UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

18 CFR Part 101 

(Docket No. RM04-12-000; Order No. 668) 

Accounting and Financial Reporting for Public Utilities Including RTOs

(Issued December 16, 2005) 

AGENCY: Federal Energy Regulatory Commission. 

ACTION: Final Rule. 

SUMMARY: The Federal Energy Regulatory Commission (Commission) is amending its 

regulations to update the accounting requirements for public utilities and licensees, 

including independent system operators and regional transmission organizations 

(collectively referred to as RTOs). The Commission is also amending its financial 

reporting requirements for the quarterly and annual financial reporting forms for these 

entities. These updates to the Commission’s Uniform System of Accounts and the 

financial reporting requirements will allow for better comparability between public 

utilities and will result in improved transparency of financial information and will 

facilitate better understanding of RTO costs. 

EFFECTIVE DATE: The amended regulations will become effective [insert date 30 

days after publication in the FEDERAL REGISTER], with the accounting and 

financial reporting changes and updates to become effective January 1, 2006. 
Docket No. RM04-12-000 -iiFOR FUTHER INFORMATION CONTACT: 

John Okrak (Technical Information) 

Office of Markets, Tariffs and Rates 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington DC 20426 

(202) 502-8280 

Julie Kuhns (Technical Information) 

Office of Markets, Tariffs and Rates 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington DC 20426 

(202) 502-6287 

Lodie White (Legal Information) 

Office of the General Council 

Federal Energy Regulatory Commission 

888 First Street, N.E. 

Washington DC 20426 

(202) 502-6193 

SUPPLEMENTAL INFORMATION: 

I. INTRODUCTION 

II. BACKGROUND 

III. DISCUSSION 

 A. General 

 B. Regional Transmission and Market Operation Asset Function 

 C. RTO Revenue Accounts 

 D. Regional Market Expense Function 

 

 E. Accounting by Public Utilities for Computer Hardware, Software 

 and Communication Equipment 

 
Docket No. RM04-12-000 -iiiF. Accounting and Financial Reporting by Public Utilities, Including 

 RTOs 

 1. Accounts for Load Dispatching, Scheduling and System 

 Control Expenses 

 2. Accounts for System Planning and Standards Development 

 3. Accounts for Study Costs 

 4. Accounts for RTO Billings 

 5. Account for Revenue From Transmission of Electricity 

6. Accounting for Settlement Amounts 

7. Ministerial Filings 

 

 8. Cost Oversight 

9. Other Matters 

IV. EFFECTIVE DATE 

V. CHANGES TO THE FERC QUARTERLY AND ANNUAL REPORT FORMS 

VI. INFORMATION COLLECTION STATEMENT 

VII. ENVIRONMENTAL ANALYSIS 

VIII. REGULATORY FLEXIBILITY ACT 

IX. DOCUMENT AVAILABILTY
UNITED STATES OF AMERICA 

FEDERAL ENERGY REGULATORY COMMISSION 

Before Commissioners: Joseph T. Kelliher, Chairman; 

 Nora Mead Brownell, and Suedeen G. Kelly. 

Accounting and Financial Reporting Docket No. RM04-12-000 

for Public Utilities Including RTOs 

ORDER NO. 668 

FINAL RULE 

I. Introduction

1. In this Final Rule, the Commission is revising its Uniform System of Accounts 

(USofA)1

 to accommodate the restructuring changes that are occurring in the electric 

industry due to the availability of open-access transmission service and increasing 

competition in wholesale bulk power markets. Corresponding changes are being made to 

the FERC Form No. 1, Annual Report for Major Electric Utilities, Licensees and Others 

(Form 1); FERC Form No. 1-F, Annual Report for Nonmajor Public Utilities and 

Licensees (Form 1-F); and FERC Form No. 3-Q, Quarterly Financial Report of Electric 

Utilities, Licensees, and Natural Gas Companies (Form 3-Q). 

 

1

 18 CFR Part 101. 
Docket No. RM04-12-000 - 2 -

II. Background 

2. In April 1996, in Order No. 888,2

 the Commission established the foundation 

necessary to develop competitive bulk power markets in the United States: nondiscriminatory open access transmission services by public utilities and standard cost 

recovery rules to provide a fair transition to competitive markets. Public utilities were 

also required to functionally unbundle, and to provide transmission service separately 

from generation services. 

3. Despite the changes brought about by Order No. 888, reports of discriminatory 

practices by vertically integrated public utilities persisted. In Order No. 2000,3

 the 

Commission encouraged the formation of independent and regional organizations, to 

remedy undue discrimination and to foster regional efficiencies and efficient pricing. As 

a result, a number of independent system operators and regional transmission 

 2 See Promoting Wholesale Competition Through Open Access Nondiscriminatory Transmission Services by Public Utilities; Recovery of Stranded Costs by 

Public Utilities and Transmitting Utilities, Order No. 888, 61 FR 21,540 (May 10, 1996), 

FERC Stats. & Regs. ¶ 31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12,274 

(March 14, 1977), FERC Stats. & Regs. ¶ 31,048 (1997), order on reh'g, Order No. 888-

B, 81 FERC ¶ 61,248 (1997), order on reh'g, Order No. 888-C, 82 FERC ¶ 61,046 

(1998), aff'd in relevant part sub nom. Transmission Access Policy Study Group, v. 

FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 

(2002). 

3 See Regional Transmission Organizations, Order No. 2000, 65 FR 809 

(January 6, 2000), FERC Stats. & Regs. ¶ 31,089 (1999), order on reh’g, Order No. 2000-

A, 65 FR 12,088 (March 8, 2000), FERC Stats. & Regs. ¶ 31,092 (2000), affirmed sub 

nom. Public Utility District No. 1 of Snohomish County, Washington, v. FERC, 272 F.3d 

607 (D.C. Cir. 2001). 
Docket No. RM04-12-000 - 3 -

 

organizations (collectively referred to as RTOs) have formed and are in operation.4

 

These RTOs perform many of the same activities previously performed by the 

transmission owners whose transmission systems they now operationally control. In 

addition, RTOs perform some unique functions, not traditionally performed by other 

public utilities, they oversee markets and they conduct long-term system planning on a 

regional basis. 

4. On September 26, 2004, the Commission issued a Notice of Inquiry (NOI) in this 

proceeding.5

 The NOI invited comments on various matters including the Commission’s 

accounting and financial reporting requirements for RTOs. The Commission received 

comments from RTOs, public utilities that are RTO members, state regulatory 

commissions, and others. Generally, commenters agreed that the existing accounting 

regulations and related financial reporting requirements do not provide sufficient detailed 

information about RTO-related costs, including the costs incurred by RTOs and other 

relevant information concerning the types of services RTOs provide to their members. 

On June 3, 2005, the Commission issued a Notice of Proposed Rulemaking (NOPR) in 

4 See, e.g., the California Independent System Operator Corporation (CAISO), the 

Midwest Independent Transmission System Operator, Inc. (Midwest ISO), the ISO New 

England, Inc. (ISO-NE), the New York Independent System Operator, Inc. (NYISO), 

PJM Interconnection, L.L.C. (PJM), and the Southwest Power Pool, Inc. (SPP). 

5 See Financial Reporting and Cost Accounting and Recovery Practices for 

Regional Transmission Organizations and Independent System Operators, 69 FR 58,112 

(September 29, 2004), FERC Stats. & Regs. ¶ 35,546 (2004). 
Docket No. RM04-12-000 - 4 -

response.6

 The Commission received comments from RTOs, public utilities that are 

RTO members, and others.7

 

5. Today, the Commission is issuing this Final Rule to address the accounting and 

financial reporting issues raised in the NOPR and the comments to the NOPR. The 

changes to the Commission’s accounting and financial reporting requirements adopted 

here will provide uniformity and transparency in accounting for and reporting of 

transactions and events affecting public utilities, including RTOs. The Commission 

expects that these changes in accounting and financial reporting will also lead to 

improvements in cost recovery practices by providing details concerning the cost of RTO 

functions, and increased assurance that the costs are both legitimate and reasonable costs 

of providing service and assigned to the correct period for recovery in rates. 

III. Discussion

 A. General

6. The Commission received 22 comments on the proposed accounting and reporting 

requirements which ranged from favorable to falling short of the proposal’s intended goal 

of providing greater transparency for transactions and business functions. Most 

commenters, however, generally commend and support the Commission’s proposed 

 6 Accounting and Financial Reporting for Public Utilities Including RTOs, 70 FR 

36865 (June 27, 2005); FERC Stats. and Regs. ¶ 32,585. 

7 See Appendix A for list of commenters. 
Docket No. RM04-12-000 - 5 -

initiative to amend its regulations to update the accounting requirements for public 

utilities, including RTOs.8

 After careful consideration of the comments received, the 

Commission is adopting the changes and revisions as proposed with certain modifications 

and clarifications as discussed below. 

B. Regional Transmission And Market Operation Asset Function

1. Accounting NOPR

7. In the NOPR, the Commission proposed to create a new asset function entitled 

Regional Transmission and Market Operation Plant to record RTO investments in 

computer hardware, software and communication equipment.9

 The proposed new 

accounts in this function are Account 380, Land and Land Rights; Account 381, 

Structures and Improvements; Account 382, Computer Hardware; Account 383, 

Computer Software; Account 384, Communication Equipment; Account 385, 

Miscellaneous Regional Transmission and Market Operation Plant; Account 386, Asset 

Retirement Costs for Regional Transmission and Market Operation Plant; and reserves 

Account 387 for future accounts. 

 2. Commenters 

8. Commenters were generally supportive and did not oppose the creation of the 

Regional Transmission and Market Operation Asset Function. One commenter 

 8 See generally National Grid, NRECA, Indicated NYTOs, and TANC.

9

 NOPR at P 20-32. 
Docket No. RM04-12-000 - 6 -

recommended breaking down each new asset account into sub-accounts for general 

purpose activities, market design development, and market operation.10 

 3. Commission Conclusion

9. The Commission will adopt the Regional Transmission and Market Operation 

Asset Function as proposed in the NOPR: Account 380, Land and Land Rights; Account 

381, Structures and Improvements; Account 382, Computer Hardware; Account 383, 

Computer Software; Account 384, Communication Equipment; Account 385, 

Miscellaneous Regional Transmission and Market Operation Plant; Account 386, Asset 

Retirement Costs for Regional Transmission and Market Operation Plant; and reserves 

Account 387 for future accounts. The Commission notes that in order to perform many of 

their primary functions, RTOs must make significant investments in computer hardware, 

software and communication equipment. The cost of these assets is not explicitly 

addressed in the existing primary plant accounts, resulting in inconsistent accounting and 

reporting for these assets. In order to provide more financial transparency and consistent 

accounting and reporting for the costs of hardware, software and communication 

equipment, the Commission believes a new utility plant function is needed to record the 

cost of assets owned and used by RTOs. 

10. The Commission does not believe sufficient justification has been advanced to 

expand the proposed new accounts further as suggested by commenters. The new 

 10 City of Santa Clara at 23. 
Docket No. RM04-12-000 - 7 -

accounts adopted herein will provide the Commission and others with additional, 

more detailed information than is currently available about the major types of assets 

needed to perform region-wide transmission and market operations. These assets 

perform joint functions and at this point the Commission believes it may be unduly 

burdensome to allocate the costs of these assets in greater detail. 

A. RTO Revenue Accounts

1. Accounting NOPR 

11. Revenues RTOs receive for the reimbursement of their operational costs are not 

addressed in the current USofA because the existing revenue accounts were designed 

principally to record revenues from electricity sales on a bundled basis. Therefore, the 

Commission proposed the creation of two new revenue accounts to record amounts billed 

by RTOs to their members.11 The first, Account 457.1, Regional Transmission Service 

Revenues, would include revenues received by RTOs for services provided and amounts 

billed under each Commission-approved tariff. The second, Account 457.2, 

Miscellaneous Revenues, would include revenues received from incidental transactions 

and events, such as profits or losses on sales of miscellaneous materials. 

12. The Commission also proposes to include a new Form 1 Schedule to report the 

revenue collected by RTOs for services performed pursuant to Commission-approved 

tariffs. 

 11 NOPR at P 33-35. 
Docket No. RM04-12-000 - 8 -

2. Commenters

13. Commenters are generally supportive of the proposed accounting for RTO revenue 

accounts.12 However, one commenter suggests that the Commission should create a 

mechanism and account for all revenues and costs arising from managed market services 

and operations. 13 

14. Another commenter asserts that RTO constituents have the right to know how 

much of their RTO’s revenues derive from penalties assessed by the RTO.14 The 

commenter thus asserts that a new series of accounts should be created to record RTO’s 

revenue from penalties assessed against market participants. According to the 

commenter, these accounts should be further augmented by another, separate new subaccount for neutrality charges assessed by the RTO. 

3. Commission Conclusion

15. We will adopt Account 457.1, Regional Transmission Service Revenues, Account 

457.2, Miscellaneous Revenues, and the RTO Revenue Schedule as proposed in the 

NOPR. The Commission declines to adopt the recommendation to amend the USofA to 

require RTOs to record revenues on their books and records for energy products, services 

and commodities associated with services that RTOs manage for market participants. In 

these instances, an RTO acts as an agent in providing these services; it does not realize or 

 12 See, e.g., APPA at 19, ISO/RTO Council at 2. 

13 See TANC at 12. 

14 See SVP at 20. 
Docket No. RM04-12-000 - 9 -

earn revenue on these transactions. The RTO merely collects monies from one 

member or participant and remits it to another member or participant. For example, when 

a member or participant purchases energy through an RTO managed centralized energy 

market, the RTO merely collects monies from the purchaser of the energy and remits it or 

passes it through to the appropriate energy supplier, who then records it as revenue. 

16. We also decline to adopt the recommendation to amend the USofA to create 

separate sub-accounts of Account 457 to record penalty and neutrality revenues. 

According to the instructions of the new RTO revenue accounts, RTOs are to maintain 

records showing revenues received from customers by type of charge. RTOs then must 

report any penalty and neutrality revenues received on the newly-created RTO Revenue 

Schedule adopted herein, providing adequate disclosure of these revenues. 

 D. Regional Market Expense Function

1. Accounting NOPR 

17. In the NOPR, the Commission explained that the current USofA does not provide 

sufficient financial transparency concerning the types of costs incurred by RTOs in 

facilitating and monitoring energy markets. In order to address this deficiency the 

Commission proposed creating a separate new expense function within the USofA to 

capture these types of costs in greater detail.15 As part of this new function, the 

Commission proposed the creation of certain operating expense accounts to capture the 

 15 NOPR at P 36-51. 
Docket No. RM04-12-000 - 10 -

 

costs of managing the various RTO markets and reviewing market data to determine 

compliance with market rules. These accounts are Account 575.1, Operation 

Supervision; Account 575.2, Day-Ahead and Real-Time Market Facilitation; Account 

573.3, Transmission Rights Market Facilitation; Account 575.4, Capacity Market 

Facilitation; Account 575.5, Ancillary Services Market Facilitation and Account 575.6, 

Market Monitoring and Compliance. 

18. Additionally, new accounts were proposed to capture and provide greater detail 

as to the amount of maintenance expense incurred on computer hardware, software, 

communication equipment and other assets owned and used by RTOs. These accounts 

are Account 576.1, Maintenance of Structures and Improvements; Account 576.2, 

Maintenance of Computer Hardware; Account 576.3, Maintenance of Computer 

Software; Account 576.4, Maintenance of Communication Equipment and Account 

576.5, Maintenance of Miscellaneous and Market Operation Plant. 

19. Finally, the Commission proposed that RTOs report in Form 1 the data required by 

the Transmission of Electricity for Others schedule16 to provide more complete 

information concerning the use of the transmission system under the control of the RTO. 

16 See FERC Form 1 at 328-330. 
Docket No. RM04-12-000 - 11 -

2. Commenters

20. Most commenters did not object to the Commission’s proposal to create a new 

regional market expense function.17 However, some commenters suggest that the 

Commission clarify that the regional market expense function accounts apply solely to 

RTOs, as the proposed new regulatory text contained in the NOPR does not make this 

clear.18 Additionally, one commenter suggests that the Commission change the 

descriptive caption of this function from “regional market operations expense” to “market 

operations expense.”19 This commenter submits that these accounts should not be limited 

to RTOs, as other public utilities in the future may use market oriented approaches to 

provide these services. 

21. One commenter also suggests that the word “facilitation” in the title of Accounts 

575.2, 575.3, 575.4 and 575.5, be changed to “administer” as RTOs administer or operate 

organized markets while “facilitation” describes a more passive role than is the case.20 

22. Additionally, one commenter suggests that the Commission require RTOs to 

record and report revenues and expenses related to the cost of energy, energy products, 

 17 See, e.g., ISO/RTO Council at 2. 

18 See, e.g., EEI at 2. 

19 See APPA at 18. 

20 APPA at 19. 
Docket No. RM04-12-000 - 12 -

 

services and commodities that RTOs manage or provide to market participants.21 

Another commenter suggests that RTO customer service costs be recorded separately in a 

newly-created account;22 customer service costs are a significant component of RTO 

expense identified by public utilities and it is important for RTO/non-RTO customer 

services expenses to be segregated. 

23. Finally, most commenters did not object to the proposal to require RTOs to report 

the data required by the Form 1 Transmission of Electricity for Others schedule. 

However, one commenter asserts that RTOs do not currently organize transaction data in 

a way that would allow them to report the information called for by the schedule.23 This 

commenter notes that RTOs treat most service in their footprint as network service and as 

such can only report aggregate flows without transaction specific source and sink 

information. The commenter contends that absent extremely expensive software and 

design changes RTOs will not able to fully report the information called for on the 

schedule. The commenter recommends that the Commission not include this requirement 

in the Final Rule or in the alternative clarify that aggregate flow data will be acceptable. 

21 TANC at 2 and SVP at 27. 

22 NRECA at 8. 

23 See ISO/RTO Council at 5. 
Docket No. RM04-12-000 - 13 -

3. Commission Conclusion

24. The Commission will adopt the regional market expense function and accounts 

proposed, as modified and clarified below. Upon additional consideration, the 

Commission clarifies that any jurisdictional entity, whether an RTO or a non-RTO public 

utility, must use the regional market expense accounts if a regional market expense is 

incurred. The key for recording costs in these accounts is not whether an entity is an 

RTO or not, but whether an entity is performing market services on a region-wide basis. 

The accounts are intended to capture costs incurred in performing region-wide services 

related to market administration, market monitoring and market compliance activities 

whether performed by an RTO or another non-RTO public utility. These accounts are 

not limited to RTOs, as other non-RTO jurisdictional entities may provide these market 

services, and the costs incurred by these other non-RTO jurisdictional entities in 

performing these services must be captured in these accounts. The Commission will add 

a definition of regional market to the USofA to make clear which type of entities are to 

use the regional market expense function accounts. The Commission clarifies that 

regional market expense accounts are to be used not only by RTO/ISO public utilities but 

by any public utility that operates an organized energy market, whether directly or 

through a contractual relationship with another entity. 

25. The Commission will modify the account titles and instructions to replace the 

word “facilitation” with “administer”, as we agree with the commenter that it is more 

descriptive of the role RTOs play (and others may play) in market operations. 
Docket No. RM04-12-000 - 14 -

26. The Commission declines to adopt commenter recommendations to amend 

the USofA to require the RTOs to record expenses on their books and records for energy 

products, services and commodities associated with services that RTOs manage for 

market participants. As previously discussed, an RTO acts as an agent and does not take 

title to energy products, services and commodities associated with services in the 

performance of these managed services. The RTO merely collects monies from one 

member or participant and remits it to another member or participant. 

27. The Commission also declines to adopt one commenter’s suggestion to create new 

accounts to separately record RTO customer service costs. Our existing accounting rules 

contain customer service expense accounts for recording costs of this nature, Accounts 

901-910 (Customer Accounts and Customer Service Accounts). RTOs are required to 

record their customer service expenses in the appropriate existing customer service 

accounts. Therefore, it is not necessary to create new accounts for this purpose. 

28. One commenter asserts that RTOs cannot provide all of the information required 

on the Form 1 Transmission of Electricity for Others schedule absent costly software 

changes to their systems; most of the transmission service in their footprint is network 

service and as such RTOs do not currently maintain transaction specific source and sink 

information in a format needed to complete the schedule. However, RTOs can provide 

aggregate power flow information for the transmission facilities under their control. 

29. We will, therefore, require RTOs to report aggregate transmission usage 

information for imports into the RTO from other systems, exports from the RTO, through 
Docket No. RM04-12-000 - 15 -

and out service, network service and point-to-point service. We will also require 

RTOs to report related financial information by type of service, such as network and 

point-to-point service. These changes we adopt herein will give the Commission more 

complete information concerning the use of the transmission system under the control of 

RTOs, without requiring RTOs to make costly software changes. We will require the 

transmission usage information to be reported on a new Form 1 and Form 3-Q schedule 

entitled Monthly ISO/RTO Transmission System Peak Load and the related financial 

information on a newly created schedule entitled Transmission of Electricity by RTOs, 

rather than have RTOs report the information on the Form 1 Transmission of Electricity 

for Others schedule which is not a good fit for reporting this aggregate information. 

30. In examining the new regional market expense function, we recognize a rent 

account is needed to capture the expenses associated with renting assets to perform 

regional market functions to be consistent with our other function classifications. 

Therefore, we will also add a new account entitled Account 575.8, Rents, to capture rent 

costs in the regional market expense function. 

E. Accounting by Public Utilities for Computer Hardware, Software and 

Communication Equipment 

1. Accounting NOPR 

31. In the NOPR, the Commission proposed to add three new sub-accounts to the 

existing transmission asset function for public utilities and licensees, other than RTOs, to 

record the cost of computer hardware, software and communication equipment owned 
Docket No. RM04-12-000 - 16 -

and used for transmission related activities.24 The Commission proposed to create 

Account 351.1, Computer Hardware, Account 351.2, Computer Software, and Account 

351.3, Communication Equipment, so as to provide uniform and consistent accounting 

and reporting for these types of assets by non-RTO public utilities and licensees. 

2. Commenters

32. Commenters generally argue that the proposed changes would impose a significant 

burden on companies;25 companies will face a complex undertaking in identifying what 

portions of their computer hardware, software and communications equipment and 

operation and maintenance costs belong in the new transmission accounts because most 

companies rely on such hardware, software, and equipment for multiple purposes.26 One 

commenter suggests that the Commission appears to have overlooked the fact that public 

utilities perform many more functions than simply transmission functions.27 

33. Commenters assert that the new accounts for computer equipment and computer 

use will require judgments as to disaggregation and assignment of these costs among 

different accounts28 - - costs that are not necessarily severable and directly assignable. 

 24 NOPR at P 52-53. 

25 See EEI at 4, SCE at 2, FirstEnergy at 8. 

26 EEI at 9. 

27 SCE at 2. 

28 International Transmission at 5. 
Docket No. RM04-12-000 - 17 -

 

Commenters also assert that these allocations will be unnecessarily arbitrary and the 

Commission’s desire for comparability will never be achieved.29 

34. Commenters recommend that, due to the extreme burden the proposed changes 

would place on public utilities, these changes should be applied only to RTOs, whose 

sole business is related to performing transmission functions.30 Commenters note that the 

RTOs’ primary function is the administration of transmission systems and the use of their 

hardware, software and communication equipment is more easily identifiable as 

transmission related.31 

35. Commenters also suggest that, if the Commission retains the proposed new 

computer and communication equipment accounts for use by licensees and public utilities 

other than RTOs, that it provide companies the flexibility to make reasonable allocations 

to the new accounts and other accounts in the USofA, including the general plant 

accounts.32 Commenters also suggest that companies should be able to adopt the new 

accounts in a way that makes sense given their circumstances, with as little extra effort as 

possible, without having to perform complex allocations, and without having to modify 

prior accounting records and reports. 

29 FirstEnergy at 17. 

30 SCE at 3. 

31 FirstEnergy at 16. 

32 EEI at 9. 
Docket No. RM04-12-000 - 18 -

36. Another commenter suggests that new sub-accounts should be set up to 

record the additional computer hardware, software and communications equipment 

required to interface with the RTO.33 This commenter suggests that these sub-accounts 

should record and disclose the amount of information and technology and 

communications spending that relates specifically to the public utility’s RTO interface. 

37. Finally, one commenter also notes that the Commission proposes to add new subaccounts to Account 569, Maintenance of Structures, namely Account 569.1, 

Maintenance of Computer Hardware, Account 569.2, Maintenance of Computer 

Software, and Account 569.3, Maintenance of Communication Equipment. The 

commenter suggests that the more appropriate account for these sub-accounts would be 

Account 573, Maintenance of Miscellaneous Transmission Plant (Major only), making 

them sub-accounts Account 573.1 though Account 573.3.34

3. Commission Conclusion

38. The great majority of commenters disagree with the NOPR's proposed accounting 

for computer hardware, software and communication equipment by public utilities and 

licensees other than RTOs. These commenters argue that these assets are not necessarily 

severable and directly assignable. They point out that the equipment and software in 

question perform many different functions and that it would be extremely difficult to 

 33 SVP at 35. 

34 EEI at 9. 
Docket No. RM04-12-000 - 19 -

determine what portion of the equipment and software perform a transmission 

function. These commenters also argue that individual utilities may use different 

allocation methods to determine the portion of these items used in transmission, which 

will reduce comparability among utilities and therefore the usefulness of the reported 

accounting information. Finally, these commenters contend that it will be burdensome 

and costly to implement the proposed changes and that minimal reporting benefits will be 

derived from the change. 

39. The Commission acknowledges that some or perhaps most computer hardware, 

software and communication assets are joint use assets that may not be severable or 

directly assignable to the transmission function. We agree with commenters that 

requiring entities to record that portion of their investments in these assets used for 

transmission purposes within the transmission function on an allocated basis is 

problematic in that functional reclassification of the investment, as well as the related 

depreciation reserve, would be required each accounting period as the allocation factor 

changes. Therefore, we have decided not to adopt proposed Accounts 351.1, 351.2 and 

351.3 for public utilities and licensees other than RTOs and will continue to allow nonRTO public utilities to account for these items as joint use assets as they have historically 

done. However, we will require both RTOs and non-RTO public utilities to record the 

costs of maintaining these assets that are related to providing transmission services in 

Accounts 569.1, 569.2 and 569.3 as proposed. Non-RTO public utilities already allocate 

these joint use costs for ratemaking purposes in determining open access transmission 
Docket No. RM04-12-000 - 20 -

rates. We will now also require that public utilities allocate these costs for 

accounting purposes. 

40. Allocation approaches used by public utilities must ensure that a reasonable 

portion of the cost of maintaining these joint use assets are used in the transmission of 

electricity are allocated to the transmission function. Additionally, public utilities are 

also expected to allocate these costs to the transmission function on a consistent basis 

from year to year. Public utilities will be required to footnote their allocation method 

used to calculate these maintenance expenses as reported in the Form 1 Electric 

Operation and Maintenance Expenses Schedule (pages 320-323). 

41. Finally, we decline to adopt one commenter’s suggestion that instead of adding 

sub-accounts to Account 569, Maintenance of Structures, that we add sub-accounts to 

Account 573, maintenance of Miscellaneous Transmission Plant, for the maintenance 

costs related to computer hardware, software and communication equipment. The 

commenter provides no explanation for the proposed change and we see no benefit in 

deviating from the account structure originally proposed. 

F. Accounting and Financial Reporting by Public Utilities, Including 

RTOs

1. Accounts for Load Dispatching, Scheduling and System Control 

Expenses

i. Accounting NOPR

42. In the NOPR, the Commission proposed to replace Account 561, Load 

Dispatching, with a series of detailed expense accounts to record expenses for providing 
Docket No. RM04-12-000 - 21 -

transmission services related to load dispatching, scheduling and system control.35 

The proposed accounts are Account 561.1, Load Dispatch-Reliability, to include the costs 

incurred to manage the region-wide reliability coordination function; Account 561.2, 

Load Dispatch-Monitor and Operate Transmission System, to include the costs incurred 

to monitor, assess and operate the transmission system and ensure the system’s reliability 

and Account 561.3, Load Dispatch-Transmission Service and Scheduling, to include the 

costs incurred to process hourly, daily, weekly and monthly transmission service requests 

using an automated system such as an Open Access, Same-Time Information System 

(OASIS). 

 ii. Commenters

43. One commenter asserts that the Commission should not apply the proposed 

USofA changes to transmission owners that are members of an RTO or ISO, as doing so 

will increase the cost to consumers for the implementation of these systems, while 

providing little additional information to the Commission.36 This commenter also asserts 

that it may be difficult to disaggregate expenses among the proposed new Load Dispatch 

sub-accounts (561.1, 561.2, and 561.3), because the same staff members may perform 

functions included under more than one of these sub-accounts, tasks undertaken to 

accomplish functions relevant to one sub-account may also contribute to completion of 

 35 NOPR at P 54, 56-59. 

36 NYTOs at 2. 
Docket No. RM04-12-000 - 22 -

 

another, and the descriptions of the sub-accounts are insufficiently detailed.37 This 

commenter further asserts that if the Commission does decide to apply the proposed 

USofA changes to utilities that are members of RTOs and ISOs, it should allow those 

utilities to apply for a waiver to allow consolidated reporting of load dispatch expenses if 

they fall below a de minimus threshold.38

44. Another commenter asserts that the lines of demarcation between costs in these 

sub-accounts are not clear and that the Commission should provide additional guidance 

on its intention as to information to be captured in these sub-accounts.39 Yet another 

commenter notes that, while it supports the Commission’s goal of greater cost 

transparency, it similarly recommends that the Commission provide further guidance so 

that the useful cost comparisons that the Commission is seeking to facilitate can be made 

across RTOs and public utilities.40 This commenter asserts that the addition of accounts 

to reporting forms will be of little use if users are not populating those accounts with 

comparable costs and information. This commenter recommends that the Commission 

provide additional guidance regarding the specific information it would like captured in 

these sub-accounts. 

37 Id. at 7. 

38 Id. at 10. 

39 EEI at 8. 

40 International Transmission at 3. 
Docket No. RM04-12-000 - 23 -

45. One commenter supports the specific account structure the Commission 

proposes, as well as its applicability to both RTOs and non-RTO public utilities. 

However, that commenter suggests the Commission realign the grouping of the new 

accounts under two new functions (system control and transmission services) that it 

proposes should be created.41 

46. Finally, a commenter notes that, in the text of the NOPR’s discussion of Accounts 

561.1, 561.2 and 561.3, the NOPR states that these proposed accounts are for use by both 

non-RTO public utilities and RTOs.42 However, in the proposed text of the USofA for 

Accounts 561.1, 561.2 and 561.3, the proposed language specifically states that the 

accounts are to include expenses incurred by the regional transmission service provider, 

with no mention in the proposed text of non-RTO public utilities. The commenter 

suggests that the Commission revise the proposed text of the USofA for proposed 

Accounts 561.1, 561.2 and 561.3 to specifically state that the accounts may be used by 

RTOs, other public utilities and licensees, consistent with the NOPR’s language. 

 iii. Commission Conclusion

47. The proposed accounts for recording load dispatch, scheduling and system control 

expenses provide greater transparency concerning the types of costs incurred by both 

RTOs and non-RTO public utilities in providing transmission services. Therefore, we 

 41 APPA at 19. 

42 See SCE at 3. 
Docket No. RM04-12-000 - 24 -

will adopt the proposed accounting for load dispatch, scheduling and system control 

expenses. However, based upon the comments received, we will adopt the proposed 

accounting with certain clarifications and modifications as discussed below. 

48. The instructions to Accounts 561.1, 561.2 and 561.3 are revised to make clear that 

the accounts are to be used by both RTOs and non-RTO public utilities. Additionally, the 

items list of Account 561.2 has been revised to include certain items included in replaced 

Account 561, Load Dispatching, which were inadvertently not included on the list. These 

modifications add clarity as to which entities are to use the accounts and what types of 

costs are to be recorded in the load dispatch, scheduling and system control expense 

accounts. 

49. We will not adopt one commenter’s suggestion to realign the newly created 

accounts under its suggested new functions: system control and transmission service. 

The expanded expense accounts contained in the transmission function provide the 

requisite transparency concerning the activities and related costs incurred by public 

utilities, including RTOs, in providing transmission service for ratemaking and other 

Commission purposes. Moreover, the account structure appropriately herein adequately 

separates market service and transmission service activities. 

50. Finally, we clarify that, to the extent that RTOs and non-RTO public utilities 

perform the same activities for load dispatch, scheduling and system control, then the 

costs of those activities should be accounted for in the same manner and recorded in the 

same accounts. For example, if an RTO incurs costs to manage the region-wide 
Docket No. RM04-12-000 - 25 -

reliability coordination function it would record those costs in Account 561.1. 

Likewise, if a non-RTO public utility happens to incur costs to manage the reliability 

coordination function for third parties, it would also record those costs in Account 561.1. 

2. Accounts for System Planning and Standards Development

i. Accounting NOPR

51. In the NOPR, the Commission proposed to add a new Account 561.5, Long-Term 

Reliability Planning and Standards Development, to record the costs incurred by RTOs 

for performing long-term system planning and standards development.43 

 ii. Commenters

52. Some commenters request clarification of the Commission’s proposed changes.44 

These commenters suggest that the definition provided in the NOPR does not provide a 

definitive basis to identify the costs to be recorded in this account because planning can 

be interpreted to have several meanings. National Grid requests that the Commission 

recognize that the scope of costs covered by Account 561.5 is likely to vary from region 

to region and clarity should be provided about the meaning of “long-term system 

planning.” They explain that transmission planning occurs over several different timescales such as short-term planning to intermediate planning to long term planning.45 

Indicated NYTOs request a waiver for transmission owners that are RTO members to 

 43 NOPR at P 60-62. 

44 See, e.g., National Grid at 9-10. 

45 National Grid at 9-10. 
Docket No. RM04-12-000 - 26 -

allow consolidated reporting of de minimus amounts or alternatively guidance on 

the specific expenses to be recorded in the account.46 

53. Other commenters support the proposed changes but believe the Commission 

should require additional accounts to offer more transparency and comparability. 

Specifically one commenter believes that Account 561.5 should be augmented by 

additional accounts for the portion of system planning, development and maintenance 

expenses that relate to market design initiatives and activities of RTOs, as opposed to 

control area operation.47 

54. Finally, one commenter believes that the structure of this new account allows for 

inclusion of generation-related costs such as resource planning. 

 iii. Commission Conclusion

55. As the Commission explained in the NOPR, the existing USofA does not provide 

a specific expense account to record expenses for system planning and development 

activities. The Commission will adopt Account 561.5 as proposed as modified and 

discussed below. Commenters raise questions about the scope of planning costs that are 

to be recorded in Account 561.5 and how to record costs incurred relative to the different 

transmission planning time-scales, such as short-term, intermediate-term, and long-term. 

We will modify the instructions to Account 561.5 to allow inclusion of all transmission 

 46 See Indicated NYTO at 9-10. 

47 See City of Santa Clara, California at 21-22. 
Docket No. RM04-12-000 - 27 -

system planning time-scale planning costs, not just long-term planning. We will 

therefore modify the title of the account to Account 561.5, Reliability, Planning and 

Standards Development, to reflect the fact that planning costs other than long-term are to 

be recorded in Account 561.5. 

56. RTOs are directed to report costs of system planning, development, and 

maintenance expenses in Account 561.5. We clarify to the extent that public utilities and 

licensees that are not RTOs perform similar activities; they should also include the costs 

that they incur for system planning and standards development in Account 561.5. We 

also clarify that all system planning and standards development costs recorded in this 

account are to be transmission related. 

57. The Commission declines at this time to augment Account 561.5 with additional 

accounts for the portion of system planning, development and maintenance expenses that 

relate to market design initiatives and activities of RTOs, as opposed to control area 

operation. We have created a new regional market expense function and all market 

planning and development costs shall be recorded in the appropriate market expense 

account based on the nature of the planning and development costs incurred. 

 3. Proposed Accounts for Study Costs

i. Accounting NOPR

58. The USofA does not specially provide accounts for recording costs incurred to 

perform generation interconnect and transmission service studies. Therefore, the 

Commission proposed to create Account 561.6, Transmission Service Studies, to record 
Docket No. RM04-12-000 - 28 -

the costs incurred by public utilities and licensees, including RTOs, to conduct 

studies for transmission service requests. The Commission also proposed to add a new 

Account 561.7, Generation Interconnection Studies, to record the costs incurred by public 

utilities and licensees, including RTOs to conduct studies for generator service requests.48

59. Additionally, in order to provide more disclosure concerning the costs of 

interconnect study activities being performed by public utilities and licensees, including 

RTOs, the Commission proposed to add a new schedule to the quarterly and annual 

financial reports that will provide more specifics concerning the costs of these 

activities.49 

 ii. Commenters

60. Commenters were of divergent views regarding the Commission’s proposal to 

record costs to perform generation interconnect and transmission service studies in 

Account 561.6 and Account 561.7. Commenters state that it is not clear whether the 

proposed shift in accounting treatment of study costs could affect the billable or capital 

treatment of the underlying study costs. Commenters state that the costs of transmission 

service studies and generator interconnection studies are largely reimbursed by customers 

or folded into the capital accounting for transmission projects or upgrades, and would 

 48 NOPR at P 63. 

49 Id. at P 64. 
Docket No. RM04-12-000 - 29 -

only be expensed in rare circumstances.50 One commenter requests that the 

Commission clarify that the new expense accounts for study costs are not intended to 

cover all study costs, but only those costs that are neither reimbursed by customers nor 

capitalized. Alternatively, this commenter requests clarification that utilities may still 

charge out or capitalize such study costs as they have in the past.51 Another commenter 

requests that the Commission exempt RTO member utilities from the proposed USofA 

changes for study costs because it provides little additional information. Alternatively, 

this commenter requests a waiver to eliminate reporting study costs in Account 561.6 and 

Account 561.7 because the costs are largely reimbursed by the RTO and will appear in 

the RTO financial reports. Additionally, this commenter requests that the cost of 

transmission service and generator interconnect studies be treated as capital 

expenditures.52

 iii. Commission Conclusion

61. The Commission will adopt the proposed accounts for recording generation 

interconnection and transmission service study costs as clarified below. We clarify that 

Accounts 561.6 and 561.7 are only to be used to record the costs incurred by public 

utilities, including RTOs, to conduct studies for transmission service requests and 

 50 National Grid at 10-12, Indicated NYTOs at 6 -10. 

51 National Grid at 10-12. 

52 Indicated NYTOs at 6 -10 
Docket No. RM04-12-000 - 30 -

generator service requests, respectively, when the costs are not directly 

reimbursable by a specific customer and the costs are otherwise charged to expense under 

the USofA.. 

62. Additionally, we clarify that the Commission did not propose any change and does 

not do so now related to the recording of the costs of conducting transmission and 

generation interconnect studies in Account 186, Miscellaneous Debits, by public utilities, 

including RTOs, pending reimbursement by the entity requiring the service. We further 

clarify that the Commission did not intend to change any capitalization requirements 

related to study costs. Public utilities are to continue to follow the Commission’s existing 

rules and regulations for cost capitalization. 

 4. Accounts for RTO Billings

i. Accounting NOPR

 

63. In the NOPR, the Commission proposed to create three new sub-accounts in order 

to provide greater transparency for the payments made by public utilities and licensees to 

RTOs. The three new proposed sub-accounts are Account 561.4, Scheduling, System 

Control and Dispatching Services; Account 561.8, Reliability Planning and Standards 

Development Services; Account 575.7, Market Facilitation, Monitoring and Compliance 

Services.53 The proposed new sub-accounts will be used by public utilities and licensees 

to record their share of costs billed to them by an RTO. Additionally, the Commission 

 53 NOPR at P 65-68. 
Docket No. RM04-12-000 - 31 -

proposed that each RTO include in its monthly settlement statements a breakdown 

of the allocation of that RTO’s operational costs within each of the three sub-accounts 

discussed below

ii. Commenters

64. Commenters generally agree that non-RTO public utilities should record in 

separate sub-accounts the charges paid to RTOs and suggest that the Commission add 

more sub-accounts to separately disclose additional costs incurred by non-RTO public 

utilities.54 

65. One commenter seeks clarification of the Commission’s intent with respect to 

proposed Account 575.7 Market Facilitation, Monitoring and Compliance Services.55 

This commenter questions if the Commission intends that only costs billed to utilities by 

the RTOs be included in this account, not including costs by utilities performing 

functions that meet the description of the account. The commenter explains that 

decisions made regarding rate recovery of Balancing Authority costs by transmission 

owners are likely to depend heavily on how relevant costs are recorded and requests that 

the Commission clarify that Account 575.7 is only applicable to costs billed to utilities by 

RTOs. 

 54 See City of Santa Clara, California at 25-26, EEI at 7-8. 

55 First Energy at 17. 
Docket No. RM04-12-000 - 32 -

66. Finally, one commenter requests that the Commission not adopt an absolute 

rule that information on the three new cost sub-accounts be part of the settlement 

statements.56 This commenter believes it will be expensive to include such cost 

breakdowns in monthly customer settlement statements. This commenter states that 

RTOs have sophisticated billing software that is not easy to modify and that a number of 

RTOs would have to make expensive and time-consuming changes to their billing 

systems in order to incorporate the required cost information directly into monthly 

settlement statements. This commenter suggests that a more flexible approach would 

recognize the reality that different RTOs have different software capabilities and allow 

each entity to comply with the Commission’s requirement in their own efficient way. 

iii. Commission Conclusion

67. The Commission will adopt the new accounts for RTO billings proposed in the 

NOPR with the modification discussed below. As the Commission explained in the 

NOPR, these new accounts will allow each RTO member to record its share of the RTO’s 

total monthly operating costs in these new sub-accounts. The Commission will also 

require each RTO provide a breakdown of the allocation of that RTO’s operational costs 

within each of the three sub-accounts. However, the Commission will not require RTOs 

to include this information in its monthly settlement statements because of software costs 

to implement changes to the RTO billing systems. Instead, the Commission will permit 

 56 See ISO/RTO Council at 3-4.
Docket No. RM04-12-000 - 33 -

RTOs to use another format to provide the information to its members. However, 

RTOs are nevertheless directed to provide a breakdown of the cost allocation to the three 

new sub-accounts on the date the billings are issued. 

68. The Commission also clarifies that Account 575.7 is to be used only for costs 

billed to utilities by RTOs for market administration, monitoring and compliance 

services. 

 5. Account for Revenue From Transmission of Electricity

i. Accounting NOPR

69. In the NOPR, the Commission proposed to add a new sub-account to Account 

456, Other Electric Revenues, in order to provide greater transparency by transmission 

owners for the revenues received for use of their transmission facilities.57 

 ii. Commenters

70. Commenters were generally supportive, but request that the Commission provide 

additional clarification.58 One commenter requests that the Commission provide even 

more transparency regarding the particular sources of those revenues and how they relate 

to common ratemaking categories. This commenter suggests the Commission implement 

accounting for transmission revenues that would enable customers and the Commission 

to monitor whether previously accepted rates generate more than an appropriate level of 

 57 NOPR at P 73-74. 

58 TAPS at 6-8, International Transmission at 7. 
Docket No. RM04-12-000 - 34 -

revenues. This commenter requests that the Commission remedy its accounting and 

reporting, in this proceeding, to keep pace with standard ratemaking practice so that Form 

1 information provides accounting data for direct ratemaking use.59 Another commenter 

requests the Commission clarify that non-RTO public utilities should use the new 

Account 456.1 for transmission service revenues and existing Account 456 for 

miscellaneous revenues. 

 iii. Commission Conclusion

71. The Commission will adopt the new sub-account as proposed in the NOPR. The 

new Account 456.1, Revenues From Transmission of Electricity of Others, will include 

revenues the transmission owner receives for the transmission of electricity over its 

transmission facilities. This new account will provide greater transparency with respect 

to the revenues received by transmission owners for use of their transmission facilities. 

We also clarify that revised Account 456 is to be used for recording non-transmission 

miscellaneous operating revenues.

 6. Accounting for Settlement Amounts

i. Accounting NOPR

72. In the NOPR, the Commission proposed that public utilities or licensees that 

conduct energy transactions through an RTO that requires participants to bid their 

generation into the market and buy generation to supply their native load report these 

 59 TAPS at 6-8 
Docket No. RM04-12-000 - 35 -

transactions on a net basis in Account 555, Purchased Power.60 The Commission 

also invited comment as to what circumstances would be appropriate for a public utility 

or licensee to reflect these types of transactions on a net basis, and under what 

circumstances would it be appropriate for a public utility or licensee to reflect these types 

of transactions as distinct purchases and sales. 

 ii. Commenters

73. Two commenters do not support the netting of transactions that flow through RTO 

energy markets.61 One of these commenters argues that for accounting and tax purposes, 

purchased power should, on financial statements, represent only purchased power. This 

commenter also asserts that its members that are subject to Rural Utilities Service (RUS) 

oversight need to be able to report gross amounts of energy sales to RUS. This 

commenter further asserts that it will be difficult for cooperatives to determine income 

for income tax purposes if only net transactions are reported.62 The other commenter 

argues that showing only the net position of a market participant may understate the use 

of RTO energy markets and mask situations where a utility is a net seller during one 

period but a net buyer in another period. This commenter also notes that netting would 

 60 NOPR at P 75-79. 

61 See APPA at 2, NRECA at 4. 

62 NRECA at 5. 
Docket No. RM04-12-000 - 36 -

 

not reveal the effects of time and location-specific variation in energy prices, 

yielding only incomplete results that are unlikely to be meaningful.63 

74. Most other commenters, however, generally agree that these transactions should 

be reported on a net basis.64 One commenter submits that reporting these types of 

transactions on a gross basis might give an inaccurate picture of an entity’s size and its 

actual revenue-generating activities.65 This commenter suggests that accounting for 

transactions settled through RTO markets on a net basis more accurately reflects what 

similarly situated utilities would be doing in the absence of RTO markets. This 

commenter also suggests that accounting on a gross basis would cause it to incur an 

artificially large gross receipts tax liability which would act as a deterrent to participation 

in RTO markets. This commenter further suggests that accounting for these transactions 

on a net basis is in accord with traditional accounting principles regarding whether to 

record transactions on a gross or net basis. 

75. Some commenters support netting, but believe that it is inappropriate to report net 

sales in Account 555.66 These commenters assert that net sellers of generation should 

report the transactions in Account 447, Sales for Resale, and that net purchasers should 

63 APPA at 2. 

64 See First Energy at 15, MGE at 2, Wisconsin Electric at 3, EEI at 6, APS at 3, 

Cinergy at 4, NYTOs at 12, SCE at 1. 

65 See MGE at 3. 

66 EEI at 6, First Energy at 16, Wisconsin Electric at 4. 
Docket No. RM04-12-000 - 37 -

 

report the transactions in Account 555, Purchase Power. One commenter notes that 

consistent with the reporting methodology of its RTO it reports sales and purchases of 

power on an hourly net position basis. For each hour that the company is a net seller of 

power, the commenter states that it reports the net amount in Account 447; conversely, if 

it is net buyer of power, it reports the net amount in Account 555. In each monthly 

reporting period, the commenter notes that the hourly Account 447 and/or Account 555 

net amounts are aggregated and separately reported in Account 447and 555, respectively. 

76. Some commenters also recommend that the Commission allow companies 

flexibility in determining net sales and/or purchases during the relevant reporting period 

and for using the appropriate account or accounts to display its net sales and/or 

purchases.67 One of these commenters suggests that some companies may choose to net 

their purchases and sales for the entire reporting period, while others may reflect 

separately net purchases when the company was a net buyer and net sales when it was a 

net seller. 

77. On the other hand, one commenter suggests that the Commission define a uniform 

method for the calculation of the gross amount of sales versus purchases, whether it be by 

the hour, day, week or month.68 This commenter argues that, without such a standard, a 

wide range of interpretation and reporting is likely to result. 

67 EEI at 7, First Energy at 16. 

68 NRECA at 3. 
Docket No. RM04-12-000 - 38 -

 

78. Another commenter asserts that netting should be allowed for transactions in 

all RTO markets.69 This commenter suggests that the Commission clarify that netting of 

purchases from and sales into an RTO market is appropriate and allowed not only for 

transactions in an RTO that requires participants to offer all resources to and buy all 

power from the RTO, but for transactions in any RTO that offers an energy market in 

which participants may choose to offer all generation to and buy all power from the 

energy market. This commenter also suggests that the Commission clarify that purchases 

from and sales to one or more RTO markets may be netted against one another. 

79. Finally, one commenter recommends that the Commission’s Electronic Quarterly 

Reports (EQR) and annual reports be revised to match the accounting methodology using 

the Commission’s USofA with the required reporting format.70 While another 

commenter notes that there is a disconnect between the reporting of transactional data in 

the EQRs and reporting of the data in the FERC Form 1, stemming from how the data are 

defined in those two contexts. This commenter recommends that when the Commission 

next entertains revisions to one or the other of the forms, the Commission should discuss 

this issue with reporting entities to determine if some clarification aimed at conformity 

would be appropriate.71 

69 MGE at 3. 

70 Wisconsin Electric at 4. 

71 EEI at 7. 
Docket No. RM04-12-000 - 39 -

 iii. Commission Conclusion

80. Recording RTO energy market transactions on a net basis is appropriate as 

purchase and sale transactions taking place in the same reporting period to serve native 

load are done in contemplation of each other and should be combined. Netting accurately 

reflects what participants would be recording on their books and records in the absence of 

the use of an RTO market to serve their native load. Recording these transactions on a 

gross basis, in contrast, would give an inaccurate picture of a participant’s size and 

revenue producing potential. The Commission will, therefore, adopt the proposed 

accounting for RTO energy market transactions with certain modifications and 

clarifications as discussed below. The Commission does expect public utilities, however, 

to maintain detailed records for auditing purposes of the gross sale and purchase 

transactions that support the net energy market amounts recorded on their books. 

81. Additionally, we clarify that transactions are to be netted based on the RTO 

market reporting period in which the transaction takes place. For example, if the RTO 

market in which the transaction takes place uses an hourly period for determining energy 

market charges and credits, then non-RTO public utilities purchasing and selling energy 

in the market must net transactions on an hourly basis. Requiring participants to net 

transactions over the RTO market’s reporting period leads to consistent and comparable 

energy market information for decision making purposes by the Commission and others. 

82. Further, we clarify that the netting of purchases and sales in an RTO energy 

market is appropriate not only for transactions where participants are required to bid their 
Docket No. RM04-12-000 - 40 -

generation into the market and buy generation from the market to supply their 

native load, but also in cases where an RTO offers an energy market in which participants 

may choose to offer all generation to and buy all power from the energy market. 

83. We also clarify that if a participant is a net seller, rather than a net buyer, during a 

given market reporting period it must credit such net sales to Account 447, Sales for 

Resale, instead of Account 555, Purchased Power. 

84. Finally, one purpose of this rule is to establish uniform accounting requirements 

for the purchase and sale of energy in RTO markets. The purpose of reporting of gross 

information in EQRs, in contrast, is to provide the Commission and the public with a 

more complete picture of wholesale market activities which affect jurisdictional services 

and rates, thereby helping to monitor for any market power and to ensure that customers 

are protected from improper conduct. These are not necessarily the same criteria and 

principles that should be used in establishing uniform accounting requirements. In any 

event, the reporting of wholesale market activity in EQRs falls outside the scope of this 

rule.

 7. Ministerial Filings 

85. Some commenters argue that certain revisions to the USofA will adversely affect 

the Attachment O formula rate which is used by the vast majority of the transmission 

owners in the Midwest ISO and other formula rates that rely on the USofA and Form 1 
Docket No. RM04-12-000 - 41 -

 

data for the rate inputs.72 Specifically, for the Midwest ISO, new accounts or 

renumbered accounts may cause disruptions in the operation of the Attachment O 

formula rate, especially if there is no parallel revision to Attachment O to reflect these 

changes. Some commenters therefore request that the Commission clarify that it will 

accept “ministerial” filings in order to conform these formula rates to the final revisions 

of the USofA.73 

86. In particular, FirstEnergy, among others, has expressed concern that the 

Commission ensure that the revisions to its accounting and financial reporting 

requirements will not provide an opportunity for challenges to Commission-approved 

formula rates nor shall the Commission entertain such challenges to these previouslyaccepted rates.74 Therefore, the Commission should state that it will accept “ministerial” 

filings necessary to conform to the Final Rule all Commission accepted formula rates that 

rely on Form 1 inputs. FirstEnergy further argues that the Commission should provide a 

specific timeline to allow such filings but coordinate the respective effective dates of the 

rate filings and reporting changes to ensure that there is no gap in cost recovery.75 

International Transmission requests that the Final Rule establish a compliance filing 

72 See FirstEnergy at 13, International Transmission at 4, EEI at 10. 

73 See FirstEnergy at 1-2, 13-15, International Transmission at 3-4. 

74 International Transmission at 3-4, FirstEnergy at 14. 

75 FirstEnergy at 14. 
Docket No. RM04-12-000 - 42 -

process, rather than allow a Federal Power Act section 205 filing,76 so that there 

will be no challenges to ministerial filings in order for public utilities to revise the 

formula rate templates.77

Commission Conclusion

87. We will allow revisions to tariffs to conform to the changes adopted here, but 

pursuant to section 205. We will, however, consider only comments that address the 

specific revisions necessary to comply with these accounting and reporting revisions. By 

narrowly focusing the scope of the filings and of the comments to only those changes 

necessary to conform to this Final Rule, public utilities can be assured that commenters 

cannot otherwise and inappropriately challenge the reasonableness of their Commissionapproved and accepted formula rates. 

88. We also find that any necessary revisions to formula rates in order to conform to 

the Final Rule should not increase rates. The requisite changes to Attachment O, for 

example, would be the result of the new accounts and would solely reflect accounting 

changes adopted in this Final Rule. Such changes also should not involve substantive 

changes to the way the formula rates operate or the way the charges are calculated. 

 76 16 U.S.C. 824d (2000). 

77 International Transmission at 4. 
Docket No. RM04-12-000 - 43 -

 8. Cost Oversight

89. The Commission received multiple comments regarding cost oversight in response 

to the accounting and financial reporting NOPR. Commenters assert that the 

restructuring of the electric industry will only benefit consumers if transmission 

organizations are subject to greater efficiency and accountability.78 As the National 

Rural Electric Cooperative Association (NRECA) states, “[t]he absence of common 

standards and rules currently hampers meaningful examination of the cost-effectiveness 

of the products and services that RTOs/ISOs offer.”79 

90. Commenters have also included general suggestions to the Commission, which 

they argue, would not only enhance and facilitate transparency and comparability of RTO 

finances, but could also be an integral first step towards controlling RTO operational 

costs. Among other things, commenters have suggested that the Commission require 

RTOs to include a detailed analysis of their business risks and opportunities as part of 

their periodic financial reporting.80 

91. A few commenters also urge the Commission to continue its efforts in reviewing 

the cost oversight and accountability in the budgeting and expenditure process that RTOs 

 78 See, e.g., ELCON at 1, IESO at 2. 

79 See NRECA at 2. 

80 Indicated NYTOs at 2, 5-6. 
Docket No. RM04-12-000 - 44 -

 

utilize.81 Revision of the USofA represents only a partial solution in providing 

adequate transparency and accountability in RTO financial reporting. 

92. Commenters have expressed concern that the Commission’s proposed revisions 

fall short in meeting the goal of ensuring that the costs of the RTOs are legitimate and 

reasonable.82 Cinergy has therefore, for example, proposed that RTOs annually file with 

the Commission a formula cost assignment template which supports the projected RTO 

costs by billing schedule for a twelve month period. This report, Cinergy explains, would 

include detailed projected direct costs and a proposed assignment/allocation of overhead 

costs to the specific schedule. This would provide parties with an opportunity to 

comment and prior Commission approval would be required before the RTO could 

proceed with the expenditure. 

93. Midwest ISO Transmission Owners argue that the proposed revisions to the 

USofA lack before-the-fact review of costs. They contend that while after-the-fact 

review of costs is being done if an RTO has a formula rate, it does not adequately 

respond to the needs of these not-for-profit entities, as an entity’s “not-for-profit status 

complicates a prudence review after the costs are incurred.”83 Midwest ISO 

Transmission Owners therefore suggest that, in order to keep the Commission and RTO 

81 See, e.g., NEPOOL Participants Committee at 1-5. 

82 See, e.g., Cinergy and Midwest ISO Transmission Owners. 

83 Midwest ISO Transmission Owners at 5, citing Midwest Independent 

Transmission System Operators, Inc., 101 FERC ¶ 61,221 (2002).
Docket No. RM04-12-000 - 45 -

members, as well as interested state commission, abreast of estimated and actual 

expenditures and to provide RTO members due process, the Commission should require 

approval before the RTO incurs significant costs and also require regular reporting after 

costs have been incurred. 

 Commission Conclusion

94. We recognize that there are divergent views as to the best way to accomplish the 

goals of this initiative. The accounting and form changes adopted herein add visibility 

and uniformity to the accounting and financial reporting for the costs of transmission and 

market operation plant, and the expenses incurred and revenue received in providing 

transmission and market services. The changes provide comparability among RTOs and 

non-RTO public utilities that perform region-wide transmission and market operations, 

and minimize inconsistent reporting by RTOs and non-RTO public utilities. Further, 

these revisions allow the Commission to better understand transactions and events that 

affect RTOs and their members and non-RTO public utilities. 

95. The Commission expects the changes in financial reporting to lead to 

improvements in cost recovery practices by providing more details concerning the costs 

of certain functions and increased assurance that the costs are legitimate and reasonable 

costs of providing service and assigned to the correct period for recovery in rates. We 

believe the changes we are adopting herein are an important first step. The concerns 

raised with regard to RTO cost oversight, including the budgeting process, the 

expenditure process, and the analysis of RTO business risks and opportunities are beyond 
Docket No. RM04-12-000 - 46 -

the scope of this proceeding. However, cost oversight practices are an important 

aspect of the initiative we began with the NOI and we intend to address those matters in 

the near future. 

 9. Other Matters 

96. The Commission noted in the NOPR that the derivative and asset retirement 

accounts established under Order Nos. 627 and 631 were not included in the Chart of 

Account listings contained in the USofA.84 The Commission here takes this opportunity 

to update the account listing to include the accounts established under these orders. 

IV. Effective Date

 i. Accounting NOPR

97. In the NOPR, the Commission proposed that the aforementioned accounting and 

financial reporting changes and updates would become effective on January 1, 2006.85

 ii. Commenters

98. Most of the commenters suggest the Commission instead adopt a January 1, 2007 

effective date. Some of the commenters believe non-RTO public utilities face a 

substantial burden of implementation because of other obligations and functions 

performed by these companies.86 One commenter explains that it has Sarbanes-Oxley 

 84 NOPR at P 80. 

85 Id. at P 82. 

86 See EEI at 11-12, SoCal ED at 4, First Energy at 11-13. 
Docket No. RM04-12-000 - 47 -

 

Act concerns about any proposal that would require changes, reconfigurations or 

modifications to its general ledger computer systems and reporting structures, and/or the 

methodology of the reporting of RTO-related revenue and cost transactions. This 

commenter requests that the Commission provide sufficient time to implement, internally 

test and have any necessarily validations by external auditors of such changes or 

modifications.87 Another commenter expresses similar concerns and requests that the 

Commission provide a minimum of three months to adjust their accounting and reporting 

systems. This commenter explains that the easiest time for companies to implement 

changes in the start of a fiscal year, typically the calendar year.88 Other commenters 

indicate that more time is needed to allow for more coordination, discussion and 

consideration of the complexities of all the issues.89 Another commenter submits that the 

rule take effect on the proposed date unless it places an undue burden on the industry as a 

whole or on some public utilities; in which case, the commenter recommends that RTOs 

submit pro forma financial statements conforming to the new rules on the proposed 

date.90 

87 First Energy at 11-13. 

88 EEI at 11. 

89 See National Grid at 13-14, Indicated NYTOs at 11-12. 

90 See APPA at 7-8. 
Docket No. RM04-12-000 - 48 -

99. Commenters generally were in agreement that the Commission should not 

require comparative analyses of the new data for earlier reporting periods. Commenters 

contend that it would be unduly burdensome for FERC Form 1 and 3-Q filers to go back 

in time to try to capture retroactive prior period information for the new sub-accounts.91

iii. Commission Conclusion

100. The accounting and form changes adopted herein add visibility and uniformity to 

the accounting and financial reporting for the costs of transmission and market operation 

plant, and the expenses incurred and revenue received in providing transmission and 

market services. The changes provide comparability among RTOs and non-RTO public 

utilities that perform region wide transmission and market operations, and minimize 

inconsistent reporting by RTOs and non-RTO public utilities. Further, these revisions 

allow the Commission to better understand transactions and events that affect RTOs and 

their members and non-RTO public utilities. 

101. The Commission also expects the changes in financial reporting to lead to 

improvements in cost recovery practices by providing more details concerning the costs 

of certain functions and increased assurance that the costs are legitimate and reasonable 

costs of providing service and assigned to the correct period for recovery in rates. 

102. For the above reasons, the Commission orders that the aforementioned accounting 

and financial reporting changes and updates become effective on January 1, 2006. The 

 91 See EEI at 12. 
Docket No. RM04-12-000 - 49 -

Commission believes it is imperative to obtain as quickly as possible adequate 

transparency of transactions and business functions among and between RTOs and their 

member public utilities as well as non-RTO public utilities to allow for prudent choices to 

be made on issues such as optimizing the efficiency of business functions. Hence, the 

Commission adopts a January 1, 2006 effective date as originally proposed in the NOPR. 

103. The Commission clarifies that it has no intention of requiring public utilities to 

report prior period information in the newly-created accounts for FERC Form 1 and 3-Q 

purposes. Public utilities should report prior period information in the accounts 

originally used, except for Account 561, Load Dispatching. Since Account 561 is being 

replaced by newly-created sub-accounts, public utilities should report amounts reported 

in Account 561 for 2005 in Account 561.292 for the 2006 Form 1 filed in April 2007 and 

for the Form 3-Qs filed in 2006. This approach will alleviate any burden associated with 

reporting prior period information. 

V. Changes To The FERC Quarterly And Annual Report Forms

104. The changes adopted herein will require revising the existing schedules in the 

FERC Forms 1, 1-F and 3-Q filed with the Commission. Appendix B contains samples 

 92 This is for reporting purposes only and no amounts should be reclassified for 

accounting purposes. 
Docket No. RM04-12-000 - 50 -

of the updated or new schedules that will be included in these reports and will be 

available on e-Library.93 

VI. Information Collection Statement

105. 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 1995.94 OMB’s regulations require OMB to 

approve certain information collection requirements imposed by agency rule.95 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 why the control number should be displayed. 

 93 Appendix B will not be published in the Federal Register. 

94 See 44 U.S.C. 3507(d) (2000). 

95 5 CFR 1320.11. 
Docket No. RM04-12-000 - 51 -

106. The following burden estimates are for complying with this final rule as 

follows: 

Data Collection Number of 

Respondents 

Number of 

Responses 

Hours Per 

Response 

Total 

1 Form 1 (RTOs) 6 1 35 210 

2 Form 1 (Non-RTOs) 214 1 11 2,354 

3 Form 1-F 33 1 11 363 

4 Form 3-Q (RTOs) 6 3 30 540 

5 Form 3-Q (NonRTOs) 247 3 15 11,115 

Totals 14,582 

Information Collection Costs: The Commission has projected the average annualized 

cost of all respondents to be the following: 14,582 hrs. + (2 hrs recordkeeping x 253 

respondents) = 15,088 hrs. @ $60 per hour = $905,280 for respondents. No capital 

startup costs are estimated to be incurred by respondents. 

Annualized Costs (Operations & Maintenance): The costs for performing the prepared 

schedules are rolled into the total costs for completing the Commission’s annual and 

quarterly financial reports. 

Title: FERC Form 1, “Annual report of Major electric utilities, licensees, and others” 

 FERC Form 1-F, “Annual report for Nonmajor public utilities and licensees” 

FERC Form 3-Q, “Quarterly financial report of electric utilities, licensees, and 

natural gas companies” 
Docket No. RM04-12-000 - 52 -

Action: Information collections. 

OMB Control Nos.: 1902-0021; 1902-0029; and 1902-0205. 

Respondents: Businesses or other for profit. 

Frequency of responses: Annually and quarterly. 

Necessity of the Information: This Final Rule revises the Commission’s regulations to 

reflect changes that are occurring in the electric industry due to the availability of openaccess transmission service and increasing competition in the wholesale bulk power 

industry. The addition of these new accounts is intended to standardize accounting for 

transactions and events affecting public utilities and licensees, including independent 

system operators and regional transmission organizations that file financial reports with 

the Commission. The accounting regulations currently found in the USofA and related 

financial reporting requirements capture financial information along traditional primary 

business functions but do not provide sufficient detailed information concerning RTOs 

and, in particular, the costs incurred by these organizations as well as non-RTO public 

utilities that engage in similar activities. The addition of these accounts, and related 

changes in reporting, are intended to improve the transparency, completeness and 

consistency of accounting practices for the cost of assets, the expenses incurred in 

providing services, along with revenues collected. Without specific instructions and 

accounts for recording and reporting the above transactions and events, inconsistent and 

incomplete accounting and reporting will result. 
Docket No. RM04-12-000 - 53 -

Internal Review: The Commission has reviewed the requirements pertaining to the 

USofA and to the financial reports it prescribes and determined that the proposed 

revisions are necessary because the Commission needs to establish uniform accounting 

and reporting requirements for the costs of utility assets and the expenses incurred for 

providing services as part of utility operations. 

107. These requirements conform to the Commission’s plan for efficient information 

collection, communication, and management within the electric industry. The 

Commission has assured itself, by means of internal review, that there is specific, 

objective support for the burden estimates associated with the information requirements. 

108. Interested persons may obtain information on the reporting requirements by 

contacting the following: Federal Energy Regulatory Commission, 888 First Street, NE, 

Washington, D.C. 20426 [Attention: Michael Miller, Office of the Executive Director, 

Phone (202)502-8415, fax: (202)273-0873, e-mail: michael.miller@ferc.gov ] 

109. 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, D.C. 20503, Attention: Desk Officer for the Federal Energy Regulatory 

Commission; Phone: (202)395-4650, fax: (202)395-7285. 

VII. Environmental Analysis 

110. The Commission is required to prepare an Environmental Assessment or an 

Environmental Impact Statement for any action that may have a significant adverse effect 
Docket No. RM04-12-000 - 54 -

on the human environment.96 No environmental consideration is necessary for the 

promulgation of a rule that addresses information gathering, analysis, and 

dissemination,97 and also that addresses accounting.98 This Final Rule addresses 

accounting. In addition, this Final Rule involves information gathering, analysis, and 

dissemination. 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. 

VIII. Regulatory Flexibility Act

111. The Regulatory Flexibility Act of 1980 (RFA)99 generally requires a description 

and analysis of the effect that the final rule will have on small entities or a certification 

that the rule will not have a significant economic impact on a substantial number of small 

entities. 

112. The Commission concludes that this rule would not have such an impact on a 

substantial number of small entities. Most companies regulated by the Commission do 

 96 See Regulations Implementing the National Environmental Policy Act, Order 

No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ¶ 30,783 (1987). 

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

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

99 See 5 U.S.C. 601-612 (2000). 
Docket No. RM04-12-000 - 55 -

not fall within the RFA’s definition of a small entity;100 this rule applies principally 

to public utilities that own, control, or operate facilities for transmitting electric energy in 

interstate commerce and not electric utilities per se. The Commission also concludes that 

this rule will not impose a significant burden on industry since the information is already 

being captured by their accounting systems and generally being reported at a consolidated 

business level. 

IX. Document Availabilty

113. 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 5:00 p.m. Eastern time) at 888 First Street, N.E., Room 2A, 

Washington D.C. 20426. 

114. From the Commission’s Home Page on the Internet, this information is available 

in the Commission’s management system, e-Library. The full text of this document is 

 100 See 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 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. 13 CFR 121.201. 
Docket No. RM04-12-000 - 56 -

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. 

115. User assistance is available for e-Library and the Commission’s website during 

normal business hours from our Help line at (202) 502-8222 or the Public Reference 

Room at (202) 502-8371, Press 0, TTY (202) 502-8659. E-Mail the Public Reference 

Room at public.referenceroom@ferc.gov 

Effective Date and Congressional Notification

 This Final Rule will take effect January 1, 2006. The Commission has determined 

with the concurrence of the Administrator of the Office of Information and Regulatory 

Affairs of the Office of Management and Budget, that this rule is not a major rule within 

the meaning of section 251 of the Small Business Regulatory Enforcement Fairness Act 

of 1996. The Commission will submit the Final Rule to both houses of Congress and the 

General Accounting Office. 

List of subjects in 18 C.F.R. Part 101

 Electric power, electric utilities, Reporting and recordkeeping requirements, and 

Uniform System of Accounts. 

By the Commission. 

( S E A L ) 

 Magalie R. Salas, 

 Secretary. 
Docket No. RM04-12-000 - 57 -

 In consideration of the foregoing, the Commission amends Part 101, 

Chapter I, Title 18, Code of Federal Regulations, as follows. 

PART 101 - UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR PUBLIC 

UTILITIES AND LICENSES SUBJECT TO THE PROVISIONS OF THE 

FEDERAL POWER ACT 

1. The authority citation for Part 101 continues to read as follows: 

Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 U.S.C. 7101-

7352, 7651-7651o. 

2. In part 101, Definitions, redesignate definitions 30-39 as definitions 31-40 and add 

new definition 30. Regional market to the list to read as follows: 

 * * * * * 

30. Regional market means an organized energy market operated by a public 

utility, whether directly or through a contractual relationship with another entity. 

3. In part 101, Balance Sheet Chart of Accounts, Accounts 175, 176, 219, 230, 244, 

and 245 are added to the list: 

Balance Sheet Chart of Accounts 

ASSETS AND OTHER DEBITS 

* * * * * 
Docket No. RM04-12-000 - 58 -

3. CURRENT AND ACCRUED ASSETS 

 * * * * * 

 175 Derivative instrument assets. 

 176 Derivative instrument assets-Hedges. 

 * * * * * 

 LIABILITIES AND OTHER CREDITS 

 5. PROPRIETARY CAPITAL 

 * * * * * 

 219 Accumulated other comprehensive income. 

 * * * * * 

 7. OTHER NONCURRENT LIABILITIES 

 * * * * * 

 230 Asset retirement obligations.

 8. CURRENT AND ACCRUED LIABILITIES 

 * * * * * 

 244 Derivatives instrument liabilities. 

 245 Derivative instrument liabilities-Hedges. 

 * * * * * 
Docket No. RM04-12-000 - 59 -

4. In part 101, Balance Sheet Accounts, Account 108, paragraph C is revised to 

read as follows: 

 * * * * * 

108 Accumulated provision for depreciation of electric utility plant (Major only). 

 * * * * * 

 C. For general ledger and balance sheet purposes, this account shall be 

regarded and treated as a single composite provision for depreciation. For purposes of 

analysis, however, each utility shall maintain subsidiary records in which this account is 

segregated according to the following functional classification for electric plant: 

(1) Steam production, 

(2) Nuclear production, 

(3) Hydraulic production, 

 (4) Other production, 

(5) Transmission, 

(6) Distribution, 

(7) Regional Transmission and Market Operation, and 

(8) General. 

 These subsidiary records shall reflect the current credits and debits to this account 

in sufficient detail to show separately for each such functional classification: 
Docket No. RM04-12-000 - 60 -

(a) the amount of accrual for depreciation, 

(b) the book cost of property retired, 

(c) cost of removal, 

(d) salvage, and 

(e) other items, including recoveries from insurance. 

 Separate subsidiary records shall be maintained for the amount of accrued cost of 

removal other than legal obligations for the retirement of plant recorded in Account 108, 

Accumulated provision for depreciation of electric utility plant (Major only). 

 * * * * * 

5. In part 101, Electric Plant Chart of Accounts, Accounts 317, 326, 337, 347, 359.1, 

and 374 are added to the list: 

Electric Plant Chart of Accounts 

 * * * * * 

 2. PRODUCTION PLANT 

 A. STEAM PRODUCTION 

 * * * * * 

317 Asset retirement costs for steam production plant. 

 B. NUCLEAR PRODUCTION 

 * * * * * 

326 Asset retirement costs for nuclear production plant (Major only). 

 * * * * * 
Docket No. RM04-12-000 - 61 -

 C. HYDRAULIC PRODUCTION 

 * * * * * 

 337 Asset retirement costs for hydraulic production plant. 

 D. OTHER PRODUCTION 

 * * * * * 

 347 Asset retirement costs for other production plant. 

 3. TRANSMISSION PLANT 

 * * * * * 

 359.1 Asset retirement costs for transmission plant. 

 4. DISTRIBUTION PLANT 

 * * * * * 

374 Asset retirement costs for distribution plant. 

6. In part 101, Electric Plant Chart of Accounts, a new section with primary plant 

account listing is added as follows: 

5. REGIONAL TRANSMISSION AND MARKET OPERATION 

PLANT 

 380 Land and land rights. 

 381 Structures and improvements. 

 382 Computer hardware. 

 383 Computer software. 

 384 Communication Equipment. 
Docket No. RM04-12-000 - 62 -

 385 Miscellaneous Regional Transmission and Market Operation Plant. 

386 Asset Retirement Costs for Regional Transmission and Market Operation 

Plant. 

 387 [Reserved] 

7. In Part 101, Electric Plant Accounts, new primary plant accounts 380, 381, 382, 

383, 384, 385, and 386 are added to read as follows: 

Electric Plant Accounts 

 * * * * * 

380 Land and land rights. 

This account shall include the cost of land and land rights used in connection with 

regional transmission and market operations. 

381 Structures and improvements. 

This account shall include the cost in place of structures and improvements 

used for regional transmission and market operations. 

382 Computer hardware. 

This account shall include the cost of computer hardware and miscellaneous 

information technology equipment to provide scheduling, system control and dispatching, 

system planning, standards development, market monitoring, and market administration 

activities. Records shall be maintained identifying to the maximum extent practicable 

computer hardware owned and used for: (1) scheduling, system control and dispatching, 
Docket No. RM04-12-000 - 63 -

(2) system planning and standards development, and (3) market monitoring and 

market administration activities. 

ITEMS 

1. Personal computers 

2. Servers 

3. Workstations 

4. Energy Management System (EMS) hardware 

5. Supervisory Control and Data Acquisition (SCADA) system hardware 

6. Peripheral equipment 

7. Networking components 

383 Computer software. 

This account shall include the cost of off-the-shelf and in-house developed 

software purchased and used to provide scheduling, system control and dispatching, 

system planning, standards development, market monitoring, and market administration 

activities. Records shall be maintained identifying to the maximum extent practicable the 

cost of software used for: 

(1) scheduling, system control and dispatching, 

(2) system planning and standards development, and 

(3) market monitoring and market administration activities. 
Docket No. RM04-12-000 - 64 -

ITEMS 

1. Software licenses 

2. User interface software 

3. Modeling software 

4. Database software 

5. Tracking and monitoring software 

6. Energy Management System (EMS) software 

7. Supervisory Control and Data Acquisition (SCADA) system software 

8. Evaluation and assessment system software 

9. Operating, planning and transaction scheduling software 

10. Reliability applications 

11. Market application software 

384 Communication equipment. 

This account shall include the cost of communication equipment owned and used 

to acquire or share data and information used to control and dispatch the system. 
Docket No. RM04-12-000 - 65 -

ITEMS 

1. Fiber optic cable 

2. Remote terminal units 

3. Microwave towers 

4. Global Positioning System (GPS) equipment 

5. Servers 

6. Workstations 

7. Telephones 

385 Miscellaneous regional transmission and market operation plant. 

This account shall include the cost of regional transmission and market operation 

plant and equipment not provided for elsewhere, 

386 Asset retirement costs for regional transmission and market operation plant. 

This account shall include asset retirement costs on regional control and market 

operation plant and equipment. 

8. In part 101, Electric Plant Chart of Accounts, 5. General Plant, is redesignated as 

6. General Plant, and a new Account 399.1 is added to the list. 

 399.1 Asset retirement costs for general plant. 

9. In part 101, Operating Revenue Chart of Accounts, new Accounts 456.1, 457.1 

and 457.2 are added to the other operating revenue listing as follows: 
Docket No. RM04-12-000 - 66 -

Operating Revenue Chart of Accounts 

 * * * * * 

 2. OTHER OPERATING REVENUES 

 456.1 Revenues from transmission of electricity of others. 

 457.1 Regional transmission service revenues. 

 457.2 Miscellaneous revenues. 

10. In part 101, Income Accounts, Account 456 Item 5 is removed, and Item 6 is 

redesignated as Item 5. 

11. In part 101, Income Accounts, new revenue accounts 456.1, 457.1, and 457.2 are 

added to read as follows: 

Operating Revenue Accounts 

 * * * * * 

456.1 Revenues from transmission of electricity of others. 

This account shall include revenues from transmission of electricity of others over 

transmission facilities of the utility. 

457.1 Regional transmission service revenues. 

This account shall include revenues derived from providing scheduling, system 

control and dispatching services. Include also in this account reimbursements for system 

planning, standards development, and market monitoring and market compliance 

activities. Records shall be maintained so as to show: (1) the services supplied and 
Docket No. RM04-12-000 - 67 -

revenues received from each customer and (2) the amounts billed by tariff or 

specified rates. 

457.2 Miscellaneous revenues. 

This account shall include revenues and reimbursements for costs incurred by 

regional transmission service providers not provided for elsewhere. Records shall be 

maintained so as to show: (1) the services supplied and revenues received from each 

customer, and (2) the amounts billed by tariff or specified rates. 

12. In part 101, Operation and Maintenance Expense Chart of Accounts, a new 

Regional Market Expenses function is added and new Accounts 575.1 575.2, 575.3, 

575.4, 575.5, 575.6, 575.7, 575.8, 576.1, 576.2, 576.3, 576.4 and 576.5 are added as 

follows: 

Operation and Maintenance Expense Chart of Accounts 

 * * * * * 

 3. REGIONAL MARKET EXPENSES 

Operation

 575.1 Operation Supervision 

 575.2 Day-ahead and real-time market facilitation. 

 575.3 Transmission rights market facilitation. 

 575.4 Capacity market facilitation. 

 575.5 Ancillary services market facilitation 

 575.6 Market monitoring and compliance 
Docket No. RM04-12-000 - 68 -

 575.7 Market facilitation, monitoring and compliance services 

 575.8 Rents 

Maintenance

576.1 Maintenance of structures and improvements 

 576.2 Maintenance of computer hardware 

 567.3 Maintenance of computer software 

 567.4 Maintenance of communication equipment 

 567.5 Maintenance of miscellaneous market operation plant 

13. In part 101, Operation and Maintenance Expense Chart of Accounts, 3. 

Distribution Expenses is redesignated as 4. Distribution Expenses; 4. Customer Accounts 

Expenses is redesignated as 5. Customer Accounts Expenses; 5. Customer Service and 

Informational Expenses is redesignated as 6. Customer Service and Informational 

Expenses; 6. Sales Expense is redesignated as 7. Sales Expenses; and 7. Administrative 

and General Expenses is redesignated as 8. Administrative and General Expenses. 

14. In part 101, Operation and Maintenance Expense Chart of Accounts, the listing of 

transmission expenses is removed and replaced with the following list of accounts: 

Operation and Maintenance Expense Chart of Accounts 

 * * * * * 
Docket No. RM04-12-000 - 69 -

 2. TRANSMISSION EXPENSES 

Operation

560 Operation supervision and engineering 

 561.1 Load dispatch-Reliability 

 561.2 Load dispatch-Monitor and operate transmission system. 

 561.3 Load dispatch-Transmission service and scheduling. 

 561.4 Scheduling, system control and dispatch services. 

 561.5 Reliability planning and standards development. 

 561.6 Transmission service studies. 

 561.7 Generation interconnection studies. 

 561.8 Reliability planning and standards development services 

 562 Station expenses (Major only). 

 563 Overhead line expenses (Major only). 

 564 Underground line expenses (Major only). 

 565 Transmission of electricity by others (Major only). 

 566 Miscellaneous transmission expenses (Major only). 

 567 Rents. 

 567.1 Operation supplies and expenses (Nonmajor only). 

Maintenance

568 Maintenance supervision and engineering (Major only). 

 569 Maintenance of structures (Major only). 
Docket No. RM04-12-000 - 70 -

 569.1 Maintenance of computer hardware. 

 569.2 Maintenance of computer software. 

 569.3 Maintenance of communication equipment. 

569.4 Maintenance of miscellaneous regional transmission plant. 

 570 Maintenance of station equipment (Major only). 

 571 Maintenance of overhead lines (Major only). 

 572 Maintenance of underground lines (Major only). 

 573 Maintenance of miscellaneous transmission plant (Major only). 

 574 Maintenance of transmission plant (Nonmajor only). 

15. In part 101, Operation and Maintenance Expense Accounts, the first paragraph of 

Account 556 instruction is revised to read as follows: 

 Operation and Maintenance Expense Accounts 

 * * * * * 

Account 556 System control and load dispatching (Major only).

 This account shall include the cost of labor and expenses incurred in load 

dispatching activities for system control. Utilities having an interconnected electric 

system or operating under a central authority which controls the production and 

dispatching of electricity may apportion these costs to this account and transmission 

expense Accounts 561.1 through 561.4, and Account 581, Load DispatchingDistribution. 
Docket No. RM04-12-000 - 71 -

16. In part 101, Operation and Maintenance Expense Accounts, Account 561, 

Load Dispatching (Major only) is removed. 

17. In part 101, Operation and Maintenance Expense Accounts, new expense accounts 

561.1, 561.2, 561.3, 561.4, 561.5, 561.6, 561.7, 561.8, 569.1, 569.2, 569.3, 575.1,575.2, 

575.3, 575.4 575.5, 575.6, 575.7, 575.8, 576.1, 576.2, 576.3, 576.4 and 576.5 are added 

to read as follows: 

Operation and Maintenance Expense Accounts 

 * * * * * 

561.1 Load dispatch-Reliability. 

This account shall include the cost of labor, materials used and expenses incurred 

by a regional transmission service provider or other transmission provider to manage the 

reliability coordination function as specified by the North American Electric Reliability 

Council (NERC) and individual reliability organizations. These activities shall include 

performing current and next day reliability analysis. This account shall include the costs 

incurred to calculate load forecasts, and performing contingency analysis. 

561.2 Load dispatch-Monitor and operate transmission system. 

This account shall include the costs of labor, materials used and expenses incurred 

by a regional transmission service provider or other transmission provider to monitor, 

assess and operate the power system and individual transmission facilities in real-time to 

maintain safe and reliable operation of the transmission system. This account shall also 

include the expense incurred to manage transmission facilities to maintain system 
Docket No. RM04-12-000 - 72 -

reliability and to monitor the real-time flows and direct actions according to 

regional plans and tariffs as necessary. 

ITEMS 

 1. Receive and analyze outage requests 

 2. Reschedule outage plans 

 3. Monitor solution quality field data values, providing model 

 updates to NERC and coordinating network model changes across all 

 systems 

4. Conduct operating training related to NERC certification 

5. Monitor generation resources and communicate expected dispatch 

actions 

6. Ensure ancillary service requirements are met 

7. Directing switching 

8. Controlling system voltages 

9. Obtaining reports on the weather and special events 

10. Preparing operating reports and data for billing and budget 

 purposes 

561.3 Load dispatch-Transmission service and scheduling. 

This account shall include the costs of labor, materials used and expenses incurred 

by a regional transmission service provider or other transmission provider to process 

hourly, daily, weekly and monthly transmission service requests using an automated 
Docket No. RM04-12-000 - 73 -

system such as an Open Access Same-Time Information System (OASIS). It shall 

also include the expenses incurred to operate the automated transmission service request 

system and to monitor the status of all scheduled energy transactions. 

561.4 Scheduling, system control and dispatching services. 

This account shall include the costs billed to the transmission owner, load serving 

entity or generator for scheduling, system control and dispatching service. Include in this 

account service billings for system control to maintain the reliability of the transmission 

area in accordance with reliability standards, maintaining defined voltage profiles, and 

monitoring operations of the transmission facilities. 

561.5 Reliability, planning and standards development. 

This account shall include the cost of labor, materials used and expenses incurred 

for the system planning of the interconnected bulk electric transmission systems within a 

planning authority area. 

 ITEMS 

1. Developing and maintaining transmission system models to evaluate 

transmission system performance. 

2. Maintaining and applying methodologies and tools for the analysis and 

simulation of the transmission systems for the assessment and development of 

transmission expansion plans. 
Docket No. RM04-12-000 - 74 -

3. Assessing, developing and documenting transmission expansion plans. 

4. Maintaining transmission system models (steady-state, dynamics, and short 

circuit). 

5. Collecting transmission information and transmission facility characteristics and 

ratings. 

6. Notifying participants of any planned transmission changes that may impact 

their facilities. 

7. Developing and reporting on transmission expansion plans for assessment and 

compliance with reliability standards. 

8. Developing reliability standards for the planning and operation of the 

interconnected bulk electric transmission systems that serve the United States, Canada, 

and Mexico. 

9. Developing criteria and certification procedures for reliability authorities, 

transmission operators and others. 

10. Outside services employed 

Note: The cost of supervision, customer records and collection expenses, 

administrative and general salaries, office supplies and expenses, property 

insurance, injuries and damages, employee pension and benefits, regulatory 

commission expenses, general advertising, and rents shall be charged to the 

customer accounts, service, and administrative and general expense accounts 

contained in the Uniform System of Accounts. 
Docket No. RM04-12-000 - 75 -

561.6 Transmission service studies. 

 This account shall include the cost of labor, materials used and expenses incurred 

to conduct transmission services studies for proposed interconnections with the 

transmission system. Detailed records shall be maintained for each study undertaken and 

all reimbursements received for conducting such a study. 

561.7 Generation interconnection studies. 

 This account shall include the cost of labor, materials used and expenses incurred 

to conduct generation interconnection studies for proposed interconnections with the 

transmission system. Detailed records shall be maintained for each study undertaken and 

all reimbursements received for conducting such a study. 

561.8 Reliability planning and standards development services. 

 This account shall include the costs billed to the transmission owner, load serving 

entity, or generator for system planning of the interconnected bulk electric transmission 

system. Include also the costs billed by the regional transmission service provider for 

system reliability and resource planning to develop long-term strategies to meet customer 

demand and energy requirements. This account shall also include fees and expenses for 

outside services incurred by the regional transmission service provider and billed to the 

load serving entity, transmission owner or generator. 

 * * * * * 
Docket No. RM04-12-000 - 76 -

569.1 Maintenance of computer hardware. 

This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of computer hardware serving the transmission function. 

569.2 Maintenance of computer software. 

This account shall include the cost of labor, materials used and expenses incurred 

for annual computer software license renewals, annual software update services and the 

cost of ongoing support for software products serving the transmission function. 

ITEMS 

1. Telephone support 

2. Onsite support 

3. Software updates and minor revisions 

569.3 Maintenance of communication equipment. 

This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of communication equipment serving the transmission function. 

569.4 Maintenance of miscellaneous regional transmission plant. 

This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of miscellaneous regional transmission plant serving the transmission 

function. 

 * * * * * 
Docket No. RM04-12-000 - 77 -

575.1 Operation Supervision. 

 This account shall include the cost of labor and expenses incurred in the general 

supervision and direction of the regional energy markets. 

575.2 Day-ahead and real-time market administration. 

This account shall include the cost of labor, materials used and expenses incurred 

to facilitate the Day-Ahead and Real-Time markets. This account shall also include the 

costs incurred to manage the real-time deployment of resources to meet generation needs 

and to provide capacity adequacy verification. Include in this account the costs incurred 

to maintain related sections of the tariff, market rules, operating procedures, and 

standards and coordinating with neighboring areas. 

ITEMS 

1. Consultant fees and expenses 

2. System record and report forms 

3. Meals, traveling and incidental expenses 

Note: The cost of supervision, customer records and collection expenses, 

administrative and general salaries, office supplies and expenses, property 

insurance, injuries and damages, employee pension and benefits, regulatory 

commission expenses, general advertising, and rents shall be charged to the 

customer accounts, service, and administrative and general expense accounts 

contained in the Uniform System of Accounts. 
Docket No. RM04-12-000 - 78 -

575.3 Transmission rights market administration. 

This account shall include the cost of labor, materials used and expenses incurred 

to manage the allocation and auction of transmission rights. 

575.4 Capacity market administration. 

This account shall include the cost of labor, materials used and expenses incurred 

to manage the allocation of capacity rights. 

575.5 Ancillary services market administration. 

This account shall include the cost of labor, materials used and expenses incurred 

to manage all other ancillary services market functions. 

575.6 Market monitoring and compliance. 

This account shall include the cost of labor, materials used and expenses incurred 

to review market data and operational decisions for compliance with market rules. It 

shall also include the costs incurred to interface with external market monitors. 

575.7 Market administration, monitoring and compliance services. 

This account shall include the costs billed to the transmission owner, load serving 

entity or generator for market administration, monitoring and compliance services. 

575.8 Rents. 

This account shall include all rents of property of others used, occupied, or 

operated in connection with market administration and monitoring. (See operating 

expense instruction 3.) 
Docket No. RM04-12-000 - 79 -

576.1 Maintenance of structures and improvements. 

 This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of structures used in market administration and monitoring. (See 

operating expense instruction 2.) 

576.2 Maintenance of computer hardware. 

The account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of computer hardware used in market administration and monitoring. 

576.3 Maintenance of computer software. 

 This account shall include the cost of labor, materials used and expenses incurred 

for annual computer software license renewals, annual software update services and the 

cost of ongoing support for software products used in market administration and 

monitoring. 

 ITEMS

 1. Telephone support 

 2. Onsite support 

 3. Software updates and minor revisions 

576.4 Maintenance of communication equipment. 

 This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of communication equipment used in market administration and 

monitoring. 
Docket No. RM04-12-000 - 80 -

576.5 Maintenance of miscellaneous market operation plant. 

 This account shall include the cost of labor, materials used and expenses incurred 

in the maintenance of miscellaneous market operation plant used in market 

administration and monitoring. 
Docket No. RM04-12-000 - 81 -

Appendix A 

List of Commenters

1 American Public Power Association (APPA) 

2 Arizona Public Service Company (APS) 

3 Cinergy Services, Inc. (Cinergy)101

4 City of Santa Clara, California \dba Silicon Valley Power (City of Santa Clara) 

5 Electricity Consumers Resource Council (ELCON) 

6 The Independent Electricity System Operator of Ontario (IESO) 

7 Indicated New York Transmission Owners (Indicated NYTOs)102

8 International Transmission Company (International Transmission) 

9 The Iowa Utilities Board (Iowa Board) 

10 ISO/RTO Council103

11 FirstEnergy Service Company (FirstEnergy)104

12 Madison Gas & Electric Company (MGE) 

13 Massachusetts Municipal Wholesale Electric Company (MMWEC) 

 101 Cinergy Services filed comments on behalf of its franchised utility affiliates, 

The Cincinnati Gas & Electric Company, PSI Energy, Inc., and The Union Light, Heat 

and Power Company (collectively, Cinergy) 

102 Indicated NYTOs includes: Central Hudson Gas & Electric Corporation; 

Consolidated Edison Company of New York, Inc.; LIPA; New York Power Authority; 

New York Electric & Gas Corporation; Orange and Rockland Utilities, Inc., and 

Rochester Gas and Electric Corporation. 

103 ISO/RTO Council includes: The Alberta Electric System Operator; California 

Independent System Operators, Inc.; Electric Reliability Council of Texas; the 

Independent Electricity System of Ontario, Inc.; ISO New England, Inc.; Midwest 

Independent Transmission System Operators, Inc; New York Independent System 

Operators, Inc.; PJM Interconnection, L.L.C.; and Southwest Power Pool. 

104 FirstEnergy filed on behalf of its electric utility operating company affiliates: 

Ohio Edison Company; The Toledo Edison Company; the Cleveland Electric 

Illuminating Company; Pennsylvania Power Company; American Transmission System, 

Inc; Jersey Central Power & Light Company; Pennsylvania Electric Company; and 

Metropolitan Edison Company. 
Docket No. RM04-12-000 - 82 -

 

14 Midwest ISO Transmission Owners105

15 National Rural Electric Cooperative Association (NRECA) 

16 National Grid USA 

17 The New England Power Pool Participants Committee (NEPOOL Participants 

Committee) 

18 NiSource Inc. (NiSource) 

19 Southern California Edison Company (SCE) 

20 The Transmission Agency of Northern California (TANC) 

21 Transmission Access Policy Study Group (TAPS) 

22 Wisconsin Electric Power Company (Wisconsin Electric) 

105 The Midwest ISO Transmission Owners for this filing consist of: Ameren 

Services Company, as agent for Union Electric Company d/b/a AmerenUE, Central 

Illinois Public Service Company d/b/a AmerenCIPS, Central Illinois Light Co. d/b/a 

AmerenCilco, and Illinois Power Company d/b/a AmerenIP; Alliant Energy Corporate 

Services, Inc. on behalf of its operating company affiliate Interstate Power and Light 

Company (f/k/a IES Utilities Inc. and Interstate Power Company); American 

Transmission Systems, Incorporated, a subsidiary of FirstEnergy Corp.; Aquila, Inc. d/b/a 

Aquila Networks (f/k/a Utilicorp United, Inc.); City Water, Light & Power (Springfield, 

IL); Great River Energy; Hoosier Energy Rural Electric Cooperative, Inc.; Indiana 

Municipal Power Agency; Indianapolis Power & Light Company; LG&E Energy LLC 

(for Louisville Gas and Electric Company and Kentucky Utilities Company); Minnesota 

Power (and its subsidiary Superior Water, L&P); Montana-Dakota Utilities Co.; Northern 

Indiana Public Service Company; Northern States Power Company and Northern States 

Power Company (Wisconsin), subsidiaries of Xcel Energy Inc.; Northwestern Wisconsin 

Electric Company; Otter Tail Corporation d/b/a Otter Tail Power Company; Southern 

Illinois Power Cooperative; Southern Indiana Gas & Electric Company (d/b/a Vectren 

Energy Delivery of Indiana); and Wabash Valley Power Association, Inc.