A) that is part of GAAP disclosure 

requirements, but has never been a 

requirement of the FERC Form No. 60, 

Form No. 1, or Form No. 2. EEI indicates 

that an explanation of service company 

expense variances is frequently 

scrutinized by state regulators and 

would unnecessarily add to the 

administrative burden of annual 

reporting. EEI contends this level of 

detail could be provided on an ad hoc 

basis as needed, and, when it is needed, 

companies would like the flexibility of 

attaching a Microsoft Word file rather 

than re-keying voluminous footnote data 

into the Commission’s automated 

reporting application. 

Commission Determination 

171. Contrary to EEI’s assertion, 

Instruction No. 3 is not a new reporting 

requirement. Instruction No. 3 is 

included in the December 2005 FERC 

Form No. 60 under Schedule XVIII, 

Notes to the Statement of Income. Any 

large increase in services and expenses 

could impact cost allocations which 

would be useful information to the 

Commission and others. The disclosure 

of significant increases in services 

rendered or expenses incurred is 

particularly relevant to understanding 

the business operations of the 

centralized service company and the 

efficiency or inefficiency of providing 

services on a centralized basis to 

associated utilities. Furthermore, 

reporting this information should not be 

administratively burdensome. As EEI 

notes, this type of information is already 

part of the MD&A in its GAAP 

disclosures. The Commission’s FERC 

Form No. 60 submission software will 

allow copy and paste of this information 

into the footnote page. Consequently, 

we will retain the instruction as 

proposed.151

(9) Schedule XV, Comparative Income 

Statement 

172. Proposed Schedule XV requires 

centralized service companies to report 

revenues, expenses, gains and losses for 

the current and prior year by account. 

Comments 

173. EEI states that the Commission 

should not require reporting of 

information broken down into accounts 

that do not make sense for a given 

service company. EEI states that there 

seems to be a presumption in the NOPR 

that the service company income 

statement can be presented in a 

ratemaking format, with an ‘‘above the 

line’’ and ‘‘below the line’’ character. 

EEI points out, that just as with the 

proposed use of the 500 and 800 series 

of operational and maintenance expense 

accounts, this presumption does not fit 

well with many service company 

operations, which typically consist 

primarily of labor services to other 

companies.152

Commission Determination 

174. The Schedule XV, Comparative 

Income Statement, we are adopting for 

the revised FERC Form No. 60 will 

require centralized service companies to 

report the amounts entered in the 

income statement accounts adopted in 

this Final Rule. These accounts were 

developed to be of sufficient scope and 

breadth to allow for recording the 

economic effects of all transactions and 

events that could impact a centralized 

service company. As noted elsewhere in 

this Final Rule, not all service 

companies are engaged in all of the 

activities for which use of the new 

accounts would be required. This, 

however, does not mean that the 

accounts do not ‘‘fit well’’ or do not 

‘‘make sense’’ for centralized service 

companies, as EEI seems to suggest. It 

means only that more accounts exist 

under the USofA than might be used by 

any particular centralized service 

company. If a centralized service 

company does not incur costs properly 

included in one of the new accounts 

adopted in this Final Rule, it simply 

would not record anything in that 

account. 

(10) Schedule XV–A, Schedule of Utility 

Operating Expenses; Schedule XVI, 

Analysis of Charges for Service; 

Schedule XVII, Schedule of Expense 

Distribution by Department or Service 

Function 

175. Proposed Schedule XV–A 

requires centralized service companies 

to report all amounts entered in the 500 

and 800 series of operation and 

maintenance expense accounts. 

Proposed Schedule XVI requires 

centralized service companies to report 

direct and indirect costs charged to 

associate utility companies, associate 

non-utility companies, non-associate 

utility companies and non-associate 

non-utility companies. Proposed 

Schedule XVII requires centralized 

service companies to report service cost 

billed by department or service function 

and overhead costs. 

Comments 

176. EEI recommends that the 

Commission consider deleting Schedule 

XV–A and either Schedule XVI or 

XVII.153 EEI states that, whichever of 

these schedules the Commission retains, 

the Commission should allow 

companies to report total amounts for 

each account or group of accounts listed 

rather than by direct and indirect or 

overhead costs. In EEI’s opinion, the 

breakdown by direct, indirect, and use 

of capital would require companies to 

parse the information in each account or 

set of accounts to too fine a degree with 

no clear benefit. EEI indicates that if 

Schedule XVI is retained, the 

Commission should follow the SEC’s 

past practice of having companies 

distinguish the information for associate 

and non-associate companies, ideally by 

group of accounts rather than by utility 

versus non-utility.154

177. In addition, EEI encourages the 

Commission not to require information 

to be broken down as shown on 

Schedule XVII by service company 

department or service function.155 As 

presented, EEI states, the schedule 

would require companies to break down 

internal financials across the array of 

USofA accounts by department or 


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156 Id. 

157Southern Supplemental Comments at 3. 

158NARUC Supplemental Comments at 7. 

159 Id. 

160EEI at 29. 

161Southern Supplemental Comments at 3. 

function, requiring far too much detail 

with no clear benefit.156 Southern states 

departmental/functional reporting by 

account adds difficulty and would not 

be consistent among companies.157

178. NARUC, on the other hand, 

states Schedule XVI is important since 

it allows a comparison of direct and 

indirect costs allocated to utility 

companies and non-utility companies 

while showing the allocation of 100 

percent of these costs to the various 

billing groups.158 NARUC indicates this 

is needed to ensure utility companies 

are not treated differently from nonutility companies. NARUC suggests 

simplifying this schedule, at least for 

the 500 and 800 series of operation and 

maintenance expense accounts; NARUC 

contends it may be possible to allow 

companies to provide information by 

group of accounts. 

179. NARUC explains that Schedule 

XVII assists state regulators in 

classifying charges on the utility’s 

records, helps in judging the 

reasonableness of service company 

charges and whether such charges 

duplicate what the utility incurs 

internally, and focuses attention on 

comparisons between what gets charged 

to the associated utility companies and 

non-utility companies. NARUC 

proposes expanding Schedule XVII to 

provide a breakdown by associate 

utilities and non-utilities, and by nonassociate companies. NARUC states this 

is important to make a comparison of 

departmental costs allocated to associate 

utility and non-utility companies 

because these comparisons ensure that 

associate utility companies are not 

treated differently from associated nonutility companies.159

Commission Determination 

180. The Commission agrees with EEI 

that the information required in 

proposed Schedule XV–A is 

unnecessary, and will delete Schedule 

XV–A. The same information is reported 

in Schedule XVI, Analysis of Charges 

for Services, except for comparable 

information for the prior year. 

Therefore, the Commission will delete 

Schedule XV–A. 

181. The Commission will also delete 

Schedule XVII. With regard to Schedule 

XVII, Southern notes that departmental/ 

functional reporting would not be 

consistent among companies. 

Departments and functions are not 

standardized and, therefore, comparison 

across companies is not possible. While 

we agree with NARUC that Schedule 

XVII may provide some useful 

departmental/functional information, on 

a company by company basis, requiring 

the reporting on an annual basis may be 

an unnecessary burden. NARUC’s 

proposal to expand Schedule XVII to 

include reporting by individual 

associate and non-associate utility 

companies, associate non-utility 

companies and non-associate companies 

points to a weakness in the current 

schedule. In fact, the schedule does not 

disclose information on charges to 

utility companies except through the 

department service or functional 

category. The additional expense 

accounts required under the new USofA 

will provide better functional 

information and lessen the need for this 

schedule. The information provided in 

Schedule XVI will enable the 

Commission to capture information 

about charges for services provided to 

utility companies. If departmental/ 

functional information is needed, the 

information can be obtained from each 

centralized service company on a caseby-case basis without the need to be 

reported annually. Therefore, the 

Commission will delete Schedule XVII. 

182. The Commission will retain 

Schedule XVI, but modify the schedule 

to remove the utility versus non-utility 

expense separation, consistent with our 

decision concerning the service 

company revenue accounts discussed 

elsewhere in this Final Rule. While the 

utility versus non-utility expense 

separation is removed, the total amounts 

assigned to individual utility companies 

are available in the Analysis of Billing 

schedules. This will result in returning 

to the associate company/non-associate 

company expense separation contained 

in the December 2005 FERC Form No. 

60. We also will revise Schedule XVI to 

roll up certain expense classifications 

suggested by EEI and NARUC to reduce 

the burden associated with completing 

this schedule. 

(11) Analysis of Billing Schedules 

183. In the NOPR, the Commission 

proposed to modify the Analysis of 

Billing schedules that report billings to 

each company for services provided by 

the centralized service companies by 

breaking out the schedules into 

associate utility, non-associate utility 

and non-utility companies. 

Comments 

184. EEI indicates the Commission 

should not require reporting of 

information broken down into utility 

and non-utility services, in particular 

for non-associate companies where the 

service company often will not have this 

information. Service companies 

currently report their services provided 

by individual company in the FERC 

Form No. 60, on schedules ‘‘Analysis of 

Billing—Associate Companies’’ and 

‘‘Analysis of Billing—Non-associate 

Companies.’’ EEI argues these schedules 

provide ample information of the sort 

being proposed and that no additional 

detail is necessary.160

185. Southern recommends the 

schedule, Analysis of Billing—Nonassociate Companies, be revised to 

request the names and amounts for nonassociate companies only for those that 

exceed 10% of the total non-associate 

billings. Southern argues this would 

reduce the time spent in preparation of 

this schedule while still providing the 

Commission with the names of all nonassociate companies of consequence.161

Commission Determination 

186. We agree with EEI’s comments 

that the Analysis of Billing schedules 

contained in the December 2005 FERC 

Form No. 60 provide sufficient 

information concerning the customers to 

whom amounts are billed, and a further 

separation of those customers into 

utility and non-utility classifications for 

purposes of this schedule is not needed 

by the Commission since specific 

information about utilities is already 

reported separately in the current 

Analysis of Billing schedules. Therefore, 

consistent with our decision above to 

eliminate Account 459, Services 

rendered to non-utility companies, we 

will also eliminate the proposed 

schedule ‘‘Analysis of Billing Nonutility 

Companies—Account 459.’’ Also, we 

will revise the ‘‘Analysis of Billing 

Schedules’’ for Accounts 457, Services 

rendered to associate companies, and 

458, Services rendered to non-associate 

companies to reflect only a separation of 

billings between associate and nonassociate companies, consistent with 

our decision on the service company 

revenue accounts discussed elsewhere 

in this Final Rule. The Commission will 

not adopt Southern’s proposal to reduce 

the reported number of non-associate 

companies. The requirement is not 

overly burdensome and allows the 

Commission to observe all billings to 

such companies. 

(12) Departmental Analysis of Salaries 

Schedule; Methods of Allocation 

Schedule; and Organizational Chart 

Schedule 

187. The proposed Departmental 

Analysis of Salaries Schedule reports 

the amount of service company salaries 


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162EEI at 30. 

163EEI at 31. 

164Southern at 3. 

165EEI at 31. 

166NARUC Supplemental Comments at 8 and 9. 

167EEI at 37; Southern at 3. 

168Our staff review of FERC Form No. 60 

submissions for calendar year 2005 indicates that 

$50,000 is a reasonable threshold that will provide 

sufficient information without eliminating 

necessary detail. 

169The FERC Form No. 1 threshold for this 

account schedule is $5,000. 

billed by department or service function 

to the parent holding company, 

associate companies, and non-associate 

companies and the number of 

employees. The Methods of Allocation 

Schedule reports the allocation factors 

used to allocate indirect costs to each 

associate company. The Organizational 

Chart schedule reports how the service 

company is organized. 

Comments 

188. EEI states these schedules 

involve what it considers organizational 

reporting and recommends eliminating 

the schedules because adequate 

oversight can be accomplished without 

this level of detail, and accurate 

comparisons between companies would 

be very difficult.162 If the Methods of 

Allocation schedule is retained, EEI 

requests the Commission continue its 

current practice of allowing companies 

to list their allocation methods, as they 

currently do in the FERC Form No. 60, 

rather than having to elaborate on the 

methods in the form. EEI indicates 

companies should not be required to 

key voluminous formulas, by service 

rendered, into the automated reporting 

application.163

189. Southern does not see the benefit 

to the Commission of providing a 

current Organizational Chart in the 

FERC Form No. 60 and proposes that 

this requirement be eliminated. 

Southern argues it is not required for 

FERC Form No. 1.164

Commission Determination 

190. The Commission will eliminate 

the Departmental Analysis of Salaries 

Schedule. Consistent with our decision 

above regarding our decision to 

eliminate Schedule XVII, departmental 

or functional categories are difficult to 

compare because they are not 

standardized. If needed, the information 

can be obtained from centralized service 

companies on a case-by-case basis. 

191. The Commission will retain the 

Methods of Allocation schedule, 

however, because that is the only means 

readily available to determine how 

indirect costs are being allocated to 

services provided. The current schedule 

has no instructions and Staff’s review of 

2005 FERC Form No. 60s indicated poor 

reporting. The main purpose of the 

schedule is to disclose what allocation 

ratios are used and what numerator and 

denominator were used to create the 

ratio. We are revising the instruction, 

accordingly. 

192. The Commission will also 

continue to require submission of an 

Organization Chart in the FERC Form 

No. 60 as proposed. An Organization 

Chart provides basic information about 

the hierarchical structure of the service 

company. It provides useful information 

to the Commission about how the 

centralized service company deploys its 

resources and the relationship between 

organizational departments within the 

centralized service company and the 

allocation of costs to services, functions 

and projects. We recognize the FERC 

Form No. 1 does not require an 

Organization Chart. However, our need 

to know the organizational structure of 

a centralized service company is greater 

as opposed to the organizational 

structure of an electric utility company. 

(13) Annual Statement of Compensation 

for Use of Capital Billed 

193. This schedule reports the amount 

of compensation for use of capital billed 

to each associate company. 

Comments 

194. EEI proposes to eliminate the 

Annual Statement of Compensation for 

Use of Capital Billed, and the associated 

revenue Accounts 457.3, Compensation 

for use of capital-associate companies, 

458.3, Compensation for use of capital—

Non-associate companies, and 459.3, 

Compensation for use of capital—Nonassociate non-utility companies. EEI 

argues compensation for use of capital 

is so minor that it does not warrant 

special treatment in reporting. 

Moreover, EEI states details of 

significant financial arrangements are 

included in the notes to the balance 

sheet, and total interest costs are 

disclosed in the income statement.165

195. Conversely, NARUC indicates 

the Annual Statement of Compensation 

for Use of Capital Billed should be 

required in FERC Form No. 60. NARUC 

argues this statement provides the 

calculation of the use of capital that will 

be billed to the centralized service 

companies’ associate companies during 

the calendar year. In addition, NARUC 

indicates this statement in the FERC 

Form No. 60 is a resource for verifying 

and reconciling the costs that are 

included in centralized service 

company billings. NARUC notes the 

FERC Form No. 60 requires a separate 

statement for each associate company. 

However, NARUC claims, a separate 

statement for each associate company 

may not be necessary if the calculations 

are consistent.166

Commission Determination 

196. We agree with EEI that footnote 

disclosure would be a suitable 

substitute for this schedule, and so, we 

will delete the Annual Statement of 

Compensation for Use of Capital Billed. 

However, we will not delete Accounts 

457.3 or 458.3. The amounts recorded in 

these accounts will continue to be 

reported on the Analysis of Billing 

Schedules for Accounts 457 and 458. 

Centralized service companies should 

disclose the basis of how the amounts 

are assigned to the associate and nonassociate companies in a footnote to the 

Analysis of Billing Schedules for 

Accounts 457 and 458. As long as all 

companies are treated similarly, we 

believe this should satisfy NARUC’s 

requirements. 

(14) Miscellaneous General Expenses 

Schedule (Account 930.2) 

197. This schedule lists the items 

included in Account 930.2, 

Miscellaneous general expenses. 

Comments 

198. EEI and Southern recommend 

deleting the schedule or only requiring 

disclosure of items that exceed $1 

million. EEI and Southern contend this 

schedule requires considerable detailed 

analysis to complete.167

Commission Determination 

199. The Commission will retain this 

schedule. Many service companies 

report significant amounts in Account 

930.2. This schedule provides the 

nature of the amounts included in a 

miscellaneous catchall account where 

the account title does not provide 

descriptive information of the amounts 

included in the account. This schedule 

currently has no threshold level. 

However, in response to EEI’s and 

Southern’s proposal, we will adopt a 

threshold requiring the separate 

reporting of items over $50,000.168 We 

believe a $1,000,000 threshold 

alternative suggested by commenters is 

unreasonably high and would not 

provide for adequate disclosure of the 

nature of the items included in this 

account.169

(c) General Instruction IX 

200. General Instruction IX states that 

prior period comparison figures must be 

the same as reported in the previous 


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65222 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

170EEI at 32–33. 

171EEI at 30–31. 

172EEI Supplemental Comments at 12. 

173For example, for one centralized service 

company, one percent of its billings represents a 

$9,000,000 threshold, at five percent, it would 

represent $45,000,000. These thresholds would 

eliminate reporting in most itemized schedules. 

174SEC instructions to SEC Form U–13–60, the 

predecessor to December 2005 FERC Form No. 60, 

allowed service companies to report in either whole 

dollars, thousands of dollars, hundreds of thousand 

of dollars, or millions of dollars. 

175Supra note 34. 

176EEI at 49. 

report, or ‘‘an appropriate explanation 

given as to why the different figures 

were used.’’

Comments 

201. EEI states that in general, 

companies would like to follow the 

GAAP practice of reclassifying prior 

period amounts when necessary, with a 

footnote to the effect that ‘‘certain prior 

amounts have been reclassified to 

conform to the current year 

presentation.’’ 170 EEI indicates any 

material reclassifications would include 

a footnote disclosure. Therefore, EEI 

recommends the Commission insert the 

word ‘‘materially’’ before ‘‘different 

figures were used.’’

Commission Determination 

202. As an initial matter, we note that 

instances in which prior year data in 

current reports is different than 

previously reported should be rare. The 

instances should be limited to such 

things as corrections of accounting 

errors and changes in accounting 

principles. The Commission and other 

users of the FERC Form No. 60 are 

particularly interested in understanding 

the economic effects of these types of 

occurrences, including the particular 

accounts affected and the related 

amounts. An explanation that ‘‘certain 

prior amounts have been reclassified to 

conform to the current year 

presentation’’ does not provide an 

adequate explanation. Footnote 

disclosure of only material amounts as 

EEI suggests also is insufficient because 

amounts below the material threshold 

could affect cost allocations or have rate 

implications. Consequently, we will 

adopt the proposed instruction 

unmodified. 

(d) Raising the Threshold for 

Individually Itemized Items 

203. Some of the supporting 

schedules contained in the FERC Form 

No. 60 require reporting individual 

items when the amount for such items 

exceeds a specified threshold amount. 

For instance, some schedules list 

individual items and amounts less than 

a $5,000 threshold can be grouped 

together rather than reported separately. 

Comments 

204. EEI proposes the establishment 

of a higher threshold to apply to 

itemizations on schedules. Currently, 

when stated, the minimum for 

itemization is $5,000 or $10,000. EEI 

states that, due to the difference in 

company sizes, the establishment of a 

relative threshold (for example, five 

percent of total) would minimize 

unnecessary itemization and still 

provide meaningful data.171 EEI further 

recommends the Commission allow 

companies to set a materiality threshold, 

so that items less than some de minimis 

amount do not need to be broken out in 

the FERC Form No. 60.172 EEI suggests 

using as the de minimis amount 

$100,000, one to five percent of 

company billings, or 10 percent of the 

total amount on a particular schedule, 

whichever is higher. Further, EEI points 

out that the SEC’s ‘‘PUHCA Staff 

Examination Instructional Manual,’’

section IV.A.3(c), which advised their 

staff to use a $50,000 or five percent 

threshold to determine if allocation 

methods should come to the attention of 

the SEC for approval. 

Commission Determination 

205. We agree with EEI that the 

thresholds can be raised without losing 

appropriate detail. However, the 

thresholds suggested by EEI are 

extremely high and would eliminate 

needed disclosure.173 The SEC Staff 

manual threshold suggested by EEI 

addressed allocations, and did not apply 

to thresholds in individual schedules. 

The Commission will raise or add 

thresholds over the current FERC Form 

No. 60 schedules. We believe a 

threshold of $50,000 would reduce the 

reporting burden without the loss of 

appropriate detail. Therefore, we will 

establish a threshold of $50,000 for the 

following schedules: Schedules IV, VIII, 

IX, X, XIII, and XIX. 

(e) Reporting in Whole Dollars or 

Alternatively in Thousands 

206. In the NOPR, the Commission 

proposed to require reporting 

companies to use whole dollars as the 

reported dollar amounts. 

Comments 

207. EEI proposes that centralized 

service companies should have the 

option to report all dollars consistently 

in thousands, as opposed to whole 

dollars as proposed in the NOPR, as 

long as the companies indicate what 

they are doing. EEI indicates the added 

digits do not add significant 

information, but rather, make the 

schedules substantially harder to 

produce and read. EEI notes this is 

consistent with the way amounts were 

reported in the SEC Form U–13–60.174

Commission Determination 

208. When centralized service 

companies filed with the SEC their 

filings were text based and did not 

allow for data retrieval and analysis. 

The Commission supports the use of 

submission software to ensure data 

integrity and permit ready analysis of 

forms data. The Commission plans to 

issue submission software for the FERC 

Form No. 60 in the early part of 2007. 

The software would allow companies to 

reduce costs of completing FERC Form 

No. 60 and allow for data retrieval and 

analysis not currently possible in the 

hard copy FERC Form No. 60. However, 

electronic reporting requires selecting 

one common reporting basis. 

Comparability is important, and can not 

be achieved without one common 

reporting basis. Consequently, we will 

adopt reporting in whole dollars. 

However, during a transition period 

covering the 2006 and 2007 reporting 

years, for the FERC Form No. 60s due 

May 1, 2007 and May 1, 2008, 

respectively, we will allow centralized 

service companies that report in 

thousands to round to the nearest $1000 

(reporting $123,000 instead of 

$123,456).175

(f) Comparative Information 

209. Some FERC Form No. 60 

schedules present data from the current 

year along with the same data from the 

prior year. 

Comments 

210. EEI states that comparative 

information provided in the revised 

FERC Form No. 60 should not be 

required until the following year, at 

least to the extent the information being 

compared is not already presented in 

the December 2005 FERC Form No. 

60.176

Commission Determination 

211. In response to EEI’s proposal and 

in order to reduce the possible 

administrative burden that may be 

incurred by respondents during the 

initial reporting year for the FERC Form 

No. 60 adopted in this Final Rule, i.e., 

the FERC Form No. 60 for the 2008 

reporting year due May 1, 2009, the 

Commission will only require current 

year data. Respondents will be required 


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177NARUC Supplemental Comments at 8. 

178NARUC Supplemental Comments at 9. 179Southern at 3. 

180EEI at 43–44; National Grid at 13. 

181National Grid at 13–14; EEI at 44. 

182Southern at 6. 

to report prior year’s amounts beginning 

with the second year the FERC Form 

No. 60 adopted in this Final Rule is 

required, i.e., the FERC Form No. 60 for 

the 2009 reporting year due May 1, 

2010. 

(g) Request To Expand Data Collection 

in FERC Form No. 60 Comments 

212. NARUC proposes adding a new 

schedule showing charges from 

affiliated companies to the service 

company. NARUC states the schedule 

would show the affiliate, the nature of 

the charges, and the basis of the 

charges—i.e., cost, market, or other. 

NARUC states this schedule is 

important, since an affiliate may charge 

the service company a marked-up price. 

Since this would become a cost to the 

service company, the marked-up item 

then could be charged to a public utility 

at a cost higher than if it had been 

directly charged to the utility. NARUC 

also proposes adding a new schedule 

showing goods and services provided by 

the service company both internally and 

externally. NARUC’s concern is that, 

once a good or service becomes 

profitable, it will be moved from the 

service company and offered by another 

affiliate.177

213. NARUC notes that in Order No. 

667, the Commission deleted two 

supporting schedules concerning 

outside services employed (Account 

923) and employee pensions and 

benefits (Account 926) from the FERC 

Form No. 60.178 NARUC proposes to 

add these schedules back in the revised 

FERC Form No. 60. NARUC argues 

outside services and employee expenses 

are major components of expense (along 

with labor) incurred by a service 

company. According to NARUC, the 

detail in these schedules would provide 

an important tool for understanding 

service company costs and functions. As 

a result, according to NARUC, these 

schedules are essential in the evaluation 

of whether cross-subsidization exists 

within the holding company 

organization. 

Commission Response 

214. We share NARUC’s concerns 

about the possibility of inappropriate 

cross subsidization or other unfair 

results obtained through affiliate 

relationships and transactions. At this 

time, however, we are not convinced 

that it is necessary to require centralized 

service companies to report as 

extensively about its affiliated 

transactions as NARUC recommends. 

With regard to adding back schedules 

for outside services employed (Account 

923) and employee pensions and 

benefits (Account 926) which we 

deleted in Order No. 667, we deleted the 

schedules because they are not required 

in the FERC Form No. 1. Our need to 

weigh centralized service company 

burden versus protecting the public 

interest is difficult. Our requirement to 

report services performed for public 

utilities in the 500 and 800 accounts 

should reduce the amounts reported in 

Account 923. Centralized service 

companies do report information on 

pensions and benefits in their notes to 

the financial statements. Therefore, the 

Commission will not adopt NARUC’s 

recommendations to add Schedules for 

Account 923 and Account 926 back in 

the revised FERC Form No. 60 in this 

Final Rule. However, as we gain 

additional knowledge about our needs 

for centralized service company 

information we may revisit these 

proposals. 

(h) Schedule Numbering 

Comments 

215. Southern notes that some of the 

schedules within the revised FERC 

Form No. 60 have a schedule number 

while others are referenced by the 

account number. Southern states that it 

would be helpful if the schedules were 

all labeled consistently with schedule 

numbers.179

Commission Determination 

216. The Commission agrees that 

assigning schedule numbers to all 

schedules in the revised FERC Form No. 

60 would be helpful for referencing 

purposes for both users and preparers. 

Therefore, we will label all schedules 

with schedule numbers. 

(i) Chief Accountant’s Delegated 

Authority 

217. The NOPR proposed to revise 

§ 375.303(c), (d), (e), (f), (g) and (h) to 

update the delegations to the Chief 

Accountant or the Chief Accountant’s 

designee. These authorities are similar 

to those that the Chief Accountant has 

for public utilities and licensees, natural 

gas companies and oil pipeline 

companies. 

Comments 

218. EEI and National Grid request 

clarification of proposed § 375.303(f), 

that authorizes the Chief Accountant or 

the Chief Accountant’s designee to 

‘‘accept for filing’’ FERC Form Nos. 60, 

3–Q, and 6–Q. The commenters believe 

that the requirement appears to imply 

that the Commission, its Chief 

Accountant, or the Chief Accountant’s 

designee would issue a formal order 

accepting such forms, which is not the 

current practice. They argue that 

because such a delegation could raise 

the expectation (especially on the part 

of auditors) that orders accepting Form 

Nos. 60, 3–Q and 6–Q would be issued, 

the Commission should clarify either 

that it will, in fact, issue such 

acceptance orders, or that the regulatory 

text is not intended to provide for the 

issuance of formal acceptance orders.180

219. EEI and National Grid also 

request that the Commission clarify 

proposed § 375.303(g) that permits the 

Chief Accountant or the Chief 

Accountant’s designee to grant or deny 

requests for waiver of various 

regulations including § 366.23, which 

requires the filing of FERC Form No. 60. 

The commenters assert that the 

authority to act on motions for 

extensions of time is not explicitly 

provided for in the revisions in 

§ 375.303(g). The commenters ask that 

the Commission clarify that this 

delegated authority includes the 

authority to grant an extension of 

time.181

220. Southern asserts that, in the 

proposed § 375.303(f), the reference to 

the Form Nos. 3–Q and 6–Q is 

erroneous for service companies.182

Commission Determination 

221. We grant EEI and National Grid’s 

request for clarification of § 375.303(f), 

that the authorization granted to the 

Chief Accountant or designee to ‘‘accept 

for filing’’ FERC Form Nos. 60, 3–Q, and 

6–Q is not intended to provide for the 

issuance of formal acceptance orders; 

the term ‘‘accept for filing’’ is merely a 

designation of the office or Commission 

officer responsible for the management 

and oversight of the applicable form. 

222. We acknowledge Southern’s 

comment that the proposed § 375.303(f) 

reference to the Form Nos. 3–Q and 6&Q 

would be erroneous for centralized 

service companies. Form Nos. 3–Q and 

6–Q are not filing requirements for 

centralized service companies. 

However, the delegation of authority to 

accept the financial forms filed with the 

Commission, including Form Nos. 3–Q 

and 6–Q, and, with this Final Rule, the 

revised FERC Form No. 60, is not 

directed solely to centralized service 

companies but to all regulated public 

utilities and licensees, natural gas 

pipelines, oil pipelines and with this 

Final Rule centralized service 

companies. In this Final Rule, the 


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65224 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

183 18 CFR 366.23(a)(2) (2006). 184See 44 U.S.C. 3507(d) (2000). 185 5 CFR 1320.11 (2006). 

Commission adopts the delegations to 

the Chief Accountant in § 375.303(f) as 

proposed in the NOPR with one 

modification, to include an additional 

form, FERC–61. Holding companies are 

required to file FERC–61, Narrative 

description of service company 

functions, annually with the 

Commission those centralized for 

service companies that do not file FERC 

Form No. 60, and, similar to the other 

reporting Forms, included in this 

delegation should be handled under 

delegated authority by the Chief 

Accountant.183

223. We will grant EEI and National 

Grid’s request to clarify § 375.303(g) to 

include the authority to act on motions 

for extensions of time to file FERC Form 

No. 60. While the Commission has 

previously delegated the authority to 

grant extensions of time to file FERC 

Form No. 60 to the Chief Accountant in 

§ 366.23(a)(3), for ease of administration 

we will include this delegation in 

§ 375.303(g). 

V. Information Collection Statement 

224. The following collections of 

information referenced in this Final 

Rule have been submitted to the Office 

of Management and Budget (OMB) for 

review under section 3507(d) of the 

Paperwork Reduction Act of 1995.184

OMB’s regulations require OMB to 

approve certain information collection 

requirements imposed by agency 

rule.185 Upon approval of a collection of 

information, OMB will assign an OMB 

control number and expiration date. 

Respondents subject to the filing 

requirements of this Final Rule will not 

be penalized for failing to respond to 

these collections of information unless 

the collections of information display a 

valid OMB control number or the 

Commission had provided a 

justification as to why the control 

number should be displayed. 

225. In the NOPR, the Commission 

provided burden estimates for 

complying with the rule as follows: 

FERC Form No. 60: 38 Respondents, 

38 Responses @ 10 hours per response 

= 380 Total Annual Hours; and 

FERC–555A (recordkeeping): 300 

Respondents @ 1,080 hours per 

respondent = 324,000 Total Annual 

Hours. 

226. In response to comments the 

Commission received (see below), the 

Commission is revising its estimates as 

follows: 

Data collection Number of 

respondents 

Number of 

responses 

Hours per 

response Total 

1 FERC Form No. 60 .................................................................................... 38 38 75 2,850 

2 FERC–555A ............................................................................................... 300 ........................ 1,080 324,000 

Totals ........................................................................................................ ........................ ........................ ........................ 326,850 

Information Collection Costs: The 

Commission also projected (and has 

revised) the average annualized cost of 

all respondents to be the following: 

FERC Form No. 60 = 380 Hours at 

$120 an hour (an average of 3 staff @ $40 

an hour) = $45,600. As revised, FERC 

Form No. 60 = 2,850 hours @ $120 (an 

average of 3 staff @ $40 an hour) = 

$342,000. 

FERC–555A = The Commission 

projected an annualized cost of all 

respondents as 324,000 hours @ $68 an 

hour ($17 an hour, an average of 4 staff) 

= $22,032,000 (staffing) + $6,696,000 

(storage) = $28,728,000. These costs 

assume that the average office storage 

space is $7,440 for retaining records onsite. (Usually after the initial year 

records are transferred to an off-site 

location where the storage costs drop to 

$925 (on average).) As these 

requirements are being approved for an 

initial three-year period, the assumption 

was made that during that period the 

records would be retained on-site). 

These cost estimates used as an 

example: 120 cubic feet (20 four-drawer 

file cabinets) and include the cubic feet 

of storage plus the cost of floor space 

plus the costs for records storage 

cartons. Greater saving can be 

accomplished if documents are stored 

electronically, i.e., one file cabinet (fourdrawer) (10,000 pages on average) = 500 

MegaBytes (MByte) = one CD ROM. 

The Total Costs for reporting and 

recordkeeping ($342,000 + $28,728,000) 

= $29,070,000. 

227. As noted above, the Commission 

sought comments on both the burden 

estimates and corresponding costs: it 

should be noted that the Commission’s 

initial estimates were based on its 

review of the SEC’s burden estimates 

and its first year of experience in 

implementing the FERC Form No. 60 

reporting requirement. The Commission 

received one comment specifically 

addressing the burden estimate for 

completing the revised FERC Form No. 

60. This commenter, Southern, provided 

an estimate for completion of the 

revised FERC Form No. 60 prior to our 

adoption of the requirements contained 

in this Final Rule. The Commission 

notes that Southern has significant 

operations, and it is to be expected that 

its estimates would exceed the average 

projected by the Commission. 

Otherwise, the majority of the 

commenters, while not providing 

specific comments on the estimates, in 

general opposed the Commission’s 

proposal of establishing new accounting 

and reporting requirements for 

centralized service companies. These 

objections were also repeated in the staff 

technical conference where some 

participants stated that the NOPR’s 

proposed requirements would be 

burdensome and costly to implement as 

changes would have to be made to their 

accounting systems. The Commission 

did not receive any specific comments 

concerning the estimates for the 

recordkeeping requirements. 

228. The Commission has addressed 

commenters’ substantive concerns 

elsewhere in this Final Rule and will 

not repeat its responses here. The 

actions taken in this Final Rule should 

ameliorate the concerns of a significant 

burden increase and any corresponding 

cost increase. 

229. Further, in Order No. 667, the 

Commission provided its initial 

estimate for completing the FERC Form 

No. 60, and did not receive any 

comments in response to that estimate. 

In Order No. 667–A, the Commission 

made offsetting changes to those 

reporting requirements and, in light of 

the changes and the absence of 

comments, let the original projected 

burden estimates stand. However, we 

went on to say that, with additional 

experience, including comments 

received in response to our initiatives, 

we would adjust the burden estimates. 

In view of the comments received 

specifically concerning the burden 

estimates and the implementation of the 

reporting requirements contained in this 

Final Rule, we are revising the estimates 

accordingly. On the other hand, as the 

Commission is adopting electronic 

submission of this information in a 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65225 

186Supra note 34. 

187See Regulations Implementing the National 

Environmental Policy Act, Order No. 486, 52 FR 

47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 

(1987). 

188See 18 CFR 380.4(a)(5). 

189See 18 CFR 380.4(c)(16). 

190See 5 U.S.C. 601–612. 

191See 5 U.S.C. 601(3) citing to section 3 of the 

Small Business Act, 15 U.S.C. 632. Section 3 of the 

Small Business Act defines a ‘‘small-business 

concern’’ as a business which is independently 

owned and operated and which is not dominant in 

its field of operation. The Small Business Size 

Standards component of the North American 

Industry Classification System (NAICS) defines a 

small electric utility as one that, including its 

affiliates, is primarily engaged in generation, 

transmission, and/or distribution of electric energy 

for sale and whose total electric output for the 

preceding fiscal years did not exceed 4 million 

MWh. NAICS defines a small natural gas pipeline 

company as one that transports natural gas and 

whose annual receipts (total income including cost 

of goods sold) did not exceed $6.5 million dollars 

for the preceding years. 13 CFR 121.201. 

separate rulemaking proceeding in 

Docket No. RM06–25–000, this will save 

time and resources for all parties since 

electronic filings require fewer 

personnel than paper filings by avoiding 

the need for paper processing and 

mailing and consequently reduce the 

burden.186

Title: FERC Form No. 60, ‘‘Annual 

Report of Centralized Service 

Companies’’ and FERC–555A, 

‘‘Preservation of Records for Service 

Companies Subject to PUHCA 2005.’’

Action: Proposed collections. 

OMB Control Nos.: 1902–0215 (FERC 

Form No. 60) and 1902–XXXX (to be 

determined) (FERC–555A). 

Respondents: Businesses or other for 

profit. 

Frequency of Responses: Annually 

and on occasion. 

Necessity of the Information: This 

Final Rule amends the Commission’s 

regulations to implement PUHCA 2005 

as enacted by the EPAct 2005. 

Specifically, the Commission is 

adopting a USofA for Centralized 

Service Companies, adding preservation 

of records requirements for holding 

companies and service companies, 

revising the FERC Form No. 60 in order 

to provide for financial reporting 

consistent with the new USofA, and 

providing for the electronic filing of 

revised FERC Form No. 60. In Order No. 

667, the Commission also set forth its 

objective to prescribe uniform 

accounting requirements for centralized 

service companies, i.e., service 

companies that are not special purpose 

companies, within holding company 

systems, and records retention 

requirements for both service companies 

and holding companies. The addition of 

these accounts and related changes in 

the reporting, as well as uniform records 

retention requirements, provides 

uniformity and transparency for costs 

that are billed to regulated entities, 

allows for comparability of like costs 

across centralized service companies, 

provides for comparisons of year-to-year 

changes in a centralized service 

company’s costs and billings, and 

facilitates the uniform compilation of 

consolidated financial statements. 

Without specific instructions and 

accounts for recording and reporting the 

above transactions and events, and 

retaining relevant records and 

information, inconsistent and 

incomplete accounting and reporting 

will result. 

230. Interested persons may obtain 

information on the reporting 

requirements by contacting the 

following: Federal Energy Regulatory 

Commission, 888 First Street, NE., 

Washington, DC 20426 [Attention: 

Michael Miller, Office of the Executive 

Director, phone (202) 502–8415, fax: 

(202) 273–0873, e-mail: 

michael.miller@ferc.gov] 

231. For submitting comments 

concerning the collection of 

information(s) and the associated 

burden estimates, please send your 

comments to the contact listed above 

and to the Office of Management and 

Budget, Office of Information and 

Regulatory Affairs, Washington, DC 

20503, Attention: Desk Officer for the 

Federal Energy Regulatory Commission; 

Phone: (202) 395–4650, fax: (202) 395–

7285. 

VI. Environmental Analysis 

232. The Commission is required to 

prepare an Environmental Assessment 

or an Environmental Impact Statement 

for any action that may have a 

significant adverse effect on the human 

environment.187 No environmental 

consideration is necessary for the 

promulgation of a rule that addresses 

information gathering, analysis, and 

dissemination,188 and, also, that 

addresses accounting.189 This Final 

Rule addresses information gathering, 

analysis, and dissemination. In 

addition, this Final Rule involves 

accounting requirements. Therefore, the 

Final Rule falls within categorical 

exemptions provided in the 

Commission’s regulations. 

Consequently, neither an Environmental 

Impact Statement nor an Environmental 

Assessment is required. 

VII. Regulatory Flexibility Act 

233. The Regulatory Flexibility Act of 

1980 (RFA) 190 generally requires a 

description and analysis of the effect 

that a Final Rule will have on small 

entities or a certification that a rule will 

not have a significant economic impact 

on a substantial number of small 

entities. 

234. The Commission concludes that 

this Final Rule will not have such an 

impact on a substantial number of small 

entities. Most holding companies to 

which this Final Rule would be 

applicable do not fall within the RFA’s 

definition of a small entity.191

Moreover, the Commission also 

concludes that this Final Rule will not 

impose a significant burden since the 

information is already being captured by 

existing accounting systems and 

generally being reported at a 

consolidated business level. 

VIII. Document Availability 

235. In addition to publishing the full 

text of this document in the Federal 

Register, the Commission provides all 

interested persons an opportunity to 

view and/or print the contents of this 

document via the Internet through the 

Commission’s Home Page (http:// 

www.ferc.gov) and in the Commission’s 

Public Reference Room during normal 

business hours (8:30 a.m. to 5 p.m. 

Eastern time) at 888 First Street, NE., 

Room 2A, Washington DC 20426. 

236. From the Commission’s Home 

Page on the Internet, this document is 

available in the Commission’s document 

management system, e-Library. The full 

text of this document is available on 

e-Library in PDF and Microsoft Word 

format for viewing, printing, and/or 

downloading. To access this document 

in e-Library, type the docket number 

excluding the last three digits of this 

document in the docket number field. 

237. User assistance is available for 

e-Library and the Commission’s Web 

site during normal business hours. For 

assistance, please contact FERC Online 

Support at 1–866–208–3676 (toll free) or 

202–502–6652 (e-mail at FERCOnlineSupport@ferc.gov) or the Public 

Reference Room at 202–502–8371, TTY 

202–502–8659 (e-mail at 

public.referenceroom@ferc.gov). 

IX. Effective Date and Congressional 

Notification 

238. This Final Rule will take effect 

January 8, 2007; however, the revised 

FERC Form No. 60 adopted herein will 

be implemented with the reporting year 

2008 (due by May 1, 2009) and the 

accounting and records retention 

requirements adopted herein will be 

implemented January 1, 2008. 

239. The Commission has determined 

with the concurrence of the 

Administrator of the Office of 

Information and Regulatory Affairs of 


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65226 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

192 5 U.S.C. 801. 

the Office of Management and Budget 

that this Final Rule is not a major rule 

within the meaning of section 251 of the 

Small Business Regulatory Enforcement 

Fairness Act of 1996.192 The 

Commission will submit the Final Rule 

to both houses of Congress and the 

General Accounting Office. 

List of Subjects 

18 CFR Part 366 

Electric power, Natural gas, Reporting 

and recordkeeping requirements. 

18 CFR Part 367 

Electric power, Natural gas, Uniform 

System of Accounts, Reporting and 

recordkeeping requirements. 

18 CFR Part 368 

Electric power, Natural gas, Reporting 

and recordkeeping requirements. 

18 CFR Part 369 

Electric power, Natural gas, Reporting 

and recordkeeping requirements. 

18 CFR Part 375 

Authority delegations (Government 

agencies), Seals and insignia, Sunshine 

Act. 

By the Commission. 

Magalie R. Salas, 

Secretary. 

In consideration of the foregoing, 

under the authority of EPAct 2005, the 

Commission amends parts 366, and 375 

and adds parts 367, 368 and 369, to 

Chapter I, Title 18 of the Code of 

Federal Regulations, as set forth below: 

PART 366—PUBLIC UTILITY HOLDING 

COMPANY ACT OF 2005 

■ 1. The authority citation for part 366 

is revised to read as follows: 

Authority: 42 U.S.C. 16451–16463. 

■ 2. In § 366.21, paragraph (b) is revised 

to read as follows: 

§ 366.21 Accounts and records of holding 

companies. 

* * * * * 

(b) Unless otherwise exempted or 

granted a waiver by Commission rule or 

order pursuant to §§ 366.3 and 366.4, 

beginning January 1, 2008, all holding 

companies must comply with the 

Commission’s records retention 

requirements for holding companies and 

service companies as prescribed in part 

368 of this chapter. Until December 31, 

2007, holding companies registered 

under the Public Utility Holding 

Company Act of 1935 (15 U.S.C. 79a et 

seq.) may follow either the 

Commission’s records retention rules for 

public utilities and licensees or for 

natural gas companies, as appropriate 

(parts 125 and 225 of this chapter), or 

the Securities and Exchange 

Commission’s record retention rules in 

17 CFR part 257. 

* * * * * 

■ 3. In § 366.22, paragraphs (a)(1), (a)(2) 

(b)(1) and (b)(2) are revised to read as 

follows: 

§ 366.22 Accounts and records of service 

companies. 

(a) Records retention requirements—

(1) General. Unless otherwise exempted 

or granted a waiver by Commission rule 

or order pursuant to §§ 366.3 and 366.4, 

beginning January 1, 2008, every service 

company must maintain and make 

available to the Commission such books, 

accounts, memoranda, and other records 

in such manner and preserve them for 

such periods as the Commission 

prescribes in part 368 of this chapter, in 

sufficient detail to permit examination, 

audit, and verification, as necessary and 

appropriate for the protection of utility 

customers with respect to jurisdictional 

rates. 

(2) Transition period. Until December 

31, 2007, service companies in holding 

company systems registered under the 

Public Utility Holding Company Act of 

1935 (15 U.S.C. 79a et seq.) may follow 

either the Commission’s records 

retention requirements in parts 125 and 

225 of this chapter or the Securities and 

Exchange Commission’s records 

retention rules in 17 CFR part 257. 

* * * * * 

(b) Accounting requirements—(1) 

General. Unless otherwise exempted or 

granted a waiver by Commission rule or 

order pursuant to §§ 366.3 and 366.4, 

beginning January 1, 2008, every 

centralized service company (See 

§ 367.2 of this chapter) must maintain 

and make available to the Commission 

such books, accounts, memoranda, and 

other records as the Commission 

prescribes in part 367 of this chapter, in 

sufficient detail to permit examination, 

audit, and verification, as necessary and 

appropriate for the protection of utility 

customers with respect to jurisdictional 

rates. Every such service company must 

maintain and make available such 

books, accounts, memoranda, and other 

records in such manner as are 

prescribed in part 367 of this chapter, 

and must keep no other records with 

respect to the same subject matter 

except: 

(i) Records other than accounts; 

(ii) Records required by Federal or 

State law; 

(iii) Subaccounts or supporting 

accounts which are not inconsistent 

with the accounts required either by the 

Uniform System of Accounts for 

Centralized Service Companies in part 

367 of this chapter; and 

(iv) Any other accounts that may be 

authorized by the Commission. 

(2) Transition period. Until December 

31, 2007, service companies in holding 

company systems registered under the 

Public Utility Holding Company Act of 

1935 (15 U.S.C. 79a et seq.), as 

described in paragraph (b)(1) of this 

section, may follow either the 

Commission’s Uniform System of 

Accounts in parts 101 and 201 of this 

chapter or the Securities and Exchange 

Commission’s Uniform System of 

Accounts in 17 CFR part 256. 

* * * * * 

■ 4. In § 366.23, the section heading and 

paragraphs (a)(1) and (b) are revised to 

read as follows: 

§ 366.23 FERC Form No. 60, Annual report 

of centralized service companies, and 

FERC–61, Narrative description of service 

company functions. 

(a) General. 

(1) FERC Form No. 60. Unless 

otherwise exempted or granted a waiver 

by Commission rule or order pursuant 

to §§ 366.3 and 366.4, every centralized 

service company (See § 367.2 of this 

chapter) in a holding company system 

must file an annual report, FERC Form 

No. 60, as provided in § 369.1 of this 

chapter. Every report must be submitted 

on the FERC Form No. 60 then in effect 

and must be prepared in accordance 

with the instructions incorporated in 

that form. 

* * * * * 

(b) Transition period. Service 

companies in holding company systems 

exempted from the requirements of the 

Public Utility Holding Company Act of 

1935 (15 U.S.C. 79a et seq.) need not file 

an annual report, FERC Form No. 60, for 

calendar years 2005 through 2007, after 

which they must comply with the 

provisions of this section. 

* * * * * 

■ 5. Part 367 is added to subchapter U 

to read as follows: 

PART 367—UNIFORM SYSTEM OF 

ACCOUNTS FOR CENTRALIZED 

SERVICE COMPANIES SUBJECT TO 

THE PROVISIONS OF PUBLIC UTILITY 

HOLDING COMPANY ACT OF 2005 

Subpart A—Definitions 

Sec. 

367.1 Definitions. 


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Subpart B—General Instructions 

367.2 Companies for which this system of 

accounts is prescribed. 

367.3 Records. 

367.4 Numbering system. 

367.5 Accounting period. 

367.6 Submittal of questions. 

367.7 Item list. 

367.8 Extraordinary items. 

367.9 Prior period items. 

367.10 Unaudited items. 

367.11 Distribution of pay and expenses of 

employees. 

367.12 Payroll distribution. 

367.13 Accounting to be on accrual basis. 

367.14 Transactions with associate 

companies. 

367.15 Contingent assets and liabilities. 

367.16 Long-term debt: Premium, discount 

and expense, and gain or loss on 

reacquisition. 

367.17 Comprehensive inter-period income 

tax allocation. 

367.18 Criteria for classifying leases. 

367.19 Accounting for leases. 

367.20 Depreciation accounting. 

367.22 Accounting for asset retirement 

obligations 

367.23 Transactions with non-associate 

companies. 

367.24 Construction and service contracts 

for other companies. 

367.25 Determination of service cost. 

367.26 Departmental classification. 

367.27 Billing procedures. 

367.28 Methods of allocation. 

367.29 Compensation for use of capital. 

367.30 Cost allocation system for associate 

companies. 

Subpart C—Service Company Property 

Instructions 

367.50 Service company property to be 

recorded at cost. 

367.51 Components of construction. 

367.52 Overhead construction costs. 

367.53 Service company property 

purchased or sold. 

367.54 Expenditures on leased property. 

367.55 Land and land rights. 

367.56 Structures and improvements. 

367.57 Equipment. 

367.58 Property record system required for 

service company property. 

367.59 Additions and retirements of 

property. 

Subpart D—Operating Expense Instructions 

367.80 Supervision and engineering. 

367.81 Maintenance. 

367.82 Rents. 

367.83 Training costs. 

Subpart E—Special Instructions 

367.100 Accounts 131–174, Current and 

accrued assets. 

367.101 Accounts 231–243, Current and 

accrued liabilities. 

367.102 Accounts 408.1 and 408.2, Taxes 

other than income taxes. 

367.103 Accounts 409.1, 409.2, and 409.3, 

Income taxes. 

367.104 Accounts 410.1, 410.2, 411.1, and 

411.2, Provision for deferred income 

taxes. 

367.105 Accounts 411.4, and 411.5, 

Investment tax credit adjustments. 

367.106 Accounts 426.1, 426.2, 426.3, 

426.4, and 426.5, Miscellaneous expense 

accounts. 

Subpart F—Balance Sheet Chart of 

Accounts 

Service Company Property 

367.1010 Account 101, Service company 

property. 

367.1011 Account 101.1, Property under 

capital leases. 

367.1060 Account 106, Completed 

construction not classified. 

367.1070 Account 107, Construction work 

in progress. 

367.1080 Account 108, Accumulated 

provision for depreciation of service 

company property. 

367.1110 Account 111, Accumulated 

provision for amortization of service 

company property. 

Other Property and Investments 

367.1230 Account 123, Investment in 

associate companies. 

367.1240 Account 124, Other investments. 

367.1280 Account 128, Other special funds. 

Current and Accrued Assets 

367.1310 Account 131, Cash. 

367.1340 Account 134, Other special 

deposits. 

367.1350 Account 135, Working funds. 

367.1360 Account 136, Temporary cash 

investments. 

367.1410 Account 141, Notes receivable. 

367.1420 Account 142, Customer accounts 

receivable. 

367.1430 Account 143, Other accounts 

receivable. 

367.1440 Account 144, Accumulated 

provision for uncollectible accountsCredit. 

367.1450 Account 145, Notes receivable 

from associate companies. 

367.1460 Account 146, Accounts receivable 

from associate companies. 

367.1520 Account 152, Fuel stock expenses 

undistributed. 

367.1540 Account 154, Materials and 

operating supplies. 

367.1630 Account 163, Stores expense 

undistributed. 

367.1650 Account 165, Prepayments. 

367.1710 Account 171, Interest and 

dividends receivable. 

367.1720 Account 172, Rents receivable. 

367.1730 Account 173, Accrued revenues. 

367.1740 Account 174, Miscellaneous 

current and accrued assets. 

367.1750 Account 175, Derivative 

instrument assets. 

367.1760 Account 176, Derivative 

instrument assets—Hedges. 

Deferred Debits 

367.1810 Account 181, Unamortized debt 

expense. 

367.182.3 Account 182.3, Other regulatory 

assets. 

367.1830 Account 183, Preliminary survey 

and investigation charges. 

367.1840 Account 184, Clearing accounts. 

367.1850 Account 185, Temporary 

facilities. 

367.1860 Account 186, Miscellaneous 

deferred debits. 

367.1880 Account 188, Research, 

development and demonstration 

expenditures. 

367.1890 Account 189, Unamortized loss 

on reacquired debt. 

367.1900 Account 190, Accumulated 

deferred income taxes. 

Proprietary Capital 

367.2010 Account 201, Common stock 

issued. 

367.2040 Account 204, Preferred stock 

issued. 

367.2110 Account 211, Miscellaneous paidin-capital. 

367.2150 Account 215, Appropriated 

retained earnings. 

367.2160 Account 216, Unappropriated 

retained earnings. 

367.2161 Account 216.1, Unappropriated 

undistributed subsidiary earnings. 

367.2190 Account 219, Accumulated other 

comprehensive income. 

Long-Term Debt 

367.2230 Account 223, Advances from 

associate companies. 

367.2240 Account 224, Other long-term 

debt. 

367.2250 Account 225, Unamortized 

premium on long-term debt. 

367.2260 Account 226, Unamortized 

discount on long-term debt—Debit. 

Other Noncurrent Liabilities 

367.2270 Account 227, Obligations under 

capital lease—Non-current. 

367.2282 Account 228.2, Accumulated 

provision for injuries and damages. 

367.2283 Account 228.3, Accumulated 

provision for pensions and benefits. 

367.2300 Account 230, Asset retirement 

obligations. 

Current and Accrued Liabilities 

367.2310 Account 231, Notes payable. 

367.2320 Account 232, Accounts payable. 

367.2330 Account 233, Notes payable to 

associate companies. 

367.2340 Account 234, Accounts payable to 

associate companies. 

367.2360 Account 236, Taxes accrued. 

367.2370 Account 237, Interest accrued. 

367.2380 Account 238, Dividends declared. 

367.2410 Account 241, Tax collections 

payable. 

367.2420 Account 242, Miscellaneous 

current and accrued liabilities. 

367.2430 Account 243, Obligations under 

capital leases-Current. 

367.2440 Account 244, Derivative 

instrument liabilities. 

367.245 Account 245, Derivative 

instrument liabilities—Hedges. 

Deferred Credits 

367.2530 Account 253, Other deferred 

credits. 

367.2540 Account 254, Other regulatory 

liabilities. 

367.2550 Account 255, Accumulated 

deferred investment tax credits. 

367.2820 Account 282, Accumulated 

deferred income taxes—Other property. 

367.2830 Account 283, Accumulated 

deferred income taxes—Other. 


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Subpart G—Service Company Property 

Chart of Accounts 

367.3010 Account 301, Organization. 

367.3030 Account 303, Miscellaneous 

intangible property. 

367.3060 Account 306, Leasehold 

improvements. 

367.3890 Account 389, Land and land 

rights. 

367.3900 Account 390, Structures and 

improvements. 

367.3910 Account 391, Office furniture and 

equipment. 

367.3920 Account 392, Transportation 

equipment. 

367.3930 Account 393, Stores equipment. 

367.3940 Account 394, Tools, shop and 

garage equipment. 

367.3950 Account 395, Laboratory 

equipment. 

367.3960 Account 396, Power operated 

equipment. 

367.3970 Account 397, Communication 

equipment. 

367.3980 Account 398, Miscellaneous 

equipment. 

367.3990 Account 399, Other tangible 

property. 

367.3991 Account 399.1, Asset retirement 

costs for service company property. 

Subpart H—Income Statement Chart of 

Accounts 

Service Company Operating Income 

367.4000 Account 400, Operating revenues. 

367.4010 Account 401, Operation expense. 

367.4020 Account 402, Maintenance 

expense. 

367.4030 Account 403, Depreciation 

expense. 

367.4031 Account 403.1, Depreciation 

expense for asset retirement costs. 

367.4040 Account 404, Amortization of 

limited-term property. 

367.4050 Account 405, Amortization of 

other property. 

367.4073 Account 407.3, Regulatory debits. 

367.4074 Account 407.4, Regulatory credits. 

367.4081 Account 408.1, Taxes other than 

income taxes, operating income. 

367.4082 Account 408.2, Taxes other than 

income taxes, other income and 

deductions. 

367.4091 Account 409.1, Income taxes, 

operating income. 

367.4092 Account 409.2, Income taxes, 

other income and deductions. 

367.4093 Account 409.3, Income taxes, 

extraordinary items. 

367.4101 Account 410.1, Provision for 

deferred income taxes, operating income. 

367.4102 Account 410.2, Provision for 

deferred income taxes, other income and 

deductions. 

367.4111 Account 411.1, Provision for 

deferred income taxes—Credit, operating 

income. 

367.4112 Account 411.2, Provision for 

deferred income taxes—Credit, other 

income and deductions. 

367.4114 Account 411.4, Investment tax 

credit adjustments, service company 

property. 

367.4115 Account 411.5, Investment tax 

credit adjustments, other. 

367.4116 Account 411.6, Gains from 

disposition of service company plant. 

367.4117 Account 411.7, Losses from 

disposition of service company plant. 

367.4118 Account 411.10, Accretion 

expense. 

367.4120 Account 412, Costs and expenses 

of construction or other services. 

367.4160 Account 416, Costs and expenses 

of merchandising, jobbing and contract 

work. 

367.4180 Account 418, Non-operating 

rental income. 

367.4181 Account 418.1, Equity in earnings 

of subsidiary companies. 

367.4190 Account 419, Interest and 

dividend income. 

367.4191 Account 419.1, Allowance for 

other funds used during construction. 

367.4210 Account 421, Miscellaneous 

income or loss. 

367.4211 Account 421.1, Gain on 

disposition of property. 

367.4212 Account 421.2, Loss on 

disposition of property. 

367.4250 Account 425, Miscellaneous 

amortization. 

367.4261 Account 426.1, Donations. 

367.4262 Account 426.2, Life insurance. 

367.4263 Account 426.3, Penalties. 

367.4264 Account 426.4, Expenditures for 

certain civic, political and related 

activities. 

367.4265 Account 426.5, Other deductions. 

367.4270 Account 427, Interest on longterm debt. 

367.4280 Account 428, Amortization of 

debt discount and expense. 

367.4290 Account 429, Amortization of 

premium on debt—Credit. 

367.4300 Account 430, Interest on debt to 

associate companies. 

367.4310 Account 431, Other interest 

expense. 

367.4320 Account 432, Allowance for 

borrowed funds used during 

construction—Credit. 

Subpart I—Retained Earnings Accounts 

367.4330 Account 433, Balance transferred 

from income. 

367.4340 Account 434, Extraordinary 

income. 

367.4350 Account 435, Extraordinary 

deductions. 

367.4360 Account 436, Appropriations of 

retained earnings. 

367.4370 Account 437, Dividends 

declared—Preferred stock. 

367.4380 Account 438, Dividends 

declared—Common stock. 

367.4390 Account 439, Adjustments to 

retained earnings. 

Subpart J—Operating Revenue Chart of 

Accounts 

367.4570 Account 457, Services rendered to 

associate companies. 

367.4571 Account 457.1, Direct costs 

charged to associate companies. 

367.4572 Account 457.2, Indirect costs 

charged to associate companies. 

367.4573 Account 457.3, Compensation for 

use of capital-associate companies. 

367.4580 Account 458, Services rendered to 

non-associate companies. 

367.4581 Account 458.1, Direct costs 

charged to non-associate companies. 

367.4582 Account 458.2, Indirect costs 

charged to non-associate companies. 

367.4583 Account 458.3, Compensation for 

use of capital—Non-associate companies. 

367.4584 Account 458.4, Excess or 

deficiency on servicing non-associate 

utility companies. 

Subpart K—Operation and Maintenance 

Expense Chart of Accounts 

367.5000 Accounts 500–598, Electric 

operation and maintenance accounts. 

367.8000 Accounts 800–894, Gas operation 

and maintenance accounts. 

367.9010 Account 901, Supervision. 

367.9020 Account 902, Meter reading 

expenses. 

367.9030 Account 903, Customer records 

and collection expenses. 

367.9040 Account 904, Uncollectible 

accounts. 

367.9050 Account 905, Miscellaneous 

customer accounts expenses. 

367.9070 Account 907, Supervision. 

367.9080 Account 908, Customer assistance 

expenses. 

367.9090 Account 909, Informational and 

instructional advertising expenses. 

367.9100 Account 910, Miscellaneous 

customer service and informational 

expenses. 

367.9110 Account 911, Supervision. 

367.9120 Account 912, Demonstrating and 

selling expenses. 

367.9130 Account 913, Advertising 

expenses. 

367.9160 Account 916, Miscellaneous sales 

expenses. 

367.9200 Account 920, Administrative and 

general salaries. 

367.9210 Account 921, Office supplies and 

expenses. 

367.9230 Account 923, Outside services 

employed. 

367.9240 Account 924, Property insurance. 

367.9250 Account 925, Injuries and 

damages. 

367.9260 Account 926, Employee pensions 

and benefits. 

367.9280 Account 928, Regulatory 

commission expenses. 

367.9301 Account 930.1, General 

advertising expenses for associated 

companies. 

367.9302 Account 930.2, Miscellaneous 

general expenses. 

367.9310 Account 931, Rents. 

367.9350 Account 935, Maintenance of 

structures and equipment. 

Authority: 42 U.S.C. 16451–16463. 

Subpart A—Definitions 

§ 367.1 Definitions. 

(a) When used in this system of 

accounts: 

(1) Accounts mean the accounts 

prescribed by this Uniform System of 

Accounts. 

(2) Actually issued, as applied to 

securities issued or assumed by the 

service companies, means those which 

have been sold to bona fide purchasers 


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for a valuable consideration, those 

issued as dividends on stock, and those 

which have been issued in accordance 

with contractual requirements direct to 

trustees of sinking funds. 

(3) Actually outstanding, as applied to 

securities issued or assumed by the 

service company, means those which 

have been actually issued and are 

neither retired nor held by or for the 

service company; provided, however, 

that securities held by trustees must be 

considered as actually outstanding. 

(4) Amortization means the gradual 

extinguishment of an amount in an 

account by distributing such amount 

over a fixed period, over the life of the 

asset or liability to which it applies, or 

over the period during which it is 

anticipated the benefit will be realized. 

(5) Associate company means any 

company in the same holding company 

system with such company. 

(6) Book cost means the amount at 

which property is recorded in these 

accounts without deduction of related 

provisions for accrued depreciation, 

amortization, or for other purposes. 

(7) Centralized service company 

means a service company that provides 

services such as administrative, 

managerial, financial, accounting, 

recordkeeping, legal or engineering 

services, which are sold, furnished, or 

otherwise provided (typically for a 

charge) to other companies in the same 

holding company system. Centralized 

service companies are different from 

other service companies that only 

provide a discrete good or service. 

(8) Commission means the Federal 

Energy Regulatory Commission. 

(9) Company, when not otherwise 

indicated in the context, means a 

service company. 

(10) Construction, when used in the 

context of a service provided to other 

companies, means any construction, 

extension, improvement, maintenance, 

or repair of the facilities or any part 

thereof of a company, which is 

performed for a charge. 

(11) Cost means the amount of money 

actually paid for property or services. 

When the consideration given is other 

than cash in a purchase and sale 

transaction, as distinguished from a 

transaction involving the issuance of 

common stock in a merger, the value of 

such consideration must be determined 

on a cash basis. 

(12) Cost accumulation system means 

a system for the accumulation of service 

company costs on a job, project, or 

functional basis. It includes schedules 

and worksheets used to account for 

charges billed to single and groups of 

associate and non-associate companies. 

It can be a variety of systems, including 

but not limited to, a work order system 

or an activity-based accounting software 

system. 

(13) Cost of removal means the cost of 

demolishing, dismantling, tearing down 

or otherwise removing service property, 

including the cost of transportation and 

handling incidental thereto. It does not 

include the cost of removal activities 

associated with asset retirement 

obligations that are capitalized as part of 

the tangible long-lived assets that give 

rise to the obligation (See General 

Instructions in § 367.22). 

(14) Debt expense means all expenses 

in connection with the issuance and 

initial sale of evidences of debt, such as 

fees for drafting mortgages and trust 

deeds; fees and taxes for issuing or 

recording evidences of debt; cost of 

engraving and printing bonds and 

certificates of indebtedness; fees paid 

trustees; specific costs of obtaining 

governmental authority; fees for legal 

services; fees and commissions paid 

underwriters, brokers, and salesmen for 

marketing such evidences of debt; fees 

and expenses of listing on exchanges; 

and other like costs. 

(15) Depreciation, as applied to 

depreciable service company property, 

means the loss in service value not 

restored by current maintenance. 

Among the causes to be used as 

consideration for causes of loss in 

service value are wear and tear, decay, 

action of the elements, inadequacy, 

obsolescence, changes in the art, 

changes in demand and requirements of 

public authorities. 

(16) Direct cost means the labor costs 

and expenses which can be identified 

through a cost allocation system as 

being applicable to services performed 

for a single or group of associate and 

non-associate companies. Cost 

incidental to or related to a directly 

charged item must be classified as direct 

costs. 

(17) Discount, as applied to the 

securities issued or assumed by the 

service company, means the excess of 

the par (stated value of no-par stocks) or 

face value of the securities plus interest 

or dividends accrued at the date of the 

sale over the cash value of the 

consideration received from their sale. 

(18) Electric utility company means 

any company that owns or operates 

facilities used for the generation, 

transmission, or distribution of electric 

energy for sale. For the purposes of this 

subchapter, ‘‘electric utility company’’

shall not include entities that engage 

only in marketing of electric energy. 

(19) Gas utility company means any 

company that owns or operates facilities 

used for distribution at retail (other than 

the distribution only in enclosed 

portable containers or distribution to 

tenants or employees of the company 

operating such facilities for their own 

use and not for resale) of natural or 

manufactured gas for heat, light, or 

power. For the purposes of this 

subchapter, ‘‘gas utility company’’ shall 

not include entities that engage only in 

marketing of natural and manufactured 

gas. 

(20) Goods means any goods, 

equipment (including machinery), 

materials, supplies, appliances, or 

similar property (including coal, oil, or 

steam, but not including electric energy, 

natural or manufactured gas, or utility 

assets) which is sold, leased, or 

furnished, for a charge. 

(21) Holding company. 

(i) In general. The term ‘‘holding 

company’’ means—

(A) Any company that directly or 

indirectly owns, controls, or holds, with 

power to vote, 10 percent or more of the 

outstanding voting securities of a 

public-utility company or of a holding 

company of any public-utility company; 

and 

(B) Any person, determined by the 

Commission, after notice and 

opportunity for hearing, to exercise 

directly or indirectly (either alone or 

pursuant to an arrangement or 

understanding with one or more 

persons) such a controlling influence 

over the management or policies of any 

public-utility company or holding 

company as to make it necessary or 

appropriate for the rate protection of 

utility customers with respect to rates 

that such person be subject to the 

obligations, duties, and liabilities 

imposed by this subchapter upon 

holding companies. 

(ii) Exclusions. The term ‘‘holding 

company’’ does not include—

(A) A bank, savings association, or 

trust company, or their operating 

subsidiaries that own, control, or hold, 

with the power to vote, public utility or 

public utility holding company 

securities so long as the securities are—

(1) Held as collateral for a loan; 

(2) Held in the ordinary course of 

business as a fiduciary; or 

(3) Acquired solely for purposes of 

liquidation and in connection with a 

loan previously contracted for and 

owned beneficially for a period of not 

more than two years; or 

(B) A broker or dealer that owns, 

controls, or holds with the power to 

vote public utility or public utility 

holding company securities so long as 

the securities are—

(1) Not beneficially owned by the 

broker or dealer and are subject to any 

voting instructions which may be given 

by customers or their assigns; or 


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65230 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

(2) Acquired in the ordinary course of 

business as a broker, dealer, or 

underwriter with the bona fide intention 

of effecting distribution within 12 

months of the specific securities so 

acquired. 

(22) Holding company system means 

a holding company, together with its 

subsidiary companies. 

(23) Indirect cost means the costs of 

a general overhead nature such as 

general services, housekeeping costs, 

and other support cost which cannot be 

separately identified to a single or group 

of associate and non-associate 

companies and, therefore, must be 

allocated. Costs incidental to or related 

to indirect items should also be 

classified as an indirect cost. 

(24) Investment advances means 

advances, represented by notes or by 

book accounts only, with respect to 

which it is mutually agreed or intended 

between the creditor and debtor that 

they must be settled by the issuance of 

securities or must not be subject to 

current settlement. 

(25) Lease, capital means a lease of 

property used by the service company, 

which meets one or more of the criteria 

stated in General Instructions in 

§ 367.18. 

(26) Lease, operating means a lease of 

property used by a service company, 

which does not meet any of the criteria 

stated in General Instructions in 

§ 367.18. 

(27) Minor items of property means 

the associated parts or items of which 

retirement units are composed. 

(28) Natural gas company means a 

person engaged in the transportation of 

natural gas in interstate commerce or 

the sale of such gas in interstate 

commerce for resale. 

(29) Net salvage value means the 

salvage value of property retired less the 

cost of removal. 

(30) Nominally issued, as applied to 

securities issued or assumed by the 

service company, means those which 

have been signed, certified, or otherwise 

executed, and placed with the proper 

officer for sale and delivery, or pledged, 

or otherwise placed in some special 

fund of the service company, but which 

have not been sold, or issued direct to 

trustees of sinking funds in accordance 

with contractual requirements. 

(31) Nominally outstanding, as 

applied to securities issued or assumed 

by the service company, means those 

which, after being actually issued, have 

been reacquired by or for the service 

company under circumstances which 

require them to be considered as held 

alive and not retired, provided, 

however, that securities held by trustees 

must be considered as actually 

outstanding. 

(32) Non-associate company means a 

person, partnership, organization, 

government body or company which is 

not a member of the holding company 

system. 

(33) Non-utility company means a 

company that is not a utility company. 

(34) Person means an individual or 

company. 

(35) Premium, as applied to securities 

issued or assumed by the service 

company, means the excess of the cash 

value of the consideration received from 

their sale over the sum of their par 

(stated value of no-par stocks) or face 

value and interest or dividends accrued 

at the date of sale. 

(36) Public utility means any person 

who owns or operates facilities used for 

transmission of electric energy in 

interstate commerce or sales of electric 

energy at wholesale in interstate 

commerce. 

(37) Public-utility company means an 

electric utility company or gas utility 

company. 

(38) Regulatory assets and liabilities 

are the assets and liabilities that result 

from rate actions for regulatory agencies. 

Regulatory assets and liabilities arise 

from specific revenues, expenses, gains, 

or losses that would have been included 

in net income determination in one 

period under the general requirements 

of the Uniform System of Accounts but 

for it being probable: 

(i) That such items will be included 

in a different period(s) for purposes of 

developing rates the service company is 

authorized to charge for its services; or 

(ii) In the case of regulatory liabilities, 

that refunds to customers, not provided 

for in other accounts, will be required. 

(39) Replacing or replacement, when 

not otherwise indicated in the context, 

means the construction or installation of 

service property in place of property 

retired, together with the removal of the 

property retired. 

(40) Research, development, and 

demonstration (RD&D) means 

expenditures incurred by a service 

company, for the service company or on 

behalf of others, either directly or 

through another person or organization 

(such as research institute, industry 

association, foundation, university, 

engineering company or similar 

contractor) in pursuing research, 

development, and demonstration 

activities including experiment, design, 

installation, construction, or operation. 

This definition includes expenditures 

for the implementation or development 

of new and/or existing concepts until 

technically feasible and commercially 

feasible operations are verified. When 

conducted on behalf of an associate or 

non-associate utility company such 

research, development, and 

demonstration costs should be 

reasonably related to the existing or 

future business of such company. The 

term includes, but is not limited to: All 

the costs incidental to the design, 

development or implementation of an 

experimental facility, a plant process, a 

product, a formula, an invention, a 

system or similar items, and the 

improvement of already existing items 

of a like nature; amounts expended in 

connection with the proposed 

development and/or proposed delivery 

of alternate sources of electricity or 

substitute or synthetic gas supplies 

(alternate fuel sources, for example, an 

experimental coal gasification plant or 

an experimental plant synthetically 

producing gas from liquid 

hydrocarbons); and the costs of 

obtaining its own patent, such as 

attorney’s fees expended in making and 

perfecting a patent application. The 

term includes preliminary 

investigations and detailed planning of 

specific projects for securing for 

customers’ non-conventional electric 

power or pipeline gas supplies that rely 

on technology that has not been verified 

previously to be feasible. The term does 

not include expenditures for efficiency 

surveys; studies of management, 

management techniques and 

organization; consumer surveys, 

advertising, promotions, or items of a 

like nature. 

(41) Retained earnings means the 

accumulated net income of the service 

company less distribution to 

stockholders and transfers to other 

capital accounts. 

(42) Retirement units means those 

items of property which, when retired, 

with or without replacement, are 

accounted for by crediting the book cost 

of the retirement units to the property 

account in which it is included. 

(43) Salvage value means the amount 

received for property retired, less any 

expenses incurred in connection with 

the sale or in preparing the property for 

sale; or, if retained, the amount at which 

the material recoverable is chargeable to 

materials and supplies, or other 

appropriate account. 

(44) Service means any managerial, 

financial, legal, engineering, purchasing, 

marketing, auditing, statistical, 

advertising, publicity, tax, research, or 

any other service (including supervision 

or negotiation of construction or of 

sales), information or data, which is 

sold or furnished for a charge. 

(45) Service company means any 

associate company within a holding 

company system organized specifically 


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for the purpose of providing non-power 

goods or services or the sale of goods or 

construction work to any public utility 

in the same holding company system. 

(46) Service cost means the total of 

direct and indirect costs incurred to 

provide a service to an associate or nonassociate company which are properly 

charged to expense by the service 

company. 

(47) Service life means the time 

between the date property is placed in 

service, or property is leased to others, 

and the date of its retirement. If 

depreciation is accounted for on a 

production basis rather than on a time 

basis, then service life should be 

measured in terms of the appropriate 

unit of production. 

(48) Service value means the 

difference between the cost and net 

salvage value of service property. 

(49) State commission means any 

commission, board, agency, or officer, 

by whatever name designated, of a State, 

municipality, or other political 

subdivision of a State that, under the 

laws of such State, has jurisdiction to 

regulate public-utility companies. 

(50) Uniform System of Accounts 

(USofA) means the Uniform System of 

Accounts for Centralized Service 

Companies prescribed in this part, as 

amended from time to time. 

(51) Utility company means a publicutility company or natural gas company 

whose rates are regulated by the 

Commission, state commission or other 

similar regulatory body. 

(b) [Reserved] 

Subpart B—General Instructions 

§ 367.2 Companies for which this system 

of accounts is prescribed. 

(a) Unless otherwise exempted or 

granted a waiver by Commission rule or 

order pursuant to §§ 366.3 and 366.4 of 

this chapter, this Uniform System of 

Accounts applies to any centralized 

service company operating, or organized 

specifically to operate, within a holding 

company system for the purpose of 

providing non-power services to any 

public utility in the same holding 

company system. 

(b) This Uniform System of Accounts 

is not applicable to: 

(1) Service companies that are 

specifically organized as a specialpurpose company such as a fuel supply 

company or a construction company. 

(2) Electric or gas utility companies. 

(3) Companies primarily engaged: 

(i) In the production of goods, 

including exploration and development 

of fuel resources, 

(ii) In the provision of water, 

telephone, or similar services, the sale 

of which is normally subject to public 

rate regulation, 

(iii) In the provision of transportation, 

whether or not regulated, or 

(iv) In the ownership of property, 

including leased property and fuel 

reserves, for the use of associate 

companies. 

(4) A service company that provides 

services exclusively to a local gas 

distribution company. 

(5) Holding companies. 

(c) To the extent that the term service 

company is used in this Uniform 

System of Accounts, it applies only to 

centralized service companies. 

§ 367.3 Records. 

(a) Each service company must keep 

its books of account, and all other 

books, records, and memoranda that 

support the entries in the books of 

account, so as to be able to furnish full 

information on any item included in 

any account. Each entry must be 

supported by sufficient detailed 

information that will permit ready 

identification, analysis, and verification 

of all facts relevant and related to the 

records. 

(b) The books and records referred to 

in this part include not only accounting 

records in a limited technical sense, but 

all other records, such as minutes books, 

stock books, reports, correspondence, 

and memoranda, that may be useful in 

developing the history of or facts 

regarding any transaction. 

(c) No service company may destroy 

any books or records unless the 

destruction is permitted by the rules 

and regulations of the Commission. 

(d) In addition to prescribed accounts, 

clearing accounts, temporary or 

experimental accounts, and subaccounts 

of any accounts may be kept, provided 

the integrity of the prescribed accounts 

is not impaired. 

(e) The arrangement or sequence of 

the accounts prescribed in this part 

must not be controlling as to the 

arrangement or sequence in report forms 

that may be prescribed by the 

Commission. 

§ 367.4 Numbering system. 

(a) The account numbering plan used 

in this part consists of a system of threedigit whole numbers as follows: 

(1) 100–199, Assets and other debits. 

(2) 200–299, Liabilities and other 

credits. 

(3) 300–399, Property accounts. 

(4) 400–432 and 434–435, Income 

accounts. 

(5) 433, 436 and 439, Retained 

earnings accounts. 

(6) 457–458, Revenue accounts. 

(7) 500–599, Electric operating 

expenses. 

(8) 800–894, Gas operating expenses. 

(9) 900–949, Customer accounts, 

customer service and informational, 

sales, and general and administrative 

expenses. 

(b) The numbers prefixed to account 

titles are to be considered as parts of the 

titles. Each service company, however, 

may adopt for its own purposes a 

different system of account numbers 

(See also General Instructions in 

§ 367.3(d)) provided that the numbers 

prescribed in this part must appear in 

the descriptive headings of the ledger 

accounts and in the various sources of 

original entry; however, if a service 

company uses a different system of 

account numbers and it is not 

practicable to show the prescribed 

account numbers in the various sources 

of original entry, the reference to the 

prescribed account numbers may be 

omitted from the various sources of 

original entry. Each service company 

using different account numbers for its 

own purposes must keep readily 

available a list of the account numbers 

that it uses and a reconciliation of those 

account numbers with the account 

numbers provided in this part. It is 

intended that the service company’s 

records must be kept so as to permit 

ready analysis by prescribed accounts 

(by direct reference to sources of 

original entry to the extent practicable) 

and to permit preparation of financial 

and operating statements directly from 

the records at the end of each 

accounting period according to the 

prescribed accounts. 

§ 367.5 Accounting period. 

Each service company must keep its 

books on a monthly basis so that for 

each month all transactions applicable 

to the account, as nearly as may be 

ascertained, must be entered in the 

books of the service company. Amounts 

applicable or assignable to a single or 

group of associate and non-associate 

companies must be segregated monthly. 

Each service company must close its 

books at the end of each calendar year 

unless otherwise authorized by the 

Commission. 

§ 367.6 Submittal of questions. 

To maintain uniformity of accounting, 

service companies must submit 

questions of doubtful interpretation to 

the Commission for consideration and 

decision. 

§ 367.7 Item list. 

Lists of items appearing in the texts of 

the accounts or elsewhere in this part 

are for the purpose of indicating clearly 

the application of the prescribed 

accounting. The lists are intended to be 


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representative, but not exhaustive. The 

appearance of an item in a list warrants 

the inclusion of the item in the account 

mentioned only when the text of the 

account also indicates inclusion 

inasmuch as the same item frequently 

appears in more than one list. The 

proper entry in each instance must be 

determined by the texts of the accounts. 

§ 367.8 Extraordinary items. 

Extraordinary items are to be 

recognized according to the rules which 

are considered generally accepted 

accounting principles. These items are 

related to the effects of events and 

transactions that have occurred during 

the current period and that are of an 

unusual nature and infrequent 

occurrence. Each item recognized as 

extraordinary must be disclosed in the 

notes to financial statements (See 

Accounts 434 and 435 in §§ 367.4340 

and 367.4350). 

§ 367.9 Prior period items. 

(a) Items of profit and loss related to 

the following must be accounted for as 

prior period adjustments and excluded 

from the determination of net income 

for the current year: 

(1) Correction of an error in the 

financial statements of a prior year. 

(2) Adjustments that result from 

realization of income tax benefits of preacquisition operating loss carry 

forwards of purchased subsidiaries. 

(b) All other items of profit and loss 

recognized during the year must be 

included in the determination of net 

income for that year. 

§ 367.10 Unaudited items. 

Whenever a financial statement is 

required by the Commission, if it is 

known that a transaction has occurred 

that affects the accounts but the amount 

involved in the transaction and its effect 

upon the accounts cannot be 

determined with absolute accuracy, the 

amount must be estimated and the 

estimated amount included in the 

proper accounts. The service company 

is not required to anticipate minor items 

that would not appreciably affect the 

accounts. 

§ 367.11 Distribution of pay and expenses 

of employees. 

The charges to property, operating 

expense and other accounts for services 

and expenses of employees engaged in 

activities chargeable to various 

accounts, such as construction, 

maintenance, and operations, must be 

based upon the actual time engaged in 

the respective classes of work, or an 

appropriate allocation method. 

§ 367.12 Payroll distribution. 

Underlying accounting data must be 

maintained so that the distribution of 

the cost of labor charged direct to the 

various accounts will be readily 

available. The underlying data must 

permit a reasonably accurate 

distribution to be made of the cost of 

labor charged initially to clearing 

accounts so that the total labor cost may 

be classified among construction, cost of 

removal, or operating functions. 

§ 367.13 Accounting to be on accrual 

basis. 

(a) The service company is required to 

keep its accounts on the accrual basis. 

This requires the inclusion in its 

accounts of all known transactions of 

appreciable amount that affect the 

accounts. If bills covering the 

transactions have not been received or 

rendered, the amounts must be 

estimated and appropriate adjustments 

made when the bills are received. When 

the amount is ascertained, the necessary 

adjustments must be made through the 

accounts in which the estimate was 

recorded. If it is determined during the 

interval that a material adjustment will 

be required, the estimate must be 

adjusted through the current accounts. 

The service company is not required to 

anticipate minor items which would not 

appreciably affect these accounts. 

(b) When payments are made in 

advance for items such as insurance, 

rents, taxes or interest, the amount 

applicable to future periods must be 

charged to account 165, Prepayments 

(§ 367.1650), and spread over the 

periods to which they are applicable by 

credits to account 165 (§ 367.1650), and 

charges to the accounts appropriate for 

the expenditure. 

§ 367.14 Transactions with associate 

companies. 

Each service company must keep its 

accounts and records so as to be able to 

furnish accurately and expeditiously 

statements of all transactions with 

associate companies. The statements 

may be required to show the general 

nature of the transactions, the amounts 

involved in the transactions and the 

amounts included in each account 

prescribed in this part with respect to 

such transactions. Transactions with 

associate companies must be recorded 

in the appropriate accounts for 

transactions of the same nature. Nothing 

contained in this part, however, must be 

construed as restraining the service 

company from subdividing accounts for 

the purpose of recording separately 

transactions with associate companies. 

§ 367.15 Contingent assets and liabilities. 

Contingent assets represent a possible 

source of value to the service company 

contingent upon the fulfillment of 

conditions regarded as uncertain. 

Contingent liabilities include items that, 

under certain conditions, may become 

obligations of the service company but 

that are neither direct nor assumed 

liabilities at the date of the balance 

sheet. The service company must be 

prepared to give a complete statement of 

significant contingent assets and 

liabilities (including cumulative 

dividends on preference stock) in its 

annual report and at such other times as 

may be requested by the Commission. 

§ 367.16 Long-term debt: Premium, 

discount and expense, and gain or loss on 

reacquisition. 

(a) A separate premium, discount and 

expense account must be maintained for 

each class and series of long-term debt 

(including receivers’ certificates) issued 

or assumed by the service company. The 

premium must be recorded in account 

225, Unamortized premium on longterm debt (§ 367.2250), the discount 

must be recorded in account 226, 

Unamortized discount on long-term 

debt—Debit (§ 367.2260), and the 

expense of issuance must be recorded in 

account 181, Unamortized debt expense 

(§ 367.1810). The premium, discount 

and expense must be amortized over the 

life of the respective issues under a plan 

that will distribute the amounts 

equitably over the life of the securities. 

The amortization must be on a monthly 

basis, and the amounts relating to 

discounts and expenses must be charged 

to account 428, Amortization of debt 

discount and expense (§ 367.4280). The 

amounts relating to premiums must be 

credited to account 429, Amortization of 

premium on debt—Credit (§ 367.4290). 

(b) When long-term debt is reacquired 

the difference between the amount paid 

upon reacquisition of any long-term 

debt and the face value, adjusted for 

unamortized discount, expenses or 

premium, as the case may be, applicable 

to the debt redeemed must be 

recognized currently in income and 

recorded in account 421, Miscellaneous 

income or loss (§ 367.4210), or account 

426.5, Other deductions (§ 367.4265). 

§ 367.17 Comprehensive inter-period 

income tax allocation. 

(a) Where there are timing differences 

between the periods in which 

transactions affect taxable income and 

the periods in which they enter into the 

determination of pretax accounting 

income, the income tax effects of such 

transactions are to be recognized in the 

periods in which the differences 


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between book accounting income and 

taxable income arise and in the periods 

in which the differences reverse using 

the deferred tax method. In general, 

comprehensive inter-period tax 

allocation should be followed whenever 

transactions enter into the 

determination of pretax accounting 

income for the period even though some 

transactions may affect the 

determination of taxes payable in a 

different period, as further qualified in 

this section. 

(b) Once comprehensive inter-period 

tax allocation has been initiated, either 

in whole or in part, it must be practiced 

on a consistent basis and must not be 

changed or discontinued without prior 

Commission approval. 

(c) Tax effects deferred currently will 

be recorded as deferred debits or 

deferred credits in accounts 190, 

Accumulated deferred income taxes 

(§ 367.1900), 282, Accumulated deferred 

income taxes—Other property 

(§ 367.2820), and 283, Accumulated 

deferred income taxes—Other 

(§ 367.2830), as appropriate. The 

resulting amounts recorded in these 

accounts must be disposed of as 

prescribed in this system of accounts or 

as otherwise authorized by the 

Commission. 

§ 367.18 Criteria for classifying leases. 

(a) If, at its inception, a lease meets 

one or more of the following criteria, the 

lease must be classified as a capital 

lease. Otherwise, it must be classified as 

an operating lease. 

(1) The lease transfers ownership of 

the property to the lessee by the end of 

the lease term. 

(2) The lease contains a bargain 

purchase option. 

(3) The lease term is equal to 75 

percent or more of the estimated 

economic life of the leased property. 

However, if the beginning of the lease 

term falls within the last 25 percent of 

the total estimated economic life of the 

leased property, including earlier years 

of use, this criterion must not be used 

for purposes of classifying the lease. 

(4) The present value at the beginning 

of the lease term of the minimum lease 

payments, excluding that portion of the 

payments representing executory costs 

such as insurance, maintenance, and 

taxes to be paid by the lessor, including 

any related profit, equals or exceeds 90 

percent of the excess of the fair value of 

the leased property to the lessor at the 

inception of the lease over any related 

investment tax credit retained by the 

lessor and expected to be realized by the 

lessor. However, if the beginning of the 

lease term falls within the last 25 

percent of the total estimated economic 

life of the leased property, including 

earlier years of use, this criterion must 

not be used for purposes of classifying 

the lease. The lessee must compute the 

present value of the minimum lease 

payments using its incremental 

borrowing rate, unless: 

(i) It is practicable for the company to 

learn the implicit rate computed by the 

lessor, and 

(ii) The implicit rate computed by the 

lessor is less than the lessee’s 

incremental borrowing rate. 

(iii) If both of those conditions are 

met, the lessee must use the implicit 

rate. 

(b) If, at any time, the lessee and 

lessor agree to change the provisions of 

the lease, other than by renewing the 

lease or extending its term, in a manner 

that would have resulted in a different 

classification of the lease under the 

criteria in paragraph (a) of this section 

had the changed terms been in effect at 

the inception of the lease, the revised 

agreement must be considered as a new 

agreement over its term, and the criteria 

in paragraph (a) of this section must be 

applied for purposes of classifying the 

new lease. Likewise, any action that 

extends the lease beyond the expiration 

of the existing lease term, such as the 

exercise of a lease renewal option other 

than those already included in the lease 

term, must be considered as a new 

agreement and must be classified 

according to the criteria in paragraph (a) 

of this section. Changes in estimates (for 

example, changes in estimates of the 

economic life or of the residual value of 

the leased property) or changes in 

circumstances (for example, default by 

the lessee) must not give rise to a new 

classification of a lease for accounting 

purposes. 

§ 367.19 Accounting for leases. 

(a) All leases must be classified as 

either capital or operating leases. 

(b) The service company must record 

a capital lease as an asset in account 

101.1, Property under capital leases 

(§ 367.1011) and an obligation in 

account 227, Obligations under capital 

leases—Non-current (§ 367.2270), or 

account 243, Obligations under capital 

leases—Current (§ 367.2430), at an 

amount equal to the present value at the 

beginning of the lease term of minimum 

lease payments during the lease term, 

excluding that portion of the payments 

representing executory costs such as 

insurance, maintenance, and taxes to be 

paid by the lessor, together with any 

related profit. However, if the 

determined amount exceeds the fair 

value of the leased property at the 

inception of the lease, the amount 

recorded as the asset and obligation 

must be the fair value. 

(c) The service company, as a lessee, 

must recognize an asset retirement 

obligation (See General Instructions in 

§ 367.22) arising from the property 

under a capital lease unless the 

obligation is recorded as an asset and 

liability under a capital lease. The 

service company must record the asset 

retirement cost by debiting account 

101.1, Property under capital leases 

(§ 367.1011), and crediting the liability 

for the asset retirement obligation in 

account 230, Asset retirement 

obligations (§ 367.2300). Asset 

retirement costs recorded in account 

101.1 (§ 367.1011) must be amortized by 

charging rent expense (see Operating 

Expense Instructions in § 367.82) or 

account 421, Miscellaneous income or 

loss (§ 367.4210), as appropriate, and 

crediting a separate subaccount of the 

account in which the asset retirement 

costs are recorded. Charges for the 

periodic accretion of the liability in 

account 230, Asset retirement 

obligations (§ 367.2300), must be 

recorded by a charge to account 411.10, 

Accretion expense (§ 367.4118), for 

service company property, and account 

421, Miscellaneous income or loss 

(§ 367.4210), for non-service company 

property and a credit to account 230, 

Asset retirement obligations 

(§ 367.2300). 

(d) Rental payments on all leases must 

be charged to rent expense, fuel 

expense, construction work in progress, 

or other appropriate accounts as they 

become payable. 

(e) For a capital lease, for each period 

during the lease term, the amounts 

recorded for the asset and obligation 

must be reduced by an amount equal to 

the portion of each lease payment that 

would have been allocated to the 

reduction of the obligation, if the 

payment had been treated as a payment 

on an installment obligation (liability) 

and allocated between interest expense 

and a reduction of the obligation so as 

to produce a constant periodic rate of 

interest on the remaining balance. 

§ 367.20 Depreciation accounting. 

(a) Method. Service companies must 

use a method of depreciation that 

allocates in a systematic and rational 

manner the service value of depreciable 

property over the service life of the 

property. 

(b) Service lives. Estimated useful 

service lives of depreciable property 

must be supported by objective 

evidence and analysis, including where 

appropriate engineering, economic, or 

other depreciation studies. 


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(c) Rate. Service companies must use 

percentage rates of depreciation that are 

based on a method of depreciation that 

allocates the service value of 

depreciable property over the service 

life of the property. Where composite 

depreciation rates are used, they must 

be based on the weighted average 

estimated useful service lives of the 

depreciable property comprising the 

composite group. 

§ 367.22 Accounting for asset retirement 

obligations. 

(a) An asset retirement obligation 

represents a liability for the legal 

obligation associated with the 

retirement of a tangible, long-lived asset 

that a service company is required to 

settle as a result of an existing or 

enacted law, statute, ordinance, or 

written or oral contract, or by legal 

construction of a contract under the 

doctrine of promissory estoppel. An 

asset retirement cost represents the 

amount capitalized when the liability is 

recognized for the long-lived asset that 

gives rise to the legal obligation. The 

amount recognized for the liability and 

an associated asset retirement cost must 

be stated at the fair value of the asset 

retirement obligation in the period in 

which the obligation is incurred. 

(b) The service company must 

initially record a liability for an asset 

retirement obligation in account 230, 

Asset retirement obligations 

(§ 367.2300), and charge the associated 

asset retirement costs to service 

company property (including account 

101.1 in § 367.1011) related to the 

property that gives rise to the legal 

obligation. The asset retirement cost 

must be depreciated over the useful life 

of the related asset that gives rise to the 

obligations. For periods subsequent to 

the initial recording of the asset 

retirement obligation, a service 

company must recognize the period to 

period changes of the asset retirement 

obligation that result from the passage of 

time due to the accretion of the liability 

and any subsequent measurement 

changes to the initial liability for the 

legal obligation recorded in account 

230, Asset retirement obligations 

(§ 367.2300), as follows: 

(1) The service company must record 

the accretion of the liability by debiting 

account 411.10, Accretion expense 

(§ 367.4118); and 

(2) The service company must 

recognize any subsequent measurement 

changes of the liability initially 

recorded in account 230, Asset 

retirement obligations (§ 367.2300), for 

each specific asset retirement obligation 

as an adjustment of that liability in 

account 230 with the corresponding 

adjustment to service company 

property. The service company must on 

a timely basis monitor any measurement 

changes of the asset retirement 

obligations. 

(c) Gains or losses resulting from the 

settlement of asset retirement 

obligations associated with service 

company property resulting from the 

difference between the amount of the 

liability for the asset retirement 

obligation included in account 230, 

Asset retirement obligations 

(§ 367.2300), and the actual amount 

paid to settle the obligation shall be 

accounted for as follows: 

(1) Gains shall be credited to account 

421, Miscellaneous income or loss 

(§ 367.4210), and; 

(2) Losses shall be charged to account 

426.5, Other deductions (§ 367.4265). 

(d) Separate subsidiary records must 

be maintained for each asset retirement 

obligation showing the initial liability 

and associated asset retirement cost, any 

incremental amounts of the liability 

incurred in subsequent reporting 

periods for additional layers of the 

original liability and related asset 

retirement cost, the accretion of the 

liability, the subsequent measurement 

changes to the asset retirement 

obligation, the depreciation and 

amortization of the asset retirement 

costs and related accumulated 

depreciation, and the settlement date 

and actual amount paid to settle the 

obligation. For purposes of analysis, a 

service company must maintain 

supporting documentation so as to be 

able to furnish accurately and 

expeditiously with respect to each asset 

retirement obligation the full details of 

the identity and nature of the legal 

obligation, the year incurred, the 

identity of the plant giving rise to the 

obligation, the full particulars relating to 

each component and supporting 

computations related to the 

measurement of the asset retirement 

obligation. 

§ 367.23 Transactions with non-associate 

companies. 

When a service or construction is 

performed for non-associate companies 

at an amount other than cost, the 

amount of revenues in excess or 

deficiency of the cost on servicing the 

non-associate companies must be 

charged to account 458.4, Excess or 

deficiency on servicing non-associate 

utility companies (§ 367.4584). A 

deficiency incurred in a project deemed 

beneficial to the associate companies 

may be charged to associate companies 

subject to disallowance by a State 

Commission or Federal Commission 

having jurisdiction over the rates or 

services of the associate companies. To 

the extent not charged, or if disallowed, 

the deficiency will be charged to 

account 458.4 (§ 367.4584). In 

computing charges to associate 

companies for any calendar year, any 

net credit in this account must be 

deducted from amounts reimbursable by 

associate companies as compensation 

for use of capital invested in the service 

company. 

§ 367.24 Construction and service 

contracts for other companies. 

(a) Expenditures made in the 

performance of construction or service 

contracts, under which the service 

company undertakes projects to 

construct physical property for associate 

or non-associate companies must be 

recorded in Account 412, Cost and 

expenses of construction or other 

services (§ 367.4120). The service 

company must keep records pursuant to 

its cost allocation system indicating the 

cost of each contract or project, the 

amount of service costs allocated to the 

contracts, and the additional 

classification of expenditures relating to 

projects that will meet the accounting 

requirements of the company for which 

the work is performed. 

(b) Account 412 (§ 367.4120) will 

include: 

(1) The cost of materials, construction 

payrolls, outside services, and other 

expenses which are directly attributable 

to the performance of service or 

construction contracts for other 

companies. 

(2) The cost of goods procured 

directly attributable to the performance 

of service or construction contracts for 

other companies. 

(3) The related salaries, expense of 

officers and employees, pay of 

employees on the service company’s 

regular staff specifically assigned to 

construction work, and other expenses 

of maintaining the service company’s 

organization and equipment. 

(4) The support services performed by 

the service company in connection with 

the procurement of goods for associate 

companies. 

§ 367.25 Determination of service cost. 

A service must be deemed at cost and 

fair allocation of costs requires an 

accurate accounting for the elements 

that makes up the aggregate expense of 

conducting the business of the service 

company. In the accounts prescribed in 

this part, the total amounts included in 

the expense accounts during any period 

plus the amount that appropriately may 

be added as compensation for the use of 

capital constitute cost during that 

period. 


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§ 367.26 Departmental classification. 

Salaries and wages and all other costs 

must be classified by departmental or 

other functional category in accordance 

with the departmental organization of 

the service company to provide a 

readily available basis for analysis. 

§ 367.27 Billing procedures. 

Charges for services to associate 

public-utility companies must be made 

monthly with sufficient information and 

in sufficient detail to permit such 

company, where applicable, to identify 

and classify the charge in terms of the 

system of accounts prescribed by the 

regulatory authorities to which it is 

subject. The information provided to 

associate public-utility companies must 

provide a summary of the accounts by 

service provided and showing the 

charges, classified as direct cost, 

indirect cost, and compensation for use 

of capital. 

§ 367.28 Methods of allocation. 

Indirect costs and compensation for 

use of capital must be allocated to 

projects in accordance with the service 

company’s applicable and currently 

effective methods of allocation. Both 

direct and allocated indirect costs on 

projects must be assigned among those 

companies in the same manner. The 

cost accumulation system must identify 

the methods of allocation and the 

accounts to be charged. Companies must 

be notified in writing of any change in 

the methods of allocation. 

§ 367.29 Compensation for use of capital. 

A servicing transaction is deemed to 

be performed at no more than cost if the 

price of the service does not exceed a 

fair and equitable allocation of expenses 

plus reasonable compensation for 

necessary capital procured through the 

issuance of capital stock. Interest on 

borrowed capital and compensation for 

the use of capital must only represent a 

reasonable return on the amount of 

capital reasonably necessary for the 

performance of services or construction 

work for, or the sale of goods to, 

associate companies. The compensation 

may be estimated and must be 

computed monthly. The amount of 

compensation must be stated separately 

in each billing to the associate 

companies. An annual statement to 

support the amount of compensation for 

use of capital billed for the previous 12 

months and how it was calculated must 

be supplied to each associate company 

at the end of the calendar year. 

§ 367.30 Cost accumulation system for 

associate companies. 

Service companies must maintain a 

detailed classification of service costs, 

that permits costs to be identified with 

the functional processes of the associate 

companies served. To permit the 

classification, each service company 

must maintain a cost accumulation 

system, as described in Definitions 

§ 367.1(a)(12), for accumulating 

reimbursable costs and charges to the 

associate companies served, and 

maintain time records for all service 

company employees in order to support 

the accounting allocation of all expenses 

assignable to the types of services 

performed and chargeable to the 

associate companies served. Service 

company employee records must permit 

a ready identification of the hours 

worked, account numbers charged, and 

other code designations that facilitate 

proper classification. 

Subpart C—Service Company Property 

Instructions 

§ 367.50 Service company property to be 

recorded at cost. 

(a) All amounts included in the 

accounts for service company property 

must be stated at the cost incurred by 

the service company, except for 

property acquired by lease which 

qualifies as capital lease property under 

General Instructions in § 367.18, Criteria 

for classifying leases, and is recorded in 

Account 101.1, Property under capital 

leases (§ 367.1011). 

(b) When the consideration given for 

property is other than cash, the value of 

the consideration must be determined 

on a cash basis (See, however, 

Definitions § 367.1(a)(11)). In the entry 

recording the transaction, the actual 

consideration must be described with 

sufficient particularity to identify it. The 

service company must be prepared to 

furnish the Commission the particulars 

of its determination of the cash value of 

the consideration, if other than cash. 

(c) When property is purchased under 

a plan involving deferred payments, no 

charge must be made to the service 

company property accounts for interest, 

insurance, or other expenditures 

occasioned solely by such form of 

payment. 

(d) The service company property 

accounts must not include the cost or 

other value of service company property 

contributed to the company. 

Contributions in the form of money or 

its equivalent toward the construction of 

property must be credited to accounts 

charged with the cost of such 

construction. Property constructed from 

contributions of cash or its equivalent 

must be shown as a reduction to gross 

property constructed when assembling 

cost data for posting to property ledgers 

of accounts. The accumulated gross 

costs of property must be recorded as a 

debit in the plant ledger of accounts 

along with the related amount of 

contributions concurrently recorded as a 

credit. 

§ 367.51 Components of construction. 

(a) For service companies, the cost of 

construction properly included in the 

service company property accounts 

must include, where applicable, the 

direct and overhead costs as listed and 

defined as follows: 

(1) Contract work includes amounts 

paid for work performed under contract 

by other companies, firms, or 

individuals, costs incident to the award 

of such contracts, and the inspection of 

the work. 

(2) Labor includes the pay and 

expenses of employees of the service 

company engaged in construction work, 

and related workmen’s compensation 

insurance, payroll taxes and similar 

items of expense. It does not include the 

pay and expenses of employees that are 

distributed to construction through 

clearing accounts nor the pay and 

expenses included in other items in this 

section. 

(3)(i) Materials and supplies includes 

the purchase price at the point of free 

delivery plus customs duties, excise 

taxes, the cost of inspection, loading 

and transportation, the related stores 

expenses, and the cost of fabricated 

materials from the service company’s 

shop. In determining the cost of 

materials and supplies used for 

construction, proper allowance must be 

made for unused materials and supplies, 

for materials recovered from temporary 

structures used in performing the work 

involved, and for discounts allowed and 

realized in the purchase of materials 

and supplies. 

(ii) The cost of individual items of 

equipment of small value (for example, 

$500 or less) or of short life, including 

small portable tools and implements, 

must not be charged to service company 

property accounts unless the correctness 

of the accounting is verified by current 

inventories. The cost must be charged to 

the appropriate operating expense or 

clearing accounts, according to the use 

of the items, or, if the items are 

consumed directly in construction 

work, the cost must be included as part 

of the cost of the construction. 

(4) Transportation includes the cost of 

transporting employees, materials and 

supplies, tools, purchased equipment, 

and other work equipment (when not 

under own power) to and from points of 

construction. It includes amounts paid 

to others as well as the cost of operating 

the service company’s own 


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transportation equipment. (See 

paragraph (a)(5) of this section.) 

(5) Special machine service includes 

the cost of labor (optional), materials 

and supplies, depreciation, and other 

expenses incurred in the maintenance, 

operation and use of special machines, 

such as steam shovels, pile drivers, 

derricks, ditchers, scrapers, material 

unloaders, and other labor saving 

machines; also expenditures for rental, 

maintenance and operation of machines 

of others. It does not include the cost of 

small tools and other individual items 

of small value or short life which are 

included in the cost of materials and 

supplies. (See paragraph (a)(3) of this 

section.) When a particular construction 

job requires the use for an extended 

period of time of special machines, 

transportation or other equipment, the 

associated net book cost, less the 

appraised or salvage value at time of 

release from the job, must be included 

in the cost of construction. 

(6) Shop service includes the 

proportion of the expense of the service 

company’s shop department assignable 

to construction work except that the 

cost of fabricated materials from the 

service company’s shop must be 

included in materials and supplies. 

(7) Protection includes the cost of 

protecting the service company’s 

property from fire or other casualties 

and the cost of preventing damages to 

others, or to the property of others, 

including payments for discovery or 

extinguishment of fires, cost of 

apprehending and prosecuting 

incendiaries, related witness fees, 

amounts paid to municipalities and 

others for fire protection, and other 

analogous items of expenditures in 

connection with construction work. 

(8) Injuries and damages includes 

expenditures or losses in connection 

with construction work on account of 

injuries to persons and damages to the 

property of others; also the cost of 

investigation of, and defense against, 

actions for the injuries and damages. 

Insurance recovered or recoverable on 

account of compensation paid for 

injuries to persons incident to 

construction must be credited to the 

account or accounts to which such 

compensation is charged. Insurance 

recovered or recoverable on account of 

property damages incident to 

construction must be credited to the 

account or accounts charged with the 

cost of the damages. 

(9) Privileges and permits includes 

payments for and expenses incurred in 

securing temporary privileges, permits 

or rights in connection with 

construction work, such as for the use 

of private or public property, streets, or 

highways, but it does not include rents. 

(10) Rents include amounts paid for 

the use of construction quarters and 

office space occupied by construction 

forces and amounts properly includible 

in construction costs for the facilities 

jointly used. 

(11) Engineering and supervision 

includes the portion of the pay and 

expenses of engineers, surveyors, 

draftsmen, inspectors, superintendents 

and their assistants applicable to 

construction work. 

(12) General administration 

capitalized includes the portion of the 

pay and expenses of the general officers 

and administrative and general 

expenses applicable to construction 

work. 

(13) Engineering services includes 

amounts paid to other companies, firms, 

or individuals engaged by the service 

company to plan, design, prepare 

estimates, supervise, inspect, or give 

general advice and assistance in 

connection with construction work. 

(14) Insurance includes premiums 

paid or amounts provided or reserved as 

self-insurance for the protection against 

loss and damages in connection with 

construction, by fire or other casualty 

injuries to or death of persons other 

than employees, damages to property of 

others, defalcation of employees and 

agents, and the nonperformance of 

contractual obligations of others. It does 

not include workmen’s compensation or 

similar insurance on employees 

included as labor in paragraph (a)(2) of 

this section. 

(15) Law expenditures includes the 

general law expenditures incurred in 

connection with construction and the 

directly related court and legal costs, 

other than law expenses included in 

protection in paragraph (a)(7) of this 

section, and in injuries and damages in 

paragraph (a)(8) of this section. 

(16) Taxes include taxes on physical 

property (including land) during the 

period of construction and other taxes 

properly includible in construction 

costs before the facilities become 

available for service. 

(17) Interest cost on funds used 

during construction which are allowed 

to be capitalized following generally 

accepted accounting principles. 

(18) Earnings and expenses during 

construction. The earnings and 

expenses during construction must 

constitute a component of construction 

costs. 

(19) Training costs. When it is 

necessary that employees be trained to 

operate or maintain property that is 

being constructed and the property is 

not conventional in nature, or is new to 

the company’s operations, these costs 

may be capitalized as a component of 

construction cost. Once property is 

placed in service, the capitalization of 

training costs must cease and 

subsequent training costs must be 

expensed. (See Operating Expense 

Instructions in § 367.83.) 

(20) Studies include the costs of 

studies such as safety or environmental 

studies mandated by regulatory bodies 

relative to property under construction. 

Studies relative to facilities in service 

must be charged to account 183, 

Preliminary survey and investigation 

charges (§ 367.1830). 

(21) Asset retirement costs. The costs 

recognized as a result of asset retirement 

obligations incurred during the 

construction and testing of service 

company property must constitute a 

component of construction costs. 

(b) [Reserved] 

§ 367.52 Overhead construction costs. 

(a) All overhead construction costs, 

such as engineering, supervision, 

general office salaries and expenses, 

construction engineering and 

supervision by others than the service 

company, law expenses, insurance, 

injuries and damages, relief and 

pensions, taxes and interest, must be 

charged to particular jobs or units on the 

basis of the amounts of the reasonably 

applicable overheads. 

(b) As far as practicable, the 

determination of payroll charges 

includible in construction overheads 

must be based on the related time card 

distributions. Where this procedure is 

impractical, special studies must be 

made periodically of the time of 

supervisory employees devoted to 

construction activities to the end that 

only the overhead costs that have a 

definite relation to construction must be 

capitalized. 

(c) The records supporting the entries 

for overhead construction costs must be 

kept so as to show the total amount of 

each overhead for each year, the nature 

and amount of each overhead 

expenditure charged to each 

construction project and to each 

property account, and the bases of 

distribution of such costs. 

§ 367.53 Service company property 

purchased or sold. 

(a) When service company property is 

acquired by purchase, merger, 

consolidation, liquidation, or otherwise, 

after the effective date of this system of 

accounts, the costs of acquisition, 

including related incidental expenses, 

must be charged to the appropriate 

service company property accounts and 


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account 107, Construction work in 

progress (§ 367.1070), as appropriate. 

(b) If property acquired is in a 

physical condition so that it is necessary 

to rehabilitate it substantially in order to 

bring the property up to the standards 

of the service company, the cost of the 

work, except replacements, must be 

accounted for as a part of the purchase 

price of the property. 

(c) Unless otherwise authorized by the 

Commission, all service company 

property acquired from an affiliate 

company must be recorded at its book 

value. Additionally, if property is 

acquired that is in excess of $10 million 

and has been previously devoted to 

public service at a price above book 

value, the service company must file 

with the Commission the proposed 

journal entries associated with the 

acquisition within six months from the 

date of acquisition of the property. 

(d) When service company property is 

sold, conveyed, or transferred to another 

by sale, merger, consolidation, or 

otherwise, the book cost of the property 

sold or transferred to another must be 

credited to the appropriate service 

company property accounts. The 

amounts (estimated, if not known) 

carried with respect the accounts for 

accumulated provision for depreciation 

and amortization must be charged to 

those accounts. The difference, if any, 

between the net amount of debits and 

credits and the consideration received 

for the property (less commissions and 

other expenses of making the sale) must 

be included in account 421.1, Gain on 

disposition of property (§ 367.4211), or 

account 421.2, Loss on disposition of 

property (§ 367.4212). 

(e) In connection with the acquisition 

of service company property previously 

devoted to service company operations 

or acquired from an associate company, 

the service company must procure, if 

possible, all existing records relating to 

the property acquired or related 

certified copies, and must preserve the 

records in conformity with regulations 

or practices governing the preservation 

of records of its own construction. 

§ 367.54 Expenditures on leased property. 

(a) The cost of substantial initial 

improvements (including repairs, 

rearrangements, additions, and 

betterments) made to prepare service 

company property leased to be used for 

a period of more than one year, and the 

cost of subsequent substantial additions, 

replacements, or betterments to the 

property, must be charged to the service 

company property account appropriate 

for the class of property leased. If the 

service life of the improvements is 

terminable by action of the lease, the 

cost, less net salvage, of the 

improvements must be spread over the 

life of the lease by charges to account 

404, Amortization of limited-term 

service property (§ 367.4040). However, 

if the service life is not terminated by 

action of the lease but by depreciation 

proper, the cost of the improvements, 

less net salvage, must be accounted for 

as depreciable property. The provisions 

of this paragraph are applicable to 

property leased under either capital 

leases or operating leases. 

(b) If improvements made to property 

leased for a period of more than one 

year are of relatively minor cost, or if 

the lease is for a period of not more than 

one year, the cost of the improvements 

must be charged to the account in which 

the rent is included, either directly or by 

amortization. 

§ 367.55 Land and land rights. 

(a) The accounts for land and land 

rights must include the cost of land 

owned in fee by the service company 

and rights. Interests, and privileges held 

by the service company in land owned 

by others, such as leaseholds, 

easements, water and water power 

rights, diversion rights, submersion 

rights, rights-of-way, and other like 

interests in land. Do not include in the 

accounts for land and land rights and 

rights-of-way costs incurred in 

connection with first clearing and 

grading of land and rights-of-way and 

the damage costs associated with the 

construction and installation of 

property. The costs must be included in 

the appropriate property accounts 

directly benefited. 

(b) Where special assessments for 

public improvements provide for 

deferred payments, the full amount of 

the assessments must be charged to the 

appropriate land account and the 

unpaid balance must be carried in an 

appropriate liability account. Interest on 

unpaid balances must be charged to the 

appropriate interest account. If any part 

of the cost of public improvements is 

included in the general tax levy, the 

related amount must be charged to the 

appropriate tax account. 

(c) The net profit from the sale of 

timber, cord wood, sand, gravel, other 

resources or other property acquired 

with the rights-of-way or other lands 

must be credited to the appropriate 

property account to which it is related. 

Where land is held for a considerable 

period of time and timber and other 

natural resources on the land at the time 

of purchase increases in value, the net 

profit (after giving effect to the cost of 

the natural resources) from the sales of 

timber or its products or other natural 

resources must be credited to the 

appropriate operating income account 

when the land has been recorded in 

account 101, Service company property 

(§ 367.1010), otherwise to account 421, 

Miscellaneous income or loss 

(§ 367.4210). 

(d) Separate entries must be made for 

the acquisition, transfer, or retirement of 

each parcel of land, and each land right 

(except rights of way for distribution 

lines), or water right, having a life of 

more than one year. A record must be 

maintained showing the nature of 

ownership, full legal description, area, 

map reference, purpose for which used, 

city, county, and tax district on which 

situated, from whom purchased or to 

whom sold, payment given or received, 

other costs, contract date and number, 

date of recording of deed, and book and 

page of record. Entries transferring or 

retiring land or land rights must refer to 

the original entry recording its 

acquisition. 

(e) Any difference between the 

amount received from the sale of land 

or land rights, less agents’ commissions 

and other costs incident to the sale, and 

the book cost of such land or rights, 

must be included in account 421.1, Gain 

on disposition of property (§ 367.4211), 

or account 421.2, Loss on disposition of 

property (§ 367.4212), when the 

property has been recorded in account 

101, Service company property 

(§ 367.1010). Appropriate adjustments 

of the accounts must be made with 

respect to any structures or 

improvements located on the land sold. 

(f) The cost of buildings and other 

improvements (other than public 

improvements) must not be included in 

the land accounts. If, at the time of 

acquisition of an interest in land the 

interest extends to buildings or other 

improvements (other than public 

improvements) that are then devoted to 

operations, the land and improvements 

must be separately appraised and the 

cost allocated to land and buildings or 

improvements on the basis of the 

appraisals. If the improvements are 

removed or wrecked without being used 

in operations, the cost of removing or 

wrecking must be charged and the 

salvage credited to the account in which 

the cost of the land is recorded. 

(g) Provisions must be made for 

amortizing amounts carried in the 

accounts for limited-term interests in 

land so as to apportion equitably the 

cost of each interest over the life thereof. 

(See account 111, Accumulated 

provision for amortization of service 

company property in § 367.1110, and 

account 404, Amortization of limitedterm property in § 367.4040.) 


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(h) The items of cost to be included 

in the accounts for land and land rights 

are as follows: 

(1) Bulkheads, buried, not requiring 

maintenance or replacement. 

(2) Cost, first, of acquisition including 

mortgages and other liens assumed (but 

not the related subsequent interest). 

(3) Condemnation proceedings, 

including court and counsel costs. 

(4) Consents and abutting damages, 

payment for. 

(5) Conveyancers’ and notaries’ fees. 

(6) Fees, commissions, and salaries to 

brokers, agents and others in connection 

with the acquisition of the land or land 

rights. 

(7) Leases, cost of voiding upon 

purchase to secure possession of land. 

(8) Removing, relocating, or 

reconstructing, property of others, such 

as buildings, highways, railroads, 

bridges, cemeteries, churches, telephone 

and power lines, in order to acquire 

quiet possession. 

(9) Retaining walls unless identified 

with structures. 

(10) Special assessments levied by 

public authorities for public 

improvements on the basis of benefits 

for new roads, new bridges, new sewers, 

new curbing, new pavements, and other 

public improvements, but not taxes 

levied to provide for the maintenance of 

such improvements. 

(11) Surveys in connection with the 

acquisition, but not amounts paid for 

topographical surveys and maps where 

the costs are attributable to structures or 

plant equipment erected or to be erected 

or installed on the land. 

(12) Taxes assumed, accrued to date 

of transfer of title. 

(13) Title, examining, clearing, 

insuring and registering in connection 

with the acquisition and defending 

against claims relating to the period 

prior to the acquisition. 

(14) Appraisals prior to closing title. 

(15) Cost of dealing with distributees 

or legatees residing outside of the state 

or county, such as recording power of 

attorney, recording will or 

exemplification of will, recording 

satisfaction of state tax. 

(16) Filing satisfaction of mortgage. 

(17) Documentary stamps. 

(18) Photographs of property at 

acquisition. 

(19) Fees and expenses incurred in 

the acquisition of water rights and 

grants. 

(20) Cost of fill to extend bulkhead 

line over land under water, where 

riparian rights are held, which is not 

occasioned by the erection of a 

structure. 

(21) Sidewalks and curbs constructed 

by the service company on public 

property. 

(22) Labor and expenses in 

connection with securing rights of way, 

where performed by company 

employees and company agents. 

§ 367.56 Structures and improvements. 

(a) The accounts for structures and 

improvements must include the cost of 

all buildings and facilities to house, 

support, or safeguard property or 

persons, including all fixtures 

permanently attached to and made a 

part of buildings and that cannot be 

removed from the buildings and 

facilities without cutting into the walls, 

ceilings, or floors, or without in some 

way impairing the buildings, and 

improvements of a permanent character 

on, or to, land. Also include those costs 

incurred in connection with the first 

clearing and grading of land and rightsof-way and the damage costs associated 

with construction and installation of 

property. 

(b) The cost of specially-provided 

foundations not intended to outlast the 

machinery or apparatus for which 

provided, and associated costs, such as 

angle irons, castings, and other items 

installed at the base of an item of 

equipment, must be charged to the same 

account as the cost of the machinery, 

apparatus, or equipment. 

(c) Where the structure of a dam also 

forms the foundation of the service 

company building, the foundation must 

be considered a part of the dam. 

(d) The cost of disposing of materials 

excavated in connection with 

construction of structures must be 

considered as a part of the cost of that 

work, except as follows: 

(1) When the material is used for 

filling, the cost of loading, hauling, and 

dumping must be equitably apportioned 

between the work in connection with 

which the removal occurs and the work 

in connection with which the material 

is used. 

(2) When the material is sold, the net 

amount realized from the sales must be 

credited to the work in connection with 

which the removal occurs. If the amount 

realized from the sale of excavated 

materials exceeds the removal costs and 

the costs in connection with the sale, 

the excess must be credited to the land 

account in which the site is carried. 

(e) Lighting or other fixtures 

temporarily attached to buildings for 

purposes of display or demonstration 

must not be included in the cost of the 

building but in the appropriate 

equipment account. 

(f) This account must include the 

following items: 

(1) Architects’’ plans and 

specifications including supervision. 

(2) Ash pits (when located within the 

building). 

(3) Athletic field structures and 

improvements. 

(4) Boilers, furnaces, piping, wiring, 

fixtures, and machinery for heating, 

lighting, signaling, ventilating, and airconditioning systems, plumbing, 

vacuum cleaning systems, incinerator 

and smoke pipe, flues and similar items. 

(5) Bulkheads, including dredging, 

riprap fill, piling, decking, concrete, 

fenders, and similar items when 

exposed and subject to maintenance and 

replacement. 

(6) Chimneys. 

(7) Coal bins and bunkers. 

(8) Commissions and fees to brokers, 

agents, architects, and others. 

(9) Conduit (not to be removed) with 

its contents. 

(10) Damages to abutting property 

during construction. 

(11) Docks. 

(12) Door checks and door stops. 

(13) Drainage and sewerage systems. 

(14) Elevators, cranes, hoists, and the 

machinery for operating them. 

(15) Excavation, including shoring, 

bracing, bridging, refill and disposal of 

excess excavated material, cofferdams 

around foundation, pumping water from 

cofferdams during construction, and test 

borings. 

(16) Fences and fence curbs (not 

including protective fences isolating 

items of equipment, which must be 

charged to the appropriate equipment 

account). 

(17) Fire protection systems when 

forming a part of a structure. 

(18) Flagpole. 

(19) Floor covering (permanently 

attached). 

(20) Foundations and piers for 

machinery, constructed as a permanent 

part of a building or other item listed in 

this paragraph (f). 

(21) Grading and clearing when 

directly occasioned by the building of a 

structure. 

(22) Intrasite communication system, 

poles, pole fixtures, wires, and cables. 

(23) Landscaping, lawns, shrubbery 

and similar items. 

(24) Leases, voiding upon purchase to 

secure possession of structures. 

(25) Leased property, expenditures 

on. 

(26) Lighting fixtures and outside 

lighting system. 

(27) Mail chutes when part of a 

building. 

(28) Marquee, permanently attached 

to building. 

(29) Painting, first cost. 

(30) Permanent paving, concrete, 

brick, flagstone, asphalt, within the 

property lines. 


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(31) Partitions, including movable. 

(32) Permits and privileges. 

(33) Platforms, railings, and gratings 

when constructed as a part of a 

structure. 

(34) Power boards for services to a 

building. 

(35) Refrigerating systems for general 

use. 

(36) Retaining walls except when 

identified with land. 

(37) Roadways, railroads, bridges, and 

trestles intrasite except railroads 

provided for in equipment accounts. 

(38) Roofs. 

(39) Scales, connected to and forming 

a part of a structure. 

(40) Screens. 

(41) Sewer systems, for general use. 

(42) Sidewalks, culverts, curbs and 

streets constructed by the service 

company on its property. 

(43) Sprinkling systems. 

(44) Sump pumps and pits. 

(45) Stacks—brick, steel, or concrete, 

when set on foundation forming part of 

general foundation and steelwork of a 

building. 

(46) Steel inspection during 

construction. 

(47) Storage facilities constituting a 

part of a building. 

(48) Storm doors and windows. 

(49) Subways, areaways, and tunnels, 

directly connected to and forming part 

of a structure. 

(50) Tanks, constructed as part of a 

building or as a distinct structural unit. 

(51) Temporary heating during 

construction (net cost). 

(52) Temporary water connection 

during construction (net cost). 

(53) Temporary shanties and other 

facilities used during construction (net 

cost). 

(54) Topographical maps. 

(55) Tunnels, intake and discharge, 

when constructed as part of a structure, 

including sluice gates, and those 

constructed to house mains. 

(56) Vaults constructed as part of a 

building. 

(57) Watchmen’s sheds and clock 

systems (net cost when used during 

construction only). 

(58) Water basins or reservoirs. 

(59) Water front improvements. 

(60) Water meters and supply system 

for a building or for general company 

purposes. 

(61) Water supply piping, hydrants 

and wells. 

(62) Wharves. 

(63) Window shades and ventilators. 

(64) Yard drainage system. 

(65) Yard lighting system. 

(66) Yard surfacing, gravel, concrete, 

or oil. (First cost only.) 

(g) Structures and Improvements 

accounts must be credited with the cost 

of structures created to house, support, 

or safeguard equipment, the use of 

which has terminated with the removal 

of the equipment with which they are 

associated even though they have not 

been physically removed. 

§ 367.57 Equipment. 

(a) The cost of equipment chargeable 

to the service company property 

accounts, unless otherwise indicated in 

the text of an equipment account, 

includes the related net purchase price, 

sales taxes, investigation and inspection 

expenses necessary to such purchase, 

expenses of transportation when borne 

by the service company, labor 

employed, materials and supplies 

consumed, and expenses incurred by 

the service company in unloading and 

placing the equipment in readiness to 

operate. Also include those costs 

incurred in connection with the first 

clearing and grading of land and rightsof-way and the damage costs associated 

with construction and installation of 

property. 

(b) Exclude from equipment accounts 

hand and other portable tools, that are 

likely to be lost or stolen or that have 

relatively small value (for example, 

$500 or less) or short life, unless the 

correctness of the related accounting as 

service company property is verified by 

current inventories. Special tools 

acquired and included in the purchase 

price of equipment must be included in 

the appropriate property account. 

Portable drills and similar tool 

equipment when used in connection 

with the operation and maintenance of 

a particular plant or department, such as 

production, transmission, distribution, 

or similar items, or in stores, must be 

charged to the property account 

appropriate for their use. 

(c) The equipment accounts must 

include angle irons and similar items 

that are installed at the base of an item 

of equipment, but piers and foundations 

that are designed to be as permanent as 

the buildings that house the equipment, 

or that are constructed as a part of the 

building and that cannot be removed 

without cutting into the walls, ceilings 

or floors or without in some way 

impairing the building, must be 

included in the building accounts. 

(d) The cost of efficiency or other tests 

made subsequent to the date equipment 

becomes available for service must be 

charged to the appropriate expense 

accounts, except that tests to determine 

whether equipment meets the 

specifications and requirements as to 

efficiency, performance, and similar 

items, guaranteed by manufacturers, 

made after operations have commenced 

and within the period specified in the 

agreement or contract of purchase may 

be charged to the appropriate service 

company property account. 

§ 367.58 Property record system required 

for service company property. 

(a) Each service company must keep 

its cost allocation system so as to show 

the nature of each addition to or 

retirement of service company property, 

the related total cost, the source or 

sources of costs, and the property 

account or accounts to which charged or 

credited. Records covering jobs of short 

duration may be cleared monthly. 

(b) Each service company must 

maintain records in which, for each 

property account, the amounts of the 

annual additions and retirements are 

classified so as to show the number and 

cost of the various record units or 

retirement units. 

§ 367.59 Additions and retirements of 

property. 

(a) For the purpose of avoiding undue 

refinement in accounting for additions 

to and retirements and replacements of 

service company property, all property 

will be considered as consisting of 

retirement units and minor items of 

property. Each company must maintain 

a written property units listing for use 

in accounting for additions and 

retirements of property and apply the 

listing consistently. 

(b) The addition and retirement of 

retirement units must be accounted for 

as follows: 

(1) When a retirement unit is added, 

the related cost must be added to the 

appropriate service company property 

account. 

(2) When a retirement unit is retired, 

with or without replacement, the related 

book cost must be credited to the 

property account in which it is 

included, determined in the manner 

provided in paragraph (d) of this 

section. If the retirement unit is of a 

depreciable class, the book cost of the 

unit retired and credited to service 

company property must be charged to 

the accumulated provision for 

depreciation applicable to the property. 

The cost of removal and the salvage 

must be charged or credited, as 

appropriate, to the depreciation 

account. 

(c) The addition and retirement of 

minor items of property must be 

accounted for as follows: 

(1) When a minor item of property 

that did not previously exist is added to 

service company property, the related 

cost must be accounted for in the same 

manner as for the addition of a 

retirement unit, as provided in 

paragraph (b)(1) of this section, if a 


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substantial addition results, otherwise 

the charge must be to the appropriate 

maintenance expense account. 

(2) When a minor item of property is 

retired and not replaced, the related 

book cost must be credited to the 

property account in which it is 

included; and, in the event the minor 

item is a part of depreciable property, 

the account for accumulated provision 

for depreciation must be charged with 

the book cost and cost of removal and 

credited with the salvage. If, however, 

the book cost of the minor item retired 

and not replaced has been or will be 

accounted for by its inclusion in the 

retirement unit of which it is a part 

when the unit is retired, no separate 

credit to the property account is 

required when the minor item is retired. 

(3) When a minor item of depreciable 

property is replaced independently of 

the retirement unit of which it is a part, 

the cost of replacement must be charged 

to the maintenance account appropriate 

for the item. However, if the 

replacement effects a substantial 

betterment (the primary aim of which is 

to make the property affected more 

useful, more efficient, of greater 

durability, or of greater capacity), the 

excess cost of the replacement over the 

estimated cost at current prices of 

replacing without betterment must be 

charged to the appropriate property 

account. 

(d) The book cost of service company 

property retired must be the amount at 

which the property is included in the 

property accounts, including all 

components of construction costs. The 

book cost must be determined from the 

service company’s records and, if this 

cannot be done, it must be estimated. 

Service companies must furnish the 

particulars of the estimates to the 

Commission, if requested. When it is 

impracticable to determine the book 

cost of each unit, due to the relatively 

large number or related small cost, an 

appropriate average book cost of the 

units, with due allowance for any 

differences in size and character, must 

be used as the book cost of the units 

retired. 

(e) The book cost of land retired must 

be credited to the appropriate land 

account. If the land is sold, the 

difference between the book cost (less 

any accumulated provision for related 

depreciation or amortization that has 

been authorized and provided) and the 

sale price of the land (less commissions 

and other expenses of making the sale) 

must be recorded in accounts 421.1, 

Gain on disposition of property 

(§ 367.4211) or 421.2, Loss on 

disposition of property (§ 367.4212), as 

appropriate. 

(f) The book cost less net salvage of 

depreciable service company property 

retired must be charged in its entirety to 

account 108, Accumulated provision for 

depreciation of service company 

property (§ 367.1080). 

(g) The accounting for the retirement 

of amounts included in account 303, 

Miscellaneous intangible property 

(§ 367.3030), and the items of limitedterm interest in land included in the 

accounts for land and land rights, must 

be as provided for in the text of account 

111, Accumulated provision for 

amortization of service company 

property (§ 367.1110), account 404, 

Amortization of limited-term property 

(§ 367.4040), and account 405, 

Amortization of other property 

(§ 367.4050). 

Subpart D—Operating Expense 

Instructions 

§ 367.80 Supervision and engineering. 

(a) The supervision and engineering 

includible in the operating expense 

accounts must consist of the pay and 

expenses of superintendents, engineers, 

clerks, other employees and consultants 

engaged in supervising and directing the 

operation and maintenance of each 

service company function. Wherever 

allocations are necessary in order to 

arrive at the amount to be included in 

any account, the method and basis of 

allocation must be reflected by 

underlying records. 

(b) This account must include the 

following labor items: 

(1) Special tests to determine 

efficiency of equipment operation. 

(2) Preparing or reviewing budgets, 

estimates, and drawings relating to 

operation or maintenance for 

departmental approval. 

(3) Preparing instructions for 

operations and maintenance activities. 

(4) Reviewing and analyzing operating 

results. 

(5) Establishing organizational setup 

of departments and executing related 

changes. 

(6) Formulating and reviewing 

routines of departments and executing 

related changes. 

(7) General training and instruction of 

employees by supervisors whose pay is 

chargeable to the training and 

instruction. Specific instruction and 

training in a particular type of work is 

chargeable to the appropriate functional 

expense account (See Service Company 

Property in § 367.51(a)(19)). 

(8) Secretarial work for supervisory 

personnel, but not general clerical and 

stenographic work chargeable to other 

accounts. 

(c) This account must include the 

following expense items: 

(1) Consultants’ fees and expenses. 

(2) Meals, traveling and incidental 

expenses. 

§ 367.81 Maintenance. 

(a) The cost of maintenance 

chargeable to the various operating 

expense and clearing accounts includes 

labor, materials, overheads and other 

expenses incurred in maintenance work. 

A list of work operations applicable 

generally to service company property is 

included in paragraph (d) of this 

section. Other work operations 

applicable to specific classes of property 

are listed in functional maintenance 

expense accounts. 

(b) Materials recovered in connection 

with the maintenance of property must 

be credited to the same account to 

which the maintenance cost was 

charged. 

(c) Maintenance of property leased 

from others must be treated as provided 

in operating expense instruction in 

§ 367.82. 

(d) This account must include the 

following items: 

(1) Direct field supervision of 

maintenance. 

(2) Inspecting, testing, and reporting 

on condition of property specifically to 

determine the need for repairs, 

replacements, rearrangements and 

changes and inspecting and testing the 

adequacy of repairs which have been 

made. 

(3) Work performed specifically for 

the purpose of preventing failure, 

restoring serviceability or maintaining 

life of property. 

(4) Rearranging and changing the 

location of property. 

(5) Repairing for reuse materials 

recovered from property. 

(6) Testing for locating and clearing 

trouble. 

(7) Net cost of installing, maintaining, 

and removing temporary facilities to 

prevent interruptions in service. 

(8) Replacing or adding minor items 

of plant which do not constitute a 

retirement unit. (See Service Company 

Property Instruction in § 367.59.) 

§ 367.82 Rents. 

(a) The rent expense accounts 

provided under the several functional 

groups of expense accounts must 

include all rents, including taxes paid 

by the lessee on leased property, for 

property used in the operations of the 

service company, except: 

(1) Minor amounts paid for occasional 

or infrequent use of any property or 

equipment and all amounts paid for use 

of equipment that, if owned, would be 

includible in property accounts 391 to 

398 (§§ 367.3910 to 367.3980), 


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inclusive, that must be treated as an 

expense item and included in the 

appropriate functional account, and 

(2) Rents that are chargeable to 

clearing accounts, and distributed from 

the clearing accounts to the appropriate 

account. If rents cover property used for 

more than one function, such as 

production and transmission, or by 

more than one department, the rents 

must be apportioned to the appropriate 

rent expense or clearing accounts of 

each department on an actual, or, if 

necessary, an estimated basis. 

(b) When a portion of property or 

equipment rented from others for use in 

connection with service company 

operations is subleased, the revenue 

derived from the subleasing must be 

credited to the rent revenue account in 

operating revenues. However, if the rent 

was charged to a clearing account, 

amounts received from subleasing the 

property must be credited to the 

clearing account. 

(c) The cost, when incurred by the 

lessee, of operating and maintaining 

leased property, must be charged to the 

accounts appropriate for the expense if 

the property were owned. 

(d) The cost incurred by the lessee of 

additions and replacements to property 

leased from others must be accounted 

for as provided in Service Company 

Property Instruction in § 367.54. 

§ 367.83 Training costs. 

When it is necessary that employees 

be trained to specifically operate or 

maintain facilities that are being 

constructed, the related costs must be 

accounted for as a current operating and 

maintenance expense. These expenses 

must be charged to the appropriate 

functional accounts currently as they 

are incurred. However, when the 

training costs involved relate to 

facilities that are not conventional in 

nature, or are new to the service 

company’s operations, these costs may 

be capitalized until the time that the 

facilities are ready for functional use. 

Subpart E—Special Instructions 

§ 367.100 Accounts 131–174, Current and 

accrued assets. 

Current and accrued assets are cash, 

those assets which are readily 

convertible into cash or are held for 

current use in operations or 

construction, current claims against 

others, payment of which is reasonably 

assured, and amounts accruing to the 

service company that are subject to 

current settlement, except those items 

for which accounts other than those 

designated as current and accrued assets 

are provided. There must not be 

included in the group of accounts 

designated as current and accrued assets 

any item, the amount or collectibility of 

which is not reasonably assured, unless 

an adequate provision for the related 

possible loss has been made. Items of 

current character but of doubtful value 

may be written down and for record 

purposes carried in these accounts at 

nominal value. 

§ 367.101 Accounts 231–243, Current and 

accrued liabilities. 

Current and accrued liabilities are 

those obligations which have either 

matured or which become due within 

one year from the date of issuance or 

assumption, except for: bonds, 

receivers’ certificates and similar 

obligations which must be classified as 

long-term debt until date of maturity; 

accrued taxes, such as income taxes, 

which must be classified as accrued 

liabilities even though payable more 

than one year from date; compensation 

awards, which must be classified as 

current liabilities regardless of date due; 

and minor amounts payable in 

installments which may be classified as 

current liabilities. If a liability is due 

more than one year from date of 

issuance or assumption by the service 

company, it shall be credited to a longterm debt account appropriate for the 

transaction, except, however, the 

current liabilities previously mentioned. 

§ 367.102 Accounts 408.1 and 408.2, Taxes 

other than income taxes. 

(a) These accounts must include the 

amounts of ad valorem, gross revenue or 

gross receipts taxes, state 

unemployment insurance, franchise 

taxes, Federal excise taxes, social 

security taxes, and all other taxes 

assessed by Federal, state, county, 

municipal, or other local governmental 

authorities, except income taxes. 

(b) These accounts shall be charged in 

each accounting period with the 

amounts of taxes which are applicable 

to each account, with concurrent credits 

to account 236, Taxes accrued 

(§ 367.2360), or account 165, 

Prepayments (§ 367.1650), as 

appropriate. When it is not possible to 

determine the exact amounts of taxes, 

the amounts shall be estimated and 

adjustments made in current accruals as 

the actual tax levies become known. 

(c) Special assessments for street and 

similar improvements must be included 

in the appropriate service company 

property account. 

(d) Taxes specifically applicable to 

construction must be included in the 

cost of construction. 

(e) Gasoline and other sales taxes 

must be charged as far as practicable to 

the same account as the materials on 

which the tax is levied. 

(f) Social security and other forms of 

so-called payroll taxes must be 

distributed to utility and non-utility 

functions on a basis related to payroll. 

Amounts applicable to construction 

must be charged to the appropriate plant 

account. 

(g) Interest on tax refunds or 

deficiencies must not be included in 

these accounts but in accounts 419, 

Interest and dividend income 

(§ 367.4190), or 431, Other interest 

expense (§ 367.4310), as appropriate. 

§ 367.103 Accounts 409.1, 409.2, and 

409.3, Income taxes. 

(a) These accounts must include the 

amounts of local, state and Federal 

income taxes on income properly 

accruable during the period covered by 

the income statement to meet the actual 

liability for such taxes. Concurrent 

credits for the tax accruals must be 

made to account 236, Taxes accrued 

(§ 367.2360), and as the exact amounts 

of taxes become known, the current tax 

accruals must be adjusted by charges or 

credits to these accounts, so that these 

accounts include the actual taxes 

payable by the service company. 

(b) The accruals for income taxes shall 

be apportioned to Operating Income, 

Other Income and Deductions, and 

Extraordinary Items so that, as nearly as 

practicable, each tax will be included in 

the appropriate account based on the 

income which gave rise to the tax. 

(c) Taxes assumed by the service 

company on interest must be charged to 

account 431, Other interest expense 

(§ 367.4310). 

(d) Interest on tax refunds or 

deficiencies must not be included in 

these accounts but in account 419, 

Interest and dividend income 

(§ 367.4190), or account 431, Other 

interest expense (§ 367.4310), as 

appropriate. 

§ 367.104 Accounts 410.1, 410.2, 411.1, 

and 411.2, Provision for deferred income 

taxes. 

(a) Accounts 410.1 (§ 367.4101) and 

410.2 (§ 367.4102) must be debited, and 

Accumulated Deferred Income Taxes 

must be credited, with amounts equal to 

any current deferrals of taxes on income 

or any allocations of deferred taxes 

originating in prior periods, as provided 

by the texts of accounts 190 

(§ 367.1900), 282 (§ 367.2820), and 283 

(§ 367.2830). There must not be netted 

against entries required to be made to 

these accounts any credit amounts 

appropriately includible in accounts 

411.1 (§ 367.4111) or 411.2 (§ 367.4112). 

(b) Accounts 411.1 (§ 367.4111) and 

411.2 (§ 367.4112) must be credited, and 


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Accumulated Deferred Income Taxes 

must be debited, with amounts equal to 

any allocations of deferred taxes 

originating in prior periods or any 

current deferrals of taxes on income, as 

provided by the texts of accounts 190 

(§ 367.1900), 282 (§ 367.2820), and 283 

(§ 367.2830). There must not be netted 

against entries required to be made to 

these accounts any debit amounts 

appropriately includible in account 

410.1 (§ 367.4101) or 410.2 (§ 367.4102). 

§ 367.105 Accounts 411.4, and 411.5, 

Investment tax credit adjustments. 

(a) Account 411.4 (§ 367.4114) must 

be debited with the amounts of 

investment tax credits related to service 

company property that are credited to 

account 255, Accumulated deferred 

investment tax credits (§ 367.2550), by 

companies which do not apply the 

entire amount of the benefits of the 

investment credit as a reduction of the 

overall income tax expense in the year 

in which such credit is realized (See 

account 255 in § 367.2550). 

(b) Account 411.4 (§ 367.4114) must 

be credited with the amounts debited to 

account 255 (§ 367.2550) for 

proportionate amounts of tax credit 

deferrals allocated over the average 

useful life of service company property 

to which the tax credits relate or such 

lesser period of time as may be adopted 

and consistently followed by the 

company. 

(c) Account 411.5 (§ 367.4115) must 

also be debited and credited as directed 

in paragraphs (a) and (b), for investment 

tax credits related to other income and 

deductions. 

§ 367.106 Accounts 426.1, 426.2, 426.3, 

426.4, and 426.5, Miscellaneous expense 

accounts. 

These accounts must include 

miscellaneous expense items which are 

nonoperating in nature but which are 

properly deductible before determining 

total income before interest charges. 

Subpart F—Balance Sheet Chart of 

Accounts 

Service Company Property 

§ 367.1010 Account 101, Service company 

property. 

(a) This account must include the cost 

of service company property, included 

in accounts 301 (§ 367.3010), 303 

(§ 367.3030) and 389 to 399.1 

(§§ 376.3890 to 367.3991), owned and 

used by the service company in its 

operations, and having an expectation of 

life in service of more than one year 

from date of installation. 

(b) The cost of additions to, and 

betterments of, property leased from 

others, that are includible in this 

account, must be recorded in 

subaccounts separate and distinct from 

those relating to owned property. (See 

Service Company Property Instruction 

in § 367.54.) 

§ 367.1011 Account 101.1, Property under 

capital leases. 

(a) This account must include the 

amount recorded under capital leases 

for property leased from others and used 

by the service company in its 

operations. 

(b) The property included in this 

account must be classified separately 

according to detailed accounts 301 

(§ 367.3010), 303 (§ 367.3030) and 389 

to 399.1 (§§ 367.3890 to 367.3991) 

prescribed for service company 

property. 

(c) Records must be maintained with 

respect to each capital lease reflecting: 

(1) Name of lessor, 

(2) Basic details of lease, 

(3) Terminal date, 

(4) Original cost or fair market value 

of property leased, 

(5) Future minimum lease payments, 

(6) Executory costs, 

(7) Present value of minimum lease 

payments, 

(8) The amount representing interest 

and the interest rate used, and 

(9) Expenses paid. 

§ 367.1060 Account 106, Completed 

construction not classified. 

At the end of the year or such other 

date as a balance sheet may be required 

by the Commission, this account must 

include the total of the balances of 

construction projects for service 

company property which has been 

completed and placed in service but 

have not been classified for transfer to 

the detailed service company property 

accounts. 

§ 367.1070 Account 107, Construction 

work in progress. 

(a) This account must include the 

total of the balances of construction 

projects for service company property in 

process of construction. 

(b) Construction projects must be 

cleared from this account as soon as 

practicable after completion of the job. 

Further, if a project is designed to 

consist of two or more units that may be 

placed in service at different dates, any 

expenditures that are common to and 

that will be used in the operation of the 

project as a whole must be included in 

service company property upon the 

completion and the readiness for service 

of the first unit. Any expenditures that 

are identified exclusively with units of 

property not yet in service must be 

included in this account. 

(c) Expenditures on research, 

development, and demonstration 

projects for construction of facilities are 

to be included in a separate subaccount 

in this account. Records must be 

maintained to show separately each 

project along with complete detail of the 

nature and purpose of the research, 

development, and demonstration project 

together with the related costs. 

§ 367.1080 Account 108, Accumulated 

provision for depreciation of service 

company property. 

(a) This account must be credited 

with the following: 

(1) Amounts charged to account 403, 

Depreciation expense (§ 367.4030), or to 

clearing accounts for current 

depreciation expense for service 

company property. 

(2) Amounts charged to account 416, 

Costs and expenses of merchandising, 

jobbing, and contract work (§ 367.4160), 

or to clearing accounts for current 

depreciation expense. 

(3) Amounts of depreciation 

applicable to properties acquired. (See 

Service Company Property Instruction 

in § 367.53.) 

(4) Amounts of depreciation 

applicable to service company property 

donated to the service company. 

(b) The service company must 

maintain separate subaccounts for 

depreciation applicable to service 

company property. 

(c) At the time of retirement of 

depreciable service company property, 

this account must be charged with the 

book cost of the property retired and the 

cost of removal, and must be credited 

with the salvage value and any other 

amounts recovered, such as insurance. 

(d) The subsidiary records for this 

account must reflect the current credits 

and debits to this account in sufficient 

detail to show the following separately: 

(1) The amount of accrual for 

depreciation, 

(2) The book cost of property retired, 

(3) Cost of removal, 

(4) Salvage, and 

(5) Other items, including recoveries 

from insurance. 

(e) The service company is restricted 

in its use of the accumulated provision 

for depreciation to the purposes 

identified in paragraphs (a) through (d) 

of this section. It must not transfer any 

portion of this account to retained 

earnings or make any other use of the 

depreciation without authorization by 

the Commission. 

§ 367.1110 Account 111, Accumulated 

provision for amortization of service 

company property. 

(a) This account must be credited 

with the following: 


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(1) Amounts charged to account 404, 

Amortization of limited-term property 

(§ 367.4040), for the current 

amortization of limited-term service 

company property investments. 

(2) Amounts charged to account 405, 

Amortization of other property 

(§ 367.4050). 

(3) Amounts charged to account 425, 

Miscellaneous amortization 

(§ 367.4250), for the amortization of 

intangible or other property, that does 

not have a definite or terminable life 

and is not subject to charges for 

depreciation expense, with Commission 

approval. 

(b) The service company must 

maintain subaccounts of this account for 

the amortization applicable to service 

company property and property leased 

to others. 

(c) When any property to which this 

account applies is sold, relinquished, or 

otherwise retired from service, this 

account must be charged with the 

amount previously credited in respect to 

the property. The book cost of the 

retired property less the amount 

chargeable to this account and less the 

net proceeds realized at retirement must 

be included in account 421.1, Gain on 

disposition of property (§ 367.4211), or 

account 421.2, Loss on disposition of 

property (§ 367.4212), as appropriate. 

(d) For general ledger and balance 

sheet purposes, this account must be 

regarded and treated as a single 

composite provision for amortization. 

The subsidiary records must reflect the 

current credits and debits to this 

account in sufficient detail to show the 

following separately: 

(1) The amount of accrual for 

amortization, 

(2) The book cost of property retired, 

(3) Cost of removal, 

(4) Salvage, and 

(5) Other items, including recoveries 

from insurance. 

(e) The service company is restricted 

in its use of the accumulated provision 

for amortization to the purposes 

provided in paragraphs (a) through (d) 

of this section. It must not transfer any 

portion of this account to retained 

earnings or make any other use of the 

amortization without authorization by 

the Commission. 

Other Property and Investments 

§ 367.1230 Account 123, Investment in 

associate companies. 

(a) This account must include the 

book cost of investments in securities 

issued or assumed by associate 

companies and investment advances to 

the companies, including related 

accrued interest when the interest is not 

subject to current settlement, provided 

that the investment does not relate to a 

subsidiary company. (If the investment 

relates to a subsidiary company, it must 

be included in account 123.1, 

Investment in subsidiary companies 

(§ 367.1231).) Include in this account 

the offsetting entry to the recording of 

amortization of discount or premium on 

interest bearing investments. (See 

account 419, Interest and dividend 

income (§ 367.4190).) 

(b) This account must be maintained 

in a manner so as to show the 

investment in securities of, and 

advances to, each associate company 

together with full particulars regarding 

any of the investments that are pledged. 

(c) Securities and advances of 

associate companies owned and pledged 

must be included in this account, but 

the securities, if held in special deposits 

or in special funds, must be included in 

the appropriate deposit or fund account. 

A complete record of securities pledged 

must be maintained. 

(d) Securities of associate companies 

held as temporary cash investments are 

includible in account 136, Temporary 

cash investments (§ 367.1360). 

(e) Balances in open accounts with 

associate companies that are subject to 

current settlement are includible in 

account 146, Accounts receivable from 

associate companies (§ 367.1460). 

(f) The service company must write 

down the cost of any security in 

recognition of a decline in the related 

value. Securities must be written off or 

written down to a nominal value if there 

is no reasonable prospect of substantial 

value. Fluctuations in market value 

must not be recorded but a permanent 

impairment in the value of securities 

must be recognized in the accounts. 

When securities are written off or 

written down, the amount of the 

adjustment must be charged to account 

426.5, Other deductions (§ 367.4265), or 

to an appropriate account for 

accumulated provisions for loss in value 

established as a separate subdivision of 

this account. 

§ 367.1240 Account 124, Other 

investments. 

(a) This account must include the 

book cost of investments in securities 

issued or assumed by non-associate 

companies, investment advances to 

these companies, and any investments 

not accounted for elsewhere. This 

account must also include unrealized 

holding gains and losses on trading and 

available-for-sale types of security 

investments. Include also the offsetting 

entry to the recording of amortization of 

discount or premium on interest bearing 

investments. (See account 419, Interest 

and dividend income (§ 367.4190).) 

(b) The records must be maintained in 

a manner so as to show the amount of 

each investment and the investment 

advances to each person. 

§ 367.1280 Account 128, Other special 

funds. 

(a) This account must include the 

amount of cash and book cost of 

investments that have been segregated 

in special funds for insurance, employee 

pensions, savings, relief, hospital, and 

other purposes not provided for 

elsewhere. This account must also 

include unrealized holding gains and 

losses on trading and available-for-sale 

types of security investments. A 

separate account with appropriate title, 

must be kept for each fund. 

(b) Amounts deposited with a trustee 

under the terms of an irrevocable trust 

agreement for pensions or other 

employee benefits must not be included 

in this account. 

Current and Accrued Assets 

§ 367.1310 Account 131, Cash. 

This account must include the 

amount of current cash funds except 

working funds. 

§ 367.1340 Account 134, Other special 

deposits. 

(a) This account must include 

deposits with fiscal agents or others for 

special purposes other than the payment 

of interest and dividends. The special 

deposits may include, among other 

things, cash deposited with federal, 

state, or municipal authorities as a 

guaranty for the fulfillment of 

obligations; cash deposited with trustees 

to be held until mortgaged property 

sold, destroyed, or otherwise disposed 

of is replaced; cash realized from the 

sale of the accounting service 

company’s securities and deposited 

with trustees to be held until invested 

in property of the service company. 

Entries to this account must specify the 

purpose for which the deposit is made. 

(b) Assets available for general 

corporate purposes must not be 

included in this account. Further, 

deposits for more than one year, that are 

not offset by current liabilities, must be 

charged to account 128, Other special 

funds (§ 367.1280). 

§ 367.1350 Account 135, Working funds. 

This account must include cash 

advanced to officers, agents, employees, 

and others as petty cash or working 

funds. 


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§ 367.1360 Account 136, Temporary cash 

investments. 

(a) This account must include the 

book cost of investments, such as 

demand and time loans, bankers’

acceptances, United States Treasury 

certificates, marketable securities, and 

other similar investments, acquired for 

the purpose of temporarily investing 

cash. 

(b) This account must be maintained 

so as to show separately temporary cash 

investments in securities of associate 

companies and of others. Records must 

be kept of any pledged investments. 

§ 367.1410 Account 141, Notes receivable. 

(a) This account must include the 

book cost, not includible elsewhere, of 

all collectible obligations in the form of 

notes receivable and similar evidences 

(except interest coupons) of money due 

on demand or within one year from the 

date of issue, except, however, notes 

receivable from associate companies. 

(See account 136,Temporary cash 

investments (§ 367.1360), and account 

145, Notes receivable from associate 

companies (§ 367.1450).) 

(b) The face amount of notes 

receivable discounted, sold, or 

transferred without releasing the service 

company from liability as a related 

endorser, must be credited to a separate 

subaccount of this account and 

appropriate disclosure must be made in 

financial statements of any contingent 

liability arising from the transactions. 

§ 367.1420 Account 142, Customer 

accounts receivable. 

(a) This account must include 

amounts due from customers for service, 

and for merchandising, jobbing and 

contract work. This account must not 

include amounts due from associate 

companies. 

(b) This account must be maintained 

so as to permit ready segregation of the 

amounts due for merchandising, jobbing 

and contract work. 

§ 367.1430 Account 143, Other accounts 

receivable. 

(a) This account must include 

amounts due the service company upon 

open accounts, other than amounts due 

from associate companies and from 

customers for services and 

merchandising, jobbing and contract 

work. 

(b) This account must be maintained 

so as to show separately amounts due 

on subscriptions to capital stock and 

from officers and employees, but the 

account must not include amounts 

advanced to officers or others as 

working funds. (See account 135, 

Working funds (§ 367.1350).) 

§ 367.1440 Account 144, Accumulated 

provision for uncollectible accounts—

Credit. 

(a) This account must be credited 

with amounts provided for losses on 

accounts receivable that may become 

uncollectible, and also with collections 

on related previously charged accounts. 

Concurrent charges must be made to 

account 904, Uncollectible accounts 

(§ 367.9040), for amounts applicable to 

service company operations, and to 

corresponding accounts for other 

operations. Records must be maintained 

so as to show the write-offs of account 

receivable for each service company 

department. 

(b) This account must be subdivided 

to show the provision applicable to the 

following classes of accounts receivable: 

(1) Service company customers. 

(2) Merchandising, jobbing and 

contract work. 

(3) Officers and employees. 

(4) Others. 

(c) Accretions to this account must 

not be made in excess of a reasonable 

provision against losses of the related 

character. 

(d) If provisions for uncollectible 

notes receivable or for uncollectible 

receivables from associate companies 

are necessary, separate related 

subaccounts must be established under 

the account in which the receivable is 

carried. 

§ 367.1450 Account 145, Notes receivable 

from associate companies. 

(a) This account must include notes 

and drafts upon which associate 

companies are liable, and that mature 

and are expected to be paid in full not 

later than one year from the date of 

issue, together with any related interest, 

and debit balances subject to current 

settlement in open accounts with 

associate companies. Items that do not 

bear a specified due date but that have 

been carried for more than twelve 

months and items that are not paid 

within twelve months from due date 

must be transferred to account 123, 

Investment in associate companies 

(§ 367.1230). 

(b) On the balance sheet, accounts 

receivable from an associate company 

may be set off against accounts payable 

to the same company. 

(c) The face amount of notes 

receivable discounted, sold or 

transferred without releasing the service 

company from liability as endorser 

thereon, must be credited to a separate 

subaccount of this account and 

appropriate disclosure must be made in 

financial statements of any contingent 

liability arising from such transactions. 

§ 367.1460 Account 146, Accounts 

receivable from associate companies. 

(a) This account must include notes 

and drafts upon which associate 

companies are liable, and that mature 

and are expected to be paid in full not 

later than one year from the date of 

issue, together with any related interest 

thereon, and debit balances subject to 

current settlement in open accounts 

with associate companies. Items that do 

not bear a specified due date but that 

have been carried for more than twelve 

months and items that are not paid 

within twelve months from due date 

must be transferred to account 123, 

Investment in associate companies 

(§ 367.1230). 

(b) On the balance sheet, accounts 

receivable from an associate company 

may be set off against accounts payable 

to the same company. 

(c) The face amount of notes 

receivable discounted, sold or 

transferred without releasing the service 

company from liability as the related 

endorser, must be credited to a separate 

subaccount of this account and 

appropriate disclosure must be made in 

financial statements of any contingent 

liability arising from the transactions. 

§ 367.1520 Account 152, Fuel stock 

expenses undistributed. 

The service company must utilize this 

account, where appropriate, to include 

the cost of service company labor and of 

office supplies used and operating 

expenses incurred with respect to the 

review, analysis and management of 

fuel supply contracts or agreements, the 

accumulation of fuel information and its 

interpretation, the logistics and 

handling of fuel, and other related 

support functions, as a service to the 

company engaged in the procurement 

and transportation of fuel. This account 

must be maintained to show the 

expenses attributable to each company 

through its cost allocation system. All 

expenses of a service company’s fuel 

department or functions must be cleared 

through this account. 

§ 367.1540 Account 154, Materials and 

operating supplies. 

(a) This account must include the cost 

of materials purchased primarily for use 

in the service company business for 

construction, operation and 

maintenance purposes. It must include 

the book cost of materials recovered in 

connection with construction, 

maintenance or the retirement of service 

company property, the materials being 

credited to construction, maintenance or 

accumulated depreciation provision, 

respectively. This account must include 

the following items: 


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(1) Reusable materials consisting of 

large individual items must be included 

in this account at original cost, 

estimated if not known. The cost of 

repairing the items must be charged to 

the maintenance account appropriate for 

the previous use. 

(2) Reusable materials consisting of 

relatively small items, the identity of 

which (from the date of original 

installation to the related final 

abandonment or sale) cannot be 

ascertained without undue refinement 

in accounting, must be included in this 

account at current prices new for the 

items. The cost of repairing the items 

must be charged to the appropriate 

expense account as indicated by 

previous use. 

(3) Scrap and non-usable materials 

included in this account must be carried 

at the estimated net amount realizable. 

The difference between the amounts 

realized for scrap and non-usable 

materials sold and the net amount at 

which the materials were carried in this 

account, as far as practicable, must be 

adjusted to the accounts credited when 

the materials were charged to this 

account. 

(b) Materials and supplies issued 

must be credited in this account and 

charged to the appropriate construction, 

operating expense, or other account on 

the basis of a unit price determined by 

the use of cumulative average, first-infirst-out, or any other method of 

inventory accounting that conforms 

with accepted accounting standards 

consistently applied. 

(c) This account must include the 

following items: 

(1) Invoice price of materials less cash 

or other discounts. 

(2) Freight, switching or other 

transportation charges when practicable 

to include as part of the cost of 

particular materials to which they 

relate. 

(3) Customs duties and excise taxes. 

(4) Costs of inspection and special 

tests prior to acceptance. 

(5) Insurance and other directly 

assignable charges. 

(d) Where expenses applicable to 

materials purchased cannot be directly 

assigned to particular purchases, they 

may be charged to a stores expense 

clearing account (account 163, Stores 

expense undistributed (§ 367.1630)), 

and distributed from there to the 

appropriate account. 

(e) When materials and supplies are 

purchased for immediate use, they need 

not be carried through this account, but 

may be charged directly to the 

appropriate service company property 

or expense account. 

§ 367.1630 Account 163, Stores expense 

undistributed. 

(a) This account must include the cost 

of supervision, labor and expenses 

incurred in the operation of general 

storerooms, including purchasing, 

storage, handling and distribution of 

materials and supplies. 

(b) This account must be cleared by 

adding to the cost of materials and 

supplies issued a suitable loading 

charge that will distribute the expense 

equitably over stores issues. The balance 

in the account at the close of the 

calendar year must not exceed the 

amount of stores expenses reasonably 

attributable to the inventory of materials 

and supplies exclusive of fuel, as any 

amount applicable to fuel costs should 

be included in account 152, Fuel stock 

expenses undistributed (§ 367.1520). 

(c) This account must include the 

following labor items: 

(1) Inspecting and testing materials 

and supplies when not assignable to 

specific items. 

(2) Unloading from shipping facility 

and putting in storage. 

(3) Supervision of purchasing and 

stores department to extent assignable to 

materials handled through stores. 

(4) Getting materials from stock and in 

readiness to go out. 

(5) Inventorying stock received or 

stock on hand by stores employees but 

not including inventories by general 

department employees as part of 

internal or general audits. 

(6) Purchasing department activities 

in checking material needs, 

investigating sources of supply, 

analyzing prices, preparing and placing 

orders, and related activities to extent 

applicable to materials handled through 

stores. (Optional. Purchasing 

department expenses may be included 

in administrative and general expenses.) 

(7) Maintaining stores equipment. 

(8) Cleaning and tidying storerooms 

and stores offices. 

(9) Keeping stock records, including 

recording and posting of material 

receipts and issues and maintaining 

inventory record of stock. 

(10) Collecting and handling scrap 

materials in stores. 

(d) This account must include the 

following supplies and expenses items: 

(1) Adjustments of inventories of 

materials and supplies, but not 

including large differences that can 

readily be assigned to important classes 

of materials and equitably distributed 

among the accounts to which the classes 

of materials have been charged since the 

previous inventory. 

(2) Cash and other discounts not 

practically assignable to specific 

materials. 

(3) Freight, express, and similar items, 

when not assignable to specific items. 

(4) Heat, light and power for 

storerooms and store offices. 

(5) Brooms, brushes, sweeping 

compounds and other supplies used in 

cleaning and tidying storerooms and 

stores offices. 

(6) Injuries and damages. 

(7) Insurance on materials and 

supplies and on stores equipment. 

(8) Losses due to breakage, leakage, 

evaporation, fire or other causes, less 

credits for amounts received from 

insurance, transportation companies or 

others in compensation of the losses. 

(9) Postage, printing, stationery and 

office supplies. 

(10) Rent of storage space and 

facilities. 

(11) Communication service. 

(12) Excise and other similar taxes not 

assignable to specific materials. 

(13) Transportation expense on 

inward movement of stores and on 

transfer between storerooms, but not 

including charges on materials 

recovered from retirements that must be 

accounted for as part of cost of removal. 

(e) A physical inventory of each class 

of materials and supplies must be made 

at least every two years. 

§ 367.1650 Account 165, Prepayments. 

This account must include amounts 

representing prepayments of insurance, 

rents, taxes, interest and miscellaneous 

items, and must be kept or supported in 

a manner so as to disclose the amount 

of each class of prepayment. 

§ 367.1710 Account 171, Interest and 

dividends receivable. 

(a) This account must include the 

amount of interest on bonds, mortgages, 

notes, commercial paper, loans, open 

accounts, deposits, and other similar 

items, the payment of which is 

reasonably assured, and the amount of 

dividends declared or guaranteed on 

stocks owned. 

(b) Interest that is not subject to 

current settlement must not be included 

in this account, but in the account in 

which is carried the principal on which 

the interest is accrued. 

(c) Interest and dividends receivable 

from associate companies must be 

included in account 146, Accounts 

receivable from associate companies 

(§ 367.1460). 

§ 367.1720 Account 172, Rents receivable. 

(a) This account must include rents 

receivable or accrued on property rented 

or leased by the service company to 

others. 

(b) Rents receivable from associate 

companies must be included in account 


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146, Accounts receivable from associate 

companies (§ 367.1460). 

§ 367.1730 Account 173, Accrued 

revenues. 

At the option of the service company, 

the estimated amount accrued for 

service rendered, but not billed at the 

end of any accounting period, may be 

included in this account. In case 

accruals are made for unbilled revenues, 

they must be made likewise for unbilled 

expenses, such as for the purchase of 

energy. 

§ 367.1740 Account 174, Miscellaneous 

current and accrued assets. 

This account must include the book 

cost of all other current and accrued 

assets, appropriately designated and 

supported so as to show the nature of 

each asset included in the account. 

§ 367.1750 Account 175, Derivative 

instrument assets. 

This account must include the 

amounts paid for derivative 

instruments, and the change in the fair 

value of all derivative instrument assets 

not designated as cash flow or fair value 

hedges. Account 421, Miscellaneous 

income or loss (§ 367.4210), must be 

credited or debited, as appropriate, with 

the corresponding amount of the change 

in the fair value of the derivative 

instrument. 

§ 367.1760 Account 176, Derivative 

instrument assets—Hedges. 

(a) This account must include the 

amounts paid for derivative 

instruments, and the change in the fair 

value of derivative instrument assets 

designated by the service company as 

cash flow or fair value hedges. 

(b) When a service company 

designates a derivative instrument asset 

as a cash flow hedge it will record the 

change in the fair value of the derivative 

instrument in this account with a 

concurrent charge to account 219, 

Accumulated other comprehensive 

income (§ 367.2190), with the effective 

portion of the gain or loss. The 

ineffective portion of the cash flow 

hedge must be charged to the same 

income or expense account that will be 

used when the hedged item enters into 

the determination of net income. 

(c) When a service company 

designates a derivative instrument as a 

fair value hedge it must record the 

change in the fair value of the derivative 

instrument in this account with a 

concurrent charge to a subaccount of the 

asset or liability that carries the item 

being hedged. The ineffective portion of 

the fair value hedge must be charged to 

the same income or expense account 

that will be used when the hedged item 

enters into the determination of net 

income. 

Deferred Debits 

§ 367.1810 Account 181, Unamortized debt 

expense. 

This account must include expenses 

related to the issuance or assumption of 

debt securities. Amounts recorded in 

this account must be amortized over the 

life of each respective issue under a 

plan that will distribute the amount 

equitably over the life of the security. 

The amortization must be on a monthly 

basis, and the related amounts must be 

charged to account 428, Amortization of 

debt discount and expense (§ 367.4280). 

Any unamortized amounts outstanding 

at the time that the related debt is 

prematurely reacquired must be 

accounted for as indicated in General 

Instructions in § 367.16. 

§ 367.1823 Account 182.3, Other 

regulatory assets. 

(a) This account must include the 

amounts of regulatory-created assets, 

not includible in other accounts, 

resulting from the ratemaking actions of 

regulatory agencies. (See Definitions 

§ 367.1(a)(38).) 

(b) The amounts included in this 

account are to be established by those 

charges which would have been 

included in net income, or accumulated 

other comprehensive income, 

determinations in the current period 

under the general requirements of the 

Uniform System of Accounts but for it 

being probable that such items will be 

included in a different period(s) for 

purposes of developing rates that the 

utility is authorized to charge for its 

utility services. When specific 

identification of the particular source of 

a regulatory asset cannot be made, such 

as in plant phase-ins, rate moderation 

plans, or rate levelization plans, account 

407.4, Regulatory credits (§ 367.4074), 

must be credited. The amounts recorded 

in this account are generally to be 

charged, concurrently with the recovery 

of the amounts in rates, to the same 

account that would have been charged 

if included in income when incurred, 

except all regulatory assets established 

through the use of account 407.4 

(§ 367.4074) must be charged to account 

407.3, Regulatory debits (§ 367.4073), 

concurrent with the recovery in rates. 

(c) If rate recovery of all or part of an 

amount included in this account is 

disallowed, the disallowed amount 

must be charged to Account 426.5, 

Other deductions (§ 367.4265), or 

Account 435, Extraordinary deductions 

(§ 367.4350), in the year of the 

disallowance. 

(d) The records supporting the entries 

to this account must be kept so that the 

service company can furnish full 

information as to the nature and amount 

of each regulatory asset included in this 

account, including justification for 

inclusion of such amounts in this 

account. 

§ 367.1830 Account 183, Preliminary 

survey and investigation charges. 

(a) This account must be charged with 

all expenditures for preliminary 

surveys, plans, investigations, and other 

similar items, made for the purpose of 

determining the feasibility of service 

company projects under contemplation. 

If construction results, this account 

must be credited and the appropriate 

service company property account 

charged. If the work is abandoned, the 

charge must be made to account 426.5, 

Other deductions (§ 367.4265), or to the 

appropriate operating expense account. 

(b) The records supporting the entries 

to this account must be kept so that the 

service company can furnish complete 

information as to the nature and the 

purpose of the survey, plans, or 

investigations and the nature and 

amounts of the several charges. 

(c) The amount of preliminary survey 

and investigation charges transferred to 

service company property must not 

exceed the expenditures that may 

reasonably be determined to contribute 

directly and immediately and without 

duplication to service company 

property. 

§ 367.1840 Account 184, Clearing 

accounts. 

This account must include 

undistributed balances in clearing 

accounts at the date of the balance 

sheet. Balances in clearing accounts 

must be substantially cleared not later 

than the end of the calendar year unless 

the items held relate to a future period. 

§ 367.1850 Account 185, Temporary 

facilities. 

This account must include amounts 

shown by project for property installed 

for temporary use for a period of less 

than one year. Each project must be 

charged with the cost of temporary 

facilities and credited with payments 

received from customers and net salvage 

realized on removal of the temporary 

facilities. Any net credit or debit 

resulting must be cleared to the 

construction or service project to which 

the facilities relate. 

§ 367.1860 Account 186, Miscellaneous 

deferred debits. 

(a) This account must include all 

debits not provided for elsewhere, such 

as miscellaneous work in progress, and 


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unusual or extraordinary expenses, not 

included in other accounts, that are in 

the process of amortization and items 

the proper final disposition of which is 

uncertain. 

(b) The records supporting the entries 

to this account must be kept so that the 

service company can furnish full 

information as to each deferred debit 

included in this account. 

§ 367.1880 Account 188, Research, 

development, or demonstration 

expenditures. 

(a) This account must be charged with 

the cost of all expenditures coming 

within the meaning of research, 

development and demonstration (RD&D) 

of this Uniform System of Accounts (See 

Definitions § 367.1(a)(40)), except those 

expenditures properly chargeable to 

account 107, Construction work in 

progress (§ 367.1070). 

(b) Costs that are minor or of a general 

or recurring nature must be transferred 

from this account to the appropriate 

operating expense function or, if the 

costs are common to the overall 

operations or cannot be feasibly 

allocated to the various operating 

accounts, then the costs must be 

recorded in account 930.2, 

Miscellaneous general expenses 

(§ 367.9302). 

(c) In certain instances, a service 

company may incur large and 

significant research, development, and 

demonstration expenditures that are 

nonrecurring and that would distort the 

annual research, development, and 

demonstration charges for the period. In 

such a case, the portion of such amounts 

that causes the distortion may be 

amortized to the appropriate operating 

expense account over a period not to 

exceed five years, unless otherwise 

authorized by the Commission. 

(d) The entries in this account must 

be maintained so as to show separately 

each project along with complete detail 

of the nature and purpose of the 

research, development, and 

demonstration project together with the 

related costs. 

§ 367.1890 Account 189, Unamortized loss 

on reacquired debt. 

This account must include the losses 

on long-term debt reacquired or 

redeemed. The amounts in this account 

must be amortized in accordance with 

General Instruction § 367.16. 

§ 367.1900 Account 190, Accumulated 

deferred income taxes. 

(a) This account must be debited and 

account 411.1, Provision for deferred 

income taxes—Credit, operating income 

(§ 367.4111), or account 411.2, Provision 

for deferred income taxes—Credit, other 

income and deductions (§ 367.4112), as 

appropriate, must be credited with an 

amount equal to that by which income 

taxes payable for the year are higher 

because of the inclusion of certain items 

in income for tax purposes, which items 

for general accounting purposes will not 

be fully reflected in the service 

company’s determination of annual net 

income until subsequent years. 

(b) This account must be credited and 

account 410.1, Provision for deferred 

income taxes, operating income 

(§ 367.4101), or account 410.2, Provision 

for deferred income taxes, other income 

and deductions (§ 367.4102), as 

appropriate, must be debited with an 

amount equal to that by which income 

taxes payable for the year are lower 

because of prior payment of taxes as 

provided by paragraph (a) of this 

section, because of difference in timing 

for tax purposes of particular items of 

income or income deductions from that 

recognized by the utility for general 

accounting purposes. The credit to this 

account and debit to account 410.1 

(§ 367.4101), or 410.2 (§ 367.4102) must, 

in general, represent the effect on taxes 

payable in the current year of the 

smaller amount of book income 

recognized for tax purposes as 

compared to the amount recognized in 

the service company’s current accounts 

with respect to the item or class of items 

for which deferred tax accounting by the 

service company was authorized by the 

Commission. 

(c) The service company is restricted 

in its use of this account to the purpose 

provided in paragraphs (a) and (b) of 

this section. The service company must 

not make use of the balance in this 

account or any related portion except as 

provided in the text of this account, 

without prior approval of the 

Commission. Any remaining deferred 

tax account balance with respect to an 

amount for any prior year’s tax deferral, 

the amortization of which or other 

recognition in the service company’s 

income accounts has been completed, or 

other disposition made, must be debited 

to account 410.1, Provision for deferred 

income taxes, operating income 

(§ 367.4101), or account 410.2, Provision 

for deferred income taxes, other income 

and deductions (§ 367.4102), as 

appropriate, or otherwise disposed of as 

the Commission may authorize or 

direct. (See General Instructions in 

§ 367.17.) 

Proprietary Capital 

§ 367.2010 Account 201, Common stock 

issued. 

This account must include the par or 

stated value of all common capital stock 

issued and outstanding. 

§ 367.2040 Account 204, Preferred stock 

issued. 

This account must include the par or 

stated value of all preferred stock issued 

and outstanding. 

§ 367.2110 Account 211, Miscellaneous 

paid-in capital. 

This account must include the 

balance of all other credits for paid-in 

capital that is not properly included in 

proprietary capital accounts. This 

account may include all commissions 

and expenses incurred in connection 

with the issuance of capital stock. 

§ 367.2150 Account 215, Appropriated 

retained earnings. 

This account must include the 

amount of retained earnings that has 

been appropriated or set aside for 

special purposes. Separate subaccounts 

must be maintained under titles that 

will designate the purpose for which 

each appropriation was made. 

§ 367.2160 Account 216, Unappropriated 

retained earnings. 

This account must include the 

balances, either debit or credit, of 

unappropriated retained earnings 

arising from earnings of the service 

company. This account must not 

include any amounts representing the 

undistributed earnings of subsidiary 

companies. 

§ 367.2161 Account 216.1, Unappropriated 

undistributed subsidiary earnings. 

This account must include the 

balances, either debit or credit, of 

undistributed retained earnings of 

subsidiary companies since their 

acquisition. When dividends are 

received from subsidiary companies 

relating to amounts included in this 

account, this account must be debited 

and account 216, Unappropriated 

retained earnings (§ 367.2160), credited. 

§ 367.2190 Account 219, Accumulated 

other comprehensive income. 

(a) This account must include 

revenues, expenses, gains, and losses 

that are properly includable in other 

comprehensive income during the 

period. Examples of other 

comprehensive income include, but are 

not limited to, minimum pension 

liability adjustments, and unrealized 

gains and losses on certain investments 

in debt and equity securities. Records 

supporting the entries to this account 


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must be maintained so that the service 

company can furnish the amount of 

other comprehensive income for each 

item included in this account. 

(b) This account also must be debited 

or credited, as appropriate, with 

amounts of accumulated other 

comprehensive income that have been 

included in the determination of net 

income during the period and in 

accumulated other comprehensive 

income in prior periods. Separate 

records for each category of items must 

be maintained to identify the amount of 

the reclassification adjustments from 

accumulated other comprehensive 

income to earnings made during the 

period. 

Long-Term Debt 

§ 367.2230 Account 223, Advances from 

associate companies. 

(a) This account must include the face 

value of notes payable to associate 

companies and the amount of open book 

accounts representing advances from 

associate companies. It does not include 

notes and open accounts representing 

indebtedness subject to current 

settlement that are includible in account 

233, Notes payable to associate 

companies (§ 367.2330), or account 234, 

Accounts payable to associate 

companies (§ 367.2340). 

(b) The records supporting the entries 

to this account must be kept so that the 

service company can furnish complete 

information concerning each note and 

open account. 

§ 367.2240 Account 224, Other long-term 

debt. 

(a) This account must include, until 

maturity, all long-term debt not 

otherwise provided for. This covers 

items such as receivers’ certificates, real 

estate mortgages executed or assumed, 

assessments for public improvements, 

notes and unsecured certificates of 

indebtedness not owned by associate 

companies, receipts outstanding for 

long-term debt, and other obligations 

maturing more than one year from date 

of issue or assumption. 

(b) Separate accounts must be 

maintained for each class of obligation, 

and records must be maintained to show 

for each class all details as to date of 

obligation, date of maturity, interest 

dates and rates, security for the 

obligation, and other similar items. 

§ 367.2250 Account 225, Unamortized 

premium on long-term debt. 

(a) This account must include the 

excess of the cash value of consideration 

received over the face value upon the 

issuance or assumption of long-term 

debt securities. 

(b) Amounts recorded in this account 

must be amortized over the life of each 

respective issue under a plan that will 

distribute the amount equitably over the 

life of the security. The amortization 

must be on a monthly basis, with the 

related amounts credited to account 

429, Amortization of premium on 

debt—Credit (§ 367.4290) (see General 

Instructions in § 367.16). 

§ 367.2260 Account 226, Unamortized 

discount on long-term debt—Debit. 

(a) This account must include the 

excess of the face value of long-term 

debt securities over the related cash 

value of consideration received, related 

to the issue or assumption of all types 

and classes of debt. 

(b) Amounts recorded in this account 

must be amortized over the life of the 

respective issues under a plan that will 

distribute the amount equitably over the 

life of the securities. The amortization 

must be on a monthly basis, with the 

related amounts charged to account 428, 

Amortization of debt discount and 

expense (§ 367.4280). (see General 

Instructions in § 367.16.) 

Other Noncurrent Liabilities 

§ 367.2270 Account 227, Obligations under 

capital lease—Non-current. 

This account must include the portion 

not due within one year, of the 

obligations recorded for the amounts 

applicable to leased property recorded 

as assets in account 101.1, Property 

under capital leases (§ 367.1011). 

§ 367.2282 Account 228.2, Accumulated 

provision for injuries and damages. 

(a) This account must be credited 

with amounts charged to account 925, 

Injuries and damages (§ 367.9250), or 

other appropriate accounts, to meet the 

probable liability, not covered by 

insurance, for deaths or injuries to 

employees and others and for damages 

to property neither owned nor held 

under lease by the service company. 

(b) When liability for any injury or 

damage is admitted by the service 

company, either voluntarily or because 

of the decision of a court or other lawful 

authority, such as workmen’s 

compensation board, the admitted 

liability must be charged to this account 

and credited to the appropriate current 

liability account. Details of these 

charges must be maintained according 

to the year the casualty occurred which 

gave rise to the loss. 

(c) Recoveries or reimbursements for 

losses charged to this account must be 

credited to this account; the cost of 

repairs to property of others if provided 

for in this account must be charged to 

this account. 

§ 367.2283 Account 228.3, Accumulated 

provision for pensions and benefits. 

(a) This account must include 

provisions made by the service 

company and amounts contributed by 

employees for pensions, accident and 

death benefits, savings, relief, hospital 

and other provident purposes, where 

the funds are included in the assets of 

the service company either in general or 

in segregated fund accounts. 

(b) Amounts paid by the service 

company for the purposes for which this 

liability is established must be charged 

to this account. 

(c) A separate account must be kept 

for each kind of provision included in 

this account. 

(d) If employee pension or benefit 

plan funds are not included among the 

assets of the service company but are 

held by outside trustees, payments into 

such funds, or accruals therefore, must 

be included in this account. 

§ 367.2300 Account 230, Asset retirement 

obligations. 

(a) This account must include the 

amount of liabilities for the recognition 

of asset retirement obligations related to 

service company property. This account 

must be credited for the amount of the 

liabilities for asset retirement 

obligations with amounts charged to the 

appropriate property account to record 

the related asset retirement costs. 

(b) The service company must charge 

the accretion expense to account 411.10, 

Accretion expense (§ 367.4118), and 

credit account 230, Asset retirement 

obligations (§ 367.2300). 

(c) This account must be debited with 

amounts paid to settle the asset 

retirement obligations recorded in this 

account. 

(d) The service company must clear 

from this account any gains or losses 

resulting from the settlement of asset 

retirement obligations in accordance 

with the instructions prescribed in the 

General Instructions in § 367.22. 

Current and Accrued Liabilities 

§ 367.2310 Account 231, Notes payable. 

This account must include the face 

value of all notes, drafts, acceptances, or 

other similar evidences of indebtedness, 

payable on demand or within a time not 

exceeding one year from date of issue, 

to other than associate companies. 

§ 367.2320 Account 232, Accounts 

payable. 

This account must include all 

amounts payable by the service 

company within one year that are not 

provided for in other accounts. 


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§ 367.2330 Account 233, Notes payable to 

associate companies. 

(a) This account must include 

amounts owing to associate companies 

on notes, drafts, acceptances, or other 

similar evidences of indebtedness, and 

open accounts payable on demand or 

not more than one year from date of 

issue or creation. 

(b) Exclude from this account notes 

and accounts that are includible in 

account 223, Advances from associate 

companies (§ 367.2230). 

§ 367.2340 Account 234, Accounts payable 

to associate companies. 

This account must include all 

amounts payable to associate companies 

by the service company within one year, 

which are not provided for in other 

accounts. 

§ 367.2360 Account 236, Taxes accrued. 

(a) This account must be credited 

with the amount of taxes accrued during 

the accounting period, corresponding 

debits being made to the appropriate 

accounts for tax charges. The credits 

may be based upon estimates, but from 

time to time during the year as the facts 

become known, the amount of the 

periodic credits must be adjusted so as 

to include as nearly as can be 

determined in each year the related 

applicable taxes. Any amount 

representing a prepayment of taxes 

applicable to the period subsequent to 

the date of the balance sheet, must be 

shown under account 165, Prepayments 

(§ 367.1650). 

(b) If accruals for taxes are found to 

be insufficient or excessive, corrections 

must be made through current tax 

accruals. 

(c) Accruals for taxes must be based 

upon the net amounts payable after 

credit for any discounts, and must not 

include any amounts for interest on tax 

deficiencies or refunds. Interest received 

on refunds must be credited to account 

419, Interest and dividend income 

(§ 367.4190), and interest paid on 

deficiencies must be charged to account 

431, Other interest expense (§ 367.4310). 

(d) The records supporting the entries 

to this account must be kept so as to 

show for each class of taxes, the amount 

accrued, the basis for the accrual, the 

accounts to which charged, and the 

amount of tax paid. 

§ 367.2370 Account 237, Interest accrued. 

This account must include the 

amount of interest accrued but not 

matured on all liabilities of the service 

company not including, however, 

interest that is added to the principal of 

the debt on which it is incurred. 

Supporting records must be maintained 

so as to show the amount of interest 

accrued on each obligation. 

§ 367.2380 Account 238, Dividends 

declared. 

This account must include the 

amount of dividends that have been 

declared but not paid. Dividends must 

be credited to this account when they 

become a liability. 

§ 367.2410 Account 241, Tax collections 

payable. 

(a) This account must include the 

amount of taxes collected by the service 

company through payroll deductions or 

otherwise pending transmittal of the 

taxes to the proper taxing authority. 

(b) Do not include liability for taxes 

assessed directly against the service 

company that is accounted for as part of 

the service company’s own tax expense. 

§ 367.2420 Account 242, Miscellaneous 

current and accrued liabilities. 

This account must include the 

amount of all other current and accrued 

liabilities not provided for elsewhere, 

appropriately designated and supported 

so as to show the nature of each 

liability. 

§ 367.2430 Account 243, Obligations under 

capital leases—Current. 

This account must include the 

portion, due within one year, of the 

obligations recorded for the amounts 

applicable to leased property recorded 

as assets in account 101.1, Property 

under capital leases (§ 367.1011). 

§ 367.2440 Account 244, Derivative 

instrument liabilities. 

This account must include the change 

in the fair value of all derivative 

instrument liabilities not designated as 

cash flow or fair value hedges. Account 

426.5, Other deductions (§ 367.4265), 

must be debited or credited as 

appropriate with the corresponding 

amount of the change in the fair value 

of the derivative instrument. 

§ 367.2450 Account 245, Derivative 

instrument liabilities—Hedges 

(a) This account must include the 

change in the fair value of derivative 

instrument liabilities designated by the 

service company as cash flow or fair 

value hedges. 

(b) A service company must record 

the change in the fair value of a 

derivative instrument liability related to 

a cash flow hedge in this account, with 

a concurrent charge to account 219, 

Accumulated other comprehensive 

income (§ 367.2190), with the effective 

portion of the derivative’s gain or loss. 

The ineffective portion of the cash flow 

hedge must be charged to the same 

income or expense account that will be 

used when the hedged item enters into 

the determination of net income. 

(c) A service company must record 

the change in the fair value of a 

derivative instrument liability related to 

a fair value hedge in this account, with 

a concurrent charge to a subaccount of 

the asset or liability that carries the item 

being hedged. The ineffective portion of 

the fair value hedge must be charged to 

the same income or expense account 

that will be used when the hedged item 

enters into the determination of net 

income. 

Deferred Credits 

§ 367.2530 Account, 253, Other deferred 

credits. 

This account must include advance 

billings and receipts and other deferred 

credit items, not provided for elsewhere, 

including amounts which cannot be 

entirely cleared or disposed of until 

additional information has been 

received. 

§ 367.2540 Account 254, Other regulatory 

liabilities. 

(a) This account must include the 

amounts of regulatory liabilities, not 

includible in other accounts, imposed 

on the service company by the 

ratemaking actions of regulatory 

agencies. (See Definitions 

§ 367.1(a)(38).) 

(b) The amounts included in this 

account are to be established by those 

credits which would have been 

included in net income, or accumulated 

other comprehensive income, 

determinations in the current period 

under the general requirements of the 

USofA but for it being probable that: 

Such items will be included in a 

different period(s) for purposes of 

developing the rates that the service 

company is authorized to charge for its 

services; or refunds to customers, not 

provided for in other accounts, will be 

required. When specific identification of 

the particular source of the regulatory 

liability cannot be made or when the 

liability arises from revenues collected 

pursuant to tariffs on file at a regulatory 

agency, account 407.3, Regulatory debits 

(§ 367.4073), must be debited. The 

amounts recorded in this account 

generally are to be credited to the same 

account that would have been credited 

if included in income when earned 

except: All regulatory liabilities 

established through the use of account 

407.3 (§ 367.4073) must be credited to 

account 407.4, Regulatory credits 

(§ 367.4074); and in the case of refunds, 

a cash account or other appropriate 

account should be credited when the 

obligation is satisfied. 


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(c) If it is later determined that the 

amounts recorded in this account will 

not be returned to customers through 

rates or refunds, such amounts must be 

credited to Account 421, Miscellaneous 

income or loss (§ 367.4210), or Account 

434, Extraordinary income (§ 367.4340), 

as appropriate, in the year such 

determination is made. 

(d) The records supporting the entries 

to this account must be so kept that the 

service company can furnish full 

information as to the nature and amount 

of each regulatory liability included in 

this account, including justification for 

inclusion of such amounts in this 

account. 

§ 367.2550 Account 255, Accumulated 

deferred investment tax credits. 

This account must be credited with 

all investment tax credits deferred by 

companies that have elected to follow 

deferral accounting, partial or full, 

rather than recognizing in the income 

statement the total benefits of the tax 

credit as realized. After this election, a 

company may not transfer amounts from 

this account, except as authorized in 

this account and in accounts 411.4, 

Investment tax credit adjustments, 

service company property (§ 367.4114) 

or 411.5, Investment tax credit 

adjustments, other income and 

deductions (§ 367.4115), or with 

approval of the Commission. 

§ 367.2820 Account 282, Accumulated 

deferred income taxes—Other property. 

(a) This account must include the tax 

deferrals resulting from adoption of the 

principle of comprehensive inter-period 

income tax allocation described in the 

General Instructions in § 367.17 that are 

related to all property other than 

accelerated amortization property. 

(b) This account must be credited and 

accounts 410.1, Provision for deferred 

income taxes, operating income 

(§ 367.4101), or 410.2, Provision for 

deferred income taxes, Other income 

and deductions (§ 367.4102), as 

appropriate, must be debited with tax 

effects related to property described in 

paragraph (a) of this section where 

taxable income is lower than pretax 

accounting income due to differences 

between the periods in which revenue 

and expense transactions affect taxable 

income and the periods in which they 

enter into the determination of pretax 

accounting income. 

(c) This account must be debited, and 

accounts 411.1, Provision for deferred 

income taxes—Credit, operating income 

(§ 367.4111), or 411.2, Provision for 

deferred income taxes—Credit, other 

income and deductions (§ 367.4112), as 

appropriate, must be credited with tax 

effects related to property described in 

paragraph (a) of this section where 

taxable income is higher than pretax 

accounting income due to differences 

between the periods in which revenue 

and expense transactions affect taxable 

income and the periods in which they 

enter into the determination of pretax 

accounting income. 

(d) The service company is restricted 

in its use of this account to the purposes 

described in paragraphs (a) through (c) 

of this section. It must not transfer the 

balance in this account or any related 

portion to retained earnings or make any 

other use of the balance except as 

provided in paragraph (a) through (c) of 

this section without prior approval of 

the Commission. Upon the disposition 

by sale, exchange, transfer, 

abandonment or premature retirement 

of property on which there is a related 

balance, this account must be charged 

with an amount equal to the related 

income tax expense, if any, arising from 

the disposition and accounts 411.1, 

Income taxes deferred in prior years—

Credit, operating income (§ 367.4111), 

or 411.2, Income taxes deferred in prior 

years—Credit, other income and 

deductions (§ 367.4112), must be 

credited. When property is disposed of 

by transfer to a wholly-owned 

subsidiary, the related balance in this 

account also must be transferred. When 

the disposition relates to retirement of 

an item or items under a group method 

of depreciation where there is no tax 

effect in the year of retirement, no 

entries are required in this account if it 

can be determined that the related 

balance must be retained to offset future 

group item tax deficiencies. 

§ 367.2830 Account 283, Accumulated 

deferred income taxes—Other. 

(a) This account must include all 

credit tax deferrals resulting from the 

adoption of the principles of 

comprehensive inter-period income tax 

allocation described in the General 

Instructions in § 367.17 other than those 

deferrals that are includible in account 

282, Accumulated deferred income 

taxes—Other property (§ 367.2820). 

(b) This account must be credited, and 

accounts 410.1 Provision for deferred 

income taxes, operating income 

(§ 367.4101), or 410.2 Provision for 

deferred income taxes, other income 

and deductions (§ 367.4102), as 

appropriate, must be debited with tax 

effects related to items described in 

paragraph (a) of this section where 

taxable income is lower than pretax 

accounting income due to differences 

between the periods in which revenue 

and expense transactions affect taxable 

income and the periods in which they 

enter into the determination of pretax 

accounting income. 

(c) This account must be debited, and 

accounts 411.1, Provision for deferred 

income taxes-Credit, operating income 

(§ 367.4111), or 411.2, Provision for 

deferred income taxes-Credit, other 

income and deductions (§ 367.4112), as 

appropriate, must be credited with tax 

effects related to items described in 

paragraph (a) of this account where 

taxable income is higher than pretax 

accounting income due to differences 

between the periods in which revenue 

and expense transactions affect taxable 

income and the periods in which they 

enter into the determination of pretax 

accounting income. 

(d) Records with respect to entries to 

this account, as described in paragraphs 

(a) through (c) of this section, and the 

account balance, must be maintained so 

as to show the factors of calculation 

with respect to each annual amount of 

the item or class of items. 

(e) The service company is restricted 

in its use of this account to the purposes 

described in paragraphs (a) through (c) 

of this section. It must not transfer the 

balance in the account or any portion of 

the account to retained earnings or to 

any other account or make any use of 

the account except as provided in the 

text of this account, without prior 

approval of the Commission. Upon the 

disposition by sale, exchange, transfer, 

abandonment or premature retirement 

of items on which there is a related 

balance herein, this account must be 

charged with an amount equal to the 

related income tax effect, if any, arising 

from the disposition and accounts 

411.1, Provision for deferred income 

taxes-Credit, operating income 

(§ 367.4111), or 411.2, Provision for 

deferred income taxes—Credit, other 

income and deductions (§ 367.4112), as 

appropriate, must be credited. 

(f) When property is disposed of by 

transfer to a wholly-owned subsidiary, 

the related balance in this account also 

must be transferred. When the 

disposition relates to retirement of an 

item or items under a group method of 

depreciation where there is no tax effect 

in the year of retirement, no entries are 

required in this account if it can be 

determined that the related balance 

must be retained to offset future group 

item tax deficiencies. 

Subpart G—Service Company Property 

Chart of Accounts 

§ 367.3010 Account 301, Organization. 

(a) This account must include all fees 

paid to federal or state governments for 

the privilege of incorporation and 

expenditures incident to organizing the 


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corporation, partnership, or other 

enterprise and putting it into readiness 

to do business. 

(b) This account must include the 

following items: 

(1) Cost of obtaining certificates 

authorizing the service company to 

engage in its business. 

(2) Fees and expenses for 

incorporation. 

(3) Fees and expenses for mergers or 

consolidations. 

(4) Office expenses incident to 

organizing the service company. 

(5) Stock and minute books and 

corporate seal. 

(c) This account must not include any 

discounts upon securities issued or 

assumed; nor may it include any costs 

incident to negotiating loans, selling 

bonds or other evidences of debt or 

expenses in connection with the 

authorization, issuance or sale of capital 

stock. 

(d) Exclude from this account and 

include in the appropriate expense 

account, the cost of preparing and filing 

papers in connection with the extension 

of the term of incorporation unless the 

first organization costs have been 

written off. When charges are made to 

this account for expenses incurred in 

mergers, consolidations, or 

reorganizations, amounts previously 

included in this account or in similar 

accounts in the books of the companies 

concerned must be excluded from this 

account. 

§ 367.3030 Account 303, Miscellaneous 

intangible property. 

(a) This account must include the cost 

of patent rights, licenses, privileges, and 

other intangible property necessary or 

valuable in the conduct of service 

company operations and not specifically 

chargeable to any other account. 

(b) When any item included in this 

account is retired or expires, the related 

book cost must be credited to this 

account and charged to account 426.5, 

Other deductions (§ 367.4265), or 

account 111, Accumulated provision for 

amortization of property (§ 367.1110). 

(c) This account must be maintained 

in a manner so that the service company 

can furnish full information with 

respect to the amounts included in this 

account. 

§ 367.3060 Account 306, Leasehold 

improvements. 

This account must include all costs 

incurred by the service company in 

improvements of, remodeling of, or 

installation of additional facilities in 

rented offices or buildings to suit 

tenant’s needs, placed in service prior to 

January 1, 2008. 

§ 367.3890 Account 389, Land and land 

rights. 

This account must include the cost of 

land and land rights used for service 

company purposes, the cost of which is 

not properly includible in other land 

and land rights accounts (See Service 

Company Property Instructions in 

§ 367.55). 

§ 367.3900 Account 390, Structures and 

improvements. 

This account must include the cost in 

place of structures and improvements 

used for service company purposes, the 

cost of which is not properly includible 

in other structures and improvements 

accounts (See Service Company 

Property Instructions in § 367.56). 

§ 367.3910 Account 391, Office furniture 

and equipment. 

(a) This account must include the cost 

of office furniture and equipment 

owned by the service company and 

devoted to service company operations, 

and not permanently attached to 

buildings, except the cost of the 

furniture and equipment that the service 

company elects to assign to other 

property accounts on a functional basis. 

(b) This account must include the 

following items: 

(1) Bookcases and shelves. 

(2) Desks, chairs, and desk equipment. 

(3) Drafting-room equipment. 

(4) Filing, storage, and other cabinets. 

(5) Floor covering. 

(6) Library and library equipment. 

(7) Mechanical office equipment, such 

as accounting machines, typewriters, 

and other similar items. 

(8) Safes. 

(9) Tables. 

§ 367.3920 Account 392, Transportation 

equipment. 

(a) This account must include the cost 

of transportation vehicles used for 

service company purposes. 

(b) This account must include the 

following items: 

(1) Airplanes. 

(2) Automobiles. 

(3) Bicycles. 

(4) Electrical vehicles. 

(5) Motor trucks. 

(6) Motorcycles. 

(7) Repair cars or trucks. 

(8) Tractors and trailers. 

(9) Other transportation vehicles. 

§ 367.3930 Account 393, Stores 

equipment. 

(a) This account must include the cost 

of equipment used for the receiving, 

shipping, handling, and storage of 

materials and supplies. 

(b) This account must include the 

following items: 

(1) Chain falls. 

(2) Counters. 

(3) Cranes (portable). 

(4) Elevating and stacking equipment 

(portable). 

(5) Hoists. 

(6) Lockers. 

(7) Scales. 

(8) Shelving. 

(9) Storage bins. 

(10) Trucks, hand and power driven. 

(11) Wheelbarrows. 

§ 367.3940 Account 394, Tools, shop and 

garage equipment. 

(a) This account must include the cost 

of tools, implements, and equipment 

used in construction, repair work, 

general shops and garages and not 

specifically provided for or includible 

in other accounts. 

(b) This account must include the 

following items: 

(1) Air compressors. 

(2) Anvils. 

(3) Automobile repair shop 

equipment. 

(4) Battery charging equipment. 

(5) Belts, shafts and countershafts. 

(6) Boilers. 

(7) Cable pulling equipment. 

(8) Concrete mixers. 

(9) Drill presses. 

(10) Derricks. 

(11) Electric equipment. 

(12) Engines. 

(13) Forges. 

(14) Furnaces. 

(15) Foundations and settings 

specially constructed for equipment in 

this account and not expected to outlast 

the equipment for which provided. 

(16) Gas producers. 

(17) Gasoline pumps, oil pumps and 

storage tanks. 

(18) Greasing tools and equipment. 

(19) Hoists. 

(20) Ladders. 

(21) Lathes. 

(22) Machine tools. 

(23) Motor-driven tools. 

(24) Motors. 

(25) Pipe threading and cutting tools. 

(26) Pneumatic tools. 

(27) Pumps. 

(28) Riveters. 

(29) Smithing equipment. 

(30) Tool racks. 

(31) Vises. 

(32) Welding apparatus. 

(33) Work benches. 

§ 367.3950 Account 395, Laboratory 

equipment. 

(a) This account must include the cost 

installed of laboratory equipment used 

for general laboratory purposes. 

(b) This account must include the 

following items: 


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(1) Ammeters. 

(2) Balances and scales. 

(3) Barometers. 

(4) Calorimeters-bomb, flow, 

recording types, and other similar items. 

(5) Current batteries. 

(6) Electric furnaces. 

(7) Frequency changers. 

(8) Galvanometers. 

(9) Gas burning equipment. 

(10) Gauges. 

(11) Glassware, beakers, burettes, and 

other similar items. 

(12) Humidity testing apparatus. 

(13) Inductometers. 

(14) Laboratory hoods. 

(15) Laboratory standard millivolt 

meters. 

(16) Laboratory standard volt meters. 

(17) Laboratory tables and cabinets. 

(18) Meter-testing equipment. 

(19) Millivolt meters. 

(20) Motor generator sets. 

(21) Muffles. 

(22) Oil analysis apparatus. 

(23) Panels. 

(24) Phantom loads. 

(25) Piping. 

(26) Portable graphic ammeters, 

voltmeters, and wattmeters. 

(27) Portable loading devices. 

(28) Potential batteries. 

(29) Potentiometers. 

(30) Rotating standards. 

(31) Specific gravity apparatus. 

(32) Standard bottles for meter prover 

testing. 

(33) Standard cell, reactance, resistor, 

and shunt. 

(34) Stills. 

(35) Sulphur and ammonia apparatus. 

(36) Switchboards. 

(37) Synchronous timers. 

(38) Tar analysis apparatus. 

(39) Testing panels. 

(40) Testing resistors. 

(41) Thermometers—indicating and 

recording. 

(42) Transformers. 

(43) Voltmeters. 

(44) Other testing, laboratory, or 

research equipment not provided for 

elsewhere. 

(45) Other items of equipment for 

testing gas, fuel, flue gas, water, 

residuals, and other similar items. 

§ 367.3960 Account 396, Power operated 

equipment. 

(a) This account must include the cost 

of power operated equipment used in 

construction or repair work exclusive of 

equipment includible in other accounts. 

Include, also, the tools and accessories 

acquired for use with the equipment 

and the vehicle on which the equipment 

is mounted. 

(b) This account must include the 

following items: 

(1) Air compressors, including driving 

unit and vehicle. 

(2) Back filling machines. 

(3) Boring machines. 

(4) Bulldozers. 

(5) Cranes and hoists. 

(6) Diggers. 

(7) Engines. 

(8) Pile drivers. 

(9) Pipe cleaning machines. 

(10) Pipe coating or wrapping 

machines. 

(11) Tractors—Crawler type. 

(12) Trenchers. 

(13) Other power operated equipment. 

(c) It is intended that this account 

include only the large units that are 

generally self-propelled or mounted on 

movable equipment. 

§ 367.3970 Account 397, Communication 

equipment. 

(a) This account must include the cost 

installed of telephone, telegraph, and 

wireless equipment for general use in 

connection with service company 

operations. 

(b) This account must include the 

following items: 

(1) Amplifiers. 

(2) Antennae. 

(3) Booths. 

(4) Cables. 

(5) Carrier terminal equipment. 

(6) Conductors. 

(7) Distributing boards. 

(8) Extension cords. 

(9) Gongs. 

(10) Hand sets, manual and dial. 

(11) Insulators. 

(12) Intercommunicating sets. 

(13) Loading coils. 

(14) Microwave equipment. 

(15) Operators’ desks. 

(16) Paraboloids. 

(17) Poles and fixtures used wholly 

for telephone or telegraph wire. 

(18) Power supply equipment. 

(19) Radio transmitting and receiving 

sets. 

(20) Reflectors. 

(21) Repeaters. 

(22) Remote control equipment and 

lines. 

(23) Sending keys. 

(24) Storage batteries. 

(25) Switchboards. 

(26) Telautograph circuit connections. 

(27) Telegraph receiving sets. 

(28) Telephone and telegraph circuits. 

(29) Testing instruments. 

(30) Towers. 

(31) Underground conduit used 

wholly for telephone or telegraph wires 

and cable wires. 

§ 367.3980 Account 398, Miscellaneous 

equipment. 

(a) This account must include the cost 

of equipment, apparatus, and other 

similar items, used in the service 

company’s operations that are not 

included in any other account of this 

system of accounts. 

(b) This account must include the 

following items: 

(1) Hospital and infirmary equipment. 

(2) Kitchen equipment. 

(3) Employees’ recreation equipment. 

(4) Radios. 

(5) Restaurant equipment. 

(6) Soda fountains. 

(7) Operators’ cottage furnishings. 

(8) Other miscellaneous equipment. 

§ 367.3990 Account 399, Other tangible 

property. 

This account must include the cost of 

tangible service company property not 

provided for elsewhere. 

§ 367.3991 Account 399.1, Asset 

retirement costs for service company 

property. 

This account must include asset 

retirement costs on service company 

property. 

Subpart H—Income Statement Chart of 

Accounts 

Service Company Operating Income 

§ 367.4000 Account 400, Operating 

revenues. 

There must be shown under this 

caption the total amount included in the 

service company operating revenue 

accounts 457 through 459 (§§ 367.4570 

through 367.4590). 

§ 367.4010 Account 401, Operation 

expense. 

There must be shown under this 

caption the total amount included in the 

service company operation expense 

accounts 500 through 589 (§§ 367.5000 

through 367.5890), 800 through 881 

(§§ 367.8000 through 367.8810) and 901 

through 931 (§§ 367.9010 through 

367.9310). 

§ 367.4020 Account 402, Maintenance 

expense. 

There must be shown under this 

caption the total amount included in the 

service company maintenance expense 

accounts 500 through 598 (§§ 367.5000 

through 367.5890), 800 through 894 

(§§ 367.8000 through 367.8810), and 935 

(§ 367.9350). 

§ 367.4030 Account 403, Depreciation 

expense. 

(a) This account must include the 

amount of depreciation for all service 

company property, the cost of which is 

included in accounts 390 through 399.1 

(§§ 367.3900 through 367.3991). Provide 

subaccounts by each class of service 

company property owned or leased 


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except the depreciation expense that is 

charged to clearing accounts or to 

account 416, Costs and expenses of 

merchandising, jobbing and contract 

work (§ 367.4160). 

(b) The service company must keep 

the records of property and property 

retirements that will reflect the service 

life of property that has been retired and 

aid in estimating probable service life by 

mortality, turnover, or other appropriate 

methods; and also the records that will 

reflect the percentage of salvage and 

costs of removal for property retired 

from each account, or related 

subaccount, for depreciable property. 

(c) Depreciation expenses applicable 

to transportation equipment, shop 

equipment, tools, work equipment, 

power operated equipment and other 

general equipment may be charged to 

clearing accounts as necessary in order 

to obtain a proper distribution of 

expenses between construction and 

operation. 

§ 367.4031 Account 403.1, Depreciation 

expense for asset retirement costs. 

This account must include the 

depreciation expense for asset 

retirement costs included in service 

company property. 

§ 367.4040 Account 404, Amortization of 

limited-term property. 

This account must include 

amortization charges applicable to 

amounts included in the service 

company property accounts for limitedterm franchises, licenses, patent rights, 

limited-term interests in land, and 

expenditures on leased property where 

the service life of the improvements is 

terminable by action of the lease. The 

charges to this account must be 

sufficient to distribute the book cost of 

each investment as evenly as may be 

over the period of its benefit (See 

account 111, Accumulated provision for 

amortization of service company 

property (§ 367.1110)). 

§ 367.4050 Account 405, Amortization of 

other property. 

(a) When authorized by the 

Commission, this account must include 

charges for amortization of intangible or 

other property that does not have a 

definite or terminable life and that is not 

subject to charges for depreciation 

expense. 

(b) This account must be supported in 

sufficient detail to show the 

amortization applicable to each 

investment being amortized, together 

with the book cost of the investment 

and the period over which it is being 

written off. 

§ 367.4073 Account 407.3, Regulatory 

debits. 

This account shall be debited, when 

appropriate, with amounts credited to 

Account 254, Other Regulatory 

Liabilities, to record regulatory 

liabilities imposed on the service 

company by the ratemaking actions of 

regulatory agencies. This account shall 

also be debited, when appropriate, with 

the amounts credited to Account 182.3, 

Other Regulatory Assets, concurrent 

with the recovery of such amounts in 

rates. 

§ 367.4074 Account 407.4, Regulatory 

credits. 

This account shall be credited, when 

appropriate, with amounts debited to 

Account 182.3, Other Regulatory Assets, 

to establish regulatory assets. This 

account shall also be credited, when 

appropriate, with the amounts debited 

to Account 254, Other Regulatory 

Liabilities, concurrent with the return of 

such amounts to customers through 

rates. 

§ 367.4081 Account 408.1, Taxes other 

than income taxes, operating income. 

This account must include those 

taxes, other than income taxes, that 

relate to service company operating 

income. This account must be 

maintained so as to allow ready 

identification of the various classes of 

taxes. 

§ 367.4082 Account 408.2, Taxes other 

than income taxes, other income and 

deductions. 

This account must include those 

taxes, other than income taxes, that 

relate to other income and deductions. 

§ 367.4091 Account 409.1, Income taxes, 

operating income. 

This account must include the 

amount of those local, state and Federal 

income taxes that relate to service 

company operating income. 

§ 367.4092 Account 409.2, Income taxes, 

other income and deductions. 

This account must include the 

amount of those local, state and Federal 

income taxes (both positive and 

negative), that relate to other income 

and deductions. 

§ 367.4093 Account 409.3, Income taxes, 

extraordinary items. 

This account must include the 

amount of those local, state and Federal 

income taxes (both positive and 

negative), that relate to extraordinary 

items. 

§ 367.4101 Account 410.1, Provision for 

deferred income taxes, operating income. 

This account must include the 

amounts of those deferrals of taxes and 

allocations of deferred taxes that relate 

to service company operating income. 

§ 367.4102 Account 410.2, Provision for 

deferred income taxes, other income and 

deductions. 

This account must include the 

amounts of those deferrals of taxes and 

allocations of deferred taxes that relate 

to other income and deductions. 

§ 367.4111 Account 411.1, Provision for 

deferred income taxes—Credit, operating 

income. 

This account must include the 

amounts of those allocations of deferred 

taxes and deferrals of taxes, credit, that 

relate to service company operating 

income. 

§ 367.4112 Account 411.2, Provision for 

deferred income taxes—Credit, other 

income and deductions. 

This account must include the 

amounts of those allocations of deferred 

taxes and deferrals of taxes, credit, that 

relate to other income and deductions. 

§ 367.4114 Account 411.4, Investment tax 

credit adjustments, service company 

property. 

This account must include the 

amount of those investment tax credit 

adjustments that relate to service 

company property. 

§ 367.4115 Account 411.5, Investment tax 

credit adjustments, other. 

This account must include the 

amount of those investment tax credit 

adjustments not properly included in 

other accounts. 

§ 367.4116 Account 411.6, Gains from 

disposition of service company plant. 

(a) The service company must record 

in this account gains resulting from the 

settlement of asset retirement 

obligations related to service company 

plant in accordance with the accounting 

prescribed in General Instructions in 

§ 367.22. 

(b) Income taxes relating to losses, 

recorded in this account must be 

recorded in Account 409.1, Income 

Taxes, operating income (§ 367.4091). 

§ 367.4117 Account 411.7, Losses from 

disposition of service company plant. 

(a) The service company must record 

in this account losses resulting from the 

settlement of asset retirement 

obligations related to service company 

plant in accordance with the accounting 

prescribed in General Instructions in 

§ 367.22. 

(b) Income taxes relating to losses, 

recorded in this account must be 


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recorded in Account 409.1, Income 

Taxes, operating income (§ 367.4091). 

§ 367.4118 Account 411.10, Accretion 

expense. 

This account must be charged for 

accretion expense on the liabilities 

associated with asset retirement 

obligations included in account 230, 

Asset retirement obligations 

(§ 367.2300), related to service company 

property. 

§ 367.4120 Account 412, Cost and 

expenses of construction or other services. 

This account must include 

expenditures related to the performance 

of construction or service contracts, 

under which the service company 

undertakes projects to construct 

physical property for associate or nonassociate companies (see General 

Instructions § 367.24, Construction and 

service contracts for other companies) 

and the cost of services performed for 

others not provided for elsewhere. 

§ 367.4160 Account 416, Costs and 

expenses of merchandising, jobbing and 

contract work. 

(a) This account must include the 

following labor items for services 

provided: 

(1) Canvassing and demonstrating 

appliances in homes and other places 

for the purpose of selling appliances. 

(2) Demonstrating and selling 

activities in sales rooms. 

(3) Installing appliances on customer 

premises where the work is done only 

for purchasers of appliances from the 

associated company. 

(4) Installing wiring, piping, or other 

property work, on a jobbing or contract 

basis. 

(5) Preparing advertising materials for 

appliance sales purposes. 

(6) Receiving and handling customer 

orders for merchandise or for jobbing 

services. 

(7) Cleaning and tidying sales rooms. 

(8) Maintaining display counters and 

other equipment used in merchandising. 

(9) Arranging merchandise in sales 

rooms and decorating display windows. 

(10) Reconditioning repossessed 

appliances. 

(11) Bookkeeping and other clerical 

work in connection with merchandise 

and jobbing activities. 

(12) Supervising merchandise and 

jobbing operations. 

(b) This account must include the 

following materials and expenses items: 

(1) Advertising in newspapers, 

periodicals, radio, television, and other 

similar items. 

(2) Cost of merchandise sold and of 

materials used in jobbing work. 

(3) Stores expenses on merchandise 

and jobbing stocks. 

(4) Fees and expenses of advertising 

and commercial artists’ agencies. 

(5) Printing booklets, dodgers, and 

other advertising data. 

(6) Premiums given as inducement to 

buy appliances. 

(7) Light, heat and power. 

(8) Depreciation on equipment used 

primarily for merchandise and jobbing 

operations. 

(9) Rent of sales rooms or of 

equipment. 

(10) Transportation expense in 

delivery and pick-up of appliances by 

the associated company’s facilities. 

(11) Stationery and office supplies 

and expenses. 

(12) Losses from uncollectible 

merchandise and jobbing accounts. 

(c) Records in support of this account 

shall be so kept as to permit ready 

summarization of costs and expenses by 

such major items as are feasible. 

(d) Related taxes must be recorded in 

account 408.2, Taxes other than income 

taxes, other income and deductions 

(§ 367.4082), or account 409.2, Income 

taxes, other income and deductions 

(§ 367.4092), as appropriate. 

§ 367.4180 Account 418, Non-operating 

rental income. 

(a) The expenses shall include all 

elements of costs incurred in the 

ownership and rental of property and 

the accounts shall be maintained so as 

to permit ready summarization of 

operation, maintenance, rents, 

depreciation, and amortization. 

(b) Related taxes shall be recorded in 

Account 408.2, Taxes other than income 

taxes, other income and deductions 

(§ 367.4082) or Account 409.2, Income 

taxes, other income and deductions 

(§ 367.4092), as appropriate. 

§ 367.4181 Account 418.1, Equity in 

earnings of subsidiary companies. 

This account must include the service 

company’s equity in the earnings or 

losses of subsidiary companies for the 

year. 

§ 367.4190 Account 419, Interest and 

dividend income. 

(a) This account must include interest 

revenues on securities, loans, notes, 

advances, special deposits, tax refunds 

and all other interest-bearing assets, and 

dividends on stocks of other companies, 

whether the securities on which the 

interest and dividends are received are 

carried as investments or included in 

sinking or other special fund accounts. 

(b) This account may include the pro 

rata amount necessary to extinguish 

(during the interval between the date of 

acquisition and the date of maturity) the 

difference between the cost to the 

service company and the face value of 

interest-bearing securities. The amounts 

credited or charged must be 

concurrently included in the accounts 

in which the securities are carried. 

(c) Where significant in amount, 

expenses, excluding operating taxes and 

income taxes, applicable to security 

investments and to interest and 

dividend revenues on the account must 

be charged in this account. 

(d) Related taxes must be recorded in 

account 408.2, Taxes other than income 

taxes, other income and deductions 

(§ 367.4082), or account 409.2, Income 

taxes, other income and deductions 

(§ 367.4092). 

(e) Interest accrued, the payment of 

which is not reasonably assured, 

dividends receivable that have not been 

declared or guaranteed, and interest or 

dividends upon reacquired securities 

issued or assumed by the service 

company must not be credited to this 

account. 

§ 367.4191 Account 419.1, Allowance for 

other funds used during construction. 

This account must include concurrent 

credits for allowance for other funds 

used during construction. 

§ 367.4210 Account 421, Miscellaneous 

income or loss. 

This account must include all revenue 

and expense items except taxes properly 

includible in the income account and 

not provided for elsewhere. Related 

taxes must be recorded in account 

408.2, Taxes other than income taxes, 

other income and deductions 

(§ 367.4082), or account 409.2, Income 

taxes, other income and deductions 

(§ 367.4092). 

§ 367.4211 Account 421.1, Gain on 

disposition of property. 

This account must be credited with 

the gain on the sale, conveyance, 

exchange, or transfer of service or other 

property to another. Income taxes on 

gains recorded in this account must be 

recorded in account 409.2, Income 

taxes, other income and deductions 

(§ 367.4092). 

§ 367.4212 Account 421.2, Loss on 

disposition of property. 

This account must be charged with 

the loss on the sale, conveyance, 

exchange or transfer of service or other 

property to another. The reduction in 

income taxes relating to losses recorded 

in this account must be recorded in 

account 409.2, Income taxes, other 

income and deductions (§ 367.4092). 

§ 367.4250 Account 425, Miscellaneous 

amortization. 

(a) This account must include 

amortization charges not includible in 


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other accounts which are properly 

deductible in determining the income of 

the service company before interest 

charges. Charges included in this 

account, if significant in amount, must 

be in accordance with an orderly and 

systematic amortization program. 

(b) This account must include the 

following items: 

(1) Amortization of intangibles 

included in service company property. 

(2) Other miscellaneous amortization 

charges authorized to be included in 

this account by the Commission. 

§ 367.4261 Account 426.1, Donations. 

This account must include all 

payments or donations for charitable, 

social or community welfare purposes. 

§ 367.4262 Account 426.2, Life insurance. 

This account must include all 

payments for life insurance of officers 

and employees where the service 

company is beneficiary (net premiums 

less increase in cash surrender value of 

policies). 

§ 367.4263 Account 426.3, Penalties. 

This account must include payments 

by the service company for penalties or 

fines for violation of any regulatory 

statutes by the service company or its 

officials. 

§ 367.4264 Account 426.4, Expenditures 

for certain civic, political and related 

activities. 

(a) This account must include 

expenditures for the purpose of 

influencing public opinion with respect 

to the election or appointment of public 

officials, referenda, legislation, or 

ordinances (either with respect to the 

possible adoption of new referenda, 

legislation or ordinances or repeal or 

modification of existing referenda, 

legislation or ordinances) or approval, 

modification, or revocation of 

franchises; or for the purpose of 

influencing the decisions of public 

officials. 

(b) This account must not include 

expenditures that are directly related to 

appearances before regulatory or other 

governmental bodies in connection with 

an associate utility company’s existing 

or proposed operations. 

§ 367.4265 Account 426.5, Other 

deductions. 

This account must include other 

miscellaneous expenses that are not 

properly included in service company 

operations. 

§ 367.4270 Account 427, Interest on longterm debt. 

(a) This account must include the 

amount of interest on outstanding longterm debt issued or assumed by the 

service company, the liability for which 

is included in account 224, Other longterm debt (§ 367.2240). 

(b) This account must be kept or 

supported so as to show the interest 

accruals on each class and series of 

long-term debt. 

(c) This account must not include 

interest on nominally issued or 

nominally outstanding long-term debt, 

including securities assumed. 

§ 367.4280 Account 428, Amortization of 

debt discount and expense. 

(a) This account must include the 

amortization of unamortized debt 

discount and expense on outstanding 

long-term debt. Amounts charged to this 

account must be credited concurrently 

to accounts 181, Unamortized debt 

expense (§ 367.1810), and 226, 

Unamortized discount on long-term 

debt—Debit (§ 367.2260). 

(b) This account must be kept or 

supported so as to show the debt 

discount and expense on each class and 

series of long-term debt. 

§ 367.4290 Account 429, Amortization of 

premium on debt—Credit. 

(a) This account must include the 

amortization of unamortized net 

premium on outstanding long-term debt. 

Amounts credited to this account must 

be charged concurrently to account 225, 

Unamortized premium on long-term 

debt (§ 367.2250). 

(b) This account must be kept or 

supported so as to show the premium 

on each class and series of long-term 

debt. 

(c) This account must include the 

following items: 

(1) Loss relating to investments in 

securities written-off or written-down. 

(2) Loss on sale of investments. 

(3) Loss on reacquisition, resale or 

retirement of service company’s debt 

securities. 

(4) Preliminary survey and 

investigation expenses related to 

abandoned projects, when not writtenoff to the appropriate operating expense 

account. 

§ 367.4300 Account 430, Interest on debt 

to associate companies. 

This account must include interest 

accrued on amounts included in 

account 223, Advances from associate 

companies (§ 367.2230), and account 

233, Notes payable to associate 

companies (§ 367.2330). The records 

supporting the entries to this account 

must be kept so as to show to who the 

interest is to be paid, the period covered 

by the accrual, the rate of interest and 

the principal amount of the advances or 

other obligations on which the interest 

is accrued. Separate subaccounts must 

be maintained for each related debt 

account. 

§ 367.4310 Account 431, Other interest 

expense. 

This account must include all interest 

charges not provided for elsewhere. 

§ 367.4320 Account 432, Allowance for 

borrowed funds used during construction—

Credit. 

This account must include concurrent 

credits for allowance for borrowed 

funds used during construction. 

Subpart I—Retained Earnings 

Accounts 

§ 367.4330 Account 433, Balance 

transferred from income. 

This account must include the net 

credit or debit transferred from income 

for the year. 

§ 367.4340 Account 434, Extraordinary 

income. 

This account must be credited with 

gains of unusual nature and infrequent 

occurrence that would significantly 

distort the current year’s income 

computed before extraordinary items, if 

reported other than as extraordinary 

items. Income tax relating to the 

amounts recorded in this account must 

be recorded in account 409.3, Income 

taxes, extraordinary items (§ 367.4093) 

(See General Instructions in § 367.8). 

§ 367.4350 Account 435, Extraordinary 

deductions. 

This account must be debited with 

losses of unusual nature and infrequent 

occurrence that would significantly 

distort the current year’s income 

computed before extraordinary items, if 

reported other than as extraordinary 

items. Income tax relating to the 

amounts recorded in this account must 

be recorded in account 409.3, Income 

taxes, extraordinary items (§ 367.4093) 

(See General Instructions in § 367.8). 

§ 367.4360 Account 436, Appropriations of 

retained earnings. 

This account must include 

appropriations of retained earnings as 

follows: 

(a) Appropriations required under 

terms of mortgages, orders of courts, 

contracts, or other agreements. 

(b) Appropriations required by action 

of regulatory authorities. 

(c) Other appropriations made at 

option of the service company for 

specific purposes. 

§ 367.4370 Account 437, Dividends 

declared—preferred stock. 

(a) This account must include 

amounts declared payable out of 


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retained earnings as dividends on 

actually outstanding preferred or prior 

lien capital stock issued by the service 

company. 

(b) Dividends must be segregated for 

each class and series of preferred stock 

as to those payable in cash, stock, and 

other forms. If not payable in cash, the 

medium of payment must be described 

with sufficient detail to identify it. 

§ 367.4380 Account 438, Dividends 

declared—common stock. 

(a) This account must include 

amounts declared payable out of 

retained earnings as dividends on 

actually outstanding common capital 

stock issued by the service company. 

(b) Dividends must be segregated for 

each class of common stock as to those 

payable in cash, stock and other forms. 

If not payable in cash, the medium of 

payment must be described with 

sufficient detail to identify it. 

§ 367.4390 Account 439, Adjustments to 

retained earnings. 

(a) This account must, with prior 

Commission approval, include 

significant non-recurring transactions 

accounted for as prior period 

adjustments, as follows: 

(1) Correction of an error in the 

financial statements of a prior year. 

(2) Adjustments that result from 

realization of income tax benefits of 

reacquisition operating loss carry 

forwards of purchased subsidiaries. All 

other items of profit and loss recognized 

during a year must be included in the 

determination of net income for that 

year. 

(b) Adjustments, charges, or credits 

due to losses on reacquisition, resale or 

retirement of the company’s own capital 

stock must be included in this account. 

Subpart J—Operating Revenue Chart 

of Accounts 

§ 367.4570 Account 457, Services 

rendered to associate companies. 

This account must include amounts 

billed to associate companies for 

services rendered at cost (See accounts 

457.1 through 457.3 in §§ 367.4571 

through 367.4573). Overbillings or 

underbillings arising from adjustments 

of estimated costs to actual costs must 

be cleared through this account and 

concurrent adjustments made to other 

accounts involved. 

§ 367.4571 Account 457.1, Direct costs 

charged to associate companies. 

This account must include those 

direct costs that can be identified 

through a cost allocation system as 

being applicable to services performed 

for associate companies. This account 

must not include any compensation for 

use of equity capital or inter-company 

interest on indebtedness. 

§ 367.4572 Account 457.2, Indirect costs 

charged to associate companies. 

This account must include recovery of 

those indirect costs that cannot be 

separately identified to a single or group 

of associate companies and therefore 

must be allocated. Only journal or 

memorandum entries should be 

prepared monthly, by departments, for 

all such cost accumulated and billed to 

customers. Amounts billed to associate 

companies must be included in this 

account. This account must not include 

any compensation for use of equity 

capital or inter-company interest on 

indebtedness. 

§ 367.4573 Account 457.3, Compensation 

for use of capital-associate companies. 

This account must include only the 

portion of compensation for use of 

equity capital and inter-company 

interest on indebtedness before income 

taxes that is properly allocable to 

services rendered to each associate 

company. 

§ 367.4580 Account 458, Services 

rendered to non-associate companies. 

This account must include amounts 

billed for services rendered to nonassociate companies (See accounts 458.1 

through 458.4 (§§ 367.4581 through 

367.4584)). 

§ 367.4581 Account 458.1, Direct costs 

charged to non-associate companies. 

This account must include those 

direct costs that can be identified 

through a cost allocation system as 

being applicable to services performed 

for non-associate companies. This 

account must not include any 

compensation for use of equity capital 

or interest on indebtedness. 

§ 367.4582 Account 458.2, Indirect costs 

charged to non-associate companies. 

This account must include recovery of 

those indirect costs of services 

performed for non-associate companies 

that cannot be specifically assigned and 

therefore must be allocated. This 

account must not include any 

compensation for use of equity capital 

or inter-company interest on 

indebtedness. 

§ 367.4583 Account 458.3, Compensation 

for use of capital—Non-associate 

companies. 

This account must include only the 

portion of compensation for use of 

equity capital and inter-company 

interest on indebtedness before income 

taxes that is properly allocable to 

services rendered to non-associate 

utility companies. A statement to 

support the basis for the compensation 

and how it was calculated must be 

attached to a separate journal entry, 

ledger system, or memorandum file. 

§ 367.4584 Account 458.4, Excess or 

deficiency on servicing non-associate utility 

companies. 

This account must include the 

amount by which the aggregate price 

received for services rendered to nonassociate utility companies differs from 

the sum of the total direct and indirect 

costs and compensation for use of 

capital which are properly allocable to 

such services (See accounts 458.1 

through 458.3 (§§ 367.4581 through 

367.4583) and General Instructions in 

§ 367.23). 

Subpart K—Operation and 

Maintenance Expense Chart of 

Accounts 

§ 367.5000 Accounts 500–598, Electric 

operation and maintenance accounts. 

Service companies must use accounts 

500 through 598 in part 101 of this 

chapter. 

§ 367.8000 Accounts 800–894, Gas 

operation and maintenance accounts. 

Service companies must use accounts 

800 through 894 in part 201 of this 

chapter. 

§ 367.9010 Account 901, Supervision. 

This account must include the cost of 

labor and expenses incurred in the 

general direction and supervision of 

customer accounting and collecting 

activities. Direct supervision of a 

specific activity must be charged to 

account 902, Meter reading expenses 

(§ 367.9020), or account 903, Customer 

records and collection expenses 

(§ 367.9030), as appropriate (See 

Operating Expense Instructions in 

§ 367.80). 

§ 367.9020 Account 902, Meter reading 

expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in reading customer meters, 

and determining consumption when 

performed by employees engaged in 

reading meters. 

(b) This account must include the 

following labor items: 

(1) Addressing forms for obtaining 

meter readings by mail. 

(2) Changing and collecting meter 

charts used for billing purposes. 

(3) Inspecting time clocks, checking 

seals, and other similar items, when 

performed by meter readers and the 

work represents a minor activity 

incidental to regular meter reading 

routine. 


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(4) Reading meters, including demand 

meters, and obtaining load information 

for billing purposes. Exclude and charge 

to account 586, Meter expenses 

(§ 367.5000), account 878, Meter and 

house regulator expenses (§ 367.8000), 

or to account 903, Customer records and 

collection expenses (§ 367.9030), as 

applicable, the cost of obtaining meter 

readings, first and final, if incidental to 

the operation of removing or resetting, 

sealing, or locking, and disconnecting or 

reconnecting meters. 

(5) Computing consumption from 

meter reader’s book or from reports by 

mail when done by employees engaged 

in reading meters. 

(6) Collecting from prepayment 

meters when incidental to meter 

reading. 

(7) Maintaining record of customers’’

keys. 

(8) Computing estimated or average 

consumption when performed by 

employees engaged in reading meters. 

(c) This account must include the 

following materials and expenses items: 

(1) Badges, lamps, and uniforms. 

(2) Demand charts, meter books and 

binders and forms for recording 

readings, but not the cost of preparation. 

(3) Postage and supplies used in 

obtaining meter readings by mail. 

(4) Transportation, meals, and 

incidental expenses. 

§ 367.9030 Account 903, Customer records 

and collection expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in work on customer 

applications, contracts, orders, credit 

investigations, billing and accounting, 

collections and complaints. 

(b) This account must include the 

following labor items: 

(1) Receiving, preparing, recording 

and handling routine orders for service, 

disconnections, transfers or meter tests 

initiated by the customer, excluding the 

cost of carrying out the orders, that is 

chargeable to the account appropriate 

for the work called for by the orders. 

(2) Investigations of customers’’ credit 

and keeping of records pertaining to the 

investigations, including records of 

uncollectible accounts written off. 

(3) Receiving, refunding or applying 

customer deposits and maintaining 

customer deposit, line extension, and 

other miscellaneous records. 

(4) Checking consumption shown by 

meter readers’’ reports where incidental 

to preparation of billing data. 

(5) Preparing address plates and 

addressing bills and delinquent notices. 

(6) Preparing billing data. 

(7) Operating billing and bookkeeping 

machines. 

(8) Verifying billing records with 

contracts or rate schedules. 

(9) Preparing bills for delivery, and 

mailing or delivering bills. 

(10) Collecting revenues, including 

collection from prepayment meters 

unless incidental to meter-reading 

operations. 

(11) Balancing collections, preparing 

collections for deposit, and preparing 

cash reports. 

(12) Posting collections and other 

credits or charges to customer accounts 

and extending unpaid balances. 

(13) Balancing customer accounts and 

controls. 

(14) Preparing, mailing, or delivering 

delinquent notices and preparing 

reports of delinquent accounts. 

(15) Final meter reading of delinquent 

accounts when done by collectors 

incidental to regular activities. 

(16) Disconnecting and reconnecting 

service because of nonpayment of bills. 

(17) Receiving, recording, and 

handling of inquiries, complaints, and 

requests for investigations from 

customers, including preparation of 

necessary orders, but excluding the cost 

of carrying out such orders, which is 

chargeable to the account appropriate 

for the work called for by the orders. 

(18) Statistical and tabulating work on 

customer accounts and revenues, but 

not including special analyses for sales 

department, rate department, or other 

general purposes, unless incidental to 

regular customer accounting routines. 

(19) Preparing and periodically 

rewriting meter reading sheets. 

(20) Determining consumption and 

computing estimated or average 

consumption when performed by 

employees other than those engaged in 

reading meters. 

(c) This account must include the 

following materials and expenses items: 

(1) Address plates and supplies. 

(2) Cash overages and shortages. 

(3) Commissions or fees to others for 

collecting. 

(4) Payments to credit organizations 

for investigations and reports. 

(5) Postage. 

(6) Transportation expenses (Major 

only), including transportation of 

customer bills and meter books under 

centralized billing procedure. 

(7) Transportation, meals, and 

incidental expenses. 

(8) Bank charges, exchange, and other 

fees for cashing and depositing 

customers’ checks. 

(9) Forms for recording orders for 

services removals, and other similar 

forms. 

(10) Rent of mechanical equipment. 

(d) The cost of work on meter history 

and meter location records is chargeable 

to account 586, Meter expenses 

(§ 367.5000) or account 878, Meter and 

house regulator expenses (§ 367.8000). 

§ 367.9040 Account 904, Uncollectible 

accounts. 

This account must be charged with 

amounts sufficient to provide for losses 

from uncollectible service company 

revenues. Concurrent credits must be 

made to account 144, Accumulated 

provision for uncollectible accounts—

Credit (§ 367.1440). Losses from 

uncollectible accounts also must be 

charged to account 144 (§ 367.1440). 

§ 367.9050 Account 905, Miscellaneous 

customer accounts expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred not provided for in other 

accounts. 

(b) This account must include the 

following labor items: 

(1) General clerical and stenographic 

work. 

(2) Miscellaneous labor. 

(c) This account must include the 

following materials and expenses items: 

(1) Communication service. 

(2) Miscellaneous office supplies and 

expenses and stationery and printing 

other than those specifically provided 

for in accounts 902 and 903 

(§§ 367.9020 and 367.9030). 

§ 367.9070 Account 907, Supervision. 

This account must include the cost of 

labor and expenses incurred in the 

general direction and supervision of 

customer service activities, the object of 

which is to encourage safe, efficient and 

economical use of the associate utility 

company’s service. Direct supervision of 

a specific activity within customer 

service and informational expense 

classification must be charged to the 

account wherein the costs of such 

activity are included (See Operating 

Expense Instructions in § 367.80). 

§ 367.9080 Account 908, Customer 

assistance expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in providing instructions or 

assistance to customers, the object of 

which is to encourage safe, efficient and 

economical use of the associate utility 

company’s service. 

(b) This account must include the 

following labor items: 

(1) Direct supervision of department. 

(2) Processing customer inquiries 

relating to the proper use of electric 

equipment, the replacement of such 

equipment and information related to 

the equipment. 


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(3) Advice directed to customers as to 

how they may achieve the most efficient 

and safest use of electric equipment. 

(4) Demonstrations, exhibits, lectures, 

and other programs designed to instruct 

customers in the safe, economical or 

efficient use of electric service, and/or 

oriented toward conservation of energy. 

(5) Engineering and technical advice 

to customers, the object of which is to 

promote safe, efficient and economical 

use of the associate utility company’s 

service. 

(c) This account must include the 

following materials and expenses items: 

(1) Supplies and expenses pertaining 

to demonstrations, exhibits, lectures, 

and other programs. 

(2) Loss in value on equipment and 

appliances used for customer assistance 

programs. 

(3) Office supplies and expenses. 

(4) Transportation, meals, and 

incidental expenses. 

(d) Do not include in this account 

expenses that are provided for 

elsewhere, such as accounts 416, Costs 

and expenses of merchandising, jobbing 

and contract work (§ 367.4160), 587, 

Customer installations expenses 

(§ 367.5870), 879, Customer installations 

expenses (§ 367.8790), and 912, 

Demonstrating and selling expenses 

(§ 367.9120). 

§ 367.9090 Account 909, Informational and 

instructional advertising expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in activities which primarily 

convey information as to what the 

associate utility company urges or 

suggests customers should do in 

utilizing service to protect health and 

safety, to encourage environmental 

protection, to utilize their equipment 

safely and economically, or to conserve 

energy. 

(b) This account must include the 

following labor items: 

(1) Direct supervision of informational 

activities. 

(2) Preparing informational materials 

for newspapers, periodicals, billboards, 

and other similar forms of 

advertisement, and preparing and 

conducting informational motion 

pictures, radio and television programs. 

(3) Preparing informational booklets, 

bulletins, and other similar forms of 

advertisement, used in direct mailings. 

(4) Preparing informational window 

and other displays. 

(5) Employing agencies, selecting 

media and conducting negotiations in 

connection with the placement and 

subject matter of information programs. 

(c) This account must include the 

following materials and expenses items: 

(1) Use of newspapers, periodicals, 

billboards, radio, and other similar 

forms of advertisement, for 

informational purposes. 

(2) Postage on direct mailings to 

customers exclusive of postage related 

to billings. 

(3) Printing of informational booklets, 

dodgers, bulletins, and other similar 

items. 

(4) Supplies and expenses in 

preparing informational materials for 

the associate utility company. 

(5) Office supplies and expenses. 

(d) Exclude from this account and 

charge to account 930.2, Miscellaneous 

general expenses, the cost of publication 

of stockholder reports, dividend notices, 

bond redemption notices, financial 

statements, and other notices of a 

general corporate character. Also 

exclude all expenses of a promotional, 

institutional, goodwill or political 

nature, that are included in accounts 

913, Advertising expenses (§ 367.9130), 

930.1, General advertising expenses 

(§ 367.9301), and 426.4, Expenditures 

for certain civic, political, and related 

expenses (§ 367.4264). 

(e) Entries relating to informational 

advertising included in this account 

must contain or refer to supporting 

documents that identify the specific 

advertising message. If references are 

used, copies of the advertising message 

must be readily available. 

§ 367.9100 Account 910, Miscellaneous 

customer service and informational 

expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in connection with customer 

service and informational activities that 

are not includible in other customer 

information expense accounts. 

(b) This account must include the 

following labor items: 

(1) General clerical and stenographic 

work not assigned to specific customer 

service and informational programs. 

(2) Miscellaneous labor. 

(c) This account must include the 

following materials and expenses items: 

(1) Communication service. 

(2) Printing, postage and office 

supplies expenses. 

§ 367.9110 Account 911, Supervision. 

This account must include the cost of 

labor and expenses incurred in the 

general direction and supervision of 

sales activities, except merchandising. 

Direct supervision of a specific activity, 

such as demonstrating, selling, or 

advertising, must be charged to the 

account wherein the costs of such 

activity are included (See Operating 

Expense Instructions in § 367.80). 

§ 367.9120 Account 912, Demonstrating 

and selling expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in promotional, demonstrating, 

and selling activities, except by 

merchandising, the object of which is to 

promote or retain the business of 

present and prospective customers of 

the service company and the companies 

within the holding company system that 

is not recorded in Accounts 416, Costs 

and expenses of merchandising, jobbing 

and contract work (§ 367.4160), or 

930.1, General advertising expenses for 

associated companies (§ 367.9301). 

(b) This account must include the 

following labor items: 

(1) Demonstrating uses of services 

provided by companies within the 

holding company system. 

(2) Conducting cooking schools, 

preparing recipes, and related home 

service activities. 

(3) Exhibitions, displays, lectures, and 

other programs to promote the services 

provided by the service company or the 

companies within the holding company 

system. 

(4) Experimental and development 

work in connection with new and 

improved appliances and equipment, 

prior to general public acceptance. 

(5) Solicitation of new customers or of 

additional business from old customers, 

including commissions paid employees. 

(6) Engineering and technical advice 

to present or prospective customers in 

connection with promoting or retaining 

the use of services. 

(7) Special customer canvasses when 

their primary purpose is the retention of 

business or the promotion of new 

business. 

(c) This account must include the 

following materials and expenses items: 

(1) Supplies and expenses pertaining 

to demonstration and experimental and 

development activities. 

(2) Booth and temporary space rental. 

(3) Loss in value on equipment and 

appliances used for demonstration 

purposes. 

(4) Transportation, meals, and 

incidental expenses. 

§ 367.9130 Account 913, Advertising 

expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in advertising designed to 

promote or retain the use of services 

provided by the service company or the 

companies within the holding company 

system, except advertising the sale of 

merchandise. 

(b) This account must include the 

following labor items: 

(1) Direct supervision of department. 


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(2) Preparing advertising material for 

newspapers, periodicals, billboards, and 

other similar forms of advertisement, 

and preparing and conducting motion 

pictures, radio and television programs. 

(3) Preparing booklets, bulletins, and 

other similar forms of advertisement, 

used in direct mail advertising. 

(4) Preparing window and other 

displays. 

(5) Clerical and stenographic work. 

(6) Investigating advertising agencies 

and media and conducting negotiations 

in connection with the placement and 

subject matter of sales advertising. 

(c) This account must include the 

following materials and expenses items: 

(1) Advertising in newspapers, 

periodicals, billboards, radio, and other 

similar forms of advertisement, for sales 

promotion purposes, but not including 

institutional or goodwill advertising 

included in account 930.1, General 

advertising expenses (§ 367.9301). 

(2) Materials and services given as 

prizes or otherwise in connection with 

civic lighting contests, canning, or 

cooking contests, bazaars, and other 

similar materials and services, in order 

to publicize and promote the use of 

utility services. 

(3) Fees and expenses of advertising 

agencies and commercial artists. 

(4) Novelties for general distribution. 

(5) Postage on direct mail advertising. 

(6) Premiums distributed generally, 

such as recipe books, and other similar 

items, when not offered as inducement 

to purchase appliances. 

(7) Printing booklets, dodgers, 

bulletins, and other similar forms of 

advertisement. 

(8) Supplies and expenses in 

preparing advertising material. 

(9) Office supplies and expenses. 

(d) The cost of advertisements which 

set forth the value or advantages of 

offered services without reference to 

specific appliances or the promotion of 

appliances must be considered sales 

promotion advertising and charged to 

this account. However, advertisements 

that are limited to specific makes of 

appliances sold by any company and 

prices, terms, and other similar items, 

without referring to the value or 

advantages of offered services, must be 

considered as merchandise advertising 

and the cost must be charged to account 

416, Costs and expenses of 

merchandising, jobbing and contract 

work (§ 367.4160). 

(e) Advertisements that substantially 

mention or refer to the value or 

advantages of offered services, together 

with specific reference to makes of 

appliances sold by any company and 

the price, terms, and other similar items, 

and designed for the joint purpose of 

increasing the use of offered services 

and the sales of appliances, must be 

considered as a combination 

advertisement and the costs must be 

distributed between this account and 

account 416 (§ 367.4160) on the basis of 

space, time, or other proportional 

factors. 

(f) Exclude from this account and 

charge to account 930.2, Miscellaneous 

general expenses (§ 367.9302), the cost 

of publication of stockholder reports, 

dividend notices, bond redemption 

notices, financial statements, and other 

notices of a general corporate character. 

Exclude also all institutional or 

goodwill advertising (See account 930.1, 

General advertising expenses 

(§ 367.9301)). 

§ 367.9160 Account 916, Miscellaneous 

sales expenses. 

(a) This account must include the cost 

of labor, materials used and expenses 

incurred in connection with sales 

activities, except merchandising, which 

are not includible in other sales expense 

accounts. 

(b) This account must include the 

following labor items: 

(1) General clerical and stenographic 

work not assigned to specific functions. 

(2) Special analysis of customer 

accounts and other statistical work for 

sales purposes not a part of the regular 

customer accounting and billing 

routine. 

(3) Miscellaneous labor. 

(c) This account must include the 

following materials and expenses items: 

(1) Communication service. 

(2) Printing, postage, and office 

supplies and expenses applicable to 

sales activities, except those chargeable 

to account 913, Advertising expenses 

(§ 367.9130). 

§ 367.9200 Account 920, Administrative 

and general salaries. 

(a) This account must include 

salaries, wages, bonuses and other 

consideration for services, with the 

exception of director’s fees paid directly 

to officers and employees of the service 

company. 

(b) This account must be supported by 

time records and appropriately 

referenced to detailed records 

subdividing salaries and wages by 

departments or other functional 

organization units. 

§ 367.9210 Account 921, Office supplies 

and expenses. 

(a) This account must include office 

supplies and expenses incurred in 

connection with the general 

administration of service company 

operations assignable to specific 

administrative or general departments 

and not specifically provided for in 

other accounts. This includes the 

expenses of the various administrative 

and general departments, the salaries 

and wages of which are included in 

account 920, Administrative and general 

salaries (§ 367.9200). 

(b) This account may be subdivided in 

accordance with a classification 

appropriate to the departmental or other 

functional organization of the service 

company. The following items must be 

included in this account: 

(1) Automobile service, including 

charges through clearing account. 

(2) Bank messenger and service 

charges. 

(3) Books, periodicals, bulletins and 

subscriptions to newspapers, 

newsletters, tax service, and other 

similar items. 

(4) Building service expenses for 

customer accounts, sales, and 

administrative and general purposes. 

(5) Communication service expenses 

to include telephone, telegraph, wire 

transfer, micro-wave, and other similar 

items. 

(6) Cost of individual items of office 

equipment used by general departments 

which are of small value or short life. 

(7) Membership fees and dues in 

trade, technical, and professional 

associations paid by a utility for 

employees. (Company memberships 

must be included in account 930.2 in 

§ 367.9302.) 

(8) Office supplies and expenses. 

(9) Payment of court costs, witness 

fees, and other expenses of legal 

department. 

(10) Postage, printing and stationery. 

(11) Meals, traveling, entertainment 

and incidental expenses. 

(c) Records must be so maintained to 

permit ready analysis by item showing 

the nature of the expense and identity 

of the person furnishing the service. 

§ 367.9230 Account 923, Outside services 

employed. 

(a) This account must include the fees 

and expenses of professional 

consultants and others for general 

services with the exception of fees and 

expenses for outside services of account 

928, Regulatory commission expenses 

(§ 367.9280), and account 930.1, General 

advertising expenses (§ 367.9301). 

Separate subaccounts must be provided 

for auditing, legal, engineering, 

management consulting fees and any 

other fees for professional or outside 

services. 

(b) Records must be maintained so as 

to permit ready analysis showing the 

nature of service, identity of the person 

furnishing the service, affiliation to the 

service company, and, if allocated to 


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more than one company, the specific 

method of allocation. 

§ 367.9240 Account 924, Property 

insurance. 

(a) This account must include the cost 

of insurance or reserve accruals to 

protect the service company against 

losses and damages to owned or leased 

property used in service company 

operations. It also must include the cost 

of labor and related supplies and 

expenses incurred in property insurance 

activities. 

(b) Recoveries from insurance 

companies or others for property 

damages must be credited to the account 

charged with the cost of the damage. If 

the damaged property has been retired, 

the credit must be to the appropriate 

account for accumulated provision for 

depreciation. 

(c) Records must be kept so as to show 

the amount of coverage for each class of 

insurance carried, the property covered, 

and the applicable premiums. Any 

dividends distributed by mutual 

insurance companies must be credited 

to the accounts to which the insurance 

premiums were charged. The following 

items must be included in this account: 

(1) Premiums payable to insurance 

companies for fire, storm, burglary, 

boiler explosion, lightning, fidelity, riot, 

and similar insurance. 

(2) Special costs incurred in procuring 

insurance. 

(3) Insurance inspection service. 

(4) Insurance counsel, brokerage fees, 

and expenses. 

(d) The cost of insurance or reserve 

accruals capitalized must be charged to 

construction either directly or by 

transfer to construction projects from 

this account. 

(e) The cost of insurance or reserve 

accruals for the following classes of 

property must be charged as indicated. 

(1) Materials and supplies and stores 

equipment, to account 163, Stores 

expense undistributed (§ 367.1630), or 

appropriate materials account. 

(2) Transportation and other general 

equipment to appropriate clearing 

accounts that may be maintained. 

(3) Merchandise and jobbing property, 

to account 416, Costs and expenses of 

merchandising, jobbing and contract 

work (§ 367.4160). 

(f) The cost of labor and related 

supplies and expenses of administrative 

and general employees who are only 

incidentally engaged in property 

insurance work may be included in 

accounts 920 and 921 (§§ 367.9200 and 

367.9210), as appropriate. 

§ 367.9250 Account 925, Injuries and 

damages. 

(a) This account must include the cost 

of insurance or reserve accruals to 

protect the service company against 

injuries and damages claims of 

employees or others, losses of such 

character not covered by insurance, and 

expenses incurred in settlement of 

injuries and damages claims. It also 

must include the cost of labor and 

related supplies and expenses incurred 

in injuries and damages activities. 

(b) Reimbursements from insurance 

companies or others for expenses 

charged to this account because of 

injuries and damages and insurance 

dividends or refunds must be credited 

to this account. The following items 

must be included in this account: 

(1) Premiums payable to insurance 

companies for protection against claims 

from injuries and damages by 

employees or others, such as public 

liability, property damages, casualty, 

employee liability, and other similar 

items. 

(2) Losses not covered by insurance or 

reserve accruals on account of injuries 

or deaths to employees or others and 

damages to the property of others. 

(3) Fees and expenses of claim 

investigators. 

(4) Payment of awards to claimants for 

court costs and attorneys’ services. 

(5) Medical and hospital service and 

expenses for employees as the result of 

occupational injuries, or resulting from 

claims of others. 

(6) Compensation payments under 

workmen’s compensation laws. 

(7) Compensation paid while 

incapacitated as the result of 

occupational injuries (See paragraph (c) 

of this section). 

(8) Cost of safety, accident prevention 

and similar educational activities. 

(c) Payments to or on behalf of 

employees for accident or death 

benefits, hospital expenses, medical 

supplies or for salaries while 

incapacitated for service or on leave of 

absence beyond periods normally 

allowed, when not the result of 

occupational injuries, must be charged 

to account 926, Employee pensions and 

benefits (§ 367.9260) (See also 

paragraph (e) of account 926 

(§ 367.9260)). 

(d) The cost of injuries and damages 

or reserve accruals capitalized must be 

charged to construction directly or by 

transfer to construction projects from 

this account. 

(e) Exclude the time and expenses of 

employees (except those engaged in 

injuries and damages activities) spent in 

attendance at safety and accident 

prevention educational meetings, if 

occurring during the regular work 

period. 

(f) The cost of labor and related 

supplies and expenses of administrative 

and general employees who are only 

incidentally engaged in injuries and 

damages activities may be included in 

accounts 920 and 921 (§§ 367.9200 and 

367.9210), as appropriate. 

§ 367.9260 Account 926, Employee 

pensions and benefits. 

(a) This account must include 

pensions paid to, or on behalf of, retired 

employees, or accruals to provide for 

pensions, or payments for the purchase 

of annuities for this purpose, when the 

service company has definitely, by 

contract, committed itself to a pension 

plan under which the pension funds are 

irrevocably devoted to pension 

purposes, and payments for employee 

accident, sickness, hospital, and death 

benefits, or insurance related to this 

account. Include, also, expenses 

incurred in medical, educational or 

recreational activities for the benefit of 

employees, and administrative expenses 

in connection with employee pensions 

and benefits. 

(b) The service company must 

maintain a complete record of accruals 

or payments for pensions and be 

prepared to furnish full information to 

the Commission of the plan under 

which it has created or proposes to 

create a pension fund and a copy of the 

declaration of trust or resolution under 

which the pension plan is established. 

(c) Records in support of this account 

must be kept so that the total pensions 

expense, the total benefits expense, the 

administrative expenses included in 

this account, and the amounts of 

pensions and benefits expenses 

transferred to construction or other 

accounts will be readily available. The 

following items must be included in this 

account: 

(1) Payment of pensions under a nonaccrual or non-funded basis. 

(2) Accruals for or payments to 

pension funds or to insurance 

companies for pension purposes. 

(3) Group and life insurance 

premiums (credit dividends received). 

(4) Payments for medical and hospital 

services and expenses of employees 

when not the result of occupational 

injuries. 

(5) Payments for accident, sickness, 

hospital, and death benefits or 

insurance. 

(6) Payments to employees 

incapacitated for service or on leave of 

absence beyond periods normally 

allowed, when not the result of 

occupational injuries, or in excess of 

statutory awards. 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65261 

(7) Expenses in connection with 

educational and recreational activities 

for the benefit of employees. 

(d) The cost of labor and related 

supplies and expenses of administrative 

and general employees who are only 

incidentally engaged in employee 

pension and benefit activities may be 

included in accounts 920 and 921 

(§§ 367.9200 and 367.9210), as 

appropriate. 

(e) Salaries paid to employees during 

periods of non-occupational sickness 

may be charged to the appropriate labor 

account rather than to employee 

benefits. 

§ 367.9280 Account 928, Regulatory 

commission expenses. 

(a) This account must include all 

expenses, properly included in service 

company operating expenses, incurred 

by the service company in connection 

with formal cases before regulatory 

commissions, or other regulatory bodies, 

on its own behalf or on behalf of 

associate companies, including 

payments made to a regulatory 

commission for fees assessed to the 

service company for pay and expenses 

of such commission, its officers, agents 

and employees, and for filings or reports 

made under regulations of regulatory 

commissions. The service company 

must be prepared to show the cost of 

each formal case. The following items 

must be included in this account: 

(1) Salaries, fees, retainers, and 

expenses of counsel, solicitors, 

attorneys, accountants, engineers, 

clerks, attendants, witnesses, and others 

engaged in the prosecution of, or 

defense against petitions or complaints 

presented to regulatory bodies. 

(2) Office supplies and expenses, 

payments to public service or other 

regulatory commissions, stationery and 

printing, traveling expenses, and other 

expenses incurred directly in 

connection with formal cases before 

regulatory commissions. 

(b) Exclude from this account and 

include in other appropriate operating 

expense accounts, expenses incurred in 

the improvement of service, additional 

inspection, or rendering reports, which 

are made necessary by the rules and 

regulations, or orders, of regulatory 

bodies. 

§ 367.9301 Account 930.1, General 

advertising expenses for associated 

companies. 

(a) This account must include the cost 

of labor, materials used, and expenses 

incurred in advertising and related 

activities, the cost of which by their 

content and purpose are not provided 

for elsewhere. 

(b) This account must include the 

following labor items: 

(1) Supervision. 

(2) Preparing advertising material for 

newspapers, periodicals, billboards, and 

other similar items, and preparing or 

conducting motion pictures, radio and 

television programs. 

(3) Preparing booklets, bulletins, and 

other similar forms of advertisement, 

used in direct mail advertising. 

(4) Preparing window and other 

displays. 

(5) Clerical and stenographic work. 

(6) Investigating and employing 

advertising agencies, selecting media 

and conducting negotiations in 

connection with the placement and 

subject matter of advertising. 

(c) This account must include the 

following materials and expenses items: 

(1) Advertising in newspapers, 

periodicals, billboards, radio, and other 

similar forms of advertisement. 

(2) Advertising matter such as posters, 

bulletins, booklets, and related items. 

(3) Fees and expenses of advertising 

agencies and commercial artists. 

(4) Postage and direct mail 

advertising. 

(5) Printing of booklets, dodgers, 

bulletins, and other related items. 

(6) Supplies and expenses in 

preparing advertising materials. 

(7) Office supplies and expenses. 

(d) Properly includible in this account 

is the cost of advertising activities on a 

local or national basis of a good will or 

institutional nature, which is primarily 

designed to improve the image of the 

associate utility company or the 

industry, including advertisements 

which inform the public concerning 

matters affecting the associate utility 

company’s operations, such as, the cost 

of providing service, the associate utility 

company’s efforts to improve the quality 

of service, the company’s efforts to 

improve and protect the environment, 

and other similar forms of 

advertisement. Entries relating to 

advertising included in this account 

must contain or refer to supporting 

documents which identify the specific 

advertising message. If references are 

used, copies of the advertising message 

must be readily available. 

(e) Exclude from this account and 

include in account 426.4, Expenditures 

for certain civic, political and related 

activities (§ 367.4264), expenses for 

advertising activities that are designed 

to solicit public support or the support 

of public officials in matters of a 

political nature. 

§ 367.9302 Account 930.2, Miscellaneous 

general expenses. 

(a) This account must include the cost 

of expenses incurred in connection with 

the general management of the service 

company not provided for elsewhere. 

(b) This account must include labor 

items including miscellaneous labor not 

elsewhere provided for. 

(c) This account must include the 

following expenses items: 

(1) Industry association dues for 

company memberships. 

(2) Contributions for conventions and 

meetings of the industry. 

(3) Research, development, and 

demonstration expenses not charged to 

other operation and maintenance 

expense accounts on a functional basis. 

(4) Communication service not 

chargeable to other accounts. 

(5) Trustee, registrar, and transfer 

agent fees and expenses. 

(6) Stockholders meeting expenses. 

(7) Dividend and other financial 

notices. 

(8) Printing and mailing dividend 

checks. 

(9) Directors’ fees and expenses. 

(10) Publishing and distributing 

annual reports to stockholders. 

(11) Public notices of financial, 

operating and other data required by 

regulatory statutes, not including, 

however, notices required in connection 

with security issues or acquisitions of 

property. 

(d) Records must be maintained so as 

to permit ready analysis by item 

showing the nature of the expense and 

identity of the person furnishing the 

service. 

§ 367.9310 Account 931, Rents. 

This account must include rents, 

including taxes, paid for the property of 

others used, occupied or operated in 

connection with service company 

functions. Provide subaccounts for 

major groupings such as office space, 

warehouses, other structure, office 

furniture, fixtures, computers, data 

processing equipment, microwave and 

telecommunication equipment, 

airplanes, automobiles, and other 

similar groupings of property. The cost, 

when incurred by the lessee, of 

operating and maintaining leased 

property, must be charged to the 

accounts appropriate for the expense as 

if the property were owned. 

§ 367.9350 Account 935, Maintenance of 

structures and equipment. 

This account must include materials 

used and expenses incurred in the 

maintenance of property owned, the 

cost of which is included in accounts 

390 through 399 (§§ 367.3900 through 

367.3990), and of property leased from 

others. Provide subaccounts by major 

classes of structures and equipment, 

owned and leased. 


pwalker on PRODPC60 with RULES2
65262 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

■ 6. Part 368 is added to subchapter U 

to read as follows: 

PART 368—PRESERVATION OF 

RECORDS OF HOLDING COMPANIES 

AND SERVICE COMPANIES 

Sec. 

368.1 Promulgation. 

368.2 General instructions. 

368.3 Schedule of records and periods of 

retention. 

Authority: 42 U.S.C. 16451–16463. 

§ 368.1 Promulgation. 

This part is prescribed and 

promulgated as the regulations 

governing the preservation of records by 

any holding company and by any 

service company within a holding 

company system subject to the 

jurisdiction of the Commission under 

the Public Utility Holding Company Act 

of 2005 (42 U.S.C. §§ 16451 et seq.). 

§ 368.2 General instructions. 

(a) Scope of this part. (1) The 

regulations in this part apply to all 

books of account and other records 

prepared, maintained or held by any 

agent or employee on behalf of the 

company. The specification in the 

schedule in § 368.3 of a record related 

to a type of transaction includes all 

documents and correspondence, not 

redundant or duplicative of other 

records retained, needed to explain or 

verify the transaction. 

(2) Company means a service 

company or a holding company as 

defined in § 367.1 of this chapter. Public 

utilities, licensees, and natural gas 

companies must continue to use parts 

125 and 225 of this chapter. 

(3) Any company subject to this 

regulation, that, as agent, operator, 

lessor or otherwise, maintains or has 

possession of any records relating to the 

operation, property or obligations of a 

public utility, licensee, or natural gas 

company, as defined in the Federal 

Power Act (16 U.S.C. §§ 824 et seq.), the 

Natural Gas Act (15 U.S.C. §§ 717 et 

seq.), or the laws of any state within 

which the public utility, licensee, or 

natural gas company operates, must 

comply with the laws or regulations as 

to record retention and destruction 

which would apply to the records if 

they were records of the public utility, 

licensee, or natural gas company as 

codified in parts 125 and 225 of this 

chapter. 

(4) The regulations in this part should 

not be construed as excusing 

compliance with other lawful 

requirements of any other governmental 

body, Federal or State, prescribing other 

record keeping requirements or for 

preservation of records longer than 

those prescribed in this part. 

(5) To the extent that any Commission 

regulations may provide for a different 

record retention period, the records 

must be retained for the longer of the 

retention periods. 

(6) Records, other than those listed in 

the schedule, may be destroyed at the 

option of the company. However, 

records that are used in lieu of those 

listed must be preserved for the periods 

prescribed for the records used for 

substantially similar purposes. 

Additionally, retention of records 

pertaining to added services, functions, 

plant, and other similar service, the 

establishment of which cannot be 

presently foreseen, must conform to the 

principles embodied in this section. 

(7) Notwithstanding the provisions of 

the records retention schedule in this 

section, the Commission may, upon the 

request of the company, authorize a 

shorter period of retention for any 

record listed in the schedule upon a 

showing by the company that 

preservation of the record for a longer 

period is not necessary or appropriate, 

in the public interest or for the 

protection of investors or consumers. 

(b) Designation of supervisory official. 

Each company subject to these record 

retention regulations must designate one 

or more officials to supervise the 

preservation or authorized destruction 

of its records. 

(c) Protection and storage of records. 

The company must provide reasonable 

protection from damage by fire, flood, 

and other hazards for records required 

by these record retention regulations to 

be preserved and, in the selection of 

storage space, safeguard such records 

from unnecessary exposure to 

deterioration from excessive humidity, 

dryness, or lack of proper ventilation. 

(d) Index of records. At each site or 

location where company records are 

kept or stored, the records must be 

arranged, filed, and currently indexed 

so that records may be readily identified 

and made available for inspection by 

authorized representatives of any 

regulatory agency concerned, including 

the Commission. 

(e) Record storage media. Each 

company has the flexibility to select its 

own storage media subject to the 

following conditions. 

(1) The storage media must have a life 

expectancy at least equal to the 

applicable record retention period 

provided in § 368.3 of this chapter 

unless there is a quality transfer from 

one media to another with no loss of 

data. 

(2) Each company is required to 

implement internal control procedures 

that assure the reliability of, and ready 

access to, data stored on machine 

readable media. Internal control 

procedures must be documented by a 

responsible supervisory official. 

(3) Each transfer of data from one 

media to another must be verified for 

accuracy and documented. Software and 

hardware required to produce readable 

records must be retained for the same 

period the media format is used. 

(f) Destruction of records. At the 

expiration of the retention period, the 

company may use any appropriate 

method to destroy records. Precautions 

should be taken, however, to macerate 

or otherwise destroy the legibility of 

records, the content of which is 

forbidden by law to be divulged to 

unauthorized persons. 

(g) Premature destruction or loss of 

records. When records are destroyed or 

lost before the expiration of the 

prescribed period of retention, a 

certified statement listing, as far as may 

be determined, the records destroyed 

and describing the circumstances of 

accidental or other premature 

destruction or loss must be filed with 

the Commission within 90 days from 

the date of discovery of the destruction. 

(h) Schedule of records and periods of 

retention. The schedule of records 

retention periods constitutes a part of 

these records retention regulations. The 

schedule prescribes the periods of time 

that designated records must be 

preserved. Plant records related to 

public utilities and licensees and 

natural gas companies must be retained 

in accordance with §§ 125.3 and 225.3 

of this chapter. 

(i) Retention periods designated 

‘‘Destroy at option.’’ ‘‘Destroy at option’’

constitutes authorization for destruction 

of records at managements’ discretion if 

the destruction does not conflict with 

other legal retention requirements or 

usefulness of the records in satisfying 

pending regulatory actions or directives. 

‘‘Destroy at option after audit’’ requires 

retention until the company has 

received an opinion from its 

independent accountants with respect 

to the financial statements including the 

transactions to which the records relate. 

(j) Records of services performed by 

associate companies. Holding 

companies and service companies must 

assure the availability of records of 

services performed by and for public 

utilities and licensees and natural gas 

companies with supporting cost 

information for the periods indicated in 

§§ 125.3 and 225.3 of this chapter as 

necessary to be able to readily furnish 

detailed information as to the nature of 

the transaction, the amounts involved, 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65263 

and the accounts used to record the 

transactions. 

(k) Rate case. Notwithstanding the 

minimum retention periods provided in 

these regulations, the company must 

retain the appropriate records to support 

the costs and adjustments proposed in 

any rate case. 

(l) Pending complaint litigation or 

governmental proceedings. 

Notwithstanding the minimum 

requirements, if a company is involved 

in pending litigation, complaint 

procedures, proceedings remanded by 

the court, or governmental proceedings, 

it must retain all relevant records. 

(m) Life or mortality study data. Life 

or mortality study data for depreciation 

purposes must be retained for 25 years 

or for 10 years after property is retired, 

whichever is longer. 

§ 368.3 Schedule of records and periods of 

retention. 

SCHEDULE OF RECORDS AND PERIODS OF RETENTION

Item No. and description Retention period 

Corporate and General 

1. Reports to stockholders: Annual reports or statements to stockholders.5 years. 

2. Organizational documents: 

(a) Minute books of stockholders, directors’ and directors’ committee meetings.5 years or termination of the corporation’s existence, whichever occurs 

first. 

(b) Title, franchises, and licenses: Copies of formal orders of regulatory commissions served upon the company.6 years after final non-appealable order. 

(1) Certificates of incorporation, or equivalent agreements and 

amendments thereto.

Life of corporation. 

(2) Deeds, leases and other title papers (including abstracts of 

title and supporting data), and contracts and agreements related to the acquisition or disposition of property or investments.

6 years after property or investment is disposed of unless delivered to 

transferee. 

3. Contracts and agreements: Contracts, including amendments and 

agreements (except contracts provided for elsewhere): 

(a) Service contracts, such as for management, consulting, accounting, legal, financial or engineering services.All contracts, related memoranda, and revisions should be retained for 

4 years after expiration or until the conclusion of any contract disputes pertaining to such contracts, whichever is later. 

(b) Memoranda essential to clarify or explain provisions of contracts and agreements.For same period as contract to which they relate. 

(c) Card or book records of contracts, leases, and agreements 

made, showing dates of expirations and of renewals, memoranda of receipts, and payments under such contracts.

For the same periods as contracts to which they relate. 

(d) Contracts and other agreements relating to services performed 

in connection with construction of property (including contracts 

for the construction of property by others for the company and 

for supervision and engineering relating to construction work).

All contracts, related memoranda, and revisions should be retained for 

4 years after expiration or until the conclusion of any contract disputes or governmental proceedings pertaining to such contracts, 

whichever is later. 

4. Accountants’ and auditors’ reports: 

(a) Reports of examinations and audits by accountants and auditors not in the regular employ of the company (such as reports 

of public accounting firms and commission accountants).

5 years after the date of the report. 

(b) Internal audit reports and working papers ................................... 5 years after the date of the report. 

Information Technology Management 

5. Automatic data processing records (retain original source data used 

as input for data processing and data processing report printouts for 

the applicable periods prescribed elsewhere in the schedule): Software program documentation and revisions thereto.

Retain as long as it represents an active viable program or for periods 

prescribed for related output data, whichever is shorter. 

General Accounting Records 

6. General and subsidiary ledgers: 

(a) Ledgers: 

(1) General ledgers .................................................................... 10 years. 

(2) Ledgers subsidiary or auxiliary to general ledgers except 

ledgers provided for elsewhere.

10 years. 

(b) Indexes: 

(1) Indexes to general ledgers ................................................... 10 years. 

(2) Indexes to subsidiary ledgers except ledgers provided for 

elsewhere.

10 years. 

(c) Trial balance sheets of general and subsidiary ledgers .............. 2 years 

7. Journals: General and subsidiary ........................................................ 10 years. 

8. Journal vouchers and journal entries including supporting detail: 

(a) Journal vouchers and journal entries .......................................... 10 years. 

(b) Analyses, summarization, distributions, and other computations 

which support journal vouchers and journal entries: 

(1) Charging property accounts ................................................. 25 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities and licensees and natural gas companies. 

(2) Charging all other accounts ................................................. 6 years. 


pwalker on PRODPC60 with RULES2
65264 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

SCHEDULE OF RECORDS AND PERIODS OF RETENTION—Continued 

Item No. and description Retention period 

9. Cash books: General and subsidiary or auxiliary books ..................... 5 years after close of fiscal year. 

10. Voucher registers: Voucher registers or similar records when used 

as a source document.

5 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

11. Vouchers: 

(a) Paid and canceled vouchers (one copy-analysis sheets showing detailed distribution of charges on individual vouchers and 

other supporting papers.

5 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

(b) Original bills and invoices for materials, services, etc., paid by 

vouchers.

5 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

(c) Paid checks and receipts for payments of specific vouchers ..... 5 years. 

(d) Authorization for the payment of specific vouchers .................... 5 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

(e) Lists of unaudited bills (accounts payable), list of vouchers 

transmitted, and memoranda regarding changes in audited bills.

Destroy at option. 

(f) Voucher indexes ........................................................................... Destroy at option. 

(g) Purchases and stores records related to disbursement vouchers.5 years. 

Insurance 

12. Insurance records: 

(a) Records of insurance policies in force, showing coverage, premiums paid, and expiration dates.Destroy at option after expiration of such policies. 

(b) Records of amounts recovered from insurance companies in 

connection with losses and of claims against insurance companies, including reports of losses, and supporting papers.

6 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

(c) Records of self-insurance against: 

(1) losses from fire and casualty, .............................................. 6 years after date of last accounting entry with respect thereto. 

(2) damage to property of others, and ....................................... 6 years after date of last accounting entry with respect thereto. 

(3) personal injuries ................................................................... 6 years after date of last accounting entry with respect thereto. 

(d) Inspectors’ reports and reports of condition of property ............. Destroy when superseded. 

Maintenance 

13. Maintenance project and work orders: 

(a) Authorizations for expenditures for maintenance work to be 

covered by project or work orders, including memoranda showing the estimates of costs to be incurred.

5 years. 

(b) Project or work order sheets to which are posted in detail the 

entries for labor, material, and other charges in connection with 

maintenance, and other work pertaining to company operations.

5 years. 

(c) Summaries of expenditures on maintenance and job orders and 

clearances to operating other accounts (exclusive of property accounts).

5 years. 

Property, Depreciation and Investments 

14. Property records, excluding documents included in Item 2(a)(2): 

(a) Ledgers of property accounts including land and other detailed 

ledgers showing the cost of property by classes.

25 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities and licensees and natural gas companies. 

(b) Continuing property inventory ledger, book or card records 

showing description, location, quantities, cost, etc., of physical 

units (or items) of property owned.

25 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities and licensees and natural gas companies. 

(c) Operating equipment records ...................................................... 3 years after disposition, termination of lease, or write-off of property or 

investment. 

(d) Office furniture and equipment records ....................................... 3 years after disposition, termination of lease or write-off of property or 

investment. 

(e) Automobiles, other vehicles and related garage equipment 

records.

3 years after disposition, termination of lease or write-off of property or 

investment. 

(f) Aircraft and airport equipment records ......................................... 3 years after disposition, termination of lease or write-off of property or 

investment. 

(g) Other property records not defined elsewhere ............................ 3 years after disposition, termination of lease or write-off of property or 

investment. 

15. Construction work in progress ledgers, project or work orders, and 

supplemental records: 

(a) Construction work in progress ledgers ........................................ 5 years after clearance to property account, provided continuing inventory records are maintained; otherwise 5 years after property is retired. 

(b) Project or work orders sheets to which are posted in summary 

form or in detail the entries for labor, materials, and other 

charges for property additions and the entries closing the project 

or work orders to property records at completion.

5 years after clearance to property account, provided continuing inventory records are maintained; otherwise 5 years after property is retired. 


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Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 65265 

SCHEDULE OF RECORDS AND PERIODS OF RETENTION—Continued 

Item No. and description Retention period 

(c) Authorizations for expenditures for additions to property, including memoranda showing the detailed estimates of cost, and the 

bases therefore (including original and revised or subsequent 

authorizations).

5 years after clearance to property account. 

(d) Requisitions and registers of authorizations for property expenditures.5 years after clearance to property account. 

(e) Completion or performance reports showing comparison between authorized estimates and actual expenditures for property 

additions.

5 years after clearance to property account. 

(f) Analysis or cost reports showing quantities of materials used, 

unit costs, number of man-hours etc., in connection with completed construction project.

5 years after clearance to property account. 

(g) Records and reports pertaining to progress of construction 

work, the order in which jobs are to be completed, and similar 

records which do not form a basis of entries to the accounts.

Destroy at option. 

16. Retirement work in progress ledgers, project or work orders, and 

supplemental records: 

(a) Project or work order sheets to which are posted the entries for 

removal costs, materials recovered, and credits to property accounts for cost of property retirement.

5 years after the property is retired. 

(b) Authorizations for retirement of property, including memoranda 

showing the basis for determination to be retired and estimates 

of salvage and removal costs.

5 years after the property is retired. 

(c) Registers of retirement work ........................................................ 5 years. 

17. Summary sheets, distribution sheets, reports, statements, and papers directly supporting debits and credits to property accounts not 

covered by construction or retirement project or work orders and 

their supporting records.

5 years. 

18. Appraisals and valuations: 

(a) Appraisals and valuations made by the company of its properties or investments or of the properties or investments of any 

associated companies. (Includes all records essential thereto.).

3 years after appraisal. 

(b) Determinations of amounts by which properties or investments 

of the company or any of its associated companies will be either 

written up or written down as a result of: 

(1) Mergers or acquisitions ........................................................ 10 years after completion of transaction or as ordered by the Commission. 

(2) Asset impairments ................................................................ 10 years after recognition of asset impairment. 

(3) Other bases .......................................................................... 10 years after the asset was written up or down. 

19. Production maps, geological maps, reproductions, including aerial 

photographs, showing the location of all facilities the subject matter 

of which falls within the project or work orders of the company.

6 years after completion of project or work order. 

20. Engineering records, drawings, supporting data to include diagrams, profiles, photographs, field-survey notes, plot plans, detail 

drawings, and records of engineering studies that are part of or performed by the company within the project or work order system.

6 years after completion of project or work order. 

21. Records of building space occupied by various departments of the 

company.

6 years. 

22. Contracts relating to property: 

(a) Contracts relating to acquisition or sale of property ................... 6 years after property is retired or sold 

(b) Contracts and other agreements relating to services performed 

in connection with construction of property (including contracts 

for the construction of property by others for the company and 

for supervision and engineering relating to construction work).

6 years after property is retired or sold. 

23. Records pertaining to reclassification of property accounts to conform to prescribed systems of accounts including supporting papers 

showing the bases for such reclassifications.

6 years. 

24. Records of accumulated provisions for depreciation and depletion 

of property and amortization of intangible property and supporting 

computation of expense: 

(a) Detailed records or analysis sheets segregating the accumulated depreciation according to the classification of property.3 years after retirement or disposition of property 

(b) Records reflecting the service life of property and the percentage of salvage and cost of removal for property retired from 

each account for depreciable company property.

3 years after retirement or disposition of property 

25. Investment records: 

(a) Records of investment in associate companies .......................... 3 years after disposition of investment. 

(b) Records of other investments, including temporary investments 

of cash.

3 years after disposition of investment. 


pwalker on PRODPC60 with RULES2
65266 Federal Register / Vol. 71, No. 215 / Tuesday, November 7, 2006 / Rules and Regulations 

SCHEDULE OF RECORDS AND PERIODS OF RETENTION—Continued 

Item No. and description Retention period 

Purchase and Stores 

26. Procurement: 

(a) Agreements entered into for the acquisition of goods or the 

performance of services. Includes all forms of agreements such 

as but not limited to: Letters of intent, exchange of correspondence, master agreements, term contracts, rental agreements, 

and the various types of purchase orders: 

(1) For goods or services relating to property construction ...... 6 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

(2) For other goods or services ................................................. 6 years. 

(b) Supporting documents including accepted and unaccepted bids 

or proposals (summaries of unaccepted bids or proposals may 

be kept in lieu of originals) evidencing all relevant elements of 

the procurement.

6 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies. 

27. Material ledgers: Ledger sheets of materials and supplies received, 

issued, and on hand.

6 years after the date the records/ledgers were created. 

28. Materials and supplies received and issued: Records showing the 

detailed distribution of materials and supplies issued during accounting periods.

6 years. See §§ 125.2(g) and 225.2(g) of this chapter for public utilities 

and licensees and natural gas companies). 

Revenue Accounting 

29. Miscellaneous billing data: Billing department’s copies of contracts 

with customers (other than contracts in general files).

5 years. 

30. Revenue summaries: Summaries of monthly revenues according to 

classes of service. Including summaries of forfeited discounts and 

penalties.

5 years. 

Tax 

31. Tax records: 

(a) Copies of tax returns and supporting schedules filed with taxing 

authorities, supporting working papers, records of appeals of tax 

bills, and receipts for payment. See Item 11 for vouchers evidencing disbursements: 

(1) Income tax returns ................................................................ 2 years after final tax liability is determined. 

(2) Agreements between and schedule of allocation by associate companies of consolidated Federal income taxes.2 years after final tax liability is determined. 

(b) Other taxes, including State or local property or income taxes.

(1) Property tax returns .............................................................. 2 years after final tax liability is determined. 

(2) Sales and other use taxes ................................................... 2 years. 

(3) Other Taxes .......................................................................... 2 years after final tax liability is determined. 

(c) Filings with taxing authorities to qualify employee benefit plans 5 years after discontinuance of plan. 

(d) Information returns and reports to taxing authorities .................. 3 years after final tax liability is determined. 

Treasury 

32. Statements of funds and deposits: 

(a) Summaries and periodic statements of cash balances on hand 

and with depositories for company or associate.

Destroy at option after completion of audit by independent accountants. 

(b) Requisitions and receipts for funds furnished associates and 

others.

Destroy at option after funds have been returned or accounted for. 

(c) Statements of periodic deposits with external fund administrators or trustees.Retain records for the most recent 3 years. 

(d) Statements of periodic withdrawals from external fund .............. Retain records for the most recent 3 years. 

33. Records of deposits with banks and others: 

(a) Statements from depositories showing the details of funds received, disbursed, transferred, and balances on deposit, bank 

reconcilement papers and statements of interest credits.

Destroy at option after completion of audit by independent accountants. 

(b) Check stubs, registers, or other records of checks issued ......... 6 years. 

Payroll Records 

34. Payroll records: 

(a) Payroll sheets or registers of payments of salaries and wages, 

pensions and annuities paid by company or by contractors of its 

account.

6 years. 

(b) Records showing the distribution of salaries and wages paid for 

each payroll period and summaries or recapitulations of such 

distribution.

6 years. 


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SCHEDULE OF RECORDS AND PERIODS OF RETENTION—Continued 

Item No. and description Retention period 

Miscellaneous 

35. Financial, operating and statistical annual reports regularly prepared in the course of business for internal administrative or operating purposes.5 years. 

36. Budgets and other forecasts (prepared for internal administrative or 

operating purposes) of estimated future income, receipts and expenditures in connection with financing, construction and operations, 

including acquisitions and disposals of properties or investments.

3 years. 

37. Periodic or special reports filed by the company on its own behalf 

with the Commission or with any other Federal or State rate-regulatory agency, including exhibits or amendments to such reports: 

(a) Reports to Federal and State regulatory commissions including 

annual financial, operating and statistical reports.

5 years. 

(b) Monthly and quarterly reports of operating revenues, expenses, 

and statistics.

5 years. 

38. Advertising: Copies of advertisements by or for the company on behalf of itself or any associate company in newspapers, magazines, 

and other publications, including costs and other records relevant 

thereto (excluding advertising of appliances, employment opportunities, routine notices, and invitations for bids all of which may be destroyed at option).

2 years. 

■ 7. Part 369 is added to Subchapter U 

to read as follows: 

PART 369—STATEMENTS AND 

REPORTS (SCHEDULES) 

Authority: 42 U.S.C. 16451–16463. 

§ 369.1 FERC Form No. 60, Annual report 

of centralized service company. 

(a) Prescription. The form of annual 

report for centralized service 

companies, designated as FERC Form 

No. 60, is prescribed for the reporting 

year 2008 and each subsequent year. 

(b) Filing requirements. (1) Who must 

file. Unless the holding company system 

is exempted or granted a waiver by 

Commission rule or order pursuant to 

§§ 366.3 and 366.4, every centralized 

service company (See § 367.2 of this 

chapter) in a holding company system 

must prepare and file electronically 

with the Commission the FERC Form 

No. 60 then in effect pursuant to the 

General Instructions set out in the form. 

(2) When to file and what to file. 

(i) The annual report for the year 

ending December 31, 2008 must be filed 

by May 1, 2009. The annual report for 

each year thereafter must be filed by 

May 1 of the following years. 

(ii) The annual report in effect must 

be filed with the Commission as 

prescribed in § 385.2011 of this chapter 

and as indicated in the General 

Instructions set out in the form, and 

must be properly completed and 

verified. Filing on electronic media 

pursuant to § 385.2011 of this chapter is 

required. 

PART 375—THE COMMISSION 

■ 8. The authority citation for part 375 

continues to read as follows: 

Authority: 5 U.S.C. 551–557; 15 U.S.C. 

717–717w, 3301–3432; 16 U.S.C. 791–825r, 

2601–2645; 42 U.S.C. 7101–7352; 42 U.S.C. 

16451–16463. 

■ 9. In § 375.303, paragraphs (c), (d), (e), 

(f), (g) and (h) are revised to read as 

follows: 

§ 375.303 Delegations to the Chief 

Accountant. 

* * * * * 

(c) Issue interpretations of the 

Uniform Systems of Accounts for public 

utilities and licensees, centralized 

service companies, natural gas 

companies and oil pipeline companies. 

(d) Pass upon any proposed 

accounting matters submitted by or on 

behalf of jurisdictional companies that 

require Commission approval under the 

Uniform Systems of Accounts, except 

that if the proposed accounting matters 

involve unusually large transactions or 

unique or controversial features, the 

Chief Accountant must present the 

matters to the Commission for 

consideration. 

(e) Pass upon applications to increase 

the size or combine property units of 

jurisdictional companies. 

(f) Accept for filing FERC Form No. 

60, FERC–61, and Quarterly Financial 

Report Form Nos. 3–Q and 6–Q if such 

filings are in compliance with 

Commission orders or decisions, and 

when appropriate, notify the party of 

such acceptance. Issue and sign 

deficiency letters if the filing fails to 

comply with applicable statutory 

requirements, and with all applicable 

Commission rules, regulations, and 

orders for which a waiver has not been 

granted. 

(g) Deny or grant, in whole or in part, 

requests for waiver of the reporting 

requirements for and requests for 

extensions of time for the filing of the 

forms under §§ 141.400, 260.300, 357.4, 

366.23 and part 369 of this chapter and 

the filing of these forms on electronic 

media under § 385.2011 of this chapter. 

(h) Deny or grant, in whole or in part, 

requests for waiver of the requirements 

of parts 352, 356, 367 and 368 of this 

chapter, except that, if the matters 

involve unusually large transactions or 

unique or controversial features, the 

Chief Accountant must present the 

matters to the Commission for 

consideration. 

BILLING CODE 6717–01–P 


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[FR Doc. 06–9003 Filed 11–6–06; 8:45 am] 

BILLING CODE 6717–01–C 


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