Document ID: FERC-2021-0074-0001
Agency: ferc
Document Type: Notice
Title: Accounting and Reporting Treatment of Certain Renewable Energy Assets
Posted Date: 2021-01-26T05:00Z

[Federal Register Volume 86, Number 15 (Tuesday, January 26, 2021)]
[Notices]
[Pages 7086-7089]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01657]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

[Docket No. RM21-11-000]

Accounting and Reporting Treatment of Certain Renewable Energy 
Assets

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of inquiry.

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SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory 
Commission (Commission) seeks comments on the accounting and reporting 
treatment of certain renewable energy generating assets and renewable 
energy credits. In addition, the Commission seeks comments on the 
ratemaking implications of these accounting and reporting changes.

DATES: Initial Comments are due March 29, 2021, and Reply Comments are 
due April 26, 2021.

ADDRESSES: Comments, identified by docket number, may be filed in the 
following ways:
     Electronic Filing through http://www.ferc.gov. Documents 
created electronically using word processing software should be filed 
in native applications or print-to-PDF format and not in a scanned 
format.
     Mail/Hand Delivery: Those unable to file electronically 
may mail or hand-deliver comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
     Instructions: For detailed instructions on submitting 
comments, see the Comment Procedures Section of this document.

FOR FURTHER INFORMATION CONTACT:
Daniel Birkam (Technical Information), Office of Enforcement, Federal 
Energy Regulatory Commission, 888 First Street NE, Washington, DC 
20426, (202) 502-8035, Daniel.Birkam@ferc.gov
Sarah Greenberg (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-6230, Sarah.Greenberg@ferc.gov

SUPPLEMENTARY INFORMATION: 
    1. In this Notice of Inquiry (NOI), the Federal Energy Regulatory 
Commission (Commission) seeks comments on the appropriate accounting 
treatment for certain renewable energy assets. First, the Commission 
seeks comments on whether to create new accounts within the Uniform 
System of Accounts (USofA) for non-hydro renewable energy generating 
assets,\1\ and, if so, how such accounts should be organized. Second, 
the Commission seeks comments on how to modify FERC Form No. 1 to 
reflect any new accounts. Third, the Commission seeks comments on 
whether to codify the proper accounting treatment of the purchase, 
generation, and use of renewable energy credits (RECs). Finally, the 
Commission seeks comments on the rate setting implications of these 
potential accounting and reporting changes.
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    \1\ Non-hydro renewable assets, as referred to in this notice, 
are production assets other than hydroelectric generators such as 
solar, wind energy, geothermal, biomass, etc., that rely on the heat 
or motion of the earth or sun's radiation to produce energy. 
Specifically, these are denoted as renewable because the power 
production is based on a fuel source that is not consumed or 
destroyed by the generation process, such as buried hydrocarbons 
(coal, oil, natural gas), or the decay of rare irradiated heavy 
metals (nuclear). Biomass (trees, nut shells, grain husks and 
stalks, etc.) is considered renewable, despite its hydrocarbon 
source being consumed, due to its carbon release being offset by 
regrowth of carbon capturing equivalent biomass.
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I. Background

    2. The USofA contains discrete accounts for steam production, 
nuclear production, hydraulic production, and other production.\2\ 
However, the USofA does not contain any accounts designed specifically 
for solar, wind, or other non-hydro renewable generating assets. 
Therefore, electric utilities currently record non-hydro renewable 
assets in the Other Production accounts of the USofA. Commenters have 
indicated that companies exercise ``reasonable judgment'' when 
determining in which Other Production account to book these assets.\3\
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    \2\ 18 CFR part 101; Accounting and Financial Reporting for 
Public Utilities Including RTOs, Order No. 668, 113 FERC ] 61,276 at 
59 (2005).
    \3\ Comments of the Edison Electric Institute, Docket No. AC20-
103-000, at 3 (filed May 28, 2020).
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    3. Recently, parties have expressed disagreement regarding which 
Other Production accounts should be used to book non-hydro renewable 
assets. In Docket No. AC20-103, the Commission received a request for 
confirmation that the costs of certain wind and solar generating 
equipment are properly booked to the Other Production Accounts 343 
(Prime Movers), 344 (Generators), and 345 (Accessory Electric 
Equipment). In that proceeding, commenters argued that the proposal 
booked an inappropriate amount of costs to Account 345, which are 
included in reactive power rates pursuant to the AEP Methodology.\4\ 
Commenters, including the Edison Electric Institute, suggested that the 
Commission consider creating new accounts for wind, solar, and other 
non-hydro renewables to resolve this issue.\5\ Concurrently with the 
issuance of this Notice of Inquiry, the Commission is issuing an order 
in Docket No. AC20-103, denying the request and explaining that this 
Notice of Inquiry will begin a proceeding in which the Commission will 
evaluate the need for further guidance regarding the proper accounting 
treatment of non-hydro renewable generating assets.
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    \4\ Comments of Ameren Services Company, Docket No. AC20-103-
000, at 8-9 (filed May 28, 2020).
    \5\ Id. at 6-7; Comments of Edison Electric Institute at 4.
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    4. In addition, the existing USofA accounts do not explicitly 
address the accounting treatment of the purchase, generation, or use of 
RECs. However, the Commission has stated that RECs are analogous to the 
sulfur dioxide emission allowances created by Title IV of the Clean Air 
Act Amendments of 1990, which the Commission addressed in Order No. 
552.\6\ Order No. 552 classified emission allowances as inventoriable 
items and established new inventory and expense accounts to record the 
allowances.\7\ In keeping with Order No. 552, the Commission has found 
that

[[Page 7087]]

RECs that are purchased or generated should be recorded in Account 
158.1 (Allowance Inventory) and expensed to Account 509 (Allowances) as 
they are utilized.\8\ In addition to examining the issues identified 
above, we believe further consideration of whether to clarify and 
codify this accounting practice by modifying the account instructions 
of these inventory and expense accounts to explicitly include RECs is 
warranted at this time.
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    \6\ Ameren Illinois Co., 170 FERC ] 61,267, at P 52 (2020) 
(citing Revisions to Uniform Systems of Accounts to Account for 
Allowances under the Clean Air Act Amendments of 1990 and 
Regulatory-Created Assets and Liabilities and to Form Nos. 1, 1-F, 2 
and 2-A, Order No. 552, FERC Stats. and Regs. ] 30,967 (1993) 
(cross-referenced at 62 FERC ] 61,299)).
    \7\ Revisions to Uniform Systems of Accounts to Account for 
Allowances under the Clean Air Act Amendments of 1990 and 
Regulatory-Created Assets and Liabilities and to Form Nos. 1, 1-F, 2 
and 2-A, Order No. 552, FERC Stats. and Regs. ] 30,967 (cross-
referenced at 62 FERC ] 61,299).
    \8\ Ameren Illinois Co., 170 FERC ] 61,267 at P 52.
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II. Discussion

A. Creation of New USofA Accounts

    5. Currently, electric utilities record non-hydro renewable assets, 
and associated operations and maintenance (O&M) expenses, in the 
``Other Production'' function within the USofA.\9\ Within the USofA, 
the existing plant and associated O&M account definitions do not 
provide instructions or examples of items that are used in non-hydro 
renewable energy production, specifically for wind and solar powered 
production.\10\ This may be viewed as either a problem of insufficient 
account instructions, insufficient existing accounts, or insufficient 
existing functional categories.
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    \9\ 18 CFR part 101 Other Production includes the following 
Plant in Service Accounts: 340 (Land and Land Rights), 341 
(Structures and Improvements), 342 (Fuel Holders, Producers, and 
Accessories), 343 (Prime Movers), 344 (Generators), 345 (Accessory 
Electric Equipment), 346 (Miscellaneous Power Plant Equipment), 347 
(Asset Retirement Costs for Other Production Plant), and 348 (Energy 
Storage Equipment--Production). Also included are the following O&M 
Accounts: 546 (Operation Supervision and Engineering), 547 (Fuel), 
548 Generation expenses (Major only), 548.1 (Operation of Energy 
Storage Equipment), 549 (Miscellaneous Other Power Generation 
Expenses) (Major only)), 550 (Rents), 550.1 (Operation Supplies and 
Expenses (Nonmajor only)), 551 (Maintenance Supervision and 
Engineering) (Major only)), 552 (Maintenance of Structures (Major 
only)), 553 (Maintenance of Generating and Electric Plant (Major 
only)), 553.1 (Maintenance of Energy Storage Equipment), 554 
(Maintenance of Miscellaneous Other Power Generation Plant (Major 
only)), and 554.1 (Maintenance of Other Power Production Plant 
(Nonmajor only)).
    \10\ In contrast, geothermal and biomass generation generally 
operate based on either floor mounted steam turbines or floor 
mounted fuel cycle turbines much like buried hydrocarbon generation, 
and thus, these plant in service assets can be fitted more readily 
into the existing descriptions of production accounts.
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    6. For instance, there is no account that clearly captures solar 
panels. Solar panels are not fuel holders (Account 342), prime movers 
(Account 343) or generators (Account 344).\11\ Account 342 includes:
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    \11\ 18 CFR part 101, Instructions for Accounts 342, 343, and 
344.

[T]he cost installed of fuel handling and storage equipment used 
between the point of fuel delivery to the station and the intake 
pipe through which fuel is directly drawn to the engine, also the 
cost of gas producers and accessories devoted to the production of 
gas for use in prime movers driving main electric generators.\12\
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    \12\ Id., Instructions for Account 342.

    Solar panels do not store sunlight, and they have no moving parts; 
instead, solar energy is captured passively as radiation and is then 
converted electrochemically into electricity. Therefore, solar panels 
are not fuel holders. Similarly, Account 343 ``include[s] the cost 
installed of Diesel or other prime movers devoted to the generation of 
electric energy, together with their auxiliaries,'' while Account 344 
``include[s] the cost installed of Diesel or other power driven main 
generators.'' \13\ Both of these accounts describe equipment that 
operates like a diesel-powered turbine. Solar panels, which capture and 
convert a radiated energy source, are not prime movers or power-driven 
main generators.
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    \13\ Id., Instructions for Accounts 343 and 344. These are not 
defined in the USofA, but from common usage a ``prime mover'' would 
be the source of the initial force that moves the turbine or similar 
device (the diesel here). The ``power driven main generator'' would 
be the turbine, from the tines or blades to the dynamo, including 
the pressure casing and the shaft.
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    7. Photovoltaic (PV) inverters also do not fit within any of the 
definitions of the Other Production accounts. Inverters convert the 
direct current output of a PV solar panel into alternating current. 
None of the existing Other Production accounts accommodate such a 
component in their current form.
    8. Similarly, there is no account that includes wind generation 
towers. Such towers do not meet the definition of structures and 
improvements (Account 341), miscellaneous power plant equipment 
(Account 346) or accessory electric equipment (Account 345).\14\ 
Specifically, the height of wind generation towers is central to the 
capture of wind energy; therefore, it is not simply a sheltering 
structure or a miscellaneous or accessory system. While wind generation 
towers do provide structural support for the turbine and blades, this 
is only a part of the towers' function, not its primary role. The 
Commission has previously created separate categories for plant assets 
that did not fit into existing accounts due to unique features or 
functionality; such an approach may be appropriate here as well.\15\
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    \14\ Id., Instructions for Accounts 341, 345, and 346.
    \15\ The Hydraulic Production category contains accounts created 
for hydro-related items that do not fit in as sheltering structures, 
such as a hydro dam that is central to the capture of the flow of 
water includable in Account 332 (Reservoirs, Dams, and Waterways). 
The instructions to Account 332 state: ``This account shall include 
the cost in place of facilities used for impounding, collecting, 
storage, diversion, regulation, and delivery of water used primarily 
for generating electricity. For Major utilities, it shall also 
include the cost in place of facilities used in connection with (a) 
the conservation of fish and wildlife, and (b) recreation.''
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    9. Additionally, there are no accounts for computer hardware and 
software required to operate wind and solar generation remotely. Also, 
Account 553, major maintenance of generating and electric plant, which 
only includes costs associated with Accounts 343, 344, and 345, does 
not accommodate costs to record maintenance of solar panels, wind 
turbine blades, or wind generation towers.\16\ Similarly, some of the 
O&M accounts do not apply to the related non-hydro renewable energy 
assets. For example, Account 547 (Fuel) is not applicable to wind and 
solar generation.\17\
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    \16\ 18 CFR part 101, Instructions for Account 553.
    \17\ Id., Instructions for Account 547.
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    10. Because the Commission's USofA does not include accounts that 
clearly accommodate non-hydro renewable generating plants and 
associated O&M expenses, we seek input from interested entities on 
whether to create new accounts to accommodate these resources. If the 
Commission determines that non-hydro renewables should be recorded as 
separate generating functions, then plant and O&M accounts for each new 
generation function will need to be developed where appropriate. This 
is necessary both for the correct categorization and correct cost 
causation attributes of the accounts.
    11. Within each item below, interested entities should specify 
whether the response applies to wind, solar, other, or some combination 
of these technologies.
    (Q1) Interested entities should comment on whether the Commission 
should establish separate plant and O&M expense accounts for each major 
type of non-hydro renewable plant, including separate accounts for 
solar, wind, and other non-hydro renewable technologies.
    (Q2) Interested entities should provide examples of proposed new 
accounts related to non-hydro renewable plant and related O&M expenses 
for the Commission to consider. Interested entities should also include 
proposed examples of the corresponding account instructions.
    (Q3) Creating new accounts related to non-hydro renewable plant 
would require reclassification of assets from existing accounts to 
newly created plant asset accounts. This would also require

[[Page 7088]]

reclassification of related accumulated reserves for depreciation. In 
addition, there would be other impacts related to associated 
accumulated deferred income tax (ADIT) balances. Finally, related O&M 
expenses would need to be reclassified to the newly created expense 
accounts. Interested entities should address the potential burden that 
these reclassification requirements would create.

B. Modifications to FERC Form No. 1

    12. Adding new non-hydro renewable plant and related O&M expenses 
to the USofA would require changes to the FERC Form No. 1 to report 
these accounts in an organized and transparent manner. Thus, we seek 
input from interested entities on how the Commission could modify FERC 
Form No. 1 to accommodate any such changes.
    (Q4) We invite interested entities to submit comments regarding 
proposals for reporting the new accounts for non-hydro renewable plant 
and related O&M expenses in FERC Form No. 1 and whether new reporting 
schedules and footnote disclosures would be required. Interested 
entities should provide examples of any new reporting schedules and 
footnote disclosures.
    (Q5) We encourage interested entities to address the type of non-
accounting information related to non-hydro renewable plant and related 
O&M expenses that could be included in the modified FERC Form No. 1 to 
support rate development and to provide useful information to parties 
who utilize the financial reports.

C. Addressing Renewable Energy Credits

    13. The USofA does not provide instructions for recording the 
purchase, generation or use of RECs. However, for accounting purposes, 
RECs are analogous to sulfur dioxide emission allowances, for which the 
Commission has developed accounting guidance. In Order No. 552, the 
Commission concluded that the sulfur dioxide emission allowances are 
appropriately classified as inventoriable items.\18\ To that end, the 
Commission established new inventory and expense accounts to record 
these emission allowances. Account 158.1 (Allowance Inventory) includes 
the cost of allowances owned by the utility. The instructions to 
Account 158.1 provide for allowances to be expensed to Account 509 
(Allowances) as allowances are used.\19\
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    \18\ See Revisions to Uniform Systems of Accounts to Account for 
Allowances under the Clean Air Act Amendments of 1990 and 
Regulatory-Created Assets and Liabilities and to Form Nos. 1, 1-F, 2 
and 2-A, Order No. 552, FERC Stats. and Regs. ] 30,967 (cross-
referenced at 62 FERC ] 61,299).
    \19\ See 18 CFR part 101, General Instruction 21.
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    14. More recently, the Commission found it appropriate to apply the 
Order No. 552 accounting construct to the costs of RECs.\20\ 
Specifically, the Commission has found that RECs should be recorded in 
Account 158.1 when they are purchased or generated, and then expensed 
to Account 509 as they are used.\21\
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    \20\ Ameren Illinois Co., 170 FERC ] 61,267 at P 52.
    \21\ Id.
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    15. We are considering updating the instructions for allowances 
recorded in Accounts 158.1 and 158.2 (Allowance Withheld), and 
associated revenues and expenses recorded in Accounts 456 (Other 
Electric Revenues) and 509 to explicitly include activities related to 
RECs.\22\ Thus, we seek input from interested entities regarding 
updates to existing inventory accounts to accommodate RECs.
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    \22\ Account 158.2 represents allowances withheld by the EPA to 
be later reclassified in Account 158.1 as they are released. Account 
456 represents the account in which gross sales of RECs are to be 
recorded.
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    (Q6) We are considering modifying Accounts 158.1, 158.2, and 509 to 
include the cost of RECs and modifying Account 456 to include revenues 
from the sale of RECs.\23\ We invite interested entities to comment on 
these potential modifications.
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    \23\ 18 CFR part 101, Instructions for Accounts 158.1, 158.2, 
456, and 509.
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D. Assessing Rate Implications

    16. It is possible that the proposed additions and modifications to 
the USofA and the corresponding changes to the FERC Form No. 1 could 
have a significant and measurable impact on rates for existing 
utilities. In addition to changes to the accounting and reporting 
systems, entities may have corresponding changes to their existing 
cost-of-service schedules for ratemaking purposes. For instance, 
entities that reclassify assets into the new non-hydro renewable 
accounts may need to include or exclude certain account balances from 
their rates to remain consistent with Commission approved rate 
schedules. For this reason, we seek input from interested entities.
    (Q7) We would like to receive input from interested entities as to 
how electric utilities with formula rates would be impacted if the 
Commission creates new plant and O&M expense accounts related to non-
hydro renewables. We invite interested persons to submit comments 
regarding how affected utilities would address any such changes.

III. Comment Procedures

    17. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice, including any related 
matters or alternative proposals that commenters may wish to discuss. 
Comments are due March 29, 2021, and Reply Comments are due April 26, 
2021. Comments must refer to Docket No. RM21-11-000, and must include 
the commenter's name, the organization they represent, if applicable, 
and their address.
    18. The Commission encourages comments to be filed electronically 
via the eFiling link on the Commission's website at http://www.ferc.gov. The Commission accepts most standard word-processing 
formats. Documents created electronically using word-processing 
software should be filed in native applications or print-to-PDF format 
and not in a scanned format. Commenters filing electronically do not 
need to make a paper filing.
    19. Commenters that are not able to file comments electronically 
must send an original of their comments to: Federal Energy Regulatory 
Commission, Secretary of the Commission, 888 First Street NE, 
Washington, DC 20426.
    20. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

IV. Document Availability

    21. 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). At 
this time, the Commission has suspended access to the Commission's 
Public Reference Room due to the President's March 13, 2020 
proclamation declaring a National Emergency concerning the Novel 
Coronavirus Disease (COVID-19).
    22. From the Commission's Home Page on the internet, this 
information is available on eLibrary. The full text of this document is 
available on eLibrary in PDF and Microsoft Word format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    23. User assistance is available for eLibrary and the Commission's 
website during normal business hours from the

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Commission's Online Support at (202) 502-6652 (toll free at 1-866-208-
3676) or email at ferconlinesupport@ferc.gov, or the Public Reference 
Room at (202) 502-8371, TTY (202) 502-8659. Email the Public Reference.
    24. Room at public.referenceroom@ferc.gov.

    By direction of the Commission.

    Issued: January 19, 2021.
Nathaniel J. Davis, Sr.,
Deputy Secretary.
[FR Doc. 2021-01657 Filed 1-25-21; 8:45 am]
BILLING CODE 6717-01-P