Documentation Requirements for Cash Management Programs Issued June 26, 2003

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[Federal Register: July 8, 2003 (Volume 68, Number 130)]
[Rules and Regulations]
[Page 40500-40510]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08jy03-10]

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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 101, 141, 201, 260, 352, and 357
[Docket No. RM02-14-000; Order No. 634]

Documentation Requirements for Cash Management Programs Issued
June 26, 2003

AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Interim rule.

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SUMMARY: In order to protect the customers of jurisdictional companies,
the Federal Energy Regulatory Commission is amending its regulations to
implement documentation requirements for cash management programs. The
Commission is also seeking comments on new reporting requirements that
require FERC-regulated entities to file their cash management
agreements with the Commission, and to notify the Commission when their
proprietary capital ratios fall below 30 percent, and when their
proprietary capital ratios subsequently return to or exceed 30 percent.
This initiative responds to recent investigations by FERC and
others that revealed large amounts of funds in cash management programs
(at least $16 billion) that, in many instances, were not formalized in
writing. The interim rule is intended to protect the ratepaying
customers of FERC-regulated entities by providing greater transparency
concerning cash management programs. Additionally, it will ensure that
the investing community has more and better information to evaluate the
condition of these FERC-regulated entities and their financial
exposure.

DATES: Effective Date: This rule is effective August 7, 2003.
Compliance Date: The Commission will not implement the reporting
requirements in Sec. Sec. 141.500, 260.400, and 357.5 until it has
considered the comments filed on these requirements.
Comment Date: Comments on the new reporting requirements in
Sec. Sec. 141.500, 260.400, and 357.5 are due August 7, 2003.

ADDRESSES: Comments may be filed electronically via the eFiling link on
the Commission's Web site at http://www.ferc.gov. Commenters
unable to file comments electronically must send an original and 14
copies of their comments to: Federal Energy Regulatory Commission, Office
of the Secretary, 888 First Street, NE., Washington, DC 20426. Refer to
the Comment Procedures section of the preamble for additional information
on how to file comments.

FOR FURTHER INFORMATION CONTACT:

Wayne McDanal (Technical Information), Office of the Executive
Director, Division of Regulatory Accounting Policy, Federal Energy
Regulatory Commission, 888 First Street, NE., Washington, DC 20426,
(202) 502-6010.
Peter Roidakis (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street, NE.,
Washington, DC 20426, (202) 502-8206.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background
III. Discussion
A. Prerequisites for Participating in Cash Management Programs
B. Documentation Requirements
C. Prohibition on Netting
D. Applicability of Rule
E. Legal Authority to Prescribe Prerequisites
F. Requests for Policy Statement
G. New Reporting Requirements
1. Submission of Cash Management Agreements
2. Notification Requirements
IV. Regulatory Flexibility Act Statement
V. Environmental Analysis
VI. Information Collection Statement
VII. Comment Procedures
VIII. Document Availability
IX. Effective Date and Congressional Notification

Regulatory Text

Appendix A--Commenters in RM02-14-000

I. Introduction

1. The Federal Energy Regulatory Commission (Commission or FERC) is
amending its regulations by implementing documentation requirements for
FERC-regulated entities that participate in cash management programs.
The documentation requirements are reflected in changes to 18 CFR parts
101, 201, and 352 of the Commission's Uniform Systems of Accounts for
public utilities and licensees, natural gas and oil pipeline companies.
The Commission, however, is not adopting the two financial
prerequisites as proposed in the NOPR that would have limited
participation in a cash management program when either of the two
prerequisites was not met.
2. Additionally, the Commission is seeking comments on new
reporting requirements that require FERC-regulated entities to file the
agreements related to their cash management programs with the
Commission, and require FERC-regulated entities to notify the
Commission when their proprietary capital ratios drop below 30 percent,
and when their proprietary capital ratios subsequently return to or
exceed 30 percent. By making this information available to the public,
the investing community will have needed and better information on
which to evaluate the financial conditions of FERC-regulated entities.
These reporting requirements are reflected in changes to 18 CFR
Sec. Sec. 141.500, 260.400, and 357.5 of the Commission's regulations.
The Commission will not implement the reporting requirements in these
Sections until it has considered the comments filed on these
requirements.
3. Cash management programs are of several different types. Some
concentrate and transfer funds from multiple accounts into a single
bank account in the parent company's name. Another type is known as
``cash pooling'' or ``money pooling.'' This system uses a single
summary account with interest earned or charged on the net cash balance
position. There is no movement of funds between accounts of the
entities participating in the pool. All accounts must be in the same
bank, but not at the same branch. A third type, known as a ``zero
balance account,'' empties or fills the balances in an affiliated
company's account at a bank into or out of a parent's account each day.
This list is not exhaustive and merely describes generic features of
cash management programs.

[[Page 40501]]

4. Cash management programs control a large amount of assets. FERC
Staff investigators found that in 2001, balances in cash management
programs affecting FERC-regulated entities totaled approximately $16
billion. In addition, other investigations have revealed large
transfers of funds (amounting to more than $1 billion) between
regulated pipeline affiliates and non-regulated parents whose financial
conditions were precarious. See In Re Investigation of Certain
Financial Data, ``Order to Respond,'' Docket No. IN02-6-000, 100 FERC ]
61,143 (2002). These and other fund transfers and the enormous, mostly
unregulated, pools of money in cash management programs may
detrimentally affect regulated rates.
5. To date, the scrutiny of cash management programs has been
minimal and has been made difficult because many cash management
programs have not been formalized in writing, and the impact of these
programs on the energy markets and ratepayers is thus obscured. Other
means of transferring assets from FERC-regulated entities to
unregulated entities, such as loans and dividends, have a degree of
transparency not found in cash management programs.
6. To protect the ratepaying customers of FERC-regulated entities
by providing greater transparency of cash management programs, the
Commission is implementing documentation standards for these activities
that will assure appropriate data are maintained. The availability of
such information will also allow FERC audit staff ready access to
consistent data.
7. The Commission is amending its Uniform Systems of Accounts (18
CFR parts 101, 201, and 352) to provide documentation requirements for
cash management programs, to require that cash management agreements be
in writing, that the agreements specify the duties and responsibilities
of cash management program participants and administrators, specify the
methods for calculating interest and for allocating interest income and
expenses, and specify any restrictions on deposits or borrowings by
participants.
8. Additionally, to provide greater transparency of FERC-regulated
entities' cash management programs, the Commission is seeking comments
on a new reporting requirement that requires FERC-regulated entities to
file these agreements with the Commission. Any subsequent changes to
these agreements must be filed within 10 days from the date of the
change.
9. The Commission is also seeking comments on a new reporting
requirement that requires a FERC-regulated entity to notify the
Commission within 5 days when its proprietary capital ratio falls below
30 percent. The filing must include the entity's proprietary capital
ratio, the significant event(s) or transaction(s) that contributed to
the proprietary capital ratio falling below 30 percent, the extent to
which the entity has amounts loaned or advanced to others within its
corporate group through its cash management program, and plans, if any,
to raise its proprietary capital ratio. Finally, the Commission is
seeking comments on a new reporting requirement that would require a
FERC-regulated entity to notify the Commission within 5 days when its
proprietary capital ratio subsequently returns to or exceeds 30
percent.
10. The provisions of this interim rule will apply to all FERC-
regulated entities that have not been granted waivers of the
Commission's accounting and the FERC Annual Report Forms 1, 1-F, 2, 2-A
or 6 filing requirements. The information collected through the new
reporting requirements is considered non-confidential in nature and
will be made available to the general public via the Federal Energy
Regulatory Records Information System (FERRIS) accessed from the FERC's
Home Page.
11. The new documentation standards, the filing of the cash
management agreements, and the notification requirements, will achieve
additional transparency with respect to the financial conditions and
financial dealings of FERC-regulated entities and their corporate
financial transactions. The public availability of the information will
allow all users of financial information to make informed decisions
based on relevant and accurate information.

II. Background

12. In a Notice of Proposed Rulemaking (NOPR) issued on August 1,
2002, 67 FR 51150 (Aug. 7, 2002), IV FERC Stats. & Regs. ]
32,561 (Aug.
1, 2002), the Commission proposed to amend its Uniform Systems of
Accounts for public utilities and licensees,\1\ natural gas
companies,\2\ and oil pipeline companies,\3\ to require that, as a
prerequisite to a FERC-regulated entity participating in cash
management programs, the FERC-regulated entity shall maintain a minimum
proprietary capital ratio of at least 30 percent and the FERC-regulated
entity and its parent shall maintain investment grade credit ratings.
The Commission further proposed that if either of the conditions was
not met, the FERC-regulated entity could not participate in the cash
management program. Also, the NOPR proposed documentation requirements
for cash management programs.
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\1\ Part 101 Uniform System of Accounts Prescribed for Public
Utilities and Licensees Subject to the Provisions of the Federal
Power Act. 18 CFR part 101 (2003).
\2\ Part 201 Uniform System of Accounts Prescribed for Natural
Gas Companies Subject to the Provisions of the Natural Gas Act. 18
CFR part 201 (2003).
\3\ Part 352 Uniform Systems of Accounts Prescribed for Oil
Pipeline Companies Subject to the Provisions of the Interstate
Commerce Act. 18 CFR part 352 (2003).
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13. The NOPR was published in the Federal Register on August 7,
2002, and comments were initially due 15 days thereafter, or August 22,
2002. By notice issued August 16, 2002, the Commission extended the
comment deadline to August 28, 2002. A Staff Technical Conference was
held on September 25, 2002, to explore the issues raised by the
NOPR.\4\
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\4\ Notice of the Staff Technical Conference was issued
September 6, 2002. See 67 FR 57994 (Sept. 13, 2002).
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III. Discussion

14. The Commission received nearly fifty comments concerning
various aspects of the proposed rule. Virtually all commenters were
generally supportive of the Commission's effort to establish more
precise accounting rules with respect to cash management programs
between regulated and unregulated entities.
15. On the other hand, most of the commenters objected to the
proposed prerequisites to FERC-regulated entities' participation in
cash management programs and claimed that there is no statutory basis
for these requirements. Other commenters argued that they should be
exempt from the requirements of the proposed rule. The Edison Electric
Institute (EEI), the Interstate Natural Gas Association of America
(INGAA), and the Association of Oil Pipe Lines (AOPL) filed a joint
supplement to their initial comments, urging that the Commission adopt
guidelines rather than a rule. A complete list of commenters may be
found at Appendix A.

A. Prerequisites for Participating in Cash Management Programs

16. The NOPR proposed two financial prerequisites that must be met
for FERC-regulated entities to participate in cash management programs.
As discussed below, most commenters objected to the use of these
criteria for participation in the programs, and after reviewing the
comments, the Commission will not impose the two financial
prerequisites as conditions that FERC-regulated

[[Page 40502]]

entities must meet to participate in cash management programs.

Comments Received

17. Commenters \5\ argue that the NOPR fails to explain the basis
for choosing a 30 percent proprietary capital requirement as well as
how meeting this requirement achieves the stated objectives of the
NOPR. They also assert that the proposed requirement would not
effectively prevent any ``upstream'' loans from a regulated entity to
its unregulated parent.
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\5\ E.g., NiSource Inc. (Nisource), Chevron Pipeline Company, et
al. (Chevron), El Paso Energy Partners, L.P. (El Paso).
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18. EEI, INGAA, AOPL and others object that to obtain credit
ratings for previously unrated subsidiaries would be costly, and in
some cases subsidiaries might not be able to obtain investment grade
credit ratings without parental guarantees. Other commenters (e.g.,
PEPCO Holdings, Inc.) maintain that requiring a regulated entity to
maintain a credit rating is unreasonable because not every subsidiary
has publicly held debt, as the parent entity most likely does. Public
Service Electric and Gas Company, et al. (PSEG) is concerned that many
of its subsidiaries would be unable to obtain investment grade credit
ratings based on its current business structure, which is designed to
qualify subsidiaries for exempt wholesale generator status. KeySpan
Corporation (KeySpan) expresses doubt that a credit rating for FERC-
regulated entities would do much to protect ratepayers.
19. The National Rural Electric Cooperative Association (NRECA)
points out that many of its electric cooperative members operate as
not-for-profit organizations collecting only enough revenues in excess
of operating expenses to meet mortgage requirements and would,
therefore, not be able to meet the 30 percent proprietary capital
requirement. These electric cooperatives argue that so long as they
meet their loan agreements, they should be permitted to participate in
cash management programs.
20. Commenters \6\ also argue that the investment grade credit
rating prerequisite could in fact increase costs to ratepayers where
neither the FERC-regulated entity nor its unregulated parent currently
holds a credit rating of any kind. The cost burden of obtaining and
maintaining investment grade credit ratings, commenters state, would
invariably be passed on to ratepayers. They further argue that any
costs associated with a FERC-regulated entity not being able to
participate in a cash management program, such as higher costs of
borrowing, would also be borne by ratepayers in the form of higher
rates.
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\6\ Among them are AOPL, Chevron, INGAA, National Grid USA
(National Grid), Duke Energy Corporation (Duke Energy), SCANA
Corporation (SCANA) and Ameren Corporation (Ameren) (also arguing
that cutting off access to capital could be detrimental to customers
because utilities might then avoid maintenance and improvements to
their systems).
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21. Duke Energy and NiSource fear the rule would effectively become
a financial rating trigger and would place added stress on a company's
investment grade credit rating. They point out that rating agencies
advise companies to avoid such rating triggers in financing agreements
because rating agencies view these triggers as creating additional
risk. Accordingly, these commenters would eliminate either the
investment grade credit rating or the 30 percent proprietary capital
requirement, or both.
22. Conversely, Missouri Public Service Commission (MoPSC) suggests
that the Commission require all entities that participate in the same
cash management program as a regulated entity maintain investment grade
credit ratings or maintain the ratings if they participate in different
pools with members in common with the regulated entity's pool.

Commission Response

23. The Commission recognizes the myriad concerns raised by parties
commenting on the NOPR, both in comments on the NOPR and in comments
received at the related Staff Technical Conference, particularly with
respect to the 30 percent proprietary capital and investment grade
credit rating prerequisites. Based upon the additional information
obtained from commenters, conditioning participation in a cash
management program using an investment grade credit rating and a
proprietary capital ratio of 30 percent may be too rigid and
inflexible.
24. Although over 90 percent of FERC-regulated entities have at
least 30 percent proprietary capital, many do not have credit ratings
and would thus fail the investment grade prerequisite. The
prerequisites, particularly the requirement for an investment grade
credit rating, would create uncertainty as to the ability of FERC-
regulated entities to participate in new or existing cash management
programs. The Commission therefore is not adopting the proposed
prerequisites.\7\
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\7\ The Commission will not adopt the NOPR's proposed revision
to paragraph B of Accounts 146, Accounts receivable from associated
companies and paragraph (b) of Account 13, Receivables from
affiliated companies, which prescribed the prerequisites for
participation in cash management programs.
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B. Documentation Requirements

25. The NOPR proposed that FERC-regulated entities would be
required to maintain documentation of all deposits into and borrowings
from cash management programs, as well as documentation of security, if
any, provided for repayment of deposits or in support of borrowings,
and daily balances for each individual deposit or borrowing as well as
documentation on the organization and operation of the cash management
program.

Comments Received

26. Virtually all commenters supported the NOPR's proposed
requirement to put all agreements in writing, specifying the duties of
the participants as well as the duties of the administrators. EEI
asserts that, as a general matter, the proposed documentation
requirements as to the structure and operation of the cash management
programs appear reasonable and would formalize documentation practices
that should already be in place for such programs. AOPL argues that
while companies could document the establishment of cash management
programs and all transactions, individual agreements are rarely, if
ever, put into writing. While agreeing that putting agreements into
written documents would be helpful, Duke Energy urges the Commission
not to dictate the terms of the agreements.
27. While commenters support the documentation requirements, many,
including EEI, Allegheny Energy, Inc. (Allegheny), AOPL, Cinergy Corp.
(Cinergy), Gulf South Pipeline Company LP (Gulf South), KeySpan and
NiSource, request clarification on whether they must securitize cash
management transactions. They also request clarification that
securitization is not required for participation in a cash management
program, but that the Commission intends that any security provided be
documented. AOPL, Gulf South, and National Fuel Gas Supply Corporation
(National Fuel) also request clarification of the level of detail
required for the documentation, whether the documentation may be
maintained electronically, and whether companies must submit the
documentation on any regular basis or whether maintaining the
documentation is sufficient. AOPL suggests that the documentation
requirements should be simplified to more closely mirror Generally
Accepted Accounting Principles (GAAP), arguing that tracking every
transaction is unreasonable and unwarranted.

[[Page 40503]]

Commission Response

28. While we recognize that some commenters argue that their
particular cash management programs have not been reduced to writing,
sound business practices dictate, as noted by EEI, that such agreements
be in writing. We are not, however, establishing the terms of such
agreements. In this interim rule, we require FERC-regulated entities to
maintain documentation in support of their cash management programs
including the duties and responsibilities of the program administrators
and participants, restrictions on borrowings from the cash management
programs, interest earnings and expense rates and cost sharing
provisions, all as stated in the text of revised Account 146, Accounts
receivable from associated companies, for public utilities and
licensees, and natural gas companies, and Account 13, Receivables from
affiliated companies, for oil pipeline companies.
29. With respect to the form of documentation required in support
of cash management programs, the Commission's regulations at parts 125,
225 and 356 prescribe the form of the media to be utilized for
maintaining the records including paper, electronic, optical or other
new and evolving media, as well as the retention period for such
records.\8\
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\8\ 18 CFR parts 125, 225 and 356 (2003).
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30. The Commission did not propose the filing of any of the
documentation that it proposed to be maintained. After review of
comments and in recognition of the need for transparency of information
on cash management programs, the Commission is now seeking comment on
proposed filing requirements for cash management agreements and for
notification of changes in the FERC-regulated entity's proprietary
capital ratio.
31. Duke Energy's and other commenters' concerns about the
Commission's requirements for security for cash management program
deposits and borrowings are misplaced. The interim rule does not
require security for these arrangements. To clarify, FERC-regulated
entities must maintain documentation of security for deposits into and
borrowings from these arrangements only when the cash management
programs themselves require such security.\9\
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\9\ EEI made this point in its comments at the September 25,
2002 technical conference.
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32. Duke Energy also argues that the text of Account 146 should be
revised to provide that items ``not expected to be paid'' within 12
months or non-current items should be transferred either to Account
123, Investment in associated companies, or Account 123.1, Investment
in subsidiary companies, rather than requiring the transfer of all non-
current items to Account 123 as Account 146 now provides.\10\ Duke
Energy argues that this clarification will ensure proper classification
of items and will ``eliminate the need for burdensome daily monitoring
for the twelve-month time limit on entries in this account * * *.''\11\
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\10\ Duke Energy comments at 26-27.
\11\ Id. at 27.
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33. While Duke Energy's concern is not entirely clear, it may be
related to a misperception of the proposed requirements for documenting
security of cash management program transactions. The NOPR proposed no
change in how current and non-current transactions are accounted for,
and Duke Energy's suggested revision is beyond the scope of this
interim rule. As explained above, the interim rule does not mandate
that cash management transactions be securitized, but only imposes a
documentation requirement for any security that exists. Duke Energy
implies it is hard to monitor ``undated'' paper for purposes of the
rule's documentation requirements. However, the possibility of
``undated'' paper existed prior to the interim rule, and for purposes
of proper classification in Account 146, 123, or 123.1, a reasonable
date must be imputed. Duke Energy has not clearly articulated any need
for changing Account 146 as a consequence of the interim rule.
Accordingly, the Commission will not modify Account 146, as requested
by Duke Energy.
34. AOPL's proposal that documentation ``mirror'' GAAP is imprecise
and does not identify the specific documentation to be maintained for
cash management transactions. The Commission is specifying the
documentation that FERC-regulated entities must maintain to meet
Commission's oversight needs and to satisfy its regulatory mandate.
35. Finally, FirstEnergy Corp. (FirstEnergy) suggests creating a
new account under the Uniform System of Accounts under which all cash
management program loans would be recorded. It further requests that
the Commission clarify the specific transactions to which the NOPR
applies, as Account 146 encompasses all transactions between associated
companies.
36. We do not find it necessary at this time to revise the Uniform
Systems of Accounts by adding a new account as requested by
FirstEnergy. The instructions to Account 146 are sufficient and can
accommodate cash management programs used by FERC-regulated entities.

C. Prohibition on Netting

37. The NOPR proposed that ``cash deposits and borrowings may not
be netted'' in order to provide better transparency of inter-company
payables or receivables resulting from cash management agreements.

Comments Received

38. Commenters uniformly object to this proposal or request
clarification as to the meaning of this requirement, pointing out that
netting is the essence of, and one of the key benefits of, cash
management programs.\12\ Commenters argued that cash management
programs operate, essentially, as ordinary checking accounts and that
transactions within an account are netted against each other.\13\
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\12\ See, e.g., AOPL, INGAA, and EEI.
\13\ Id.
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Commission Response

39. Prior to the issuance of the NOPR, the Commission examined a
number of FERC-regulated entities' cash management accounts. That
examination revealed numerous instances in which amounts reported in
FERC Accounts 146 and 13 had negative balances. The Commission views
the reporting of negative balances in these receivables accounts rather
than in payable accounts as inappropriate and potentially misleading.
The Commission included in the NOPR a ban on netting in an effort to
rectify that situation.
40. The Commission agrees with the commenters that cash management
programs operate essentially as ordinary checking accounts and that
transactions within an account are netted against each other. The
Commission is therefore deleting the prohibition on netting from this
interim rule. We will require, however, that the balances in the FERC
accounts that record cash management activities be properly classified:
debit balances must be reported in the appropriate accounts receivable
account and credit balances must be reported in the appropriate
accounts payable account at the end of each accounting period.

D. Applicability of Rule

41. The NOPR proposed that the requirements of this rule apply to
all FERC-regulated entities including registered holding companies that
are regulated by the United States Securities and Exchange Commission
(SEC).

[[Page 40504]]

Comments Received

42. Registered holding company commenters uniformly argue that
registered holding companies, regulated by the SEC under the Public
Utility Holding Company Act of 1935 (PUHCA), should be exempted from
the proposed rule.\14\ They argue that their cash management activities
are already regulated by the SEC, that efforts by FERC to regulate the
same would be burdensome and duplicative, that the PUHCA itself
protects against cash management abuse, and that Section 318 of the
Federal Power Act (FPA) deprives FERC of the authority to regulate
their cash management practices.\15\ Ameren suggests that the
Commission deem registered holding companies in compliance with the
proposed rule so long as the companies comply with all applicable PUHCA
rules and SEC orders. Furthermore, several commenters, including
Cinergy, point out that the regulation of cash management programs
falls squarely within the technical expertise of the SEC.
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\14\ Registered holding company commenters included: American
Electric Power Company, Inc. (AEP), Allegheny, Ameren, Cinergy,
FirstEnergy, KeySpan, National Fuel, National Grid, NiSource,
Northeast Utilities (NU), SCANA, and WGL Holdings, Inc. (WGL
Holdings).
\15\ 16 U.S.C. 792.
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43. Similarly, USG Pipelines,\16\ Cinergy and others argue that the
rule should not apply to small regulated entities and urge the
Commission expressly to exempt these entities. The NRECA asks that the
rule not be applied to cash management programs maintained by FERC-
regulated electric cooperatives.
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\16\ USG Pipeline Co., B-R Pipeline Co. and United States Gypsum
Co. (collectively USG Pipelines).
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44. Energy marketers and traders argue that ratepayers would not be
adversely affected by mismanagement of their cash management programs,
and, therefore, they should be exempted from the proposed rule.\17\
PSEG suggests expanding the exemption from the Uniform System of
Accounts to include generators and suggests that energy marketers,
traders and generators be allowed to apply for waivers by demonstrating
that they are not subject to the Commission's cost-based rate
regulation, similar to the Commission's waiver of its part 35 cost of
service filing requirements.
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\17\ Ontario Energy Trading International, Electric Power Supply
Association, Edison Mission Energy, and Edison Mission Marketing and
Trading, Inc. The concern is that entities with market-based rate
authority may lose their exemption from the requirements of the
Uniform System of Accounts, at which time they would become subject
to the Commission's cash management requirements.
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Commission Response

45. The Commission agrees with comments submitted by registered
holding companies and their affiliates asserting that the SEC regulates
their cash management activities. The Commission is not, in this
interim rule, prescribing any limitations on the entry into and
participation in cash management programs. The Commission is, however,
prescribing documentation requirements that will apply to FERC-
regulated entities that are subject to the SEC's oversight. In carrying
out its oversight, the SEC has not promulgated regulations governing
the documentation to be maintained for cash management activities. The
SEC's case-by-case documentation requirements do not provide assurance
that documentation adequate for this Commission's regulatory oversight
will be maintained. Therefore, we shall require that FERC-regulated
entities that are also subject to the PUHCA follow the documentation
requirements that we are adopting in our Uniform Systems of Accounts.
Section 318 of the FPA does not prohibit the imposition of these
requirements because there is no conflict between the documentation
requirements the Commission is adopting here and those used by the SEC.
46. The eligibility concerns of NRECA and others representing
``small regulated entities'' are moot since the Commission is not
adopting the proposed prerequisites for participation in cash
management programs. Small regulated entities and NRECA members are
subject to our Uniform Systems of Accounts and thus will be subject to
the documentation requirements that we are adopting in this interim
rule.
47. Energy marketers, traders, generators and other FERC-regulated
entities that have been granted waivers of our accounting and the FERC
Annual Report Forms 1, 1-F, 2, 2-A or 6 reporting requirements will not
be subject to the documentation requirements included in this interim
rule.

E. Legal Authority to Prescribe Prerequisites

48. Several commenters \18\ argue that FERC lacks the authority
under the Natural Gas Act (NGA),\19\ the FPA, as well as the Interstate
Commerce Act (ICA) \20\ to impose any prerequisites for the use of cash
management accounts. Other commenters argue that the regulation of cash
management participation is beyond the jurisdiction of the Commission.
Others state that the proper way to protect customers and redress cash
management issues is through rate cases.\21\ Duke Energy in particular
argues that the Commission's authority under its ratemaking powers and
its related investigatory powers offers ample protection to ratepayers
without the need for the more restrictive measures proposed in the
NOPR.
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\18\ Among the commenters are Duke Energy, INGAA (comments
supported by El Paso, National Fuel, and Williston Basin Interstate
Pipeline Co.), EEI (comments supported by AEP), AOPL (comments
supported by Chevron), and the Kinder Morgan Pipelines (Kinder
Morgan)).
\19\ 15 U.S.C. 717.
\20\ 49 App. U.S.C. 1-85 (1988).
\21\ E.g., Kinder Morgan, NiSource. These commenters argue that
the Commission can prevent harm to consumers by disallowing the
passthrough of costs related to improper cash management practices
to customers, when the regulated entity files a rate case to recover
such costs. However, the Commission observes that rate cases are
infrequent for many FERC-regulated entities, and the harm done by
improper cash management practices may occur long before a rate case
is filed.
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49. These commenters' arguments about our authority to prescribe
prerequisites to cash management programs are made moot by the
Commission's decision in this interim rule to forego such
prerequisites. The interim rule revises the Uniform Systems of Accounts
for public utilities and licensees, natural gas companies, and oil
pipeline companies pursuant to the authority granted the Commission
under the FPA, the NGA, and the ICA to prescribe uniform accounting
requirements for entities subject to the Commission's jurisdiction.\22\
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\22\ Section 301(a) of the Federal Power Act (FPA), 16 U.S.C.
825(a), section 8 of the Natural Gas Act (NGA), 15 U.S.C. 717g and
section 20 of the Interstate Commerce Act (ICA), 49 App. U.S.C. 20
(1988), authorize the Commission to prescribe rules and regulations
concerning accounts, records and memoranda as necessary or
appropriate for the purpose of administering the FPA, NGA, and the
ICA. The Commission may prescribe a system of accounts for FERC-
regulated companies and, after notice and opportunity for hearing,
may determine the accounts in which particular outlays and receipts
will be entered, charged or credited.
---------------------------------------------------------------------------

F. Requests for Policy Statement

50. EEI, INGAA, AOPL and other commenters \23\ suggest that the
Commission issue a policy statement concerning cash management programs
rather than a rule.
---------------------------------------------------------------------------

\23\ See e.g. Gulf South, Duke Energy, and Kinder Morgan.
---------------------------------------------------------------------------

51. Because a policy statement does not have the force of law, a
policy statement in lieu of a rule would not provide the assurance or
transparency of a rule on documentation requirements and, therefore,
would not adequately protect ratepayers. The Commission

[[Page 40505]]

finds that the public interest will be better satisfied by implementing
a rule rather than by issuing advisory guidelines.

G. New Reporting Requirements

52. As part of this interim rule, the Commission is seeking
comments on new reporting requirements that were not explicitly
included in the NOPR that would require FERC-regulated entities to file
their cash management agreements with the Commission, and to notify the
Commission when their proprietary capital ratios fall below 30 percent
and when they subsequently return to or exceed 30 percent.
53. As previously mentioned, large amounts of funds are controlled
through cash management programs and in many instances such programs
were not formalized in writing or were not adequately documented. In
order to monitor these types of programs, the Commission is exercising
its authority pursuant to sections 4, 304 and 309 of the Federal Power
Act, sections 10(a) and 16 of the Natural Gas Act, and section 20 of
the Interstate Commerce Act to require the filing of cash management
agreements, and the filing of a notification when a FERC-regulated
entity's proprietary capital ratio falls below 30 percent and when it
subsequently returns to or exceeds 30 percent.\24\ Additionally, all of
the information collected in these filings will be considered non-
confidential in nature and therefore will be made available to the
general public for greater transparency. The Commission will not
implement any reporting requirements, however, until it has received
and analyzed the comments.
1. Submission of Cash Management Agreements
54. The Commission is seeking comments on a new reporting
requirement that would require FERC-regulated entities participating in
cash management programs to file their cash management agreements, and
any subsequent changes within 10 days from the date of the change. The
filing of these agreements with the Commission will provide timely
information that will lend additional transparency to the cash
management program activities between FERC-regulated entities and their
affiliates. The public availability of the information will allow the
Commission, as well as all users of financial information to make
informed decisions based on relevant and accurate information.
2. Notification Requirements
55. The Commission is seeking comments on a new reporting
requirement that would require FERC-regulated entities participating in
cash management programs to notify the Commission when their
proprietary capital ratios fall below 30 percent and when they
subsequently return to or exceed 30 percent. In addition, the
Commission is seeking comments on what would be an appropriate
notification standard to use as a comparable indicator of a change in
financial condition for electric cooperatives that file FERC Annual
Report Forms 1 or 1-F with the Commission.
56. Although the two financial prerequisites (i.e., the investment
grade credit rating and the 30 percent proprietary capital) included in
the NOPR were not adopted as part of this interim rule, they are
important indicators of a company's financial health and indicate the
extent to which a FERC-regulated entity has taken on debt to finance
its assets or operations. A highly leveraged company, with the
accompanying fixed interest expense and future obligation to repay the
principal, may be in a weakened financial position if there is an
unfavorable change in the business climate. This event may result in an
inadequate flow of cash which may have an adverse impact on the FERC-
regulated entity's ability to remain solvent.
57. Therefore, when a FERC-regulated entity's proprietary capital
ratio falls below 30 percent (or conversely, its long-term debt ratio
rises above 70 percent), the FERC-regulated entity must file a
notification with the Commission, detailing its proprietary capital
ratio, the significant event(s) or transaction(s) that contributed to
the proprietary capital ratio falling below 30 percent, the extent to
which the FERC-regulated entity has amounts loaned or money advanced to
others within its corporate group through its cash management
program(s), and plans, if any, to raise its proprietary capital ratio.
---------------------------------------------------------------------------

\24\ See 16 U.S.C. 797, 825c and 825h; 15 U.S.C. 717i(a) and
717o; and 49 App. U.S.C. 1-85.
---------------------------------------------------------------------------

58. NRECA asserts that many of its electric cooperative members
operate as not-for-profit organizations collecting only enough revenues
in excess of operating expenses to meet mortgage requirements and
would, therefore, not be able to meet the 30 percent proprietary
capital requirement. However, NRECA also states that many electric
cooperatives have themselves established subsidiaries that are engaged
in diversified non-electric business activities.\25\ The Commission
recognizes that electric cooperatives generally do not accumulate
profits for shareholders as is the case of investor owned utilities.
Consequently, the proprietary capital ratio may not be an appropriate
indicator of a weakened financial condition for a cooperative. The
Commission therefore invites comment on what would be an appropriate
metric of financial condition to use as a notification trigger for
cooperatives that participate in cash management programs with their
affiliates.
---------------------------------------------------------------------------

\25\ NRECA comments at 4.
---------------------------------------------------------------------------

59. Under the Uniform System of Accounts, FERC-regulated entities
are required to keep their books and records on a monthly basis.\26\
Therefore, within 15 days after the end of the month, FERC-regulated
entities subject to this interim rule must compute their proprietary
capital ratios. The proprietary capital ratio must be computed as
follows. The numerator will be the sum of the balances in the
proprietary capital accounts. Public utilities and licensees and
natural gas companies will use Account 201, Common stock issued,
through Account 219, Accumulated other comprehensive income, and oil
pipeline companies will use Account 70, Capital stock, through Account
77, Accumulated other comprehensive income. The denominator will be the
sum of the balances in the proprietary capital accounts plus the sum of
the balances in the long-term debt accounts. Public utilities and
licensees, and natural gas companies will use Account 221, Bonds,
through Account 226, Unamortized discount on long-term debt-Debit, and
oil pipeline companies will use Account 60, Long term debt-payable
after one year, through Account 62, Unamortized discount and interest
on long term debt. In the event the proprietary capital ratio falls
below 30 percent, the FERC-regulated entity must make its notification
filing within 5 days after making the above calculation. Additionally,
the FERC-regulated entity will be required to notify the Commission
within 5 days after the determination has been made that its
proprietary capital ratio has met or exceeded 30 percent.
---------------------------------------------------------------------------

\26\ General Instruction 4 in 18 CFR parts 101 and 201, General
Instruction 1-3 in 18 CFR part 352.
---------------------------------------------------------------------------

IV. Regulatory Flexibility Act Statement

60. The Regulatory Flexibility Act (RFA) \27\ requires agencies to
prepare certain statements, descriptions, and analyses of proposed
rules that will have a significant economic impact on

[[Page 40506]]

substantial number of small entities. The Commission is not required to
make such analyses if a rule would not have such an effect.
---------------------------------------------------------------------------

\27\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

61. The Commission concludes that this interim rule would not have
such an impact on small entities. Most filing companies regulated by
the Commission do not fall within the RFA's definition of a small
entity, and the data required by this rule are already being captured
by their accounting systems. However, if the recordkeeping requirements
represent an undue burden on small businesses, the entity affected may
seek a waiver of the requirements from the Commission.
62. AOPL argues that the NOPR's estimate of the impact of this rule
for the purposes of the Regulatory Flexibility Act of 1980 was too low.
AOPL bases its estimate largely on the costs that previously unrated
subsidiaries would incur to obtain credit ratings.\28\ The interim
rule, however, eliminates the proposed prerequisites for participation
in cash management programs thus making concerns over obtaining credit
ratings moot.
---------------------------------------------------------------------------

\28\ AOPL Comments at 12.
---------------------------------------------------------------------------

V. Environmental Analysis

63. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\29\ The
Commission excludes certain actions not having a significant effect on
the human environment from the requirement to prepare an environmental
impact statement.\30\ No environmental consideration is raised by the
promulgation of a rule that is procedural or does not substantially
change the effect of legislation or regulations being amended.\31\ This
rule updates parts 101, 141, 201, 260, 352 and 357 of the Commission's
regulations and does not substantially change the effect of the
underlying legislation or the regulations being revised or eliminated.
Accordingly, no environmental consideration is necessary.
---------------------------------------------------------------------------

\29\ Order No. 486, Regulations Implementing the National
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. &
Regs. Preambles 1986-1990 ]30,783 (1987).
\30\ 18 CFR 380.4.
\31\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

VI. Information Collection Statement

64. The Office of Management and Budget's (OMB) regulations at 5
CFR 1320.11 require that it approve certain reporting and recordkeeping
requirements (collections of information) imposed by an agency. Upon
approval of a collection of information, OMB will assign an OMB control
number and an expiration date. Respondents subject to the information
collection requirements of this interim 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.
65. In accordance with section 3507(d) of the Paperwork Reduction
Act of 1995,\32\ the information collection requirements in the subject
rulemaking were submitted to OMB for review.
---------------------------------------------------------------------------

\32\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

66. Public Reporting Burden: In the NOPR the Commission provided
burden estimates based on an estimate of the number of FERC-regulated
entities currently filing FERC Forms 1, 2 and 6, who are members of
consolidated groups and participate in their consolidated groups' cash
management programs. The NOPR estimated that 448 FERC-regulated
entities would need to convert verbal cash management agreements into
writing to comply with this interim rule. For each entity, the NOPR
estimated it would require an average of two hours to make the
conversion for a total of burden estimate of 896 hours.\33\ In
addition, FERC-regulated entities must maintain documentation on their
cash management programs. Also, the Commission is seeking comments on
new reporting requirements that would require FERC-regulated entities
to file their cash management agreements and notify the Commission when
their proprietary capital ratios fall below 30 percent and when their
proprietary capital ratios subsequently return to or exceed 30 percent.
These requirements will be part of a new reporting requirement, FERC-
604. The burden estimates below reflect both the documentation and the
reporting requirements.
67. The Commission received 48 comments on the proposed cash
management prerequisites and documentation requirements. Of the 48
commenters, EEI and AOPL challenged the Commission's estimates for
reporting burden as too low. EEI asserts a company of any size with
multiple cash management agreements is likely to spend more than two
hours per year maintaining written cash management agreements and the
non-netted transactional records. EEI further asserts that the rule's
FERC Form 1 reporting requirements would likely take 10 or more hours
by themselves. EEI suggests that a more realistic estimate of burden
imposed by the rule would be at least 30 hours or more per company per
year. AOPL states that while the FERC Form 6 reporting is unlikely to
increase significantly, other requirements within the proposed rule
would have a significant impact on the cost and burden of this rule.
AOPL estimates the cost of complying with the investment grade rating
requirement could range from $100,000 to $300,000 for each previously
unrated subsidiary. Six other commenters argued that the proposed
prerequisite would impose significant costs and burdens upon them.
---------------------------------------------------------------------------

\33\ In the NOPR, the burden estimate was improperly identified
as applying to the FERC Form 1, FERC Form 2 and FERC Form 6 data
collections. Since the interim rule imposes a recordkeeping
requirement and requires all cash management agreements to be in
writing, the associated burden is correctly assigned to FERC-555
``Records Retention Requirements.'' The reporting requirements that
are also the subject of this interim rule will be identified by a
new information collection requirement.
---------------------------------------------------------------------------

68. In this interim rule, the Commission has eliminated the
prerequisites for participation in cash management programs and the no-
netting requirement for cash management transactions. Therefore, issues
raised by EEI, AOPL and others about costs and burdens of complying
with these aspects of the proposed rule are moot. The Commission
concludes that EEI's comment that the rule imposes ten or more hours of
additional burden on FERC Form 1 reporting requirements is unsupported
and misplaced. Similarly, the Commission concludes that EEI has not
provided any support regarding its assertion that burden imposed by
this rule is 30 or more hours. The Commission finds the burden
associated with converting documents to comply with this interim rule
is minimal and that its previous estimate was a reasonable one. While
FERC-regulated entities will now be required to reduce their cash
management agreements to writing, the Commission finds that this is
simply sound business practice and, as the Commission is not dictating
the terms of these agreements, the burden should be small.
69. Recordkeeping (Documentation) Requirements

[[Page 40507]]

----------------------------------------------------------------------------------------------------------------
Number of
Data Collection Number of Responses Per Hours Per Total Annual
Respondents Respondent Respondent Hours
----------------------------------------------------------------------------------------------------------------
FERC-555........................................ 448 1 2 896
-----------------
Totals...................................... .............. .............. .............. 896
----------------------------------------------------------------------------------------------------------------
The total annual hours for documentation requirements = 896 hours.

70. Reporting Requirements:

----------------------------------------------------------------------------------------------------------------
Number of
Data Collection Number of Responses Per Hours Per Total Annual
Respondents Respondent Response Hours
----------------------------------------------------------------------------------------------------------------
FERC-604 (new) (cash management agreement)...... 602* 1 1.5 903
(Notification).................................. 34 2 .75 51
-----------------
Totals...................................... .............. .............. .............. 954
----------------------------------------------------------------------------------------------------------------
*(The number of respondents as identified in the NOPR that will be subject to submitting documents describing
their cash management agreements.)
The total annual hours for reporting requirements is 954.

71. Information Collection Costs: The Commission estimates the
costs associated with converting verbal cash management agreements into
writing to comply with the requirements of this interim rule to be
$50,418.\34\ The Commission estimates the costs associated with
submitting cash management program documents and notifying the
Commission when a FERC-regulated entity's proprietary capital ratio
falls below 30 percent and when its proprietary capital ratio
subsequently returns to or exceeds 30 percent to be $53,681.\35\
---------------------------------------------------------------------------

\34\ (896 hours for collection/2,080 hours) x $117,041 =
$50,418.
\35\ (954 hours for collection/2,080 hours) x $117,041 =
$53,681.
---------------------------------------------------------------------------

72. The Commission has assured itself, by means of its internal
review that there is specific, objective support for the burden
estimates associated with the information requirements.
Title: FERC-555 ``Records Retention Requirements''; FERC-604 ``Cash
Management Programs and Financial Reporting Requirements''.
Action: Proposed information collection requirements.
OMB Control No.: 1902-0098 and to be determined.
Respondents: Public utilities and licensees; natural gas companies;
oil pipeline companies (Business or other for profit, including small
businesses.)
Frequency of the information: On occasion.
Necessity of the information: The interim rule amends the
Commission's regulations to revise parts 101, 141, 201, 260, and 352,
the Commission's Uniform Systems of Accounts, to provide information
collection requirements for cash management activities and to require
that cash management agreements be in writing.
73. The implementation of these requirements will help the
Commission carry out its responsibilities under the FPA, the NGA and
the ICA to protect ratepaying customers of FERC-regulated entities by
providing greater transparency of cash management activities.
74. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426 [Attention:
Michael Miller, Office of the Executive Director, ED-30, (202) 502-
8415, or michael.miller@ferc.gov]
or by sending comments on the
collections of information to the Office of Management and Budget,
Office of Information and Regulatory Affairs, Attention: Desk Officer
for the Federal Energy Regulatory Commission, 725 17th Street, NW.,
Washington, DC 20503. The Desk Officer can also be reached by phone at
(202) 395-7856, or fax: (202) 395-7285.

VII. Comment Procedures

75. The Commission invites all interested persons to submit
comments on the new reporting requirements included in this interim
rule, including any related matters or alternative proposals that
commenters may wish to discuss. Comments are due August 7, 2003.
Comments must refer to Docket No. RM02-14-000, and must include the
commenter's name, the organization he or she represents, if applicable,
and the commenter's address in the comments. Comments may be filed
either in electronic or paper format.
76. 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 file formats.
Commenters filing electronically do not need to make a paper filing.
Commenters that are not able to file comments electronically must send
an original and 14 copies of their comments to: Federal Energy
Regulatory Commission, Office of the Secretary, 888 First Street NE.,
Washington DC 20426.
77. 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 rule are not
required to serve copies of their comments on other commenters.

VIII. Document Availability

78. 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.
79. From FERC's Home page on the Internet, this information is
available in the Federal Energy Regulatory Records Information System
(FERRIS). The full text of this document is available on FERRIS in PDF
and WordPerfect format for viewing, printing, and/or

[[Page 40508]]

downloading. To access this document in FERRIS, type the docket number
excluding the last three digits of this document in the docket number
field.
80. User assistance is available for FERRIS and the FERC's Web site
during normal business hours by contacting FERC Online Support by
telephone at (866) 208-3676 (toll free) or for TTY, (202) 502-8659, or
by e-mail at FERCOnlineSupport@ferc.gov.
IX. Effective Date and Congressional Notification

81. These regulations are effective August 7, 2003. The Commission,
however, will not implement the new reporting requirements until it has
had an opportunity to consider the comments filed on these
requirements. The Commission has determined, with the concurrence of
the Administrator of the Office of Information and Regulatory Affairs
of OMB, that this interim rule is not a ``major rule'' as defined in
section 351 of the Small Business Regulatory Enforcement Fairness Act
of 1996.\36\ The Commission will submit the interim rule to both houses
of Congress and the General Accounting Office.\37\
---------------------------------------------------------------------------

\36\ 5 U.S.C. 804(2) (2002).
\37\ 5 U.S.C. 801(a)(1)(A) (2002).
---------------------------------------------------------------------------

List of Subjects

18 CFR Part 101

Electric power, Electric utilities, Reporting and recordkeeping
requirements, Uniform System of Accounts.

18 CFR Part 141

Electric power, Reporting and recordkeeping requirements.

18 CFR Part 201

Natural gas, Reporting and recordkeeping requirements, Uniform
System of Accounts.

18 CFR Part 260

Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 352

Pipelines, Reporting and recordkeeping requirements, Uniform System
of Accounts.

18 CFR Part 357

Pipelines, Reporting and recordkeeping requirements.

By the Commission.
Magalie R. Salas,
Secretary.

? In consideration of the foregoing, the Commission is amending parts
101, 141, 201, 260, 352, and 357 in Title 18 of the Code of Federal
Regulations, as follows:

PART 101--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR PUBLIC
UTILITIES AND LICENSEES 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, Balance Sheet Accounts, the existing paragraph in
account 146 is designated as paragraph A, and paragraphs B and C are
added to read as follows:

Balance Sheet Accounts

* * * * *
146 Accounts receivable from associated companies.
A. * * *
B. A public utility or licensee participating in a cash management
program must maintain supporting documentation for all deposits into,
borrowings from, interest income from, and interest expense to such
program. Cash management programs include all agreements in which funds
in excess of the daily needs of the public utility or licensee along
with the excess funds of the public utility's or licensee's parent,
affiliated and subsidiary companies are concentrated, consolidated, or
otherwise made available for use by other entities within the corporate
group. The written documentation must include the following
information:
(1) For each deposit with and each withdrawal from the cash
management program: the date of the deposit or withdrawal, the amount
of the deposit or withdrawal, the maturity date, if any, of the
deposit, and the interest earning rate on the deposit;
(2) For each borrowing from a cash management program: the date of
the borrowing, the amount of the borrowing, the maturity date, if any,
of the borrowing, and the interest rate on the borrowing;
(3) The security, if any, provided by the cash management program
for repayment of deposits into the cash management program and the
security required, if any, by the cash management program in support of
borrowings from the program; and
(4) The daily balance of the cash management program.
C. The public utility or licensee must maintain current and up-to-
date copies of the documents authorizing the establishment of the cash
management program including the following:
(1) The duties and responsibilities of the administrator and the
other participants in the cash management program;
(2) The restrictions on deposits or borrowings by participants in
the cash management program;
(3) The method used to determine the interest earning rates and
interest borrowing rates for deposits into and borrowings from the
program; and
(4) The method used to allocate interest income and expenses among
participants in the program.
* * * * *

PART 141--STATEMENTS AND REPORTS (SCHEDULES)

? 3. The authority citation for part 141 continues to read:

Authority: 15 U.S.C. 79, 16 U.S.C. 791a-828c, 2601-2645; 31
U.S.C. 9701; 42 U.S.C. 7101-7352.

? 4. Section 141.500 is added to read as follows:

Sec. 141.500 Cash management programs and financial condition
reports.

(a) Public utilities and licensees subject to the provisions of the
Commission's Uniform System of Accounts Prescribed in part 101 of this
title that participate in cash management programs must file these
agreements with the Commission. The documentation establishing the cash
management program and entry into the program must be filed within 10
days of entry into the program. Subsequent changes to the cash
management agreement must be filed with the Commission within 10 days
of the change.
(b) Public utilities and licensees must determine, on a monthly
basis within 15 days after the end of each month, the percentage of
their capital structure that constitutes proprietary capital. The
proprietary capital ratio must be computed using a formula in which the
total of the balances in the Proprietary Capital Accounts; Account 201,
Common stock issued, through Account 219, Accumulated other
comprehensive income, in part 101 of this title is the numerator and
the total proprietary capital plus the total of the Long-Term Debt
Accounts; Account 221, Bonds, through Account 226, Unamortized discount
on long-term debt--Debit, in part 101 of this title, is the
denominator.
(c) In the event that the proprietary capital ratio is less than 30
percent, the public utility or licensee must notify the Commission
within 5 days of the determination of that fact and must describe the
significant event(s) or transaction(s) causing its proprietary capital
ratio to be less than 30 percent including the extent to which the
public

[[Page 40509]]

utility or licensee has amounts loaned or money advanced to its parent,
subsidiary, or affiliate companies through its cash management
program(s), along with plans, if any, to regain at least a 30 percent
proprietary capital ratio.
(d) In the event that the proprietary capital ratio subsequently
meets or exceeds 30 percent, the public utility or licensee must notify
the Commission within 5 days of the determination of that fact.

PART 201--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR NATURAL GAS
COMPANIES SUBJECT TO THE PROVISIONS OF THE NATURAL GAS ACT

? 5. The authority citation for part 201 continues to read as follows:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352,
7651-7651o.

? 6. In part 201, Balance Sheet Accounts, the existing paragraph in
account 146 is designated as paragraph A, and paragraphs B and C are
added to read as follows:

Balance Sheet Accounts

* * * * *
146 Accounts receivable from associated companies.
A. * * *
B. A natural gas company participating in a cash management program
must maintain supporting documentation for all deposits into,
borrowings from, interest income from, and interest expense to such
program. Cash management programs include all agreements in which funds
in excess of the daily needs of the natural gas company along with the
excess funds of the natural gas company's parent, affiliated and
subsidiary companies are concentrated, consolidated, or otherwise made
available for use by other entities within the corporate group. The
written documentation must include the following information:
(1) For each deposit with and each withdrawal from the cash
management program: The date of the deposit or withdrawal, the amount
of the deposit or withdrawal, the maturity date, if any, of the
deposit, and the interest earning rate on the deposit;
(2) For each borrowing from a cash management program: The date of
the borrowing, the amount of the borrowing, the maturity date, if any,
of the borrowing, and the interest rate on the borrowing;
(3) The security, if any, provided by the cash management program
for repayment of deposits into the cash management program and the
security required, if any, by the cash management program in support of
borrowings from the program; and
(4) The daily balance of the cash management program.
C. The natural gas company must maintain current and up-to-date
copies of the documents authorizing the establishment of the cash
management program including the following:
(1) The duties and responsibilities of the administrator and the
other participants in the cash management program;
(2) The restrictions on deposits or borrowings by participants in
the cash management program;
(3) The method used to determine the interest earning rates and
interest borrowing rates for deposits into and borrowings from the
program; and
(4) The method used to allocate interest income and expenses among
participants in the program.
* * * * *

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

? 7. The authority citation for part 260 continues to read:

Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.

? 8. Section 260.400 is added to read as follows:

Sec. 260.400 Cash management programs and financial condition
reports.

(a) Natural gas companies subject to the provisions of the
Commission's Uniform System of Accounts in part 201 of this title that
participate in cash management programs must file these agreements with
the Commission. The documentation establishing the cash management
program and entry into the program must be filed within 10 days of
entry into the program. Subsequent changes to the cash management
agreement must be filed with the Commission within 10 days of the
change.
(b) Natural gas companies must determine, on a monthly basis within
15 days after the end of each month, the percentage of their capital
structure that constitutes proprietary capital. The proprietary capital
ratio must be computed using a formula in which the total of the
balances in the Proprietary Capital Accounts; Account 201, Common stock
issued, through Account 219, Accumulated other comprehensive income, in
part 201 of this title is the numerator and the total proprietary
capital plus the total of the Long-Term Debt Accounts; Account 221,
Bonds, through Account 226, Unamortized discount on long-term debt--
Debit, in part 201 of this title, is the denominator.
(c) In the event that the proprietary capital ratio is less than 30
percent, the natural gas company must notify the Commission within 5
days of the determination of that fact and must describe the event(s)
or transaction(s) causing its proprietary capital ratio to be less than
30 percent including the extent to which the natural gas company has
amounts loaned or money advanced to its parent, subsidiary, or
affiliate companies through its cash management program(s), along with
plans, if any, to regain at least a 30 percent proprietary capital
ratio.
(d) In the event that the proprietary capital ratio subsequently
meets or exceeds 30 percent, the company must notify the Commission
within 5 days of the determination of that fact.

PART 352--UNIFORM SYSTEMS OF ACCOUNTS PRESCRIBED FOR OIL PIPELINE
COMPANIES SUBJECT TO THE PROVISIONS OF THE INTERSTATE COMMERCE ACT

? 9. The authority citation for part 352 continues to read as follows:

Authority: 49 U.S.C. 60502; 49 App. U.S.C. 1-85 (1988).

? 10. In Part 352, Balance Sheet Accounts, the existing paragraph of
account 13 is designated as paragraph (a) and paragraphs (b) and (c)
are added to read as follows:

Balance Sheet Accounts

* * * * *
13 Receivables from affiliated companies.
(a) * * *
(b) An oil pipeline company participating in a cash management
program must maintain supporting documentation for all deposits into,
borrowings from, interest income from, and interest expense to such
program. Cash management programs include all agreements in which funds
in excess of the daily needs of the carrier along with the excess funds
of the carrier's parent, affiliated and subsidiary companies are
concentrated, consolidated, or otherwise made available for use by
other entities within the corporate group. The written documentation
must include the following information:
(1) For each deposit with and each withdrawal from the cash
management program: the date of the deposit or withdrawal, the amount
of the deposit or withdrawal, the maturity date, if any, of the
deposit, and the interest earning rate on the deposit;
(2) For each borrowing from a cash management program: the date of
the

[[Page 40510]]

borrowing, the amount of the borrowing, the maturity date, if any, of
the borrowing, and the interest rate on the borrowing;
(3) The security, if any, provided by the cash management program
for repayment of deposits into the cash management program and the
security required, if any, by the cash management program in support of
borrowings from the program; and
(4) The daily balance of the cash management program.
(c) The oil pipeline company must maintain current and up-to-date
copies of the documents authorizing the establishment of the cash
management program including the following:
(1) The duties and responsibilities of the administrator and the
other participants in the cash management program;
(2) The restrictions on deposits or borrowings by participants in
the cash management program;
(3) The method used to determine the interest earning rates and
interest borrowing rates for deposits into and borrowings from the
program; and
(4) The method used to allocate interest income and expenses among
the participants in the program.
* * * * *

PART 357--ANNUAL SPECIAL OR PERIODIC REPORTS: CARRIERS SUBJECT TO
PART I OF THE INTERSTATE COMMERCE ACT

? 11. The authority citation for part 357 continues to read:

Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C.
1-85 (1998).

? 12. Section 357.5 is added to read as follows:

Sec. 357.5 Cash management programs and financial condition reports.

(a) Oil pipeline companies subject to the provisions of the
Commission's Uniform System of Accounts in part 352 of this title that
participate in cash management programs must file these agreements with
the Commission. The documentation establishing the cash management
program and entry into the program must be filed within 10 days of
entry into the program. Subsequent changes to the cash management
agreement must be filed with the Commission within 10 days of the
change.
(b) Oil pipeline companies must determine, on a monthly basis
within 15 days after the end of each month, the percentage of their
capital structures that constitute proprietary capital. The proprietary
capital ratio must be computed using a formula in which the total of
the balances in the Proprietary Capital Accounts; Account 70, Capital
stock, through Account 77, Accumulated other comprehensive income, in
part 352 of this title, is the numerator and the total proprietary
capital plus the total of the Long-Term Debt Accounts; Account 60,
Long-term debt payable after one year, through Account 62, Unamortized
discount and interest on long-term debt, in part 352 of this title, is
the denominator.
(c) In the event that the proprietary capital ratio is less than 30
percent, the oil pipeline company must notify the Commission within 5
working days of the determination of that fact and must describe the
significant event(s) or transaction(s) causing its proprietary capital
ratio to be less than 30 percent including the extent to which the oil
pipeline company has amounts loaned or money advanced to its parent,
subsidiary, or affiliate companies through its cash management
program(s), along with plans, if any, to regain at least a 30 percent
proprietary capital ratio.
(d) In the event that the proprietary capital ratio subsequently
meets or exceeds 30 percent, the carrier must notify the Commission
within 5 days of the determination of that fact.

Note: This Appendix will not be published in the Code of Federal
Regulations.

Appendix A--Commenters in RM02-14-000

Air Conditioning Contractors of America, et al. (late-filed).
Allegheny Energy, Inc., et al.
Ameren Corporation.
American Electric Power Company, Inc., et al.
American Public Gas Association.
Association of Oil Pipelines.
Avista Corporation.
California Public Utilities Commission (late-filed).
Chevron Pipeline Company, et al.
Cinergy Corp.
Dominion Resources, Inc.
Duke Energy Corporation.
Edison Electric Institute.
Edison Mission Energy and Edison Mission Marketing and Trading, Inc.
Electric Power Supply Association.
El Paso Energy Partners, L.P.
Entergy Services, Inc.
Exelon Corporation.
Fairfax Financial Holdings, Ltd. (late-filed).
FirstEnergy Corp.
Gulf South Pipeline Company, LP.
Interstate Natural Gas Association of America.
Kansas State Corporation Commission.
KeySpan Corporation.
The KM Pipelines.
Marathon Ashland Pipeline LLC.
Midwestern Gas Transmission Company.
Missouri Public Service Commission (late-filed).
National Fuel Gas Supply Corporation.
National Grid USA.
National Rural Electric Cooperative Association.
NiSource Inc.
Northeast Utilities.
Northern Natural Gas Company.
Ontario Energy Trading International.
PEPCO Holdings, Inc.
PG&E Corporation.
Philadelphia Gas Works.
Pinnacle West Companies.
Plains All American Pipeline, L.P.
Public Service Electric and Gas Company, et al.
SCANA Corporation.
TECO Power Services Corporation.
USG Pipeline Co, B-R Pipeline Co., and United States Gypsum Co.
Washington Utilities and Transportation Commission (late-filed).
WGL Holdings, Inc., Hampshire Gas Co., and Washington Gas Light Co.
Williston Basin Interstate Pipeline Company.
WPS Resources Corporation.

[FR Doc. 03-16819 Filed 7-7-03; 8:45 am]
BILLING CODE 6717-01-P

Notices For
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994

Documentation Requirements for Cash Management Programs Issued June 26, 2003

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