Florida Administrative Code › 25 - PUBLIC SERVICE COMMISSION › 25 - Departmental › Chapter 25-30 - WATER AND WASTEWATER UTILITY RULES › Section 25-30.140 - Depreciation

Current through Reg. 50, No. 138; July 16, 2024
(1) For the purpose of the rule, the
				following definitions apply:
(a) Account -
				Water and wastewater plant accounts are defined in the NARUC Uniform System of
				Accounts adopted by Rule
				 25-30.115, F.A.C.
(b) Amortization - The gradual extinguishment
				of an amount in an account by distributing such amount over a fixed
				period.
(c) Asset - Any owned
				physical object (tangible) or right (intangible) having economic value to its
				owner.
(d) Average Remaining Life -
				The future expected service in years of the surviving plant at a given
				age.
(e) Average Service Life - The
				period of service that can be reasonably expected from the plant type in
				question. It is measured by the period of time the subject plant and its
				associated investment is included on the company's books as in service to the
				public. The average service life will typically be less than the potential
				physical life due to factors such as governmental requirements, growth or
				adverse operating conditions.
(f)
				Average Service Life Depreciation Rate - The depreciation rate based on the
				expected average service to be experienced by the investment or account in
				question.
A.S.L. Rate =
100% - Average Net Salvage %
Average Service Life
(g)
				Capitalization - Measures of the propriety of capitalization versus expensing
				as follows:
1. The addition of any retirement
				unit, or
2. Any replacement with a
				retirement unit that materially enhances the value, use, life expectancy,
				strength or capacity of the asset prior to replacement shall be
				capitalized.
3. The cost of
				incidental repairs that neither materially add to the value of the property nor
				appreciably prolong its life and that were made to keep the property in an
				ordinary efficient operating condition shall be accounted for as a maintenance
				expense.
(h) Cost of
				removal - The cost of demolishing, dismantling, tearing down or otherwise
				removing utility plant, including the cost of transportation and handling
				incidental thereto.
(i) Continuing
				Property Record (CPR) - A perpetual collection of records required by the NARUC
				Uniform System of Accounts showing the detailed original costs, quantities, and
				locations of plant in service. Generally, a CPR should contain 1) an inventory
				of property record units which can be readily checked for proof of physical
				existence, 2) the association of costs with such property record units to
				ensure accurate accounting for retirements, and 3) the dates of installation
				and removal of plant to provide data for use in connection with depreciation
				studies.
(j) Depreciation - As
				applied to depreciable utility plant, the loss in service value not restored by
				current maintenance incurred in connection with the consumption or prospective
				retirement of utility plant in the course of service from causes that are known
				to be in current operation and against which the utility is not protected by
				insurance. Among the causes to be given consideration are wear and tear, decay,
				action of the elements, inadequacy, obsolescence, changes in the art, changes
				in demand and requirements of public authorities. The intent of depreciation
				per this rule is to provide for recovery of invested capital and to match this
				recovery as nearly as possible to the useful life of the depreciable
				investment.
(k) Depreciation
				Accounting - The process of charging the book cost of depreciable property,
				adjusted for net salvage, to operations over the associated useful
				life.
(l) Depreciation Expense -
				The periodic charge to expense to allocate the original cost of a depreciable
				group of assets over the life of those assets.
(m) Depreciable Group - A homogeneous
				grouping of assets expected to experience similar life and salvage patterns.
				Unless otherwise ordered by the Commission, depreciable groups are the accounts
				defined in the NARUC Uniform System of Accounts adopted by Rule
				 25-30.115, F.A.C.
(n) Function - defined as follows:
Water
Wastewater
Source of Supply
Collection Plant
(Accounts 304 to 311 and 339)
(Accounts 354, 355 and 360 to 367)
Pumping Plant
(Accounts 354, 355, 370, 371)
Water Treatment Plant
Treatment & Disposal Plant
(Accounts 304, 310, 311, 320, and 339)
(Accounts 354 and 380 to 389)
Reclaimed Water Treatment Plant
Transmission & Distribution Plant
(Accounts 354, 355, 371, 374, 380, 381, 389)
(Accounts 304, 310, 311 and 330 to 339)
General Plant
Reclaimed Water Distribution Plant
(Accounts 354, 355, 366, 367, 371, 375, 389)
(Accounts 304 and 340 to 348)
General Plant
(Accounts 354 and 390 to 398)
(o)
				Group Depreciation - An accounting procedure under which depreciation charges
				are accrued on the basis of the original cost of all property included in each
				depreciable group. Under the group concept, no attempt is made to keep track of
				the accumulated provision for depreciation applicable to individual assets of
				property, in view of the many items making up a utility system. The group
				approach recognizes that some assets within the group may live longer or
				shorter than the average life of the group but the group is expected to live
				the average service life. Every item in the group is assumed to be fully
				depreciated at retirement.
(p)
				Mortality Data - See plant activity data.
(q) Net Salvage - The salvage value of
				property retired less the cost of removal. This is expressed as a percent of
				retirements in the depreciation rate formula.
(r) Original Cost - The cost of acquiring an
				asset and placing it into service for first utility use. This includes the
				direct costs of acquiring the asset and the cost of labor, materials, and
				associated costs of installation to prepare the asset for first utility use.
				The cost is used in the computation of depreciation expense. In the event that
				an asset is acquired that is already in public service, the original historic
				cost of the asset should be recorded in plant in service, and the historic
				accumulated depreciation should be charged to the accumulated depreciation
				account. In the event the historic cost of an asset that is already in utility
				service cannot be determined, an independent engineer's evaluation based on an
				original cost study may be used.
(s) Plant Activity Data - Annual additions,
				retirements, adjustments or transfers, sales or purchases, and investment
				balances at end of year.
(t)
				Property Retired - As applied to utility plant, property that has been removed,
				sold, abandoned, destroyed or which has been withdrawn from service for any
				cause.
(u) Remaining Life
				Depreciation Rate - The depreciation rate based on the average remaining
				portion of the service life expected to be experienced by the investment or
				account in question and on the net unrecovered capital for that investment or
				account.
R.L. Rate =
100% -
						  Accumulated Reserve % - Future Net Salvage %
Average Remaining Life
The average remaining life for an account or sub-account is a
				  function of known planned retirement or of the average age of that account and
				  its appropriate mortality table.
(v) Replacing or Replacement - The
				construction or installation of utility plant in place of property retired,
				together with the removal of the property retired.
(w) Reserve - The accumulated provision for
				depreciation. The accumulated depreciation reserve is the net of depreciation
				accruals (expenses) and retired investment with related gross salvage and cost
				of removal as well as any appropriate adjustments or transfers.
(x) Reserve Activity Data - Annual
				depreciation expense, retirements, transfers or adjustments, gross salvage
				realized, cost of removal, and end of year balance for the accumulated
				provision for depreciation.
(y)
				Retirement Units - Those items of utility plant which, when retired with or
				without replacement, are accounted for by crediting the book cost to the
				utility plant account in which it is included.
(z) Salvage Value - The amount received for
				property retired, less any expenses incurred in connection with the sale or in
				preparing the property for sale or, if retained, the amount at which the
				material recoverable is chargeable to materials and supplies or other
				appropriate account.
(aa) Straight-Line Method
				- A depreciation method by which the service value of a depreciable group is
				charged to depreciation expense (or a clearing account) and credited to the
				accumulated provision for depreciation account through equal annual charges
				over the service life of the group.
(bb) Unit Depreciation - An accounting
				procedure under which the original cost, depreciation expense, and accumulated
				provision for depreciation, and all associated activity are maintained for each
				individual asset. Service life and salvage parameters are estimated for each
				individual asset with a depreciation rate designed to recover each asset's
				original cost over its related life. If the asset lives longer than its
				expected life, depreciation expense stops accruing when the asset is fully
				recovered. If the asset retires earlier than its expected service life, the
				associated unrecovered amount is immediately written-off as a loss.
(cc) Unrecovered Amount - Original cost less
				the accumulated provision for depreciation less expected net
				salvage.