Document ID: FERC-2007-0294-0001
Agency: ferc
Document Type: Proposed Rule
Title: Assessment of Information Requirements for FERC Financial Forms
Posted Date: 2007-02-26T05:00Z

[Federal Register: February 26, 2007 (Volume 72, Number 37)]
[Proposed Rules]               
[Page 8316-8318]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr26fe07-32]                         

[[Page 8316]]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Chapter I

[Docket No. RM07-9-000]

 
Assessment of Information Requirements for FERC Financial Forms

Issued February 15, 2007.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of inquiry.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
issuing a notice of inquiry into the need for changes or revisions to 
the Commission's reporting requirements for FERC Forms Nos. 1, 1-F, 2, 
2-A, 3-Q, 6 and 6-Q (Financial Forms). This notice of inquiry follows 
informal meetings held by Office of Enforcement (OE) staff with both 
filers and users of FERC Forms Nos. 1 and 2 to reexamine the 
information in the forms and determine whether these forms should be 
modified to improve their usefulness. The notice of inquiry invites all 
interested persons to participate in the inquiry and to submit answers 
to several specific questions.

DATES: Comments on this Notice of Inquiry are due on March 28, 2007. 
Reply comments are due April 27, 2007.

ADDRESSES: You may submit comments identified by Docket No. RM07-9-000 
by one of the following methods:
     Agency Web Site: http://ferc.gov. Follow the instructions 

for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to the Federal Energy Regulatory Commission, Secretary of the 
Commission, 888 First Street, NE., Washington, DC 20426. Please refer 
to the Comment Procedures Section of the preamble for additional 
information on how to file paper comments.

FOR FURTHER INFORMATION CONTACT:

Jane Stelck, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 200426, 
jane.stelck@ferc.gov, (202) 502-6648.

Michelle Veloso, Office of Enforcement, Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426, 
michelle.veloso@ferc.gov, (202) 502-8363.

SUPPLEMENTARY INFORMATION: 

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission) is 
initiating an inquiry into the need for changes or additions to the 
financial information reported in quarterly and annual report forms, 
FERC Form Nos. 1, 1-F, 2, 2-A, 3-Q, 6 and 6-Q (Financial Forms). 
Specifically, the Commission seeks comments on whether the Commission's 
annual and quarterly financial forms provide sufficient information to 
the public to permit an evaluation of the filers' jurisdictional rates, 
and whether these forms should otherwise be modified to improve their 
usefulness.

II. Background

    2. The Federal Power Act (FPA), the Natural Gas Act (NGA) and the 
Interstate Commerce Act (ICA) authorize the Commission to prescribe 
annual or other periodic reports to assist the Commission in the 
administration of its jurisdictional responsibilities.\1\ FERC Form No. 
1, ``Annual Report of Major Electric Utilities, Licensees and Others'' 
(Form 1), and FERC Form No. 1-F, ``Annual Report for Nonmajor Public 
Utilities and Licensees'' (Form 1-F), collect annual financial 
information as prescribed in Sec. Sec.  141.1 and 141.2 of the 
Commission's regulations.\2\ FERC Form No. 2, ``Annual Report for Major 
Natural Gas Companies'' (Form 2), and FERC Form No. 2-A, ``Annual 
Report for Nonmajor Natural Gas Companies'' (Form 2-A), collect annual 
financial information from natural gas companies subject to the 
Commission's jurisdiction, as prescribed in Sec. Sec.  260.1 and 260.2 
of the regulations.\3\ FERC Form No. 6, ``Annual Report of Oil Pipeline 
Companies'' (Form 6), collects annual financial information from oil 
pipeline companies subject to the Commission's jurisdiction, as 
prescribed in Sec. Sec.  357.2 and 357.4 of the regulations.\4\ In 
2004, the Commission's regulations were revised to require the filing 
entities to submit quarterly financial reports to supplement the annual 
filings: FERC Form No. 3-Q by electric utilities, licensees and natural 
gas companies; and FERC Form No. 6-Q by oil pipeline companies.\5\
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    \1\ See sections 4, 304 and 309 of the Federal Power Act, 16 
U.S.C. 797, 825c and 825h (2000); and sections 10(a), 16 of the 
Natural Gas Act, 15 U.S.C. 717i(a) and 717o (2000); and 49 App. 
U.S.C. 1-85 (2000).
    \2\ 18 CFR 141.1, 141.2.
    \3\ 18 CFR. 260.1, 260.2.
    \4\ 18 CFR 357.2, 357.4.
    \5\ Quarterly Financial Reporting and Revisions to the Annual 
Reports, Order No. 646, 69 FR 9030 (Feb. 26, 2004), FERC Stats. & 
Regs. ] 31,158 (2004), as amended by Order No. 646-A, 69 FR 32440 
(June 10, 2004), FERC Stats. & Regs. ] 31,163 (2004). See 18 CFR 
141.400, 260.300, and 357.4.
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    3. The Financial Forms provide information that is essential to the 
Commission's oversight authority, namely, financial data covering a 
company's past performance. The financial statements are prepared in 
accordance with the Commission's Uniform Systems of Accounts and 
related regulations and provide data that enables the Commission to 
develop and monitor cost-based rates, analyze costs of different 
services and classes of assets, and compare costs across lines of 
business. In addition, the Financial Forms are relied upon by electric 
utility, interstate natural gas pipeline and oil pipeline customers, 
state commissions, and trade associations to develop and monitor rates. 
When the Commission revised its rules to require quarterly financial 
reporting, it concluded, based on comments received, that ``the 
financial information filed with the Commission represents, in most 
cases, the only source of financial data presented in a format and 
detail suitable for the Commission to exercise its duties and 
responsibilities under the Federal Power, Natural Gas, and Interstate 
Commerce Acts.'' \6\
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    \6\ Order No. 646 at P 16.
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    4. In the spring of 2006, the Office of Enforcement (OE) assumed 
responsibility for all financial forms filed with the Commission, which 
routinely reviews and updates the forms' requirements. Accordingly, in 
September and October of 2006, OE staff met informally with both filers 
and users of Forms 1 and 2 to reexamine the breadth of data collected 
by the forms and to determine the need for clarifications, corrections, 
deletions or additional information.\7\ In particular with respect to 
Form 2, the meetings were also prompted because pleadings filed 
recently by certain market participants had questioned the adequacy of 
the type and amount of data reported in the forms for purposes of 
challenging rates on file for natural gas companies.\8\
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    \7\ References to Forms 1 and 2, to the extent applicable, also 
refer to Forms 1-F, 2-A, 3-Q, 6 and 6-Q.
    \8\ See, e.g., Public Service Commission of New York, 
Pennsylvania Public Utility Commission and Pennsylvania Office of 
Consumer Advocate v. National Fuel Gas Supply Corp., 115 FERC ] 
61,299 (2006) (National Fuel) (setting for hearing a complaint filed 
by state commissions against National Fuel Gas Supply Corp. alleging 
that the company's rates are unjust and unreasonable, based on an 
analysis of Form 2 data). See also Panhandle Complainants v. 
Southwest Gas Storage Company, 117 FERC ] 61,318 (2006) (Panhandle) 
(setting for hearing a complaint filed by customers of Panhandle 
Eastern Pipeline Company (PEPL), in which complainants relied on 
Form 2-A data for support).

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[[Page 8317]]

    5. During this two-month outreach period, OE staff met with 
representatives of natural gas and electric utility companies, state 
commissions, trade associations, financial entities, energy data 
publishers, federal agencies, and other Commission staff. In addition 
to attending the informal meetings, participants were invited to submit 
written comments and recommendations. At each session, staff sought the 
participants' views on several issues, including: how Forms 1 and 2 are 
used; which information is most helpful; whether and what additional 
information might be sought; and how burdensome to filers might be 
changes made or requirements added to either Form 1 or 2.\9\
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    \9\ The staff outreach did not extend to Form 6 or 6-Q. The 
Commission believes, however, that extension of this inquiry to the 
oil pipeline financial forms makes sense as many of the concerns 
raised with respect to the other forms could apply to the oil 
pipeline forms as well.
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III. Comments on Form 1

    6. Representatives of public utilities who file Form 1 advocated 
streamlining the form, i.e., limiting the information collected to only 
what is necessary for the Commission to perform its regulatory function 
and avoiding the collection of unnecessary additional information. Many 
Form 1 filers expressed concern that these extensive reporting 
requirements put them at a competitive disadvantage because they apply 
only to major public utilities and hydropower licensees, and not to 
state and municipal public utilities, rural cooperatives, independent 
power producers, exempt wholesale generators and power marketers.
    7. Users of Form 1 data emphasized its importance in monitoring 
cost-based rates to ensure that rates are just and reasonable, and in 
determining the potential need for a section 206 complaint. More 
generally, users complained that the Form 1 filings are often 
incomplete or inconsistent and there is a need for greater quality 
control and follow-up by Commission staff. Several users focused on the 
need for greater clarity in the Form 1 instructions and a need for 
upgrades to the software to provide for, among other things, more 
standardization of data queries.
    8. Specific suggestions for additional information items to be 
collected in Form 1 submitted by the American Public Power Association 
include the following: (1) additional cost data needed to complete 
formula rate calculations, e.g., a summary schedule of information 
provided on transmission line statistics for lines 132 kV or greater; 
(2) the standard rate divisor as specified in Order No. 888; \10\ (3) 
expansion of existing reporting of individual line and substation 
facilities to identify which facilities have been placed under 
operation or control of another entity; and, (4) reporting revenue 
distributions from regional transmission organizations (RTOs) or 
independent system operators (ISOs) with a breakdown of costs and 
revenues.
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    \10\ Promoting Wholesale Competition Through Open Access Non-
Discriminatory Transmission Services by Public Utilities; Recovery 
of Stranded Costs by Public Utilities and Transmitting Utilities, 
Order No. 888, 61 FR 21540 (May 10, 1996), FERC Stats. & Regs. ] 
31,036 (1996), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 
14, 1997), 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) (TAPS v. FERC), aff'd sub nom. New York v. FERC, 535 U.S. 
1 (2002).
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IV. Comments on Form 2

    9. Representatives of the interstate natural gas pipeline 
companies, filers of Form 2, complained that the filing requirements, 
including the filing of quarterly information, are burdensome and 
collect unnecessary data. These filers also expressed their opinion 
that Form 2 is an accounting document that does not include projections 
and, therefore, should not be used as a substitute for a cost and 
revenue study or be used to gauge earnings.
    10. The users of Form 2 called for more, not less data, and 
identified specific areas and accounts they found lacking in detail. 
According to these Form 2 users, the lack of detail affects the 
reliability of an accurate assessment of pipeline rates. Users of the 
data emphasized the significance of the information collected in Form 2 
as the primary source for evaluating cost-based rates. They added that 
since interstate natural gas pipeline companies are no longer required 
to file a periodic restatement of rates, the importance of the 
information in Form 2 is particularly significant and constitutes the 
only resource available to shippers seeking pipeline rate changes by 
filing a complaint.\11\
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    \11\ See supra note 8.
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    11. Specific changes or additional details sought by the users of 
Form 2 include: (1) A breakdown of operating revenues; (2) unbundling 
of certain accounts; (3) additional detail on cost of service items, 
billing determinants, and maximum rate contracts; (4) detail on 
pensions and Post Retirement Benefits Other Than Pension (OPEBs); (5) 
more detail on employee expenses, employee benefits and executive 
compensation; and (6) more affiliate transaction schedules. Other data 
and changes requested include: (1) Separation of cost-of-service 
components from non-cost-of-service components; (2) requiring a filer 
to identify items that it considers rate-base components for ratemaking 
purposes; (3) information on construction costs and capitalized costs; 
and (4) additional information on deferred taxes and capital structure.
    12. The Industry Coalition \12\ (Coalition) submitted written 
comments suggesting specific changes to Form 2, information they 
identified as necessary to perform an evaluation of pipeline rates. The 
Coalition's specific suggestions include the following: (1) Identify 
which components of deferred taxes are included in rate base for cost-
of-service purposes; (2) provide additional information on the entity 
whose capital structure is reported on page 218a of the form; (3) 
provide detail on gas purchases and sales; (4) provide detail on 
miscellaneous gas revenues; (5) provide a calculation of the pipeline's 
effective overall state income tax rate; (6) provide detail for 
miscellaneous assets; (7) provide detail concerning the total parent 
company overhead costs and the amount assigned or allocated to the 
pipeline; (8) provide aggregate information on volumes and revenues 
associated with discounted services and negotiated rate services; (9) 
identify costs and revenues associated with at-risk facilities; and 
(10) provide a calculation of the pipeline's earned annual return on 
equity.
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    \12\ The Industry Coalition comprised the following entities: 
Natural Gas Supply Association, American Public Gas Association, 
Independent Petroleum Association of America, and The Process Gas 
Consumers Group.
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    13. In addition, many participants commented on the need to limit 
delays in filing, and the incompleteness of some information that is 
filed. The Commission shares the concern regarding timely filings. The 
Commission expects that all Financial Forms will be filed in a timely 
manner and will provide all of the requested information.\13\
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    \13\ Concurrently with the issuance of this Notice of Inquiry, 
the Commission is issuing a show cause order to financial forms 
filers who have been delinquent in making their filings.
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    14. The comments and information received as a result of the 
outreach meetings reinforce the significance of this data to the 
Commission, and to the public who depend almost solely on the data 
reported when they elect to file a complaint under section 5 of the NGA 
or section 206 of the FPA. The forms represent more than simply 
accounting documents; the information provided is essential to the 
public's right to

[[Page 8318]]

examine, monitor, and assess utility and pipeline rates to ensure that 
they do not pay excessive or unduly discriminatory rates.
    15. In light of the comments received, both orally and written, 
during OE's review of Forms 1 and 2, and in light of the complaints set 
for hearing in National Fuel and Panhandle and the importance of the 
questions they raise, the Commission believes it is appropriate to 
solicit comments on these matters. Although the informal meetings held 
as a result of OE's outreach efforts focused on Forms 1 and 2, this 
Notice of Inquiry (NOI) solicits comments on the need for changes to 
any and all of the Financial Forms filed with the Commission, i.e., 
Form 6 and quarterly submissions, Forms 3-Q and 6-Q. The Commission is 
aware that not all participants in the informal review had an 
opportunity to submit written comments or to respond to comments 
submitted by other parties. This NOI gives those entities, and all 
other interested persons, the opportunity to comment formally with the 
Commission on any of the issues raised herein. The list is not 
exhaustive. Those responding to this NOI should feel free to raise any 
other questions or to make any comments which will aid the Commission 
in assessing its Financial Forms. After receipt of comments in response 
to this NOI, the Commission will determine whether it is appropriate to 
propose changes to the financial forms in the context of a formal 
rulemaking.

V. Questions

    16. The Commission asks that interested persons respond to the 
following general questions.
    (1) Do the annual and quarterly Financial Forms provide sufficient 
data for the public to permit an evaluation of the filers' 
jurisdictional rates?
    (2) If not, what additional data is needed to conduct such an 
evaluation? Please specify the form (or forms) to which your 
suggestions pertain.
    (3) Do the financial reports provide sufficient data to the public 
to determine revenues attributable to the sale of excess fuel 
retention? If not, what additional data is needed to conduct such an 
evaluation?
    (4) Is the information included in the financial reports sufficient 
to audit formulaic rates?
    (5) Should the Commission require reporting of information on 
demand response initiatives (interruptible, load control, etc.), 
including demand and peak demand impacts, associated costs and savings, 
and the number of advanced meters installed?
    (6) Please explain how this additional data will be useful to users 
of the Financial Forms.
    (7) How burdensome would any requirement for additional information 
be to filers of Financial Forms?
    (8) Are there specific reporting requirements that are no longer 
necessary or unduly burdensome that should be deleted?
    (9) What technical revisions, if any, need to be made to the 
Financial Forms? For example, identify any suggested changes in 
instructions, desirable software upgrades, and whether there are errors 
embedded in the forms which need to be corrected.
    (10) Should the Commission require electric utilities, licensees 
and interstate natural gas and oil pipeline companies to provide 
notification when their total sales or transactions fall below the 
minimum thresholds established in the Commission's regulations such 
that they are no longer subject to these filing requirements?
    (11) Should the Commission require a showing of good cause before 
granting an extension of time in which to file the required forms?
    (12) Are these concerns of sufficient importance to warrant a 
rulemaking and, if so, what rules should the Commission promulgate? 
Commenters are encouraged to be as specific as possible.

VI. Comment Procedures

    16. The Commission invites interested persons to submit comments on 
these matters and any related matters or alternative proposals that 
commenters may wish to discuss. Comments are due March 28, 2007 and 
reply comments are due April 27, 2007. Comments and reply comments must 
refer to Docket No. RM07-9-000 and must include the commenter's name, 
the organization he or she represents, if applicable, and his or her 
address.
    17. Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. The Commission 

accepts most standard word processing formats and commenters may attach 
additional files with supporting information in certain other file 
formats. Commenters filing electronically do not need to make a paper 
filing.
    18. Commenters that are not able to file comments electronically 
must send an original and 14 copies of their comments to: The Federal 
Energy Regulatory Commission, Secretary of the Commission, 888 First 
Street, NE., Washington, DC 20426.
    19. 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 NOPR are not 
required to serve copies of their comments on other commenters.

VII. Document Availability

    20. 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 FERC's Home Page (http://www.ferc.gov.) and in FERC's 

Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    21. From the Commission's Home Page on the Internet, this 
information is available in its eLibrary. The full text of this 
document is available in the eLibrary both in PDF and Microsoft Word 
format for viewing, printing, and/or downloading. To access this 
document in eLibrary, type the docket number of this document, 
excluding the last three digits, in the docket number field.
    22. User assistance is available for eLibrary and FERC's Web site 
during normal business hours from our Help line at (202) 502-8222 or 
the Public Reference Room at public.reference@ferc.gov.

    By direction of the Commission.
Magalie R. Salas,
Secretary.
 [FR Doc. E7-3233 Filed 2-23-07; 8:45 am]

BILLING CODE 6717-01-P