Financial Accounting, Reporting and Records Retention Requirements Under the Public Utility Holding Company Act of 2005

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[Federal Register: May 16, 2006 (Volume 71, Number 94)]
[Proposed Rules]
[Page 28464-28512]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16my06-33]

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DEPARTMENT OF ENERGY
Federal Energy Regulatory Commission
18 CFR Parts 366, 367, 368, 369 and 375
[Docket No. RM06-11-000]

Financial Accounting, Reporting and Records Retention
Requirements Under the Public Utility Holding Company Act of 2005

Issued April 24, 2006.
AGENCY: Federal Energy Regulatory Commission, DOE.
ACTION: Notice of proposed rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking, the Federal Energy
Regulatory Commission (Commission) proposes to amend its regulations to
further implement the Public Utility Holding Company Act of 2005 (PUHCA
2005). Specifically, the Commission is proposing to add a Uniform
System of Accounts for Centralized Service Companies, to add
preservation of records requirements for holding companies and service
companies, to revise Form No. 60, Annual Report for Centralized Service
Companies, to provide for financial reporting consistent with the
proposed Uniform System of Accounts and to provide for electronic
filing of Form No. 60. These changes are proposed to be made effective
January 1, 2007. In addition, the Commission directs staff to hold a
technical conference to provide interested entities an opportunity to
discuss the proposed regulations.

DATES: Comments must be filed on or before June 15, 2006.

ADDRESSES: You may submit comments, identified by Docket No. RM06-11-
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: Federal Energy Regulatory Commission, Office of the Secretary, 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:

Rosemary Womack (Technical Information), Division of Audits and
Accounting, Office of Market Oversight and Investigation, Federal
Energy Regulatory Commission, 888 First Street, NE., Washington, DC
20426. Telephone: (202) 502-8989. E-mail: rosemary.womack@ferc.gov.
Julia A. Lake (Legal Information), Office of the General Counsel--
Energy Markets, Federal Energy Regulatory Commission, 888 First Street,
NE., Washington, DC 20426. Telephone: (202) 502-8370. E-mail:
julia.lake@ferc.gov.

SUPPLEMENTARY INFORMATION:

I. Introduction

1. The Commission proposes to amend its regulations to further
implement the Public Utility Holding Company Act of 2005 (PUHCA 2005).
The Commission is proposing to add a new Uniform System of Accounts for
Centralized Service Companies and new preservation of records
requirements as new Parts 367 and 368, respectively, to the
Commission's regulations; to add Form No. 60, Annual Report for
Centralized Service Companies, as Part 369 to the Commission's
regulations; to revise Form No. 60 to provide for financial reporting
by centralized service companies, i.e., service companies that are not
special purpose companies, consistent with the proposed Uniform System
of Accounts; and to provide for electronic filing of Form No. 60. The
Commission also is proposing conforming changes to its regulations in
Part 366 and corresponding changes to the Chief Accountant's
delegations of authority in Part 375 of the Commission's
regulations.\1\ The Commission proposes to make the revised regulations
effective January 1, 2007. In addition, the Commission directs staff to
hold a technical conference to provide interested entities an
opportunity to discuss the proposed regulations.
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\1\ See 18 CFR Parts 366 and 375.
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II. Background

2. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005)
\2\ was signed into law. In relevant part, it repealed the Public
Utility Holding Company Act of 1935 (PUHCA 1935) \3\ and enacted the
Public Utility Holding Company Act of 2005 (PUHCA 2005),\4\ which, with
one exception not relevant here, became effective on February 8, 2006
(six months from the date of enactment). On December 8, 2005, the
Commission issued Order No. 667, adding a new Subchapter U and Part 366
to Title 18 of the Code of Federal Regulations to implement PUHCA
2005.\5\
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\2\ Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 (2005).
\3\ 15 U.S.C. 79a et seq. (2000).
\4\ EPAct 2005 at 1261 et seq.
\5\ Order No. 667, 70 FR 75592 (Dec. 20, 2005), FERC Stats. &
Regs.; Regulations and Preambles 2001-2005 ] 31,197 (2005), order on
reh'g, Order No. 667-A, published elsewhere in this issue of the
Federal Register, FERC Stats. & Regs. ] 31,213 (2006).
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3. Order No. 667 required that, unless otherwise exempted by
Commission rule or order, holding companies \6\ and service companies
\7\ must maintain and make available to the Commission their books and
records.\8\ In addition, Order No. 667 allowed holding companies and
service companies that did not currently follow the Commission's
records retention requirements to transition to the Commission's
requirements by January 1, 2007. Order No. 667 further provided that
holding companies would not be required to comply with a Uniform System
of Accounts, but that centralized service companies would be required
to do so as of January 1, 2007.
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\6\ As defined in 18 CFR 366.1, holding company means (i) any
company that directly or indirectly owns, controls, or holds, with
power to vote, 10 percent or more of the outstanding voting
securities of a public-utility company or of a holding company of
any public-utility company; and (ii) any person, determined by the
Commission, after notice and opportunity for hearing, to exercise
directly or indirectly (either alone or pursuant to an arrangement
or understanding with one or more persons) such a controlling
influence over the management or policies of any public-utility
company or holding company as to make it necessary or appropriate
for the rate protection of utility customers with respect to rates
that such person be subject to the obligations, duties, and
liabilities imposed by this subtitle upon holding companies.
\7\ As defined in 18 CFR 366.1, service company means any
associate company within a holding company system organized
specifically for the purpose of providing non-power goods or
services or the sale of goods or construction work to any public
utility in the same holding company system.
\8\ Order No. 667 also required traditional, centralized service
companies to file the newly created Form No. 60, Annual Report for
Centralized Service Companies.
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4. The Commission indicated in Order No. 667 that it would initiate
a separate rulemaking proceeding to address how the Commission's
Uniform Systems of Accounts and records retention requirements in Parts
101, 125, 201 and 225 of its regulations should be modified to adopt or
otherwise integrate the relevant parts of the SEC's Uniform System of
Accounts and records retention rules. The Commission indicated that it
intended to issue a final rule on any appropriate accounting and
records retention requirements modifications before January 1, 2007, so
that service companies would be able to transition to the Commission's
Uniform System of Accounts and records retention requirements and so
that holding companies could transition to

[[Page 28465]]

the Commission's records retention requirements, by that date.
5. As discussed below, this Notice of Proposed Rulemaking proposes
to adopt a Uniform System of Accounts for centralized service
companies, and records retention requirements for holding companies and
service companies, under PUHCA 2005.

III. Discussion

6. In Order No. 667, the Commission prescribed uniform accounting
requirements for centralized service companies, i.e., service companies
that are not special purpose companies, within holding company systems,
and records retention requirements for both service companies and
holding companies. In that order, the Commission announced its
intention to modify the existing Uniform Systems of Accounts for public
utilities and licensees and natural gas companies in Parts 101 and 201,
respectively, of the Commission's regulations to accommodate
centralized service companies' use of those systems. The Commission
also announced its intention to similarly modify the existing records
retention requirements contained in Parts 125 and 225 of the
Commission's regulations.
7. Since the issuance of Order No. 667, we have examined in greater
depth some of the implementation issues associated with revising the
Commission's existing Uniform Systems of Accounts and records retention
requirements for public utilities and licensees and for natural gas
companies to cover service companies and holding companies. After
taking into consideration the overall framework of the Commission's
regulations and the range of changes that would be required to the
Uniform Systems of Accounts and records retention requirements, we have
concluded that modifying the existing accounting and records retention
requirements to accommodate service companies and holding companies
would make understanding and applying the accounting and records
retention requirements difficult for users of the systems. Instead, the
Commission proposes to adopt a separate Uniform System of Accounts for
centralized service companies, i.e., service companies that are not
special purpose companies, and separate records retention requirements
for service companies and holding companies. While these new
regulations appear lengthy, we believe the detail will actually make it
simpler and easier for service companies and holding companies to
comply with our requirements.
8. In developing the proposed regulations, we were guided by three
overarching objectives: (1) The new accounting and records retention
requirements should mirror the existing requirements contained in Parts
101, 201, 125 and 225 of the Commission's regulations for public
utilities and licensees and natural gas companies to the maximum extent
practicable, but should exclude provisions that are not relevant; (2)
the new accounting requirements should allow for the consolidation of
service company financial information with the financial information of
associate public utilities and licensees and natural gas companies as
needed for stockholder and SEC reporting; and (3) the new Uniform
System of Accounts for centralized service companies should include
requirements that reflect aspects of business operations that are
unique to such service companies.

A. Proposed Uniform System of Accounts

9. The Commission proposes to add as Part 367 of the Commission's
regulations a Uniform System of Accounts for Centralized Service
Companies. The proposed Uniform System of Accounts for Centralized
Service Companies conforms, to the maximum extent practicable, to the
Commission's existing Uniform Systems of Accounts for public utilities
and licensees and for natural gas companies as set forth in Parts 101
and 201, respectively, of the Commission's regulations. As explained
more fully below, however, there are a number of instances in which the
existing requirements contained in Parts 101 and 201 of the
Commission's regulations need to be revised or modified to reflect the
unique business characteristics of centralized service companies. In
some instances, the revisions simply change a word, e.g., substituting
``service company'' property for ``utility'' property.\9\ In other
instances, the changes were more significant. The sections that follow
identify and explain the basis for the more significant revisions and
modifications to the accounting requirements contained in Parts 101 and
201 of the Commission's regulations that we believe are appropriate or
necessary to reflect the unique business characteristics of centralized
service companies in the proposed Uniform System of Accounts for
Centralized Service Companies.
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\9\ For purposes of discussion, when revisions to an instruction
or account are limited to such word changes we consider it as
adopting the affected instruction or account in total.
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1. Definitions and Instructions
10. The Commission proposes to adopt most of the definitions
contained in Parts 101 and 201 of the Commission's regulations.
Additionally, the Commission proposes to adopt the definitions
contained in the SEC's Uniform System of Accounts for direct cost,
indirect cost, non-associate company, and work order system. The
Commission also proposes to incorporate definitions for construction,
electric utility company, gas utility company, goods, holding company
system, natural gas company, public utility, public-utility company,
service and service company from Sec. 366.1 of the Commission's
regulations. The definitions adopted from the SEC's Uniform System of
Accounts and Sec. 366.1 of the Commission's regulations are necessary
to facilitate understanding other instructions not contained in Parts
101 and 201 of the Commission's regulations as they should be applied
to centralized service companies, i.e., service companies that are not
special purpose companies.
11. Consistent with the instructions in Parts 101 and 201 of the
Commission's regulations, we propose to adopt instructions grouped into
four categories: General Instructions, Service Company Property
Instructions, Operating Expense Instructions and Special Instructions.
These instructions include most of the instructions contained in Parts
101 and 201 of the Commission's regulations and in the SEC's Uniform
System of Accounts. We propose to adopt instructions in the SEC's
Uniform System of Accounts because they provide instructions relevant
to certain transactions and events of a centralized service company,
that are not specifically addressed in the instructions for Parts 101
and 201 of the Commission's regulations. The instructions we propose to
adopt in the Special Instructions category include many of the
instructions for groups of accounts, which are embedded in the text to
the accounts in Parts 101 and 201 of the Commission's regulations.
Instructions not adopted from Parts 101 and 201 of the Commission's
regulations and the SEC's Uniform System of Accounts are considered
irrelevant to centralized service company operations or duplicative of
other instructions. Additionally, many of the instructions from Parts
101 and 201 are modified for centralized service company operations.
The more significant additions, deletions and modifications to the
instructions contained in Parts 101 and 201 of the Commission's
regulations are discussed below.

[[Page 28466]]

12. The instructions found in both Parts 101 and 201 of the
Commission's regulations contain provisions for implementing the
ratemaking principle of original cost. Under this principle, companies
are required to record utility property in the plant in service
accounts at the cost to the person who first devoted the property to
public service. Although public utilities and natural gas companies
frequently enter into property transactions in which the original cost
concept is at issue, centralized service companies are expected to have
few, if any, transactions in which that is the case. Moreover,
centralized service companies can now provide centralized services to
both utility and non-utility entities. In this context, the original
cost accounting rules that exist for public utilities and natural gas
companies would be difficult to apply to centralized service companies.
Therefore, the proposed instructions in the Uniform System of Accounts
for Centralized Service Companies do not contain the requirements that
would otherwise be needed to implement the original cost concept. In
proposed Sec. 367.50,\10\ Service company property to be recorded at
cost, and Sec. 367.53,\11\ Service company property purchased or sold,
we propose to modify Electric and Gas Plant Instructions Nos. 2 and 5,
respectively, to require centralized service company property to be
recorded at the cost of acquisition rather than its original cost. The
instructions to proposed Sec. 367.53 also require centralized service
companies to file journal entries with the Commission when acquired
property is at a purchase price of $10 million or more and has been
previously devoted to public service.\12\ This filing requirement
provides the Commission and others the opportunity to monitor
transactions involving property previously devoted to public service.
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\10\ Proposed 18 CFR 367.50 is adopted from Electric Plant
Instructions No. 2, Electric plant to be recorded at cost, and Gas
Plant Instructions No. 2, Gas plant to be recorded at cost.
\11\ Proposed 18 CFR 367.53 is adopted from Electric Plant
Instructions No. 5, Electric plant purchased or sold, and Gas Plant
Instructions No. 5, Gas plant purchased or sold.
\12\ The $10 million threshold is consistent with the threshold
for certain transactions subject to section 203 of the Federal Power
Act, as amended by section 1289 of the Energy Policy Act of 2005.
See Order No. 669, 71 FR 1348 (Jan. 6, 2006), FERC Stats. & Regs. ]
31,200 (2005).
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13. We propose to adopt in Sec. 367.23 an instruction for
transactions with non-associate companies from the SEC's Uniform System
of Accounts (17 CFR Sec. 265.01-2). This instruction requires that
profits and losses on transactions with non-associate companies be
recorded in Account 458.4, Excess or deficiency on servicing non-
associate utility companies (Sec. 367.4584), and Account 459.4, Excess
or deficiency on servicing non-associate non-utility companies (Sec.
367.4594), as appropriate. The instruction also requires centralized
service companies to determine the sum of the closing balances, at the
end of each calendar year, in Account 458.4 (Sec. 367.4584) and
Account 459.4 (Sec. 367.4594). If the sum of the closing balances of
these accounts combine to a net credit, the amount of the net credit
must be deducted from amounts reimbursable by associate companies as
compensation for use of capital invested in the centralized service
company. By following this instruction, service companies will be
required to channel net profits from transactions with non-associate
companies to the associate companies within the holding company system.
The Commission believes this requirement is appropriate and reasonable
because centralized service companies should be not-for-profit in
nature and provide services to associate companies at cost.\13\
Therefore, profits received outside of the holding company system
should be used to reduce the cost of providing service to associate
companies within the holding company system.
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\13\ Not-for-profit as used here does not preclude a reasonable
return on equity capital. In addition, in Order No. 667, the
Commission allowed centralized service companies to continue to sell
non-power goods and services to affiliated utilities ``at-cost.''
Order No. 667, FERC Stats. & Regs. ] 31,197 at P 14.
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14. We propose to adopt instructions from Parts 101 and 201 of the
Commission's regulations on extraordinary items \14\ with certain
modifications in proposed Sec. 367.8. Under the instructions contained
in Parts 101 and 201, an item can be accounted for as extraordinary,
without prior Commission approval if the item is more than five percent
of income before extraordinary items. We do not view this stipulation
as practical for centralized service companies because service
companies typically have little or no income. Therefore, we propose to
eliminate this threshold requirement to recognize an extraordinary
item, but will require centralized service companies to seek Commission
approval to record all extraordinary items.
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\14\ See General Instructions No. 7, Extraordinary items, in
Parts 101 and 201 of the Commission's regulations.
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15. In proposed Sec. 367.16, we propose to adopt, in part,
instructions for accounting for long-term debt from Parts 101 and 201
of the Commission's regulations.\15\ We are not adopting instructions
pertaining to the rate principle of amortizing gains and losses on the
reacquisition of long-term debt because centralized service companies
are not rate regulated and such gains and losses should be recognized
immediately in income.
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\15\ See General Instructions No. 17, Long-term debt: Premium,
discount and expense and gain or loss on reacquisition, in Parts 101
and 201 of the Commission's regulations.
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16. In proposed Sec. 367.58, we propose to adopt instructions for
maintaining a work order system for all construction and retirements of
service company property from Parts 101 and 201 of the Commission's
regulations.\16\ Additionally, in proposed Sec. 367.31, the Commission
proposes to adopt instructions from the SEC's Uniform System of
Accounts for maintaining work order systems for accumulating
reimbursable costs and charges to customers.\17\ The Commission
believes it is necessary to adopt this additional instruction from the
SEC's Uniform System of Accounts because this specific instruction is
appropriate for this proposed Uniform System of Accounts and is not
provided for in the instructions contained in Parts 101 and 201 of the
Commission's regulations.
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\16\ See Electric (Gas) Plant Instructions No. 11, Work order
and property record system required in Parts 101 and 201 of the
Commission's regulations.
\17\ See 17 CFR 256.00-1(f), 256.03(c).
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17. We note that there appears to be a regulatory gap vis-[aacute]-
vis Commission jurisdiction as it relates to service companies with
electric utility company affiliates and natural gas company affiliates
in PUHCA 2005. As a result of the definitions for holding company,
holding company system, natural gas company, public-utility company,
electric utility company and gas utility company in PUHCA 2005 section
1262, it appears that the Commission can regulate holding companies
with electric utility company affiliates as to their books, accounts,
memoranda, and other records. On the other hand, it appears that PUHCA
2005 would not grant the Commission authority to require service
companies that have only natural gas company affiliates to comply with
the Commission's financial accounting and reporting and records
retention requirements; this is in contrast to holding companies with
gas utility company affiliates, i.e., holding companies with natural
gas local distribution company affiliates.\18\

[[Page 28467]]

Companies with only natural gas company affiliates would not be a
holding company under PUHCA 2005. The Commission is seeking comments on
how we should deal with this apparent regulatory gap under PUHCA 2005,
e.g., what, if any, action the Commission might take under the Natural
Gas Act. Commenters are invited to address (1) whether there is, in
fact, a regulatory gap, (2) if there is a regulatory gap, whether there
is a need to address the gap, and, (3) if so, how the Commission should
address this gap under the Natural Gas Act.
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\18\ In PUHCA 2005 section 1262, a holding company is any
company that directly or indirectly owns, controls, or holds, with
power to vote, 10 percent or more of the outstanding voting
securities of a public-utility company or of a holding company of
any public utility company. A public-utility company is an electric
utility company or a gas utility company. An electric utility
company is any company that owns or operates facilities used for the
generation, transmission, or distribution of electric energy for
sale. A gas utility company is any company that owns or operates
facilities used for distribution at retail of natural or
manufactured gas, i.e., a natural gas local distribution company.
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2. Balance Sheet Accounts
18. The Commission proposes to adopt in the new Uniform Systems of
Accounts for Centralized Service Companies most of the balance sheet
accounts contained in Parts 101 and 201 of the Commission's
regulations, and primary property Accounts 301 (Sec. 367.3010), 303
(Sec. 367.3030) and 389 to 399.1 (Sec. Sec. 367.3890 to 367.3991).
Accounts not adopted are considered not applicable to centralized
service companies. In most instances, the non-applicability of those
accounts to centralized service companies is apparent from the account
instructions and further discussion as to the reason for not adopting
them is not necessary. However, a few warrant comment.
19. The Commission does not propose to adopt Accounts 102, Electric
and Gas plant purchased or sold, 114, Electric and Gas plant
acquisition adjustments, and 116, Other electric and gas plant
acquisition adjustments, because, as discussed above, property acquired
will be included in Account 101, Service company property (Sec.
367.1010), at acquisition cost as opposed to original cost. As a result,
these accounts are not necessary for centralized service companies.
20. In addition, we are not adopting Accounts 118, Other utility
plant, and 121, Non-utility property. These accounts are used by public
utilities and natural gas companies to record the cost of property used
exclusively in providing other utility services, e.g., water, railway,
etc., or non-utility services. In the Commission's view, the corollary
use of these accounts by centralized service companies would be to
record in these accounts the cost of property used exclusively in
providing services to non-utility customers or a non-service business
activity. While we believe it is important that such investments be
identified and disclosed, we feel that it can be done more
appropriately by the use of a schedule as opposed to adopting a
separate account. Therefore, we propose to include Schedule III-A,
Summary of Service Company Property and Accumulated Provision for
Depreciation and Amortization, in revised Form No. 60.
3. Income Statement Accounts
21. The Commission proposes to incorporate income statement
accounts contained in Parts 101 and 201 of the Commission's
regulations. We modified the accounts related to expenses for non-
utility companies\19\ and revenue accounts. The additions, deletions
and modifications to the income statement accounts contained in Parts
101 and 201 that are proposed for inclusion in the Uniform System of
Accounts for Centralized Service Companies are discussed further below.
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\19\ A non-utility company is defined in proposed 18 CFR Sec.
367.1 as ``a company that is not a utility company.''
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22. The Commission is proposing to include in the Uniform System of
Accounts for Centralized Service Companies the same instructions
covering income tax accounting presently contained in Parts 101 and 201
of the Commission's regulations. We are aware that those instructions
need to be revised to reflect the liability method of accounting for
income taxes that all other Commission jurisdictional companies now
follow.\20\ However, the changes needed to integrate the liability
method of accounting for income taxes into the Uniform Systems of
Accounts and other Commission regulations are expected to be complex
and should be taken up in a separate proceeding.\21\ Until that
proceeding can be undertaken, centralized service companies and all
other Commission jurisdictional companies should account for income
taxes using the same rules as modified by an Accounting Guidance Letter
dated April 23, 1993. This will, in our view, facilitate the
preparation of consolidated financial statements.
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\20\ See Accounting Guidance Letter AI93-50-000, Accounting for
Income Taxes, (April 23, 1993).
\21\ Regulations Implementing Tax Normalization for Certain
Items Reflecting Timing Differences in the Recognition of Expenses
or Revenues for Ratemaking and Income Tax Purposes, Order No. 144,
FERC Stats. & Regs. ] 30,254 (1981).
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23. We do not propose to include the following accounts, as
contained in Parts 101 and 201 of the Commission's regulations, because
we do not anticipate centralized service companies having transactions
that give rise to the use of these accounts:
? Account 404.1, Amortization and depletion of producing
natural gas land and land rights.
? Account 404.2, Amortization of underground storage land
and land rights.
? Account 406, Amortization of electric plant acquisition adjustments.
? Account 407, Amortization of property losses, unrecovered
plant and regulatory study costs.
? Account 407.2, Amortization of conversion expense.
? Account 407.3, Regulatory debits.
? Account 407.4, Regulatory credits.
? Account 411.6, Gains from disposition of utility plant.
? Account 411.7, Losses from disposition of utility plant.
? Account 411.8, Gains from disposition of allowances.
? Account 411.9, Losses from disposition of allowances.
? Account 412, Revenues from electric plant leased to others.
? Account 413, Expenses of electric plant leased to others.
? Account 414, Other utility operating income.
? Account 417, Revenues from non-utility operations.
? Account 418, Non-operating rental income.
? Account 420, Investment tax credits.
? Account 428.1, Amortization of loss on reacquired debt.
? Account 429.1, Amortization of gain on reacquired debt--Credit.
24. We propose to add Account 417.1, Expenses of non-utility
company related operations (Sec. 367.4171). This account will include
expenses incurred in providing services to non-utility companies where
the revenues from which are included in Account 459, Services rendered
to non-utility companies (Sec. 367.4590). Expenses related to
providing customer, sales or administrative and general services to
non-utility companies will initially be recorded in the 900 series of
accounts and transferred to Account 417.1 (Sec. 367.4171), through
credits to Account 922, Administrative expenses transferred--Credit
(Sec. 367.9220). The cost of other services provided to non-utility
companies will be charged directly to Account 417.1 (Sec. 367.4171).
25. We propose to add the following retained earnings accounts:
? Account 433, Balance transferred from income (Sec. 367.4330).
? Account 436, Appropriations of retained earnings (Sec. 367.4360).

[[Page 28468]]

? Account 437, Dividends declared-preferred stock (Sec. 367.4370).
? Account 438, Dividends declared--common stock (Sec. 367.4380).
? Account 439, Adjustments to retained earnings (Sec. 367.4390).
26. We propose to adopt retained earnings Accounts 215,
Appropriated retained earnings (Sec. 367.2150), and 216,
Unappropriated retained earnings (Sec. 367.2160), as balance sheet
accounts to track changes in the retained earnings accounts. We also
propose to revise Form No. 60 to reflect the use of these accounts.
27. We do not propose adopting the following operating revenue
accounts, contained in Parts 101 and 201 of the Commission's regulations:
? Account 440, Residential sales.
? Account 442, Commercial and industrial sales.
? Account 444, Public street and highway lighting.
? Account 445, Other sales to public authorities (Major only).
? Account 446, Sales to railroads and railways (Major only).
? Account 447, Sales for resale.
? Account 448, Interdepartmental sales.
? Account 449, Other sales (Non-major only).
? Account 449.1, Provision for rate refunds.
? Account 450, Forfeited discounts.
? Account 451, Miscellaneous service revenues.
? Account 453, Sales of water and water power.
? Account 454, Rent from electric property.
? Account 455, Interdepartmental rents.
? Account 456, Other electric revenues.
? Account 480, Residential sales.
? Account 481, Commercial and industrial sales.
? Account 482, Other sales to public authorities.
? Account 483, Sales for resale.
? Account 484, Interdepartmental sales.
? Account 485, Intracompany transfers.
These accounts are for recording revenues from the sale of
electricity or gas and transmission or transportation service.
Transactions of this nature would not be entered into by centralized
service companies. However, we propose to adopt new revenue control
Accounts 457, Services rendered to associate utility companies (Sec.
367.4570), 458, Services rendered to non-associate utility companies
(Sec. 367.4580) and 459, Services rendered to non-utility companies
(Sec. 367.4590).\22\ Each of these revenue control accounts will have
a corresponding subaccount or direct labor account (Accounts 457.1,
458.1 and 459.1 in Sec. Sec. 367.4571, 367.4581 and 367.4591),
indirect labor account (Accounts 457.2, 458.2 and 459.2 in Sec. Sec.
367.4572, 367.4582 and 367.4592) and an account for compensation for
use of capital (Accounts 457.3, 458.3 and 459.3 in Sec. Sec. 367.4573,
367.3593 and 367.4593). This differs slightly from the SEC's Uniform
System of Accounts, which provided control accounts for aggregating
revenues between associate and non-associate companies only. However,
the SEC's requirements were developed under PUHCA 1935, which
restricted registered holding companies and their associated companies
to utility operations or directly related business interests. With the
repeal of the PUHCA 1935 and the elimination of the distinction between
registered and exempt holding companies,\23\ these restrictions no
longer apply. As a consequence, we expect that centralized service
companies may provide an increasing amount of services to non-utility
companies. As an aid to monitoring the potential for cross
subsidization, we believe that it is important to have accounts that
aggregate financial information in a way that separately identifies and
measures this activity. We propose including revenue Accounts 458.4,
Excess or deficiency on servicing non-associate utility companies
(Sec. 367.4584, and 459.4, Excess or deficiency on servicing non-
associate non-utility companies (Sec. 367.4594). These accounts are
necessary to monitor and ensure that centralized service companies
comply with the requirements that profits from services provided to
non-associate companies are used to reduce the billings of associate
companies and to ensure that losses are not automatically passed on to
associate companies.
---------------------------------------------------------------------------

\22\ A control account includes the total of the related subaccounts.
\23\ Order No. 667 states, ``[a]lthough, as also discussed
below, we will provide certain exemptions from PUHCA 2005, we will
not re-create the PUHCA 1935 distinction between ``exempt'' and
``registered'' holding companies.'' Order No. 667, FERC Stats. &
Regs. ] 31,197 at P 10.
---------------------------------------------------------------------------

28. We propose to include in the Uniform System of Accounts for
Centralized Service Companies all of the 500 series of electric
operation and maintenance expense accounts presently contained in Part
101 of the Commission's regulations and all of the 800 series of gas
operation and maintenance accounts contained in Part 201 of the
Commission's regulations. Service companies use these accounts when
providing utility-related services to utility companies. However, to
avoid unnecessary duplication and to ensure that symmetry is maintained
between the Uniform Systems of Accounts, we propose to direct service
companies to use the 500 and 800 series of accounts contained in Parts
101 and 201 of the Commission's regulations instead of including all of
the 500 and 800 series of accounts in the Uniform System of Accounts
for Centralized Service Companies.
29. We propose to include in the Uniform System of Accounts for
CentralizedService Companies all of the 900 series of expense accounts
presently contained in Parts 101 and 201 of the Commission's
regulations, except the following accounts:
? Account 906, Customer service and informational expenses
(Non-major only).
? Account 917, Sales expenses (Non-major only).
? Account 927, Franchise requirements.
? Account 929, Duplicate charges--Credit.
? Account 933, Transportation expenses (Non-major)
Accounts 906, 917 and 933 are non-major. Accounts 927 and 929
relate to utility sales of electricity. We could not cross reference
the 900 series accounts as we did for the 500 or 800 series of accounts
because the individual account instructions in Part 101 differ from the
counterpart instructions in Part 201. In order to eliminate confusion
that might be caused by the differences, we modified the text of these
accounts and propose to adopt them, as modified, as part of the Uniform
System of Accounts for Centralized Service Companies.

B. Proposed Records Retention Requirements

30. The Commission proposes to establish, as Part 368 of the
Commission's regulations, records retention requirements for holding
companies and service companies. We stress that, consistent with Order
No. 667, while the proposed Uniform System of Accounts applies only to
centralized service companies, i.e., service companies that are not
special purpose companies, the proposed records retention requirements
apply to all holding companies and service companies. The records
retention requirements proposed generally are based on the requirements
contained in Sec. Sec. 125.3 and 225.3 of the Commission's
regulations, with certain modifications considered appropriate for
holding companies and service companies.

[[Page 28469]]

These modifications implement reduced retention periods for certain
holding company and service company records where the retention periods
were longer under the SEC's requirements than the retention periods
applicable to similar records in Sec. Sec. 125.3 and 225.3 of the
Commission's regulations. In addition, the modifications incorporate
certain records retention requirements that were not part of the
Commission's regulations in Sec. Sec. 125.3 and 225.3 of the
Commission's regulations.
31. To the extent that the Commission's retention periods differ
from other regulatory agency requirements, holding companies and
service companies should retain records for the longer of the required
retention periods.

C. Proposed Statements of Reports (Schedules)

32. The Commission proposes to add as Part 369 of the Commission's
regulations instructions for filing the Form No. 60. The instructions
propose to require centralized service companies to prepare and file
electronically with the Commission an annual report by April 18 for the
previous calendar year. Also, the instructions require service
companies that do not file Form No. 60 to file annually a narrative
description of their functions.

D. Proposed Revised FERC Form No. 60

33. The proposed changes, if adopted, will require revising the
existing schedules in the Form No. 60 filed with the Commission.
Revised Form No. 60 is included in Appendix A to this Notice of
Proposed Rulemaking. We plan to develop submission software to provide
for electronic filing of revised Form No. 60 similar to the software
used for electronic filing of the Commission's other annual reporting
forms, i.e., Form No. 1 and Form No. 2.
34. The proposed revisions to revised Form No. 60 include:
(1) The title of the form is changed to ``Annual Report of
Centralized Service Companies''.
(2) The format of the schedules is revised consistent with Annual
Report Form Nos. 1 and 2 (Form Nos. 1 and 2). Instructions have been
added to schedules, where necessary, because they are non-existent in
the current Form No. 60. A new cover page is added similar to the cover
page for Form Nos. 1 and 2.
(3) Two instructional pages are added to replace existing
instructions. This is consistent with Form Nos. 1 and 2. General
Information Item No. III is added to indicate how Form No. 60 is to be
submitted. General Instruction No. II is added to indicate that amounts
should be reported in whole dollars. The current Form No. 60
instruction allows reporting in whole dollars, thousands of dollars and
millions of dollars. This revision is necessary for consistency.
General Instruction No. IV is added consistent with the adoption of
submission software. General Instruction No. VII is added to indicate
the process of how resubmissions are to be filed.
(4) Page 1 is revised consistent with Form Nos. 1 and 2 and a
telephone number and an e-mail address for contact person designated to
respond to questions about Form No. 60 has been added. There currently
is no contact information except for a correspondence address. A
Corporate Officer Certification has been added the same as for Forms 1
and 2 and the Signature Clause page has been deleted.
(5) The filing date for Form No. 60 is changed to April 18 from May
1. April 18 filing date is consistent with the due date for most of the
Commission's annual report forms that contain financial information.
(6) Schedule I, Comparative Balance Sheet, is revised to include
the balance sheet accounts proposed to be adopted herein.
(7) Schedule II, Service Company Property, is revised to include
the property accounts proposed to be adopted in this NOPR.
(8) Schedule III-A, Summary of Service Company Property and
Accumulated Provision for Depreciation and Amortization, is added to
distinguish service company property devoted exclusively to utility-related
operations and property devoted exclusively to non-utility operations.
(9) Schedule XI, Proprietary Capital, is revised to include a
statement of retained earnings.
(10) Schedule XV, Comparative Income Statement, is revised to
include the income statement accounts proposed to be adopted herein.
(11) Schedule XV-A, Schedule of Utility Company Operating Expenses
is added to disclose operating expenses which were only summarized in
Schedule XV, Comparative Income Statement.
(12) Schedule, Analysis of Billing Associate Companies--Account
457, is revised to only include associate utility companies. This is
consistent with proposed Account 457.
(13) Schedule, Analysis of Billing Non-associate Companies--Account
458, is revised to only include non-associate utility companies. This
is consistent with proposed Account 458.
(14) A new schedule, Analysis of Billing Non-Utility Companies--
Account 459, is added to Form No. 60. This is consistent with proposed
Account 459.
(15) Schedule XVI--Analysis of Charges for Service--Associate and
Non-associate Companies, is revised to reflect the breakdown of utility
companies and non-utility companies proposed for Accounts 457, 458 and 459.
(16) Schedule XVII, Expense Distribution by Department or Service
Function, is revised by adding all income statement accounts.

D. Proposed Conforming Revisions to Parts 366 and 375

35. The Commission proposes to revise Sec. Sec. 366.21(b),
366.22(a)(1) and (b)(1) and 366.23(a) of the Commission's regulations
to conform to the new accounting, and records retention and reporting
requirements proposed in this notice of proposed rulemaking.
36. The Commission also proposes to revise Sec. 375.303(c), (d),
(e), (f), (g) and (h) of the Commission's regulations to update the
delegations to give to the Chief Accountant or the Chief Accountant's
designee certain authorities related to service company financial
accounting and reporting matters. These authorities are similar to
those that the Chief Accountant has for public utilities and licensees,
natural gas companies and oil pipeline companies.

E. Technical Conference

37. In addition to providing an opportunity to comment on the
regulations proposed in this Notice of Proposed Rulemaking, the
Commission directs staff to hold a technical conference regarding the
proposed Uniform System of Accounts, the records retention requirements
and revised Form No. 60 to provide interested entities an opportunity
to discuss the proposed regulations following the close of the comment
period for this Notice of Proposed Rulemaking. Entities are invited to
include a separate list of subjects they would like discussed at this
technical conference in their comments.\24\
---------------------------------------------------------------------------

\24\ This technical conference is distinct from the technical
conference announced in Order No. 667. This technical conference
will address the specific details associated with the proposed
Uniform System of Accounts, records retention requirements and
revised Form No. 60. The conference announced in Order No. 667, on
the other hand, will address other issues identified in the PUHCA
2005 and FPA section 203 final rules and rehearing orders on those rules.

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[[Page 28470]]

IV. Information Collection Statement

38. The following collections of information contained in this
proposed rule have been submitted to the Office of Management and
Budget (OMB) for review under section 3507(d) of the Paperwork
Reduction Act of 1995.\25\ The Commission solicits comments on the
Commission's need for this information, whether the information will
have practical utility, the accuracy of the provided burden estimates,
ways to enhance the quality, utility and clarity of the information to
be collected or retained, and any suggested methods for minimizing
respondents' burden, including the use of automated information techniques.
---------------------------------------------------------------------------

\25\ 44 U.S.C. 3507(d).

Estimated Annual Burden
----------------------------------------------------------------------------------------------------------------
Number of
Data collection Number of Number of hours per Total annual
respondents responses response hours
----------------------------------------------------------------------------------------------------------------
FERC form No. 60................................ 38 38 10 380
FERC-555A (new)................................. 300 .............. 1,080 324,000
---------------------------------------------------------------
Totals...................................... .............. .............. .............. 324,380
----------------------------------------------------------------------------------------------------------------

Total Annual Hours for Collection (Reporting and Recordkeeping) =
324,380.
Information Collection Costs: The Commission seeks comments on the
costs to comply with the requirements. It has projected the average
annualized costs for all respondents to be the following:
FERC Form 60 = 380 hours at $120 an hour (an average of 3 staff at
$40 an hour) = $45,600.
FERC-555A = The Commission projects an annualized average cost of
all respondents as 324,000 hours at $68 an hour ($17 an hour, an
average of 4 staff) = $22,032,000 (staffing) + $6,696,000 (storage) =
$28,728,000. These costs assume that the average office storage space
cost is $7,440 for retaining records on-site. (Usually records after
the initial years are transferred to off-site where the storage costs
drop to $925 (on average). As these requirements are being approved for
an initial three year period, the assumption was made that during that
period the records would be retained on-site.) These costs used as an
example 120 cubic feet (20 four drawer file cabinets) and include the
cubic feet of storage plus the cost of floor space plus the costs for
records storage cartons. Greater savings can be accomplished if
documents are stored electronically, i.e., one file cabinet (four
drawer) (10,000 pages on average) = 500 MegaBytes (MByte) = one CD ROM.
The Commission seeks comments on the costs to comply with these
requirements. Total costs (reporting and recordkeeping) = $9,908,880.
OMB regulations \26\ require OMB to approve certain information
collection requirements imposed by agency rule. The Commission is
submitting notification of this proposed rule to OMB. These information
collection requirements are mandatory requirements.
---------------------------------------------------------------------------

\26\ 5 CFR 1320.11.
---------------------------------------------------------------------------

Title: Annual Report for Centralized Service Companies (Form No.
60) and Preservation of Records for Service Companies Subject to PUHCA
2005 (555A).
Action: Proposed Collections.
OMB Control Nos.: 1902-0215 (Form No. 60) and new FERC-555A (To Be
Determined).
Respondents: Businesses or other for profit.
Frequency of Responses: Annually (Form No. 60) and recordkeeping
(555A).
Necessity of the Information: This proposed rule implements certain
provisions of Title XII of the Energy Policy Act of 2005, by adding
financial accounting requirements and reporting by centralized service
companies and the establishment of recordkeeping requirements for both
holding companies and service companies. Section 1275(b) provides for
Commission review and authorization of cost allocations for non-power
goods or services provided by service companies. In Order No. 667, the
Commission prescribed, for an initial transition period, uniform
financial accounting and reporting requirements for centralized service
companies' requirements within holding companies and record retention
requirements for both service companies and holding companies and that
the modification of the Commission's Uniform System of Accounts and
records retention requirements would be implemented later. However,
upon further review, the decision was made to implement a new Uniform
System of Accounts and records retention requirements to ensure a
smoother transition for service companies and holding companies. The
Commission has developed standardized accounting rules. These rules,
contained in the new Uniform System of Accounts for Centralized Service
Companies, are generally consistent with the accounting standards that
must be followed by commercial enterprises. Timely reporting of the
information is critical to monitoring the industry to ensure that
practices are not discriminatory and that appropriate rates are
charged. The official records maintained by the regulated companies are
in accordance with schedules already set by the Commission in its
regulations and already used by companies as the basis for required
filings and reports with the Commission. In addition, the records will
be used by the Commission's audit staff during compliance reviews and
special analyses as deemed necessary by the Commission. The additional
financial transparency required by these requirements will aid the
Commission in meeting its oversight and market monitoring obligations
and will benefit the public both as ratepayers and investors.
Internal Review: The Commission has reviewed the proposed
accounting and records retention requirements and made a preliminary
determination that these requirements are necessary to implement Title
XII of the Energy Policy Act of 2005. By adapting relevant parts of the
SEC's Uniform System of Accounts and records retention rules to the
Commission's Uniform System of Accounts and records retention
requirements, facilitates the Commission's need to conduct
examinations, audits and verification of this information for the
protection of utility customers with respect to jurisdictional rates.
These requirements conform to the Commission's plan for efficient
information collection, communication and management within

[[Page 28471]]

the energy industry. The Commission has assured itself, by means of
internal review, that there is specific, objective support for the
burden estimates associated with the information requirements.
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, Phone (202) 502-8415,
fax: (202) 273-0873, e-mail: michael.miller@ferc.gov].
For submitting comments concerning the collection(s) of information
and the associated burden estimate(s), please send your comments to the
contact listed above and to the Office of Management and Budget, Office
of Information and Regulatory Affairs, Washington, DC 20503 [Attention:
Desk Officer for the Federal Energy Regulatory Commission, phone (202)
395-4650, fax: (202) 295-7285, e-mail: oira_submission@omb.eop.gov].

V. Environmental Analysis

39. 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.\27\ The
Commission has categorically excluded certain actions from this
requirement as not having a significant effect on the human
environment. Included in the exclusion are rules that carry out
legislation, involve information gathering, analyses and dissemination,
and involve accounting.\28\ These proposed rules, if finalized, carry
out EPAct 2005, involve information gathering and analysis, and involve
accounting, and, therefore, fall under these exclusions. Consequently,
no environmental consideration is necessary.
---------------------------------------------------------------------------

\27\ Regulations Implementing the National Environmental Policy
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs.
1986-1990 ] 30,783 (1987).
\28\ 18 CFR 380.4(a)(3), (a)(5), (a)(16).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act Certification

40. The Regulatory Flexibility Act of 1980 (RFA) requires
rulemakings to contain either a description and analysis of the effect
that the rule will have on small entities or a certification that the
rule will not have a significant economic impact on a substantial
number of small entities.\29\ Most holding companies to which the rules
proposed herein, if finalized, would not fall within the RFA's
definition of small entity.\30\ Consequently, the rules proposed
herein, if finalized, will not have a ``significant economic impact on
a substantial number of small entities.''
---------------------------------------------------------------------------

\29\ 5 U.S.C. 603 (2000).
\30\ 5 U.S.C. 601(3)(2000), citing to section 3 of the Small
Business Act, 15 U.S.C. 632 (2000). Section 3 of the Small Business
Act defines a ``small business concern'' as a business that is
independently owned and operated and that is not dominant in its
field of operation. 15 U.S.C. 632 (2000). The Small Business Size
Standards component of the North American Industry Classification
System (NAICS) defines, for example, a small electric utility as one
that, including its affiliates, is primarily engaged in the
generation, transmission, and/or distribution of electric energy for
sale and whose total electric output for the preceding fiscal year
did not exceed four million MWh. NAICS defines a natural gas
pipeline company as one that transports natural gas and whose annual
receipts (total income plus cost of goods sold) did not exceed $6.5
million dollars for the preceding year. 13 CFR 121.201.
---------------------------------------------------------------------------

VII. Comment Procedures

41. The Commission invites interested persons to submit comments on
the matters and issues proposed in this notice to be adopted, including
any related matters or alternative proposals that commenters may wish
to discuss. Comments are due on or before June 15, 2006. Comments must
refer to Docket No. RM06-11-000, and must include the commenter's name,
the organization he or she represents, if applicable, and his or her
address.
42. Comments may be filed electronically via the eFiling link on
the Commission's website at http://www.ferc.gov . The Commission
accepts most standard word processing formats, 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.
43. Commenters who 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.
44. 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 notice of
proposed rulemaking are not required to serve copies of their comments
on other commenters.

VIII. Document Availability

45. In addition to publishing the full text of this document in the
Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's home page http://www.ferc.gov
and in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington, DC 20426.
46. From the Commission's home page on the Internet, this
information is available in the Commission's document management
system, eLibrary. The full text of this document is available on
eLibrary in PDF and Microsoft Word format for viewing, printing, and/or
downloading. To access this document in eLibrary, type the docket
number excluding the last three digits of this document in the docket
number field.
47. User assistance is available for eLibrary and the Commission's
website during normal business hours. For assistance, please contact
FERC Online Support at 1-866-208-3676 (toll free) or 202-502-6652 (e-
mail at FERCOn-lineSupport@ferc.gov), or the Public Reference Room at
202-502-8371, TTY 202-502-8659 (e-mail at
public.referenceroom@ferc.gov).

List of Subjects

18 CFR Part 366

Electric power, Natural gas, Reporting and recordkeeping
requirements.

18 CFR Part 367

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

18 CFR Part 368

Electric power, Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 369

Electric power, Natural gas, Reporting and recordkeeping
requirements.

18 CFR Part 375

Authority delegations (Government agencies), Seals and insignia,
Sunshine Act.

By direction of the Commission.
Magalie R. Salas,
Secretary.
In consideration of the foregoing, the Commission proposes to amend
parts 366 and 375 and to add parts 367, 368 and 369, Chapter I, Title
18 of the Code of Federal Regulations, as follows:

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

1. The authority citation for part 366 continues to read as follows:

Authority: Pub. L. 109-58, 1261 et seq., 119 Stat. 594, 972 et seq.

2. In Sec. 366.21, paragraph (b) is revised to read as follows:

[[Page 28472]]

Sec. 366.21 Accounts and records for holding companies.

* * * * *
(b) Unless otherwise exempted or granted a waiver by Commission
rule or order pursuant to Sec. Sec. 366.3 and 366.4 of this chapter,
beginning January 1, 2007, all holding companies must comply with the
Commission's records retention requirements for holding companies and
service companies as prescribed in part 368 of this chapter. Until
December 31, 2006, holding companies registered under the Public
Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.) may follow
either the Commission's records retention rules for public utilities
and licensees or for natural gas companies, as appropriate (parts 125
and 225 of this chapter), or the Securities and Exchange Commission's
record retention rules in 17 CFR part 257.
* * * * *
3. In Sec. 366.22, paragraphs (a)(1) and (b)(1) are revised to
read as follows:

Sec. 366.22 Accounts and records of service companies.

(a) Records retention requirements--(1) General. Unless otherwise
exempted or granted a waiver by Commission rule or order pursuant to
Sec. Sec. 366.3 and 366.4 of this chapter, beginning January 1, 2007,
every service company must maintain and make available to the
Commission such books, accounts, memoranda, and other records in such
manner and preserve them for such periods as the Commission prescribes
in part 368 of this chapter, in sufficient detail to permit
examination, audit, and verification, as necessary and appropriate for
the protection of utility customers with respect to jurisdictional rates.
* * * * *
(b) Accounting requirements--(1) General. Unless otherwise exempted
or granted a waiver by Commission rule or order pursuant to Sec. Sec.
366.3 and 366.4 of this chapter, beginning January 1, 2007, every
centralized service company (See Sec. 367.2 of this chapter) must
maintain and make available to the Commission such books, accounts,
memoranda, and other records as the Commission prescribes in part 367
of this chapter, in sufficient detail to permit examination, audit, and
verification, as necessary and appropriate for the protection of
utility customers with respect to jurisdictional rates. Every such
service company must maintain and make available such books, accounts,
memoranda, and other records in such manner as are prescribed in part
367 of this chapter, and must keep no other records with respect to the
same subject matter except:
(i) Records other than accounts;
(ii) Records required by federal or state law;
(iii) Subaccounts or supporting accounts which are not inconsistent
with the accounts required either by the Uniform System of Accounts for
Centralized Service Companies in part 367 of this chapter; and
(iv) Any other accounts that may be authorized by the Commission.
* * * * *
4. In Sec. 366.23, the section heading and paragraph (a) are
revised to read as follows:

Sec. 366.23 FERC Form No. 60, Annual report of service companies, and
FERC-61, Narrative description of service company functions.

(a) General. (1) FERC Form No. 60. Unless otherwise exempted or
granted a waiver by Commission rule or order pursuant to Sec. Sec.
366.3 and 366.4 of this chapter, every centralized service company (See
Sec. 367.2 of this chapter) in a holding company system must file with
the Commission by May 1, 2006 and May 1, 2007, and by April 18 each
year thereafter, an annual report, FERC Form No. 60, for the prior
calendar year. Every report must be submitted on the FERC Form No. 60
then in effect and shall be prepared in accordance with the
instructions incorporated in that form.
(2) FERC-61. Unless otherwise exempted or granted a waiver by
Commission rule or order pursuant to Sec. Sec. 366.3 and 366.4 of this
chapter, every service company in a holding company system, including a
special-purpose company (e.g., a fuel supply company or a construction
company), that does not file a FERC Form No. 60 shall instead file with
the Commission by April 18, 2007 and by April 18 each year thereafter,
a narrative description, FERC-61, of the service company's functions
during the prior calendar year. In complying with this section, a
holding company may make a single filing on behalf of all such service
company subsidiaries.
(3) For good cause shown, the Commission may extend the time within
which any such report or narrative description required to be filed
pursuant to paragraphs (a)(1) or (2) of this chapter is to be filed or
waive the requirements applicable to any such report or narrative
description.
* * * * *
5. Part 367 is added to read as follows:

PART 367--UNIFORM SYSTEM OF ACCOUNTS FOR CENTRALIZED SERVICE
COMPANIES SUBJECT TO THE PROVISIONS OF PUCHA 2005

Subpart A--Definitions
Sec.
367.1 Definitions.
Subpart B--General Instructions
367.2 Companies for which this system of accounts is prescribed.
367.3 Records.
367.4 Numbering system.
367.5 Accounting period.
367.6 Submittal of questions.
367.7 Item list.
367.8 Extraordinary items.
367.9 Prior period items.
367.10 Unaudited items.
367.11 Distribution of pay and expenses of employees.
367.12 Payroll distribution.
367.13 Accounting to be on accrual basis.
367.14 Transactions with associate companies.
367.15 Contingent assets and liabilities.
367.16 Long-term debt: Premium, discount and expense, and gain or
loss on reacquisition.
367.17 Comprehensive inter-period income tax allocation.
367.18 Criteria for classifying leases.
367.19 Accounting for leases.
367.20 Depreciation accounting.
367.22 Accounting for asset retirement obligations
367.23 Transactions with non-associate companies.
367.24 Construction and service contracts for other companies.
367.25 Determination of service cost.
367.26 Departmental classification.
367.27 Billing procedures.
367.28 Methods of allocation.
367.29 Compensation for use of capital.
367.30 Work order system for associate companies.
Subpart C--Service Company Property Instructions
367.50 Service company property to be recorded at cost.
367.51 Components of construction.
367.52 Overhead construction costs.
367.53 Service Company property purchased or sold.
367.54 Expenditures on leased property.
367.55 Land and land rights.
367.56 Structures and improvements.
367.57 Equipment.
367.58 Work order and property record system required for service
company property.
367.59 Additions and retirements of property.
Subpart D--Operating Expense Instructions
367.80 Supervision and engineering.
367.81 Maintenance.
367.82 Rents.
367.83 Training costs.
Subpart E--Special Instructions
367.100 Accounts 131-174, Current and accrued assets.

[[Page 28473]]

367.101 Accounts 231-243, Current and accrued liabilities.
367.102 Accounts 408.1 and 408.2, Taxes other than income taxes.
367.103 Accounts 409.1, 409.2, and 409.3, Income taxes.
367.104 Accounts 410.1, 410.2, 411.1, and 411.2, Provision for
deferred income taxes.
367.105 Accounts 411.4, and 411.5, Investment tax credit adjustments.
367.106 Accounts 426.1, 426.2, 426.3, 426.4, and 426.5,
Miscellaneous expense accounts.
Subpart F--Balance Sheet Chart of Accounts

Service Company Property

367.1010 Account 101, Service company property.
367.1011 Account 101.1, Property under capital leases.
367.1070 Account 107, Construction work in progress.
367.1080 Account 108, Accumulated provision for depreciation of
service company property.
367.1110 Account 111, Accumulated provision for amortization of
service company property.
367.1230 Account 123, Investment in associate companies.
367.1240 Account 124, Other investments.
367.1280 Account 128, Other special funds.

Current and Accrued Assets

367.1310 Account 131, Cash.
367.1340 Account 134, Other special deposits.
367.1350 Account 135, Working funds.
367.1360 Account 136, Temporary cash investments.
367.1410 Account 141, Notes receivable.
367.1420 Account 142, Customer accounts receivable.
367.1430 Account 143, Other accounts receivable.
367.1440 Account 144, Accumulated provision for uncollectible
accounts--Credit.
367.1450 Account 145, Notes receivable from associate companies.
367.1460 Account 146, Accounts receivable from associate companies.
367.1520 Account 152, Fuel stock expenses undistributed.
367.1540 Account 154, Materials and operating supplies.
367.1630 Account 163, Stores expense undistributed.
367.1650 Account 165, Prepayments.
367.1710 Account 171, Interest and dividends receivable.
367.1720 Account 172, Rents receivable.
367.1730 Account 173, Accrued revenues.
367.1740 Account 174, Miscellaneous current and accrued assets.

Deferred Debits

367.1810 Account 181, Unamortized debt expense.
367.1830 Account 183, Preliminary survey and investigation charges.
367.1840 Account 184, Clearing accounts.
367.1850 Account 185, Temporary facilities.
367.1860 Account 186, Miscellaneous deferred debits.
367.1880 Account 188, Research, development and demonstration expenditures.
367.1900 Account 190, Accumulated deferred income taxes.

Proprietary Capital

367.2010 Account 201, Common stock issued.
367.2040 Account 204, Preferred stock issued.
367.2110 Account 211, Miscellaneous paid-in-capital.
367.2150 Account 215, Appropriated retained earnings.
367.2160 Account 216, Unappropriated retained earnings.
367.2161 Account 216.1, Unappropriated undistributed subsidiary earnings.
367.2190 Account 219, Accumulated other comprehensive income.

Long-Term Debt

367.2230 Account 223, Advances from associate companies.
367.2240 Account 224, Other long-term debt.
367.2250 Account 225, Unamortized premium on long-term debt.
367.2260 Account 226, Unamortized discount on long-term debt--Debit.

Other Noncurrent Liabilities

367.2270 Account 227, Obligations under capital lease--Non-current.
367.2300 Account 230, Assets retirement obligations.

Current and Accrued Liabilities

367.2310 Account 231, Notes payable.
367.2320 Account 232, Accounts payable.
367.2330 Account 233, Notes payable to associate companies.
367.2340 Account 234, Accounts payable to associate companies.
367.2360 Account 236, Taxes accrued.
367.2370 Account 237, Interest accrued.
367.2380 Account 238, Dividends declared.
367.2410 Account 241, Tax collections payable.
367.2420 Account 242, Miscellaneous current and accrued liabilities.
367.2430 Account 243, Obligations under capital leases--Current.

Deferred Credits

367.2530 Account 253, Other deferred credits.
367.2550 Account 255, Accumulated deferred investment tax credits.
367.2820 Account 282, Accumulated deferred income taxes--Other property.
367.2830 Account 283, Accumulated deferred income taxes--Other
Subpart G--Service Company Property Chart of Accounts
367.3010 Account 301, Organization.
367.3030 Account 303, Miscellaneous intangible property.
367.3890 Account 389, Land and land rights.
367.3900 Account 390, Structures and improvements.
367.3910 Account 391, Office furniture and equipment.
367.3920 Account 392, Transportation equipment.
367.3930 Account 393, Stores equipment.
367.3940 Account 394, Tools, shop and garage equipment.
367.3950 Account 395, Laboratory equipment.
367.3960 Account 396, Power operated equipment.
367.3970 Account 397, Communication equipment.
367.3980 Account 398, Miscellaneous equipment.
367.3990 Account 399, Other tangible property.
367.3991 Account 399.1, Asset retirement costs for service company
property.
Subpart H--Income Statement Chart of Accounts

Service Company Operating Income

367.4000 Account 400, Operating revenues.
367.4010 Account 401, Operation expense.
367.4020 Account 402, Maintenance expense.
367.4030 Account 403, Depreciation expense.
367.4031 Account 403.1, Depreciation expense for asset retirement costs.
367.4040 Account 404, Amortization of limited-term property.
367.4050 Account 405, Amortization of other property.
367.4081 Account 408.1, Taxes other than income taxes, operating income.
367.4082 Account 408.2, Taxes other than income taxes, other income
and deductions.
367.4091 Account 409.1, Income taxes, operating income.
367.4092 Account 409.2, Income taxes, other income and deductions.
367.4093 Account 409.3, Income taxes, extraordinary items.
367.4101 Account 410.1, Provision for deferred income taxes,
operating income.
367.4102 Account 410.2, Provision for deferred income taxes, other
income and deductions.
367.4111 Account 411.1, Provision for deferred income taxes--Credit,
operating income.
367.4112 Account 411.2, Provision for deferred income taxes--Credit,
other income and deductions.
367.4114 Account 411.4, Investment tax credit adjustments, service
company property.
367.4115 Account 411.5, Investment tax credit adjustments, other.
367.4116 Account 411.10, Accretion expense.
367.4150 Account 415, Revenues from merchandising, jobbing and
contract work.
367.4160 Account 416, Costs and expenses of merchandising, jobbing
and contract work.
367.4171 Account 417.1, Expenses of non-utility related operations.
367.4181 Account 418.1, Equity in earnings of subsidiary companies.
367.4190 Account 419, Interest and dividend income.
367.4191 Account 419.1, Allowance for other funds used during construction.

[[Page 28474]]

367.4210 Account 421, Miscellaneous income or loss.
367.4211 Account 421.1, Gain on disposition of property.
367.4212 Account 421.2, Loss on disposition of property.
367.4250 Account 425, Miscellaneous amortization.
367.4261 Account 426.1, Donations.
367.4262 Account 426.2, Life insurance.
367.4263 Account 426.3, Penalties.
367.4264 Account 426.4, Expenditures for certain civic, political
and related activities.
367.4265 Account 426.5, Other deductions.
367.4270 Account 427, Interest on long-term debt.
367.4280 Account 428, Amortization of debt discount and expense.
367.4290 Account 429, Amortization of premium on debt--Credit.
367.4300 Account 430, Interest on debt to associate companies.
367.4310 Account 431, Other interest expense.
367.4320 Account 432, Allowance for borrowed funds used during
construction--Credit.
Subpart I--Retained Earnings Accounts
367.4330 Account 433, Balance transferred from income.
367.4340 Account 434, Extraordinary income.
367.4350 Account 435, Extraordinary deductions.
367.4360 Account 436, Appropriations of retained earnings.
367.4370 Account 437, Dividends declared--preferred stock.
367.4380 Account 438, Dividends declared--common stock.
367.4390 Account 439, Adjustments to retained earnings.
Subpart J--Operating Revenue Chart of Accounts
367.4570 Account 457, Services rendered to associate utility companies.
367.4571 Account 457.1, Direct costs charged to associate utility companies.
367.4572 Account 457.2, Indirect costs charged to associate utility
companies.
367.4573 Account 457.3, Compensation for use of capital--associate
utility companies.
367.4580 Account 458, Services rendered to non-associate utility companies.
367.4581 Account 458.1, Direct costs charged to non-associate
utility companies.
367.4582 Account 458.2, Indirect costs charged to non-associate
utility companies.
367.4583 Account 458.3, Compensation for use of capital--Non-
associate utility companies.
367.4584 Account 458.4, Excess or deficiency on servicing non-
associate utility companies.
367.4590 Account 459, Services rendered to non-utility companies.
367.4591 Account 459.1, Direct costs charged to non-utility companies.
367.4592 Account 459.2, Indirect costs charged to non-utility companies.
367.4593 Account 459.3, Compensation for use of capital--non-utility
companies.
367.4594 Account 459.4, Excess or deficiency on servicing non-
associate utility companies.
Subpart K--Operation and Maintenance Expense Chart of Accounts
367.5000 Accounts 500-598, Electric operation and maintenance accounts.
367.8000 Accounts 800-894, Gas operation and maintenance accounts.
367.9010 Account 901, Supervision.
367.9020 Account 902, Meter reading expenses.
367.9030 Account 903, Customer records and collection expenses.
367.9040 Account 904, Uncollectible accounts.
367.9050 Account 905, Miscellaneous customer accounts expenses.
367.9070 Account 907, Supervision.
367.9080 Account 908, Customer assistance expenses.
367.9090 Account 909, Informational and instructional advertising expenses.
367.9100 Account 910, Miscellaneous customer service and
informational expenses.
367.9110 Account 911, Supervision.
367.9120 Account 912, Demonstrating and selling expenses.
367.9130 Account 913, Advertising expenses.
367.9160 Account 916, Miscellaneous sales expenses.
367.9200 Account 920, Administrative and general salaries.
367.9210 Account 921, Office supplies and expenses.
367.9220 Account 922, Administrative expenses transferred--Credit.
367.9230 Account 923, Outside services employed.
367.9240 Account 924, Property insurance.
367.9250 Account 925, Injuries and damages.
367.9260 Account 926, Employee pensions and benefits.
367.9280 Account 928, Regulatory commission expense.
367.9301 Account 930.1, General advertising expenses.
367.9302 Account 930.2, Miscellaneous general expenses.
367.9310 Account 931, Rents.
367.9350 Account 935, Maintenance of structures and equipment.

Authority: 42 U.S.C. 16451-16463.

Subpart A--Definitions

Sec. 367.1 Definitions.

(a) When used in this system of accounts:
(1) Accounts means the accounts prescribed by this Uniform System
of Accounts.
(2) Actually issued, as applied to securities issued or assumed by
the service companies, means those which have been sold to bona fide
purchasers for a valuable consideration, those issued as dividends on
stock, and those which have been issued in accordance with contractual
requirements direct to trustees of sinking funds.
(3) Actually outstanding, as applied to securities issued or
assumed by the service company, means those which have been actually
issued and are neither retired nor held by or for the service company;
provided, however, that securities held by trustees must be considered
as actually outstanding.
(4) Amortization means the gradual extinguishment of an amount in
an account by distributing such amount over a fixed period, over the
life of the asset or liability to which it applies, or over the period
during which it is anticipated the benefit will be realized.
(5) Associate company means any company in the same holding company
system with such company.
(6) Book cost means the amount at which property is recorded in
these accounts without deduction of related provisions for accrued
depreciation, amortization, or for other purposes.
(7) Commission means the Federal Energy Regulatory Commission.
(8) Company, when not otherwise indicated in the context, means a
service company.
(9) Construction, when used in the context of a service provided to
other companies, means any construction, extension, improvement,
maintenance, or repair of the facilities or any part thereof of a
company, which is performed for a charge.
(10) Cost means the amount of money actually paid for property or
services. When the consideration given is other than cash in a purchase
and sale transaction, as distinguished from a transaction involving the
issuance of common stock in a merger, the value of such consideration
must be determined on a cash basis.
(11) Cost of removal means the cost of demolishing, dismantling,
tearing down or otherwise removing service property, including the cost
of transportation and handling incidental thereto. It does not include
the cost of removal activities associated with asset retirement
obligations that are capitalized as part of the tangible long-lived
assets that give rise to the obligation. (See General Instructions in
Sec. 367.22).
(12) Debt expense means all expenses in connection with the
issuance and initial sale of evidences of debt, such as fees for
drafting mortgages and trust deeds; fees and taxes for issuing or
recording evidences of debt; cost of engraving and printing bonds and
certificates of indebtedness; fees paid trustees; specific costs of
obtaining governmental authority; fees for legal services; fees and
commissions paid underwriters, brokers, and salesmen for

[[Page 28475]]

marketing such evidences of debt; fees and expenses of listing on
exchanges; and other like costs.
(13) Depreciation, as applied to depreciable service company
property, means the loss in service value not restored by current
maintenance. Among the causes to be used as consideration for causes of
loss in service value are wear and tear, decay, action of the elements,
inadequacy, obsolescence, changes in the art, changes in demand and
requirements of public authorities.
(14) Direct cost includes the labor costs and expenses which can be
identified through a work order system as being applicable to services
performed for a single or group of associate and non-associate
companies. Cost incidental to or related to a directly charged item
must be classified as direct costs.
(15) Discount, as applied to the securities issued or assumed by
the service company, means the excess of the par (stated value of no-
par stocks) or face value of the securities plus interest or dividends
accrued at the date of the sale over the cash value of the
consideration received from their sale.
(16) Electric utility company means any company that owns or
operates facilities used for the generation, transmission, or
distribution of electric energy for sale. For the purposes of this
subchapter, ``electric utility company'' shall not include entities
that engage only in marketing of electric energy.
(17) Gas utility company means any company that owns or operates
facilities used for distribution at retail (other than the distribution
only in enclosed portable containers or distribution to tenants or
employees of the company operating such facilities for their own use
and not for resale) of natural or manufactured gas for heat, light, or
power. For the purposes of this subchapter, ``gas utility company''
shall not include entities that engage only in marketing of natural and
manufactured gas.
(18) Goods means any goods, equipment (including machinery),
materials, supplies, appliances, or similar property (including coal,
oil, or steam, but not including electric energy, natural or
manufactured gas, or utility assets) which is sold, leased, or
furnished, for a charge.
(19) Holding company--(i) In general. The term ``holding company''
means--
(A) Any company that directly or indirectly owns, controls, or
holds, with power to vote, 10 percent or more of the outstanding voting
securities of a public-utility company or of a holding company of any
public-utility company; and
(B) Any person, determined by the Commission, after notice and
opportunity for hearing, to exercise directly or indirectly (either
alone or pursuant to an arrangement or understanding with one or more
persons) such a controlling influence over the management or policies
of any public-utility company or holding company as to make it
necessary or appropriate for the rate protection of utility customers
with respect to rates that such person be subject to the obligations,
duties, and liabilities imposed by this subchapter upon holding companies.
(ii) Exclusions. The term ``holding company'' must not include--
(A) A bank, savings association, or trust company, or their
operating subsidiaries that own, control, or hold, with the power to
vote, public utility or public utility holding company securities so
long as the securities are--
(1) Held as collateral for a loan;
(2) Held in the ordinary course of business as a fiduciary; or
(3) Acquired solely for purposes of liquidation and in connection
with a loan previously contracted for and owned beneficially for a
period of not more than two years; or
(B) A broker or dealer that owns, controls, or holds with the power
to vote public utility or public utility holding company securities so
long as the securities are--
(1) Not beneficially owned by the broker or dealer and are subject
to any voting instructions which may be given by customers or their
assigns; or
(2) Acquired in the ordinary course of business as a broker,
dealer, or underwriter with the bona fide intention of effecting
distribution within 12 months of the specific securities so acquired.
(20) Holding company system means a holding company, together with
its subsidiary companies.
(21) Indirect cost includes the costs of a general overhead nature
such as general services, housekeeping costs, and other support cost
which cannot be separately identified to a single or group of associate
and non-associate companies and, therefore, must be allocated. Indirect
costs must be accumulated on a departmental basis.
(22) Investment advances means advances, represented by notes or by
book accounts only, with respect to which it is mutually agreed or
intended between the creditor and debtor that they must be settled by
the issuance of securities or must not be subject to current settlement.
(23) Lease, capital means a lease of property used by the service
company, which meets one or more of the criteria stated in General
Instructions in Sec. 367.18.
(24) Lease, operating means a lease of property used by a service
company, which does not meet any of the criteria stated in General
Instructions in Sec. 367.18.
(25) Minor items of property means the associated parts or items of
which retirement units are composed.
(26) Natural gas company means a person engaged in the
transportation of natural gas in interstate commerce or the sale of
such gas in interstate commerce for resale.
(27) Net salvage value means the salvage value of property retired
less the cost of removal.
(28) Nominally issued, as applied to securities issued or assumed
by the service company, means those which have been signed, certified,
or otherwise executed, and placed with the proper officer for sale and
delivery, or pledged, or otherwise placed in some special fund of the
service company, but which have not been sold, or issued direct to
trustees of sinking funds in accordance with contractual requirements.
(29) Nominally outstanding, as applied to securities issued or
assumed by the service company, means those which, after being actually
issued, have been reacquired by or for the service company under
circumstances which require them to be considered as held alive and not
retired, provided, however, that securities held by trustees must be
considered as actually outstanding.
(30) Non-associate companies means a person, partnership,
organization, government body or company which is not a member of the
holding company system.
(31) Non-utility company means a company that is not a utility company.
(32) Person means an individual or company.
(33) Premium, as applied to securities issued or assumed by the
service company, means the excess of the cash value of the
consideration received from their sale over the sum of their par
(stated value of no-par stocks) or face value and interest or dividends
accrued at the date of sale.
(34) Public utility means any person who owns or operates
facilities used for transmission of electric energy in interstate
commerce or sales of electric energy at wholesale in interstate commerce.
(35) Public-utility company means an electric utility company or
gas utility company.

[[Page 28476]]

(36) Replacing or replacement, when not otherwise indicated in the
context, means the construction or installation of service property in
place of property retired, together with the removal of the property
retired.
(37) Research, development, and demonstration (RD&D) means
expenditures incurred by a service company, for the service company or
on behalf of others, either directly or through another person or
organization (such as research institute, industry association,
foundation, university, engineering company or similar contractor) in
pursuing research, development, and demonstration activities including
experiment, design, installation, construction, or operation. This
definition includes expenditures for the implementation or development
of new and/or existing concepts until technically feasible and
commercially feasible operations are verified. When conducted on behalf
of an associate or non-associate utility company such research,
development, and demonstration costs should be reasonably related to
the existing or future business of such company. The term includes, but
is not limited to: all the costs incidental to the design, development
or implementation of an experimental facility, a plant process, a
product, a formula, an invention, a system or similar items, and the
improvement of already existing items of a like nature; amounts
expended in connection with the proposed development and/or proposed
delivery of alternate sources of electricity or substitute or synthetic
gas supplies (alternate fuel sources, for example, an experimental coal
gasification plant or an experimental plant synthetically producing gas
from liquid hydrocarbons); and the costs of obtaining its own patent,
such as attorney's fees expended in making and perfecting a patent
application. The term includes preliminary investigations and detailed
planning of specific projects for securing for customers' non-
conventional electric power or pipeline gas supplies that rely on
technology that has not been verified previously to be feasible. The
term does not include expenditures for efficiency surveys; studies of
management, management techniques and organization; consumer surveys,
advertising, promotions, or items of a like nature.
(38) Retained earnings means the accumulated net income of the
service company less distribution to stockholders and transfers to
other capital accounts.
(39) Retirement units means those items of property which, when
retired, with or without replacement, are accounted for by crediting
the book cost of the retirement units to the property account in which
it is included.
(40) Salvage value means 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.
(41) Service means any managerial, financial, legal, engineering,
purchasing, marketing, auditing, statistical, advertising, publicity,
tax, research, or any other service (including supervision or
negotiation of construction or of sales), information or data, which is
sold or furnished for a charge.
(42) Service company means any associate company within a holding
company system organized specifically for the purpose of providing non-
power goods or services or the sale of goods or construction work to
any public utility in the same holding company system.
(43) Service cost means the total of direct and indirect costs
incurred to provide a service to an associate or non-associate company
which are properly charged to expense by the service company.
(44) Service life means the time between the date property is
placed in service, or property is leased to others, and the date of its
retirement. If depreciation is accounted for on a production basis
rather than on a time basis, then service life should be measured in
terms of the appropriate unit of production.
(45) Service value means the difference between the cost and net
salvage value of service property.
(46) State commission means any commission, board, agency, or
officer, by whatever name designated, of a State, municipality, or
other political subdivision of a State that, under the laws of such
State, has jurisdiction to regulate public-utility companies.
(47) Uniform System of Accounts means the Uniform System of
Accounts for Centralized Service Companies prescribed in this part, as
amended from time to time.
(48) Utility company means a public-utility company or natural gas
company whose rates are regulated by the Commission, state commission
or other similar regulatory body.
(49) Work order system means a system for the accumulation of
service company cost on a job, project, or functional basis. It
includes schedules and worksheets used to account for charges billed to
single and groups of associate and non-associate companies.

Subpart B--General Instructions

Sec. 367.2 Companies for which this system of accounts is prescribed.

(a) This Uniform System of Accounts applies to any centralized
service company operating, or organized specifically to operate, within
a holding company system for the purpose of providing non-power
services to any public utility in the same holding company system. A
centralized service company is not a special-purpose company (e.g., a
fuel supply company or a construction company), but rather is a service
company that provides services such as administrative, managerial,
financial, accounting, recordkeeping, legal or engineering services,
which are sold, furnished, or otherwise provided (typically for a
charge) to other companies in the same holding company system. To the
extent that the term service company is used in this Uniform System of
Accounts, it applies only to centralized service companies.
(b) This Uniform System of Accounts is not applicable to:
(1) Service companies that are specifically organized as a special-
purpose company such as a fuel supply company or a construction company.
(2) Electric or gas utility companies.
(3) Companies primarily engaged:
(i) In the production of goods, including exploration and
development of fuel resources,
(ii) In the provision of water, telephone, or similar services, the
sale of which is normally subject to public rate regulation,
(iii) In the provision of transportation, whether or not regulated,
or
(iv) In the ownership of property, including leased property and
fuel reserves, for the use of associate companies.
(4) A service company that provides services exclusively to a local
gas distribution company.

Sec. 367.3 Records.

(a) Each service company must keep its books of account, and all
other books, records, and memoranda that support the entries in the
books of account, so as to be able to furnish full information on any
item included in any account. Each entry must be supported by
sufficient detailed information that will permit ready identification,
analysis, and verification of all facts relevant and related to the records.
(b) The books and records referred to in this part include not only
accounting

[[Page 28477]]

records in a limited technical sense, but all other records, such as
minutes books, stock books, reports, correspondence, and memoranda,
that may be useful in developing the history of or facts regarding any
transaction.
(c) No service company may destroy any books or records unless the
destruction is permitted by the rules and regulations of the Commission.
(d) In addition to prescribed accounts, clearing accounts,
temporary or experimental accounts, and subaccounts of any accounts may
be kept, provided the integrity of the prescribed accounts is not impaired.
(e) The arrangement or sequence of the accounts prescribed in this
part must not be controlling as to the arrangement or sequence in
report forms that may be prescribed by the Commission.

Sec. 367.4 Numbering system.

(a) The account numbering plan used in this part consists of a
system of three-digit whole numbers as follows:
(1) 100-199, Assets and other debits.
(2) 200-299, Liabilities and other credits.
(3) 300-399, Property accounts.
(4) 400-432 and 434-435, Income accounts.
(5) 433, 436 and 439, Retained earnings accounts.
(6) 457-459, Revenue accounts.
(7) 500-599, Electric operating expenses.
(8) 800-894, Gas operating expenses.
(9) 900-949, Customer accounts, customer service and informational,
sales, and general and administrative expenses.
(b) The numbers prefixed to account titles are to be considered as
parts of the titles. Each service company, however, may adopt for its
own purposes a different system of account numbers (See also General
Instructions in Sec. 367.3(d)) provided that the numbers prescribed in
this part must appear in the descriptive headings of the ledger
accounts and in the various sources of original entry; however, if a
service company uses a different system of account numbers and it is
not practicable to show the prescribed account numbers in the various
sources of original entry, the reference to the prescribed account
numbers may be omitted from the various sources of original entry. Each
service company using different account numbers for its own purposes
must keep readily available a list of the account numbers that it uses
and a reconciliation of those account numbers with the account numbers
provided in this part. It is intended that the service company's
records must be kept so as to permit ready analysis by prescribed
accounts (by direct reference to sources of original entry to the
extent practicable) and to permit preparation of financial and
operating statements directly from the records at the end of each
accounting period according to the prescribed accounts.

Sec. 367.5 Accounting period.

Each service company must keep its books on a monthly basis so that
for each month all transactions applicable to the account, as nearly as
may be ascertained, must be entered in the books of the service
company. Amounts applicable or assignable to a single or group of
associate and non-associate companies must be segregated monthly. Each
service company must close its books at the end of each calendar year
unless otherwise authorized by the Commission.

Sec. 367.6 Submittal of questions.

To maintain uniformity of accounting, service companies must submit
questions of doubtful interpretation to the Commission for
consideration and decision.

Sec. 367.7 Item list.

Lists of items appearing in the texts of the accounts or elsewhere
in this part are for the purpose of indicating clearly the application
of the prescribed accounting. The lists are intended to be
representative, but not exhaustive. The appearance of an item in a list
warrants the inclusion of the item in the account mentioned only when
the text of the account also indicates inclusion inasmuch as the same
item frequently appears in more than one list. The proper entry in each
instance must be determined by the texts of the accounts.

Sec. 367.8 Extraordinary items.

Those items related to the effects of events and transactions that
have occurred during the current period and that are of an unusual
nature and infrequent occurrence must be considered extraordinary
items. Accordingly, there will be events and transactions of
significant effect that are abnormal and significantly different from
the ordinary and typical activities of the service company, and that
would not reasonably be expected to recur in the foreseeable future. In
determining significance, items must be considered individually and not
in the aggregate. However, the effects of a series of related
transactions arising from a single specific and identifiable event or
plan of action should be considered in the aggregate. For an item to be
recognized as extraordinary, Commission approval must be obtained. (See
Accounts 434 and 435 in Sec. Sec. 367.4340 and 367.4350.)

Sec. 367.9 Prior period items.

(a) Items of profit and loss related to the following must be
accounted for as prior period adjustments and excluded from the
determination of net income for the current year:
(1) Correction of an error in the financial statements of a prior year.
(2) Adjustments that result from realization of income tax benefits
of pre-acquisition operating loss carry forwards of purchased
subsidiaries.
(b) All other items of profit and loss recognized during the year
must be included in the determination of net income for that year.

Sec. 367.10 Unaudited items.

Whenever a financial statement is required by the Commission, if it
is known that a transaction has occurred that affects the accounts but
the amount involved in the transaction and its effect upon the accounts
cannot be determined with absolute accuracy, the amount must be
estimated and the estimated amount included in the proper accounts. The
service company is not required to anticipate minor items that would
not appreciably affect the accounts.

Sec. 367.11 Distribution of pay and expenses of employees.

The charges to property, operating expense and other accounts for
services and expenses of employees engaged in activities chargeable to
various accounts, such as construction, maintenance, and operations,
must be based upon the actual time engaged in the respective classes of
work, or an appropriate allocation method.

Sec. 367.12 Payroll distribution.

Underlying accounting data must be maintained so that the
distribution of the cost of labor charged direct to the various
accounts will be readily available. The underlying data must permit a
reasonably accurate distribution to be made of the cost of labor
charged initially to clearing accounts so that the total labor cost may
be classified among construction, cost of removal, operating functions.

Sec. 367.13 Accounting to be on accrual basis.

(a) The service company is required to keep its accounts on the
accrual basis. This requires the inclusion in its accounts of all known
transactions of appreciable amount that affect the accounts. If bills
covering the transactions have not been received or

[[Page 28478]]

rendered, the amounts must be estimated and appropriate adjustments
made when the bills are received. When the amount is ascertained, the
necessary adjustments must be made through the accounts in which the
estimate was recorded. If it is determined during the interval that a
material adjustment will be required, the estimate must be adjusted
through the current accounts. The service company is not required to
anticipate minor items which would not appreciably affect these accounts.
(b) When payments are made in advance for items such as insurance,
rents, taxes or interest, the amount applicable to future periods must
be charged to account 165, Prepayments (Sec. 367.1650), and spread
over the periods to which they are applicable by credits to account 165
(Sec. 367.1650), and charges to the accounts appropriate for the
expenditure.

Sec. 367.14 Transactions with associate companies.

Each service company must keep its accounts and records so as to be
able to furnish accurately and expeditiously statements of all
transactions with associate companies. The statements may be required
to show the general nature of the transactions, the amounts involved in
the transactions and the amounts included in each account prescribed in
this part with respect to such transactions. Transactions with
associate companies must be recorded in the appropriate accounts for
transactions of the same nature. Nothing contained in this part,
however, must be construed as restraining the service company from
subdividing accounts for the purpose of recording separately
transactions with associate companies.

Sec. 367.15 Contingent assets and liabilities.

Contingent assets represent a possible source of value to the
service company contingent upon the fulfillment of conditions regarded
as uncertain. Contingent liabilities include items that, under certain
conditions, may become obligations of the service company but that are
neither direct nor assumed liabilities at the date of the balance
sheet. The service company must be prepared to give a complete
statement of significant contingent assets and liabilities (including
cumulative dividends on preference stock) in its annual report and at
such other times as may be requested by the Commission.

Sec. 367.16 Long-term debt: Premium, discount and expense, and gain
or loss on reacquisition.

(a) A separate premium, discount and expense account must be
maintained for each class and series of long-term debt (including
receivers' certificates) issued or assumed by the service company. The
premium must be recorded in account 225, Unamortized premium on long-
term debt (Sec. 367.2250), the discount must be recorded in account
226, Unamortized discount on long-term debt--Debit (Sec. 367.2260),
and the expense of issuance must be recorded in account 181,
Unamortized debt expense (Sec. 367.1810). The premium, discount and
expense must be amortized over the life of the respective issues under
a plan that will distribute the amounts equitably over the life of the
securities. The amortization must be on a monthly basis, and the
amounts relating to discounts and expenses must be charged to account
428, Amortization of debt discount and expense (Sec. 367.4280). The
amounts relating to premiums must be credited to account 429,
Amortization of premium on debt--Credit (Sec. 367.4290).
(b) When long-term debt is reacquired the difference between the
amount paid upon reacquisition of any long-term debt and the face
value, adjusted for unamortized discount, expenses or premium, as the
case may be, applicable to the debt redeemed must be recognized
currently in income and recorded in account 421, Miscellaneous income
or loss (Sec. 367.4210), or account 426.5, Other deductions (Sec.
367.4265).

Sec. 367.17 Comprehensive inter-period income tax allocation.

(a) Where there are timing differences between the periods in which
transactions affect taxable income and the periods in which they enter
into the determination of pretax accounting income, the income tax
effects of such transactions are to be recognized in the periods in
which the differences between book accounting income and taxable income
arise and in the periods in which the differences reverse using the
deferred tax method. In general, comprehensive inter-period tax
allocation should be followed whenever transactions enter into the
determination of pretax accounting income for the period even though
some transactions may affect the determination of taxes payable in a
different period, as further qualified in this section.
(b) Once comprehensive inter-period tax allocation has been
initiated, either in whole or in part, it must be practiced on a
consistent basis and must not be changed or discontinued without prior
Commission approval.
(c) Tax effects deferred currently will be recorded as deferred
debits or deferred credits in accounts 190, Accumulated deferred income
taxes (Sec. 367.1900), 282, Accumulated deferred income taxes--Other
property (Sec. 367.2820), and 283, Accumulated deferred income taxes--
Other (Sec. 367.2830), as appropriate. The resulting amounts recorded
in these accounts must be disposed of as prescribed in this system of
accounts or as otherwise authorized by the Commission.

Sec. 367.18 Criteria for classifying leases.

(a) If, at its inception, a lease meets one or more of the
following criteria, the lease must be classified as a capital lease.
Otherwise, it must be classified as an operating lease.
(1) The lease transfers ownership of the property to the lessee by
the end of the lease term.
(2) The lease contains a bargain purchase option.
(3) The lease term is equal to 75 percent or more of the estimated
economic life of the leased property. However, if the beginning of the
lease term falls within the last 25 percent of the total estimated
economic life of the leased property, including earlier years of use,
this criterion must not be used for purposes of classifying the lease.
(4) The present value at the beginning of the lease term of the
minimum lease payments, excluding that portion of the payments
representing executory costs such as insurance, maintenance, and taxes
to be paid by the lessor, including any related profit, equals or
exceeds 90 percent of the excess of the fair value of the leased
property to the lessor at the inception of the lease over any related
investment tax credit retained by the lessor and expected to be
realized by the lessor. However, if the beginning of the lease term
falls within the last 25 percent of the total estimated economic life
of the leased property, including earlier years of use, this criterion
must not be used for purposes of classifying the lease. The lessee must
compute the present value of the minimum lease payments using its
incremental borrowing rate, unless:
(i) It is practicable for the company to learn the implicit rate
computed by the lessor, and
(ii) The implicit rate computed by the lessor is less than the
lessee's incremental borrowing rate.
(iii) If both of those conditions are met, the lessee must use the
implicit rate.
(b) If, at any time, the lessee and lessor agree to change the
provisions of the lease, other than by renewing the lease would have
resulted in a different classification of the lease under the criteria
in paragraph (a) of this section had the changed terms been in effect
at the inception of the lease, the revised

[[Page 28479]]

agreement must be considered as a new agreement over its term, and the
criteria in paragraph (a) of this section must be applied for purposes
of classifying the new lease. Likewise, any action that extends the
lease beyond the expiration of the existing lease term, such as the
exercise of a lease renewal option other than those already included in
the lease term, must be considered as a new agreement and must be
classified according to the criteria in paragraph (a) of this section.
Changes in estimates (for example, changes in estimates of the economic
life or of the residual value of the leased property) or changes in
circumstances (for example, default by the lessee) must not give rise
to a new classification of a lease for accounting purposes.

Sec. 367.19 Accounting for leases.

(a) All leases must be classified as either capital or operating leases.
(b) The service company must record a capital lease as an asset in
account 101.1, Property under capital leases (Sec. 367.1011) and an
obligation in account 227, Obligations under capital leases--Non-
current (Sec. 367.2270), or account 243, Obligations under capital
leases--Current (Sec. 367.2430), at an amount equal to the present
value at the beginning of the lease term of minimum lease payments
during the lease term, excluding that portion of the payments
representing executory costs such as insurance, maintenance, and taxes
to be paid by the lessor, together with any related profit. However, if
the determined amount exceeds the fair value of the leased property at
the inception of the lease, the amount recorded as the asset and
obligation must be the fair value.
(c) The service company, as a lessee, must recognize an asset
retirement obligation (See General Instructions in Sec. 367.22)
arising from the property under a capital lease unless the obligation
is recorded as an asset and liability under a capital lease. The
service company must record the asset retirement cost by debiting
account 101.1, Property under capital leases (Sec. 367.1011), and
crediting the liability for the asset retirement obligation in account
230, Asset retirement obligations (Sec. 367.2300). Asset retirement
costs recorded in account 101.1 (Sec. 367.1011) must be amortized by
charging rent expense (See Operating Expense Instructions in Sec.
367.82) or account 421, Miscellaneous income or loss (Sec. 367.4210),
as appropriate, and crediting a separate subaccount of the account in
which the asset retirement costs are recorded. Charges for the periodic
accretion of the liability in account 230, Asset retirement obligations
(Sec. 367.2300), must be recorded by a charge to account 411.10,
Accretion expense, for service company property (Sec. 367.4111), and
account 421, Miscellaneous income or loss, for non-service company
property (Sec. 367.4210) and a credit to account 230, Asset retirement
obligations (Sec. 367.2300).
(d) Rental payments on all leases must be charged to rent expense,
fuel expense, construction work in progress, or other appropriate
accounts as they become payable.
(e) For a capital lease, for each period during the lease term, the
amounts recorded for the asset and obligation must be reduced by an
amount equal to the portion of each lease payment that would have been
allocated to the reduction of the obligation, if the payment had been
treated as a payment on an installment obligation (liability) and
allocated between interest expense and a reduction of the obligation so
as to produce a constant periodic rate of interest on the remaining balance.

Sec. 367.20 Depreciation accounting.

(a) Method. Service companies must use a method of depreciation
that allocates in a systematic and rational manner the service value of
depreciable property over the service life of the property.
(b) Service lives. Estimated useful service lives of depreciable
property must be supported by engineering, economic, or other
depreciation studies.
(c) Rate. Service companies must use percentage rates of
depreciation that are based on a method of depreciation that allocates
the service value of depreciable property over the service life of the
property. Where composite depreciation rates are used, they must be
based on the weighted average estimated useful service lives of the
depreciable property comprising the composite group.

Sec. 367.22 Accounting for asset retirement obligations.

(a) An asset retirement obligation represents a liability for the
legal obligation associated with the retirement of a tangible, long-
lived asset that a service company is required to settle as a result of
an existing or enacted law, statute, ordinance, or written or oral
contract, or by legal construction of a contract under the doctrine of
promissory estoppel. An asset retirement cost represents the amount
capitalized when the liability is recognized for the long-lived asset
that gives rise to the legal obligation. The amount recognized for the
liability and an associated asset retirement cost must be stated at the
fair value of the asset retirement obligation in the period in which
the obligation is incurred.
(b) The service company must initially record a liability for an
asset retirement obligation in account 230, Asset retirement
obligations (Sec. 367.2300), and charge the associated asset
retirement costs to service company property (including account 101.1
in Sec. 367.1011) related to the property that gives rise to the legal
obligation. The asset retirement cost must be depreciated over the
useful life of the related asset that gives rise to the obligations.
For periods subsequent to the initial recording of the asset retirement
obligation, a service company must recognize the period to period
changes of the asset retirement obligation that result from the passage
of time due to the accretion of the liability and any subsequent
measurement changes to the initial liability for the legal obligation
recorded in account 230, Asset retirement obligations (Sec. 367.2300),
as follows:
(1) The service company must record the accretion of the liability
by debiting account 411.10, Accretion expense (Sec. 367.4116); and
(2) The service company must recognize any subsequent measurement
changes of the liability initially recorded in account 230, Asset
retirement obligations (Sec. 367.2300), for each specific asset
retirement obligation as an adjustment of that liability in account 230
with the corresponding adjustment to service company property. The
service company must on a timely basis monitor any measurement changes
of the asset retirement obligations.
(c) Gains or losses resulting from the settlement of asset
retirement obligations associated with service company property
resulting from the difference between the amount of the liability for
the asset retirement obligation included in account 230, Asset
retirement obligations(Sec. 367.2300), and the actual amount paid to
settle the obligation shall be accounted for as follows:
(1) Gains shall be credited to account 421, Miscellaneous income or
loss (Sec. 367.4210), and;
(2) Losses shall be charged to account 426.5, Other deductions
(Sec. 367.4265).
(d) Separate subsidiary records must be maintained for each asset
retirement obligation showing the initial liability and associated
asset retirement cost, any incremental amounts of the liability
incurred in subsequent reporting periods for additional layers of the
original liability and related asset retirement cost, the accretion of the

[[Page 28480]]

liability, the subsequent measurement changes to the asset retirement
obligation, the depreciation and amortization of the asset retirement
costs and related accumulated depreciation, and the settlement date and
actual amount paid to settle the obligation. For purposes of analysis,
a service company must maintain supporting documentation so as to be
able to furnish accurately and expeditiously with respect to each asset
retirement obligation the full details of the identity and nature of
the legal obligation, the year incurred, the identity of the plant
giving rise to the obligation, the full particulars relating to each
component and supporting computations related to the measurement of the
asset retirement obligation.

Sec. 367.23 Transactions with non-associate companies.

When a service or construction is performed for non-associate
companies at an amount other than cost, the amount of revenues in
excess or deficiency of the cost on servicing the non-associate
companies must be charged to account 458.4, Excess or deficiency on
servicing non-associate utility companies (Sec. 367.4584), or account
459.4, Excess or deficiency on servicing non-associate non-utility
companies(Sec. 367.4594), as appropriate. A deficiency incurred in a
project deemed beneficial to the associate companies may be charged to
associate companies subject to disallowance by a State Commission or
Federal Commission having jurisdiction over the rates or services of
the associate companies. To the extent not charged, or if disallowed,
the deficiency will be charged to account 458.4 (Sec. 367.4584) or
account 459.4 (Sec. 367.4594), as appropriate. In computing charges to
associate companies for any calendar year, the sum of the closing
balances in these accounts, if a credit, must be deducted from amounts
reimbursable by associate companies as compensation for use of capital
invested in the service company.

Sec. 367.24 Construction and service contracts for other companies.

(a) Specific accounts have not been provided to classify
expenditures made in the performance of construction or service
contracts, under which the service company undertakes projects to
construct physical property for associate or non-associate companies.
The service company must keep records pursuant to its work order system
indicating the cost of each contract or project, the amount of service
costs allocated to the contracts, and the additional classification of
expenditures relating to projects that will meet the accounting
requirements of the company for which the work is performed.
(b) Service costs allocated to construction must include the proper
proportion of salaries, expense of officers and employees, pay of
employees on the service company's regular staff specifically assigned
to construction work, and other expenses of maintaining the service
company's organization and equipment. Cost of materials, construction
payrolls, outside services, and other expenses directly attributable to
construction work must be excluded from the accounting system of the
service company and charged directly by the vendor or supplier to the
construction project.
(c) Service costs allocated to centralized procurement activities
must include only the cost of the support services performed by the
service company in connection with the procurement of goods for
associate companies. Cost of goods procured must be excluded from the
accounting system of the service company and charged directly by the
vendor or supplier to the associate company concerned. The service
company must keep records indicating the cost of goods, if any, that it
procures for each associate company and the amount of service costs
allocated thereto. These records must be maintained to meet the
Commission's accounting requirements for electric and gas companies.

Sec. 367.25 Determination of service cost.

A service must be deemed at cost and fair allocation of costs
requires an accurate accounting for the elements that makes up the
aggregate expense of conducting the business of the service company. In
the accounts prescribed in this part, the total amounts included in the
expense accounts during any period plus the amount that appropriately
may be added as compensation for the use of capital, if paid,
constitute cost during that period.

Sec. 367.26 Departmental classification.

Salaries and wages and all other costs must be classified by
departmental or other functional category in accordance with the
departmental organization of the service company to provide a readily
available basis for analysis.

Sec. 367.27 Billing procedures.

All invoices for services rendered must be submitted monthly with
sufficient information and in sufficient detail to permit such company,
where applicable, to identify and classify the charge in terms of the
system of accounts prescribed by the regulatory authorities to which it
is subject. Each month a statement must be rendered to each associate
and non-associate utility company to whom services were provided
containing a summary of the accounts by work order and showing the
charges, classified as direct cost, indirect cost, and compensation for
use of capital.

Sec. 367.28 Methods of allocation.

Indirect costs and compensation for use of capital must be
allocated to work orders in accordance with the service company's
applicable and currently effective methods of allocation. Both direct
and allocated indirect costs of work orders must be assigned among
those companies in the same manner. Each work order must identify the
methods of allocation and the accounts to be charged. Companies must be
notified in writing of any change in the methods of allocation.

Sec. 367.29 Compensation for use of capital.

A servicing transaction is deemed to be performed at no more than
cost if the price of the service does not exceed a fair and equitable
allocation of expenses plus reasonable compensation for necessary
capital procured through the issuance of capital stock. Interest on
borrowed capital and compensation for the use of capital must only
represent a reasonable return on the amount of capital reasonably
necessary for the performance of services or construction work for, or
the sale of goods to, associate companies. The compensation may be
estimated and must be computed monthly. The amount of compensation must
be stated separately in each billing to the associate companies. An
annual statement to support the amount of compensation for use of
capital billed for the previous 12 months and how it was calculated
must be supplied to each associate company at the end of the calendar year.

Sec. 367.30 Work order system for associate companies.

Service companies must maintain a detailed classification of
service costs, that permits costs to be identified with the functional
processes of the associate companies served. To permit the
classification, each service company must maintain a work order system
for accumulating reimbursable costs and charges to the associate
companies served, and maintain time records for all service company
employees in order to support the accounting allocation of all expenses
assignable to the types of services performed and chargeable to

[[Page 28481]]

the associate companies served. Service company employee records must
permit a ready identification of the hours worked, account numbers
charged, department work order number and other code designations that
facilitate proper classification.

Subpart C--Service Company Property Instructions

Sec. 367.50 Service company property to be recorded at cost.

(a) All amounts included in the accounts for service company
property must be stated at the cost incurred by the service company,
except for property acquired by lease which qualifies as capital lease
property under General Instructions in Sec. 367.18, Criteria for
classifying leases, and is recorded in Account 101.1, Property under
capital leases (Sec. 367.1011).
(b) When the consideration given for property is other than cash,
the value of the consideration must be determined on a cash basis (See,
however, Definitions Sec. 367.1(a)(10)). In the entry recording the
transaction, the actual consideration must be described with sufficient
particularity to identify it. The service company must be prepared to
furnish the Commission the particulars of its determination of the cash
value of the consideration, if other than cash.
(c) When property is purchased under a plan involving deferred
payments, no charge must be made to the service company property
accounts for interest, insurance, or other expenditures occasioned
solely by such form of payment.
(d) The service company property accounts must not include the cost
or other value of service company property contributed to the company.
Contributions in the form of money or its equivalent toward the
construction of property must be credited to accounts charged with the
cost of such construction. Property constructed from contributions of
cash or its equivalent must be shown as a reduction to gross property
constructed when assembling cost data in work orders for posting to
property ledgers of accounts. The accumulated gross costs of property
accumulated in the work order must be recorded as a debit in the plant
ledger of accounts along with the related amount of contributions
concurrently recorded as a credit.

Sec. 367.51 Components of construction.

(a) For service companies, the cost of construction properly
included in the service company property accounts must include, where
applicable, the direct and overhead costs as listed and defined as follows:
(1) Contract work includes amounts paid for work performed under
contract by other companies, firms, or individuals, costs incident to
the award of such contracts, and the inspection of the work.
(2) Labor includes the pay and expenses of employees of the service
company engaged on construction work, and related workmen's
compensation insurance, payroll taxes and similar items of expense. It
does not include the pay and expenses of employees that are distributed
to construction through clearing accounts nor the pay and expenses
included in other items in this section.
(3)(i) Materials and supplies includes the purchase price at the
point of free delivery plus customs duties, excise taxes, the cost of
inspection, loading and transportation, the related stores expenses,
and the cost of fabricated materials from the service company's shop.
In determining the cost of materials and supplies used for
construction, proper allowance must be made for unused materials and
supplies, for materials recovered from temporary structures used in
performing the work involved, and for discounts allowed and realized in
the purchase of materials and supplies.
(ii) The cost of individual items of equipment of small value (for
example, $500 or less) or of short life, including small portable tools
and implements, must not be charged to service company property
accounts unless the correctness of the accounting is verified by
current inventories. The cost must be charged to the appropriate
operating expense or clearing accounts, according to the use of the
items, or, if the items are consumed directly in construction work, the
cost must be included as part of the cost of the construction.
(4) Transportation includes the cost of transporting employees,
materials and supplies, tools, purchased equipment, and other work
equipment (when not under own power) to and from points of
construction. It includes amounts paid to others as well as the cost of
operating the service company's own transportation equipment. (See
paragraph (a)(5) of this section.)
(5) Special machine service includes the cost of labor (optional),
materials and supplies, depreciation, and other expenses incurred in
the maintenance, operation and use of special machines, such as steam
shovels, pile drivers, derricks, ditchers, scrapers, material
unloaders, and other labor saving machines; also expenditures for
rental, maintenance and operation of machines of others. It does not
include the cost of small tools and other individual items of small
value or short life which are included in the cost of materials and
supplies. (See paragraph (a)(3) of this section.) When a particular
construction job requires the use for an extended period of time of
special machines, transportation or other equipment, the associated net
book cost, less the appraised or salvage value at time of release from
the job, must be included in the cost of construction.
(6) Shop service includes the proportion of the expense of the
service company's shop department assignable to construction work
except that the cost of fabricated materials from the service company's
shop must be included in materials and supplies.
(7) Protection includes the cost of protecting the service
company's property from fire or other casualties and the cost of
preventing damages to others, or to the property of others, including
payments for discovery or extinguishment of fires, cost of apprehending
and prosecuting incendiaries, related witness fees, amounts paid to
municipalities and others for fire protection, and other analogous
items of expenditures in connection with construction work.
(8) Injuries and damages includes expenditures or losses in
connection with construction work on account of injuries to persons and
damages to the property of others; also the cost of investigation of,
and defense against, actions for the injuries and damages. Insurance
recovered or recoverable on account of compensation paid for injuries
to persons incident to construction must be credited to the account or
accounts to which such compensation is charged. Insurance recovered or
recoverable on account of property damages incident to construction
must be credited to the account or accounts charged with the cost of
the damages.
(9) Privileges and permits includes payments for and expenses
incurred in securing temporary privileges, permits or rights in
connection with construction work, such as for the use of private or
public property, streets, or highways, but it does not include rents.
(10) Rents include amounts paid for the use of construction
quarters and office space occupied by construction forces and amounts
properly includible in construction costs for the facilities jointly used.
(11) Engineering and supervision includes the portion of the pay
and expenses of engineers, surveyors, draftsmen, inspectors, superintendents

[[Page 28482]]

and their assistants applicable to construction work.
(12) General administration capitalized includes the portion of the
pay and expenses of the general officers and administrative and general
expenses applicable to construction work.
(13) Engineering services includes amounts paid to other companies,
firms, or individuals engaged by the service company to plan, design,
prepare estimates, supervise, inspect, or give general advice and
assistance in connection with construction work.
(14) Insurance includes premiums paid or amounts provided or
reserved as self-insurance for the protection against loss and damages
in connection with construction, by fire or other casualty injuries to
or death of persons other than employees, damages to property of
others, defalcation of employees and agents, and the nonperformance of
contractual obligations of others. It does not include workmen's
compensation or similar insurance on employees included as labor in
paragraph (a)(2) of this section.
(15) Law expenditures includes the general law expenditures
incurred in connection with construction and the directly related court
and legal costs, other than law expenses included in protection in
paragraph (a)(7) of this section, and in injuries and damages in
paragraph (a)(8) of this section.
(16) Taxes include taxes on physical property (including land)
during the period of construction and other taxes properly includible
in construction costs before the facilities become available for service.
(17) Allowance for funds used during construction includes the net
cost for the period of construction of borrowed funds used for
construction purposes and a reasonable rate on other funds when so
used, not to exceed, without prior approval of the Commission,
allowances computed in accordance with the formula prescribed in
paragraph (i) of this section. No allowance for funds used during
construction charges must be included in these accounts upon
expenditures for construction projects which have been abandoned.
(i) The formula and elements for the computation of the allowance
for funds used during construction must be:
(A) Ai=s(S/W)+d(D/D+P+C)(1-S/W)
(B) Ae=[1-S/W][p(P/D+P+C)+c(C/D+P+C)]
(C) Ai=Gross allowance for borrowed funds used during construction rate.
(D) Ae=Allowance for other funds used during construction rate.
(E) S=Average short-term debt.
(F) s=Short-term debt interest rate.
(G) D=Long-term debt.
(H) d=Long-term debt interest rate.
(I) P=Preferred stock.
(J) p=Preferred stock cost rate.
(K) C=Common equity.
(L) c=Common equity cost rate.
(M) W= Average balance in construction work in progress, less asset
retirement costs (See General Instructions in Sec. 367.22) related to
property under construction.
(ii) The rates must be determined annually. The balances for long-
term debt, preferred stock and common equity must be the actual book
balances as of the end of the prior year. The cost rates for long-term
debt and preferred stock must be the weighted average cost determined
in the manner indicated in Sec. 35.13 of this chapter. The cost rate
for common equity must be the rate granted common equity in the last
rate proceeding before the ratemaking body of any associate public
utility company for which services were provided during the year. If
this cost rate is not available, the average rate actually earned
during the preceding three years must be used. The short-term debt
balances and related cost and the average balance for construction work
in progress must be estimated for the current year with appropriate
adjustments as actual data becomes available.
(iii) When a part only of a property or project is placed in
operation or is completed and ready for service but the construction
work as a whole is incomplete, that part of the cost of the property
placed in operation or ready for service, must be treated as service
company property and allowance for funds used during the construction
as a charge to construction must cease. Allowance for funds used during
construction on that part of the cost of the property that is
incomplete may be continued as a charge to construction until such time
as it is placed in operation or is ready for service, except as limited
in paragraph (a)(17) of this section.
(18) Earnings and expenses during construction. The earnings and
expenses during construction must constitute a component of
construction costs.
(19) Training costs. When it is necessary that employees be trained
to operate or maintain property that is being constructed and the
property is not conventional in nature, or is new to the company's
operations, these costs may be capitalized as a component of
construction cost. Once property is placed in service, the
capitalization of training costs must cease and subsequent training
costs must be expensed. (See Operating Expense Instructions in Sec.
367.83.)
(20) Studies include the costs of studies such as safety or
environmental studies mandated by regulatory bodies relative to
property under construction. Studies relative to facilities in service
must be charged to account 183, Preliminary Survey and Investigation
Charges (Sec. 367.1830).
(21) Asset retirement costs. The costs recognized as a result of
asset retirement obligations incurred during the construction and
testing of service company property must constitute a component of
construction costs.

Sec. 367.52 Overhead construction costs.

(a) All overhead construction costs, such as engineering,
supervision, general office salaries and expenses, construction
engineering and supervision by others than the service company, law
expenses, insurance, injuries and damages, relief and pensions, taxes
and interest, must be charged to particular jobs or units on the basis
of the amounts of the reasonably applicable overheads.
(b) As far as practicable, the determination of payroll charges
includible in construction overheads must be based on the related time
card distributions. Where this procedure is impractical, special
studies must be made periodically of the time of supervisory employees
devoted to construction activities to the end that only the overhead
costs that have a definite relation to construction must be capitalized.
(c) The records supporting the entries for overhead construction
costs must be kept so as to show the total amount of each overhead for
each year, the nature and amount of each overhead expenditure charged
to each construction work order and to each property account, and the
bases of distribution of such costs.

Sec. 367.53 Service company property purchased or sold.

(a) When service company property is acquired by purchase, merger,
consolidation, liquidation, or otherwise, after the effective date of
this system of accounts, the costs of acquisition, including related
incidental expenses, must be charged to the appropriate service company
property accounts and account 107, Construction work in progress (Sec.
367.1070), as appropriate.
(b) If property acquired is in a physical condition so that it is
necessary to rehabilitate it substantially in order to bring the
property up to the standards of the service company, the cost of the
work, except replacements, must be

[[Page 28483]]

accounted for as a part of the purchase price of the property.
(c) Unless otherwise authorized by the Commission, all service
company property acquired from an affiliate company must be at its book
value. Additionally, if property is acquired that is in excess of $10
million and has been previously devoted to public service at a price
above book value, the service company must file with the Commission the
proposed journal entries associated with the acquisition within six
months from the date of acquisition of the property.
(d) When service company property is sold, conveyed, or transferred
to another by sale, merger, consolidation, or otherwise, the book cost
of the property sold or transferred to another must be credited to the
appropriate service company property accounts. The amounts (estimated,
if not known) carried with respect the accounts for accumulated
provision for depreciation and amortization must be charged to those
accounts. The difference, if any, between the net amount of debits and
credits and the consideration received for the property (less
commissions and other expenses of making the sale) must be included in
account 421.1, Gain on disposition of property (Sec. 367.4211), or
account 421.2, Loss on disposition of property (Sec. 367.4212).
(e) In connection with the acquisition of service company property
previously devoted to service company operations or acquired from an
associate company, the service company must procure, if possible, all
existing records relating to the property acquired or related certified
copies, and must preserve the records in conformity with regulations or
practices governing the preservation of records of its own construction.

Sec. 367.54 Expenditures on leased property.

(a) The cost of substantial initial improvements (including
repairs, rearrangements, additions, and betterments) made to prepare
service company property leased to be used for a period of more than
one year, and the cost of subsequent substantial additions,
replacements, or betterments to the property, must be charged to the
service company property account appropriate for the class of property
leased. If the service life of the improvements is terminable by action
of the lease, the cost, less net salvage, of the improvements must be
spread over the life of the lease by charges to account 404,
Amortization of limited-term service property. However, if the service
life is not terminated by action of the lease but by depreciation
proper, the cost of the improvements, less net salvage, must be
accounted for as depreciable property. The provisions of this paragraph
are applicable to property leased under either capital leases or
operating leases.
(b) If improvements made to property leased for a period of more
than one year are of relatively minor cost, or if the lease is for a
period of not more than one year, the cost of the improvements must be
charged to the account in which the rent is included, either directly
or by amortization.

Sec. 367.55 Land and land rights.

(a) The accounts for land and land rights must include the cost of
land owned in fee by the service company and rights. Interests, and
privileges held by the service company in land owned by others, such as
leaseholds, easements, water and water power rights, diversion rights,
submersion rights, rights-of-way, and other like interests in land. Do
not include in the accounts for land and land rights and rights-of-way
costs incurred in connection with first clearing and grading of land
and rights-of-way and the damage costs associated with the construction
and installation of property. The costs must be included in the
appropriate property accounts directly benefited.
(b) Where special assessments for public improvements provide for
deferred payments, the full amount of the assessments must be charged
to the appropriate land account and the unpaid balance must be carried
in an appropriate liability account. Interest on unpaid balances must
be charged to the appropriate interest account. If any part of the cost
of public improvements is included in the general tax levy, the related
amount must be charged to the appropriate tax account.
(c) The net profit from the sale of timber, cord wood, sand,
gravel, other resources or other property acquired with the rights-of-
way or other lands must be credited to the appropriate property account
to which it is related. Where land is held for a considerable period of
time and timber and other natural resources on the land at the time of
purchase increases in value, the net profit (after giving effect to the
cost of the natural resources) from the sales of timber or its products
or other natural resources must be credited to the appropriate
operating income account when the land has been recorded in account
101, Service company property (Sec. 367.1010), otherwise to account
421, Miscellaneous income or loss (Sec. 367.4210).
(d) Separate entries must be made for the acquisition, transfer, or
retirement of each parcel of land, and each land right (except rights
of way for distribution lines), or water right, having a life of more
than one year. A record must be maintained showing the nature of
ownership, full legal description, area, map reference, purpose for
which used, city, county, and tax district on which situated, from whom
purchased or to whom sold, payment given or received, other costs,
contract date and number, date of recording of deed, and book and page
of record. Entries transferring or retiring land or land rights must
refer to the original entry recording its acquisition.
(e) Any difference between the amount received from the sale of
land or land rights, less agents' commissions and other costs incident
to the sale, and the book cost of such land or rights, must be included
in account 421.1, Gains on disposition of property (Sec. 367.4211), or
account 421.2, Losses on disposition of property (Sec. 367.4212), when
the property has been recorded in account 101, Service company property
(Sec. 367.1010). Appropriate adjustments of the accounts must be made
with respect to any structures or improvements located on the land sold.
(f) The cost of buildings and other improvements (other than public
improvements) must not be included in the land accounts. If, at the
time of acquisition of an interest in land the interest extends to
buildings or other improvements (other than public improvements) that
are then devoted to operations, the land and improvements must be
separately appraised and the cost allocated to land and buildings or
improvements on the basis of the appraisals. If the improvements are
removed or wrecked without being used in operations, the cost of
removing or wrecking must be charged and the salvage credited to the
account in which the cost of the land is recorded.
(g) Provisions must be made for amortizing amounts carried in the
accounts for limited-term interests in land so as to apportion
equitably the cost of each interest over the life thereof. (See account
111, Accumulated provision for amortization of service company property
in Sec. 367.1110, and account 404, Amortization of limited-term
property in Sec. 367.4040.)
(h) The items of cost to be included in the accounts for land and
land rights are as follows:
(1) Bulkheads, buried, not requiring maintenance or replacement.
(2) Cost, first, of acquisition including mortgages and other liens
assumed (but not the related subsequent interest).
(3) Condemnation proceedings, including court and counsel costs.

[[Page 28484]]

(4) Consents and abutting damages, payment for.
(5) Conveyancers' and notaries' fees.
(6) Fees, commissions, and salaries to brokers, agents and others
in connection with the acquisition of the land or land rights.
(7) Leases, cost of voiding upon purchase to secure possession of land.
(8) Removing, relocating, or reconstructing, property of others,
such as buildings, highways, railroads, bridges, cemeteries, churches,
telephone and power lines, in order to acquire quiet possession.
(9) Retaining walls unless identified with structures.
(10) Special assessments levied by public authorities for public
improvements on the basis of benefits for new roads, new bridges, new
sewers, new curbing, new pavements, and other public improvements, but
not taxes levied to provide for the maintenance of such improvements.
(11) Surveys in connection with the acquisition, but not amounts
paid for topographical surveys and maps where the costs are
attributable to structures or plant equipment erected or to be erected
or installed on the land.
(12) Taxes assumed, accrued to date of transfer of title.
(13) Title, examining, clearing, insuring and registering in
connection with the acquisition and defending against claims relating
to the period prior to the acquisition.
(14) Appraisals prior to closing title.
(15) Cost of dealing with distributees or legatees residing outside
of the state or county, such as recording power of attorney, recording
will or exemplification of will, recording satisfaction of state tax.
(16) Filing satisfaction of mortgage.
(17) Documentary stamps.
(18) Photographs of property at acquisition.
(19) Fees and expenses incurred in the acquisition of water rights
and grants.
(20) Cost of fill to extend bulkhead line over land under water,
where riparian rights are held, that is not occasioned by the erection
of a structure.
(21) Sidewalks and curbs constructed by the service company on
public property.
(22) Labor and expenses in connection with securing rights of way,
where performed by company employees and company agents.

Sec. 367.56 Structures and improvements.

(a) The accounts for structures and improvements must include the
cost of all buildings and facilities to house, support, or safeguard
property or persons, including all fixtures permanently attached to and
made a part of buildings and that cannot be removed from the buildings
and facilities without cutting into the walls, ceilings, or floors, or
without in some way impairing the buildings, and improvements of a
permanent character on, or to, land. Also include those costs incurred
in connection with the first clearing and grading of land and rights-
of-way and the damage costs associated with construction and
installation of property.
(b) The cost of specially-provided foundations not intended to
outlast the machinery or apparatus for which provided, and associated
costs, such as angle irons, castings, and other items installed at the
base of an item of equipment, must be charged to the same account as
the cost of the machinery, apparatus, or equipment.
(c) Where the structure of a dam also forms the foundation of the
service company building, the foundation must be considered a part of
the dam.
(d) The cost of disposing of materials excavated in connection with
construction of structures must be considered as a part of the cost of
that work, except as follows:
(1) When the material is used for filling, the cost of loading,
hauling, and dumping must be equitably apportioned between the work in
connection with which the removal occurs and the work in connection
with which the material is used.
(2) When the material is sold, the net amount realized from the
sales must be credited to the work in connection with which the removal
occurs. If the amount realized from the sale of excavated materials
exceeds the removal costs and the costs in connection with the sale, the
excess must be credited to the land account in which the site is carried.
(e) Lighting or other fixtures temporarily attached to buildings
for purposes of display or demonstration must not be included in the
cost of the building but in the appropriate equipment account.
(f) This account must include the following items:
(1) Architects' plans and specifications including supervision.
(2) Ash pits (when located within the building).
(3) Athletic field structures and improvements.
(4) Boilers, furnaces, piping, wiring, fixtures, and machinery for
heating, lighting, signaling, ventilating, and air-conditioning
systems, plumbing, vacuum cleaning systems, incinerator and smoke pipe,
flues and similar items.
(5) Bulkheads, including dredging, riprap fill, piling, decking,
concrete, fenders, and similar items when exposed and subject to
maintenance and replacement.
(6) Chimneys.
(7) Coal bins and bunkers.
(8) Commissions and fees to brokers, agents, architects, and others.
(9) Conduit (not to be removed) with its contents.
(10) Damages to abutting property during construction.
(11) Docks.
(12) Door checks and door stops.
(13) Drainage and sewerage systems.
(14) Elevators, cranes, hoists, and the machinery for operating them.
(15) Excavation, including shoring, bracing, bridging, refill and
disposal of excess excavated material, cofferdams around foundation,
pumping water from cofferdams during construction, and test borings.
(16) Fences and fence curbs (not including protective fences
isolating items of equipment, which must be charged to the appropriate
equipment account).
(17) Fire protection systems when forming a part of a structure.
(18) Flagpole.
(19) Floor covering (permanently attached).
(20) Foundations and piers for machinery, constructed as a
permanent part of a building or other item listed in this paragraph.
(21) Grading and clearing when directly occasioned by the building
of a structure.
(22) Intrasite communication system, poles, pole fixtures, wires,
and cables.
(23) Landscaping, lawns, shrubbery and similar items.
(24) Leases, voiding upon purchase to secure possession of structures.
(25) Leased property, expenditures on.
(26) Lighting fixtures and outside lighting system.
(27) Mail chutes when part of a building.
(28) Marquee, permanently attached to building.
(29) Painting, first cost.
(30) Permanent paving, concrete, brick, flagstone, asphalt, within
the property lines.
(31) Partitions, including movable.
(32) Permits and privileges.
(33) Platforms, railings, and gratings when constructed as a part
of a structure.
(34) Power boards for services to a building.
(35) Refrigerating systems for general use.
(36) Retaining walls except when identified with land.

[[Page 28485]]

(37) Roadways, railroads, bridges, and trestles intrasite except
railroads provided for in equipment accounts.
(38) Roofs.
(39) Scales, connected to and forming a part of a structure.
(40) Screens.
(41) Sewer systems, for general use.
(42) Sidewalks, culverts, curbs and streets constructed by the
service company on its property.
(43) Sprinkling systems.
(44) Sump pumps and pits.
(45) Stacks--brick, steel, or concrete, when set on foundation
forming part of general foundation and steelwork of a building.
(46) Steel inspection during construction.
(47) Storage facilities constituting a part of a building.
(48) Storm doors and windows.
(49) Subways, areaways, and tunnels, directly connected to and
forming part of a structure.
(50) Tanks, constructed as part of a building or as a distinct
structural unit.
(51) Temporary heating during construction (net cost).
(52) Temporary water connection during construction (net cost).
(53) Temporary shanties and other facilities used during
construction (net cost).
(54) Topographical maps.
(55) Tunnels, intake and discharge, when constructed as part of a
structure, including sluice gates, and those constructed to house mains.
(56) Vaults constructed as part of a building.
(57) Watchmen's sheds and clock systems (net cost when used during
construction only).
(58) Water basins or reservoirs.
(59) Water front improvements.
(60) Water meters and supply system for a building or for general
company purposes.
(61) Water supply piping, hydrants and wells.
(62) Wharves.
(63) Window shades and ventilators.
(64) Yard drainage system.
(65) Yard lighting system.
(66) Yard surfacing, gravel, concrete, or oil. (First cost only.)
(g) Structures and Improvements accounts must be credited with the
cost of structures created to house, support, or safeguard equipment,
the use of which has terminated with the removal of the equipment with
which they are associated even though they have not been physically removed.

Sec. 367.57 Equipment.

(a) The cost of equipment chargeable to the service company
property accounts, unless otherwise indicated in the text of an
equipment account, includes the related net purchase price, sales
taxes, investigation and inspection expenses necessary to such
purchase, expenses of transportation when borne by the service company,
labor employed, materials and supplies consumed, and expenses incurred
by the service company in unloading and placing the equipment in
readiness to operate. Also include those costs incurred in connection
with the first clearing and grading of land and rights-of-way and the
damage costs associated with construction and installation of property.
(b) Exclude from equipment accounts hand and other portable tools,
that are likely to be lost or stolen or that have relatively small
value (for example, $500 or less) or short life, unless the correctness
of the related accounting as service company property is verified by
current inventories. Special tools acquired and included in the
purchase price of equipment must be included in the appropriate
property account. Portable drills and similar tool equipment when used
in connection with the operation and maintenance of a particular plant
or department, such as production, transmission, distribution, or
similar items, or in stores, must be charged to the property account
appropriate for their use.
(c) The equipment accounts must include angle irons and similar
items that are installed at the base of an item of equipment, but piers
and foundations that are designed to be as permanent as the buildings
that house the equipment, or that are constructed as a part of the
building and that cannot be removed without cutting into the walls,
ceilings or floors or without in some way impairing the building, must
be included in the building accounts.
(d) The cost of efficiency or other tests made subsequent to the
date equipment becomes available for service must be charged to the
appropriate expense accounts, except that tests to determine whether
equipment meets the specifications and requirements as to efficiency,
performance, and similar items, guaranteed by manufacturers, made after
operations have commenced and within the period specified in the
agreement or contract of purchase may be charged to the appropriate
service company property account.

Sec. 367.58 Work order and property record system required for
service company property.

(a) Each service company must record all construction and
retirements of service company property by means of work orders or job
orders. Separate work orders may be opened for additions to, and
retirements of, service company property or the retirements may be
included with the construction work order. All items relating to the
retirements must be kept separate from those relating to construction
and any maintenance costs involved in the work likewise must be segregated.
(b) Each service company must keep its work order system so as to
show the nature of each addition to or retirement of service company
property, the related total cost, the source or sources of costs, and
the property account or accounts to which charged or credited. Work
orders covering jobs of short duration may be cleared monthly.
(c) Each service company must maintain records in which, for each
property account, the amounts of the annual additions and retirements
are classified so as to show the number and cost of the various record
units or retirement units.

Sec. 367.59 Additions and retirements of property.

(a) For the purpose of avoiding undue refinement in accounting for
additions to and retirements and replacements of service company
property, all property will be considered as consisting of retirement
units and minor items of property. Each company must maintain a written
property units listing for use in accounting for additions and
retirements of property and apply the listing consistently.
(b) The addition and retirement of retirement units must be
accounted for as follows:
(1) When a retirement unit is added, the related cost must be added
to the appropriate service company property account.
(2) When a retirement unit is retired, with or without replacement,
the related book cost must be credited to the property account in which
it is included, determined in the manner provided in paragraph (d) of
this section. If the retirement unit is of a depreciable class, the
book cost of the unit retired and credited to service company property
must be charged to the accumulated provision for depreciation
applicable to the property. The cost of removal and the salvage must be
charged or credited, as appropriate, to the depreciation account.
(c) The addition and retirement of minor items of property must be
accounted for as follows:
(1) When a minor item of property that did not previously exist is
added to service company property, the related

[[Page 28486]]

cost must be accounted for in the same manner as for the addition of a
retirement unit, as provided in paragraph (b)(1) of this section, if a
substantial addition results, otherwise the charge must be to the
appropriate maintenance expense account.
(2) When a minor item of property is retired and not replaced, the
related book cost must be credited to the property account in which it
is included; and, in the event the minor item is a part of depreciable
property, the account for accumulated provision for depreciation must
be charged with the book cost and cost of removal and credited with the
salvage. If, however, the book cost of the minor item retired and not
replaced has been or will be accounted for by its inclusion in the
retirement unit of which it is a part when the unit is retired, no
separate credit to the property account is required when the minor item
is retired.
(3) When a minor item of depreciable property is replaced
independently of the retirement unit of which it is a part, the cost of
replacement must be charged to the maintenance account appropriate for
the item. However, if the replacement effects a substantial betterment
(the primary aim of which is to make the property affected more useful,
more efficient, of greater durability, or of greater capacity), the
excess cost of the replacement over the estimated cost at current
prices of replacing without betterment must be charged to the
appropriate property account.
(d) The book cost of service company property retired must be the
amount at which the property is included in the property accounts,
including all components of construction costs. The book cost must be
determined from the service company's records and, if this cannot be
done, it must be estimated. Service companies must furnish the
particulars of the estimates to the Commission, if requested. When it
is impracticable to determine the book cost of each unit, due to the
relatively large number or related small cost, an appropriate average
book cost of the units, with due allowance for any differences in size
and character, must be used as the book cost of the units retired.
(e) The book cost of land retired must be credited to the
appropriate land account. If the land is sold, the difference between
the book cost (less any accumulated provision for related depreciation
or amortization that has been authorized and provided) and the sale
price of the land (less commissions and other expenses of making the
sale) must be recorded in accounts 421.1, Gain on disposition of
property (Sec. 367.4211) or 421.2, Loss on disposition of property
(Sec. 367.4212), as appropriate.
(f) The book cost less net salvage of depreciable service company
property retired must be charged in its entirety to account 108,
Accumulated provision for depreciation of service company property
(Sec. 367.1080).
(g) The accounting for the retirement of amounts included in
account 303, Miscellaneous intangible property (Sec. 367.3030), and
the items of limited-term interest in land included in the accounts for
land and land rights, must be as provided for in the text of account
111, Accumulated provision for amortization of service company property
(Sec. 367.1110), account 404, Amortization of limited-term property
(Sec. 367.4040), and account 405, Amortization of other property
(Sec. 367.4050).

Subpart D--Operating Expense Instructions

Sec. 367.80 Supervision and engineering.

(a) The supervision and engineering includible in the operating
expense accounts must consist of the pay and expenses of
superintendents, engineers, clerks, other employees and consultants
engaged in supervising and directing the operation and maintenance of
each service company function. Wherever allocations are necessary in
order to arrive at the amount to be included in any account, the method
and basis of allocation must be reflected by underlying records.
(b) This account must include the following labor items:
(1) Special tests to determine efficiency of equipment operation.
(2) Preparing or reviewing budgets, estimates, and drawings
relating to operation or maintenance for departmental approval.
(3) Preparing instructions for operations and maintenance activities.
(4) Reviewing and analyzing operating results.
(5) Establishing organizational setup of departments and executing
related changes.
(6) Formulating and reviewing routines of departments and executing
related changes.
(7) General training and instruction of employees by supervisors
whose pay is chargeable to the training and instruction. Specific
instruction and training in a particular type of work is chargeable to
the appropriate functional expense account (See Service Company
Property in Sec. 367.51(a)(19)).
(8) Secretarial work for supervisory personnel, but not general
clerical and stenographic work chargeable to other accounts.
(c) This account must include the following expense items:
(1) Consultants' fees and expenses.
(2) Meals, traveling and incidental expenses.

Sec. 367.81 Maintenance.

(a) The cost of maintenance chargeable to the various operating
expense and clearing accounts includes labor, materials, overheads and
other expenses incurred in maintenance work. A list of work operations
applicable generally to service company property is included in
paragraph (d) of this section. Other work operations applicable to
specific classes of property are listed in functional maintenance
expense accounts.
(b) Materials recovered in connection with the maintenance of
property must be credited to the same account to which the maintenance
cost was charged.
(c) Maintenance of property leased from others must be treated as
provided in operating expense instruction in Sec. 367.82.
(d) This account must include the following items:
(1) Direct field supervision of maintenance.
(2) Inspecting, testing, and reporting on condition of property
specifically to determine the need for repairs, replacements,
rearrangements and changes and inspecting and testing the adequacy of
repairs which have been made.
(3) Work performed specifically for the purpose of preventing
failure, restoring serviceability or maintaining life of property.
(4) Rearranging and changing the location of property.
(5) Repairing for reuse materials recovered from property.
(6) Testing for locating and clearing trouble.
(7) Net cost of installing, maintaining, and removing temporary
facilities to prevent interruptions in service.
(8) Replacing or adding minor items of plant which do not
constitute a retirement unit. (See Service Company Property Instruction
in Sec. 367.59.)

Sec. 367.82 Rents.

(a) The rent expense accounts provided under the several functional
groups of expense accounts must include all rents, including taxes paid
by the lessee on leased property, for property used in the operations
of the service company, except:
(1) Minor amounts paid for occasional or infrequent use of any
property or

[[Page 28487]]

equipment and all amounts paid for use of equipment that, if owned,
would be includible in property accounts 391 to 398 (Sec. Sec.
367.3910 to 367.3980), inclusive, that must be treated as an expense
item and included in the appropriate functional account, and
(2) Rents that are chargeable to clearing accounts, and distributed
from the clearing accounts to the appropriate account. If rents cover
property used for more than one function, such as production and
transmission, or by more than one department, the rents must be
apportioned to the appropriate rent expense or clearing accounts of
each department on an actual, or, if necessary, an estimated basis.
(b) When a portion of property or equipment rented from others for
use in connection with service company operations is subleased, the
revenue derived from the subleasing must be credited to the rent
revenue account in operating revenues. However, if the rent was charged
to a clearing account, amounts received from subleasing the property
must be credited to the clearing account.
(c) The cost, when incurred by the lessee, of operating and
maintaining leased property, must be charged to the accounts
appropriate for the expense if the property were owned.
(d) The cost incurred by the lessee of additions and replacements
to property leased from others must be accounted for as provided in
Service Company Property Instruction in Sec. 367.54.

Sec. 367.83 Training costs.

When it is necessary that employees be trained to specifically
operate or maintain facilities that are being constructed, the related
costs must be accounted for as a current operating and maintenance
expense. These expenses must be charged to the appropriate functional
accounts currently as they are incurred. However, when the training
costs involved relate to facilities that are not conventional in
nature, or are new to the service company's operations, these costs may
be capitalized until the time that the facilities are ready for
functional use.

Subpart E--Special Instructions

Sec. 367.100 Accounts 131--174, Current and accrued assets.

Current and accrued assets are cash, those assets which are readily
convertible into cash or are held for current use in operations or
construction, current claims against others, payment of which is
reasonably assured, and amounts accruing to the service company that
are subject to current settlement, except those items for which
accounts other than those designated as current and accrued assets are
provided. There must not be included in the group of accounts
designated as current and accrued assets any item, the amount or
collectibility of which is not reasonably assured, unless an adequate
provision for the related possible loss has been made. Items of current
character but of doubtful value may be written down and for record
purposes carried in these accounts at nominal value.

Sec. 367.101 Accounts 231--243, Current and accrued liabilities.

Current and accrued liabilities are those obligations which have
either matured or which become due within one year from the date from
the date of issuance or assumption, except for: bonds, receivers'
certificates and similar obligations which must be classified as long-
term debt until date of maturity; accrued taxes, such as income taxes,
which must be classified as accrued liabilities even though payable
more than one year from date; compensation awards, which must be
classified as current liabilities regardless of date due; and minor
amounts payable in installments which may be classified as current
liabilities. If a liability is due more than one year from date of
issuance or assumption by the service company, it shall be credited to
a long-term debt account appropriate for the transaction, except,
however, the current liabilities previously mentioned.

Sec. 367.102 Accounts 408.1 and 408.2, Taxes other than income taxes.

(a) These accounts must include the amounts of ad valorem, gross
revenue or gross receipts taxes, state unemployment insurance,
franchise taxes, Federal excise taxes, social security taxes, and all
other taxes assessed by Federal, state, county, municipal, or other
local governmental authorities, except income taxes.
(b) These accounts shall be charged in each accounting period with
the amounts of taxes which are applicable to each account, with
concurrent credits to account 236, Taxes accrued (Sec. 367.2360), or
account 165, Prepayments (Sec. 367.1650), as appropriate. When it is
not possible to determine the exact amounts of taxes, the amounts shall
be estimated and adjustments made in current accruals as the actual tax
levies become known.
(c) The accruals for these taxes must be apportioned among service
company departments and to Other Income and Deductions so that, as
nearly as practicable, each tax is included in the expenses of the
service company department or Other Income and Deductions, the item
from which gave rise to the tax.
(d) Special assessments for street and similar improvements must be
included in the appropriate service company property account.
(e) Taxes specifically applicable to construction must be included
in the cost of construction.
(f) Gasoline and other sales taxes must be charged as far as practicable
to the same account as the materials on which the tax is levied.
(g) Social security and other forms of so-called payroll taxes must
be distributed to utility and non-utility functions on a basis related
to payroll. Amounts applicable to construction must be charged to the
appropriate plant account.
(h) Interest on tax refunds or deficiencies must not be included in
these accounts but in account 419, Interest and dividend income (Sec.
367.4190), or 431, Other interest expense (Sec. 367.4310), as appropriate.

Sec. 367.103 Accounts 409.1, 409.2, and 409.3, Income taxes.

(a) These accounts must include the amounts of local, state and
Federal income taxes on income properly accruable during the period
covered by the income statement to meet the actual liability for such
taxes. Concurrent credits for the tax accruals must be made to account
236, Taxes accrued (Sec. 367.2360), and as the exact amounts of taxes
become known, the current tax accruals must be adjusted by charges or
credits to these accounts, so that these accounts include the actual
taxes payable by the service company.
(b) The accruals for income taxes shall be apportioned among
service company departments and to Other Income and Deductions so that,
as nearly as practicable, each tax will be included in the expenses of
the service company department or Other Income and Deductions, the
income from which gave rise to the tax.
(c) Taxes assumed by the service company on interest must be
charged to account 431, Other interest expense (Sec. 367.4310).
(d) Interest on tax refunds or deficiencies must not be included in
these accounts but in account 419, Interest and dividend income (Sec.
367.4190), or account 431, Other interest expense (Sec. 367.4310), as
appropriate.

[[Page 28488]]

Sec. 367.104 Accounts 410.1, 410.2, 411.1, and 411.2, Provision for
deferred income taxes.

(a) Accounts 410.1 (Sec. 367.4101) and 410.2 (Sec. 367.4102) must
be debited, and Accumulated Deferred Income Taxes must be credited,
with amounts equal to any current deferrals of taxes on income or any
allocations of deferred taxes originating in prior periods, as provided
by the texts of accounts 190 (Sec. 367.1900), 282 (Sec. 367.2820),
and 283 (Sec. 367.2830). There must not be netted against entries
required to be made to these accounts any credit amounts appropriately
includible in accounts 411.1 (Sec. 367.4111) or 411.2 (Sec. 367.4112).
(b) Accounts 411.1 (Sec. 367.4111) and 411.2 (Sec. 367.4112) must
be credited, and Accumulated Deferred Income Taxes must be debited,
with amounts equal to any allocations of deferred taxes originating in
prior periods or any current deferrals of taxes on income, as provided
by the texts of accounts 190 (Sec. 367.1900), 282 (Sec. 367.2820),
and 283 (Sec. 367.2830). There must not be netted against entries
required to be made to these accounts any debit amounts appropriately
includible in account 410.1 (Sec. 367.4101) or 410.2 (Sec. 367.4102).

Sec. 367.105 Accounts 411.4, and 411.5, Investment tax credit adjustments.

(a) Account 411.4 (Sec. 367.4114) must be debited with the amounts
of investment tax credits related to service company property that are
credited to account 255, Accumulated deferred investment tax credits
(Sec. 367.2550), by companies which do not apply the entire amount of
the benefits of the investment credit as a reduction of the overall
income tax expense in the year in which such credit is realized (See
account 255 in Sec. 367.2550).
(b) Account 411.4 (Sec. 367.4114) must be credited with the
amounts debited to account 255 (Sec. 367.2550) for proportionate
amounts of tax credit deferrals allocated over the average useful life
of service company property to which the tax credits relate or such
lesser period of time as may be adopted and consistently followed by
the company.
(c) Account 411.5 (Sec. 367.4115) must also be debited and
credited as directed in paragraphs (a) and (b), for investment tax
credits related to other income and deductions.

Sec. 367.106 Accounts 426.1, 426.2, 426.3, 426.4, and 426.5,
Miscellaneous expense accounts.

These accounts must include miscellaneous expense items which are
nonoperating in nature but which are properly deductible before
determining total income before interest charges.

Subpart F--Balance Sheet Chart of Accounts

Service Company Property

Sec. 367.1010 Account 101, Service company property.

(a) This account must include the cost of service company property,
included in accounts 301 (Sec. 367.3010), 303 (Sec. 367.3030) and 389
to 399.1 (Sec. Sec. 376.3890 to 367.3991), owned and used by the
service company in its operations, and having an expectation of life in
service of more than one year from date of installation.
(b) The cost of additions to, and betterments of, property leased
from others, that are includible in this account, must be recorded in
subaccounts separate and distinct from those relating to owned
property. (See Service Company Property Instruction in Sec. 367.54.)

Sec. 367.1011 Account 101.1, Property under capital leases.

(a) This account must include the amount recorded under capital
leases for property leased from others and used by the service company
in its operations.
(b) The property included in this account must be classified
separately according to detailed accounts 301 (Sec. 367.3010), 303
(Sec. 367.3030) and 389 to 399.1 (Sec. Sec. 367.3890 to 367.3991)
prescribed for service company property.
(c) Records must be maintained with respect to each capital lease
reflecting:
(1) Name of lessor,
(2) Basic details of lease,
(3) Terminal date,
(4) Original cost or fair market value of property leased,
(5) Future minimum lease payments,
(6) Executory costs,
(7) Present value of minimum lease payments,
(8) The amount representing interest and the interest rate used,
and
(9) Expenses paid.

Sec. 367.1070 Account 107, Construction work in progress.

(a) This account must include the total of the balances of work
orders for service company property in process of construction.
(b) Work orders must be cleared from this account as soon as
practicable after completion of the job. Further, if a project is
designed to consist of two or more units that may be placed in service
at different dates, any expenditures that are common to and that will
be used in the operation of the project as a whole must be included in
service company property upon the completion and the readiness for
service of the first unit. Any expenditures that are identified
exclusively with units of property not yet in service must be included
in this account.
(c) Expenditures on research, development, and demonstration
projects for construction of facilities are to be included in a
separate subaccount in this account. Records must be maintained to show
separately each project along with complete detail of the nature and
purpose of the research, development, and demonstration project
together with the related costs.

Sec. 367.1080 Account 108, Accumulated provision for depreciation of
service company property.

(a) This account must be credited with the following:
(1) Amounts charged to account 403, Depreciation expense (Sec.
367.4030), or to clearing accounts for current depreciation expense for
service company property.
(2) Amounts charged to account 416, Costs and expenses of
merchandising, jobbing, and contract work (Sec. 367.4160), or to
clearing accounts for current depreciation expense.
(3) Amounts of depreciation applicable to properties acquired. (See
Service Company Property Instruction in Sec. 367.53.)
(4) Amounts of depreciation applicable to service company property
donated to the service company.
(b) The service company must maintain separate subaccounts for
depreciation applicable to service company property.
(c) At the time of retirement of depreciable service company
property, this account must be charged with the book cost of the
property retired and the cost of removal, and must be credited with the
salvage value and any other amounts recovered, such as insurance. When
retirement, costs of removal and salvage are entered originally in
retirement work orders, the net total of such work orders may be
included in a separate related subaccount. Upon completion of the work
order, the proper distribution to subaccounts of this account must be
made as provided in paragraph (d) of this section.
(d) The subsidiary records for this account must reflect the
current credits and debits to this account in sufficient detail to show
the following separately:
(1) The amount of accrual for depreciation,
(2) The book cost of property retired,
(3) Cost of removal,
(4) Salvage, and
(5) Other items, including recoveries from insurance.

[[Page 28489]]

(e) The service company is restricted in its use of the accumulated
provision for depreciation to the purposes identified in paragraphs (a)
through (d) of this section. It must not transfer any portion of this
account to retained earnings or make any other use of the depreciation
without authorization by the Commission.

Sec. 367.1110 Account 111, Accumulated provision for amortization of
service company property.

(a) This account must be credited with the following:
(1) Amounts charged to account 404, Amortization of limited-term
property (Sec. 367.4040), for the current amortization of limited-term
service company property investments.
(2) Amounts charged to account 405, Amortization of other property
(Sec. 367.4050).
(3) Amounts charged to account 425, Miscellaneous amortization
(Sec. 367.4250), for the amortization of intangible or other property,
that does not have a definite or terminable life and is not subject to
charges for depreciation expense, with Commission approval.
(b) The service company must maintain subaccounts of this account
for the amortization applicable to service company property and
property leased to others.
(c) When any property to which this account applies is sold,
relinquished, or otherwise retired from service, this account must be
charged with the amount previously credited in respect to the property.
The book cost of the retired property less the amount chargeable to
this account and less the net proceeds realized at retirement must be
included in account 421.1, Gain on disposition of property (Sec.
367.4211), or account 421.2, Loss on disposition of property (Sec.
367.4212), as appropriate.
(d) For general ledger and balance sheet purposes, this account
must be regarded and treated as a single composite provision for
amortization. The subsidiary records must reflect the current credits
and debits to this account in sufficient detail to show the following
separately:
(1) The amount of accrual for amortization,
(2) The book cost of property retired,
(3) Cost of removal,
(4) Salvage, and
(5) Other items, including recoveries from insurance.
(e) The service company is restricted in its use of the accumulated
provision for amortization to the purposes provided in paragraphs (a)
through (d) of this section. It must not transfer any portion of this
account to retained earnings or make any other use of the amortization
without authorization by the Commission.

Sec. 367.1230 Account 123, Investment in associate companies.

(a) This account must include the book cost of investments in
securities issued or assumed by associate companies and investment
advances to the companies, including related accrued interest when the
interest is not subject to current settlement, provided that the
investment does not relate to a subsidiary company. (If the investment
relates to a subsidiary company, it must be included in account 123.1,
Investment in subsidiary companies (Sec. 367.1231).) Include in this
account the offsetting entry to the recording of amortization of
discount or premium on interest-bearing investments. (See account 419,
Interest and dividend income (Sec. 367.4190).)
(b) This account must be maintained in a manner so as to show the
investment in securities of, and advances to, each associate company
together with full particulars regarding any of the investments that
are pledged.
(c) Securities and advances of associate companies owned and
pledged must be included in this account, but the securities, if held
in special deposits or in special funds, must be included in the
appropriate deposit or fund account. A complete record of securities
pledged must be maintained.
(d) Securities of associate companies held as temporary cash
investments are includible in account 136, Temporary cash investments
(Sec. 367.1360).
(e) Balances in open accounts with associate companies that are
subject to current settlement are includible in account 146, Accounts
receivable from associate companies (Sec. 367.1460).
(f) The service company must write down the cost of any security in
recognition of a decline in the related value. Securities must be
written off or written down to a nominal value if there is no
reasonable prospect of substantial value. Fluctuations in market value
must not be recorded but a permanent impairment in the value of
securities must be recognized in the accounts. When securities are
written off or written down, the amount of the adjustment must be
charged to account 426.5, Other deductions (Sec. 367.4265), or to an
appropriate account for accumulated provisions for loss in value
established as a separate subdivision of this account.

Sec. 367.1240 Account 124, Other investments.

(a) This account must include the book cost of investments in
securities issued or assumed by non-associate companies, investment
advances to these companies, and any investments not accounted for
elsewhere. This account must also include unrealized holding gains and
losses on trading and available-for-sale types of security investments.
Include also the offsetting entry to the recording of amortization of
discount or premium on interest-bearing investments. (See account 419,
Interest and dividend income (Sec. 367.4190).)
(b) The records must be maintained in a manner so as to show the
amount of each investment and the investment advances to each person.

Sec. 367.1280 Account 128, Other special funds.

(a) This account must include the amount of cash and book cost of
investments that have been segregated in special funds for insurance,
employee pensions, savings, relief, hospital, and other purposes not
provided for elsewhere. This account must also include unrealized
holding gains and losses on trading and available-for-sale types of
security investments. A separate account with appropriate title, must
be kept for each fund.
(b) Amounts deposited with a trustee under the terms of an
irrevocable trust agreement for pensions or other employee benefits
must not be included in this account.

Current and Accrued Assets

Sec. 367.1310 Account 131, Cash.

This account must include the amount of current cash funds except
working funds.

Sec. 367.1340 Account 134, Other special deposits.

(a) This account must include deposits with fiscal agents or others
for special purposes other than the payment of interest and dividends.
The special deposits may include, among other things, cash deposited
with federal, state, or municipal authorities as a guaranty for the
fulfillment of obligations; cash deposited with trustees to be held
until mortgaged property sold, destroyed, or otherwise disposed of is
replaced; cash realized from the sale of the accounting service
company's securities and deposited with trustees to be held until
invested in property of the service company. Entries to this account
must specify the purpose for which the deposit is made.
(b) Assets available for general corporate purposes must not be

[[Page 28490]]

included in this account. Further, deposits for more than one year,
that are not offset by current liabilities, must be charged to account
128, Other special funds (Sec. 367.1280).

Sec. 367.1350 Account 135, Working funds.

This account must include cash advanced to officers, agents,
employees, and others as petty cash or working funds.

Sec. 367.1360 Account 136, Temporary cash investments.

(a) This account must include the book cost of investments, such as
demand and time loans, bankers' acceptances, United States Treasury
certificates, marketable securities, and other similar investments,
acquired for the purpose of temporarily investing cash.
(b) This account must be maintained so as to show separately
temporary cash investments in securities of associate companies and of
others. Records must be kept of any pledged investments.

Sec. 367.1410 Account 141, Notes receivable.

(a) This account must include the book cost, not includible
elsewhere, of all collectible obligations in the form of notes
receivable and similar evidences (except interest coupons) of money due
on demand or within one year from the date of issue, except, however,
notes receivable from associate companies. (See account 136, Temporary
cash investments (Sec. 367.1360), and account 145, Notes receivable
from associate companies (Sec. 367.1450).)
(b) The face amount of notes receivable discounted, sold, or
transferred without releasing the service company from liability as a
related endorser, must be credited to a separate subaccount of this
account and appropriate disclosure must be made in financial statements
of any contingent liability arising from the transactions.

Sec. 367.1420 Account 142, Customer accounts receivable.

(a) This account must include amounts due from customers for
service, and for merchandising, jobbing and contract work. This account
must not include amounts due from associate companies.
(b) This account must be maintained so as to permit ready segregation
of the amounts due for merchandising, jobbing and contract work.

Sec. 367.1430 Account 143, Other accounts receivable.

(a) This account must include amounts due the service company upon
open accounts, other than amounts due from associate companies and from
customers for services and merchandising, jobbing and contract work.
(b) This account must be maintained so as to show separately
amounts due on subscriptions to capital stock and from officers and
employees, but the account must not include amounts advanced to
officers or others as working funds. (See account 135, Working funds
(Sec. 367.1350).)

Sec. 367.1440 Account 144, Accumulated provision for uncollectible
accounts--Credit.

(a) This account must be credited with amounts provided for losses
on accounts receivable that may become uncollectible, and also with
collections on related previously charged accounts. Concurrent charges
must be made to account 904, Uncollectible accounts (Sec. 367.9040),
for amounts applicable to service company operations, and to
corresponding accounts for other operations. Records must be maintained
so as to show the write-offs of account receivable for each service
company department.
(b) This account must be subdivided to show the provision
applicable to the following classes of accounts receivable:
(1) Service company customers.
(2) Merchandising, jobbing and contract work.
(3) Officers and employees.
(4) Others.
(c) Accretions to this account must not be made in excess of a
reasonable provision against losses of the related character.
(d) If provisions for uncollectible notes receivable or for
uncollectible receivables from associate companies are necessary,
separate related subaccounts must be established under the account in
which the receivable is carried.

Sec. 367.1450 Account 145, Notes receivable from associate companies.

(a) This account must include notes and drafts upon which associate
companies are liable, and that mature and are expected to be paid in
full not later than one year from the date of issue, together with any
related interest, and debit balances subject to current settlement in
open accounts with associate companies. Items that do not bear a
specified due date but that have been carried for more than twelve
months and items that are not paid within twelve months from due date
must be transferred to account 123, Investment in associate companies
(Sec. 367.1230).
(b) On the balance sheet, accounts receivable from an associate
company may be set off against accounts payable to the same company.
(c) The face amount of notes receivable discounted, sold or
transferred without releasing the service company from liability as
endorser thereon, must be credited to a separate subaccount of this
account and appropriate disclosure must be made in financial statements
of any contingent liability arising from such transactions.

Sec. 367.1460 Account 146, Accounts receivable from associate
companies.

(a) This account must include notes and drafts upon which associate
companies are liable, and that mature and are expected to be paid in
full not later than one year from the date of issue, together with any
related interest thereon, and debit balances subject to current
settlement in open accounts with associate companies. Items that do not
bear a specified due date but that have been carried for more than
twelve months and items that are not paid within twelve months from due
date must be transferred to account 123, Investment in associate
companies (Sec. 367.1230).
(b) On the balance sheet, accounts receivable from an associate
company may be set off against accounts payable to the same company.
(c) The face amount of notes receivable discounted, sold or
transferred without releasing the service company from liability as the
related endorser, must be credited to a separate subaccount of this
account and appropriate disclosure must be made in financial statements
of any contingent liability arising from the transactions.

Sec. 367.1520 Account 152, Fuel stock expenses undistributed.

The service company must utilize this account, where appropriate,
to include the cost of service company labor and of office supplies
used and operating expenses incurred with respect to the review,
analysis and management of fuel supply contracts or agreements, the
accumulation of fuel information and its interpretation, the logistics
and handling of fuel, and other related support functions, as a service
to the company engaged in the procurement and transportation of fuel.
This account must be maintained to show the expenses attributable to
each company through the use of work orders. All expenses of a service
company's fuel department or functions must be cleared through this account.

Sec. 367.1540 Account 154, Materials and operating supplies.

(a) This account must include the cost of materials purchased
primarily for use

[[Page 28491]]

in the service company business for construction, operation and
maintenance purposes. It must include the book cost of materials
recovered in connection with construction, maintenance or the
retirement of service company property, the materials being credited to
construction, maintenance or accumulated depreciation provision,
respectively. This account must include the following items:
(1) Reusable materials consisting of large individual items must be
included in this account at original cost, estimated if not known. The
cost of repairing the items must be charged to the maintenance account
appropriate for the previous use.
(2) Reusable materials consisting of relatively small items, the
identity of which (from the date of original installation to the
related final abandonment or sale) cannot be ascertained without undue
refinement in accounting, must be included in this account at current
prices new for the items. The cost of repairing the items must be
charged to the appropriate expense account as indicated by previous use.
(3) Scrap and non-usable materials included in this account must be
carried at the estimated net amount realizable. The difference between
the amounts realized for scrap and non-usable materials sold and the
net amount at which the materials were carried in this account, as far
as practicable, must be adjusted to the accounts credited when the
materials were charged to this account.
(b) Materials and supplies issued must be credited in this account
and charged to the appropriate construction, operating expense, or
other account on the basis of a unit price determined by the use of
cumulative average, first-in-first-out, or any other method of
inventory accounting that conforms with accepted accounting standards
consistently applied.
(c) This account must include the following items:
(1) Invoice price of materials less cash or other discounts.
(2) Freight, switching or other transportation charges when
practicable to include as part of the cost of particular materials to
which they relate.
(3) Customs duties and excise taxes.
(4) Costs of inspection and special tests prior to acceptance.
(5) Insurance and other directly assignable charges.
(d) Where expenses applicable to materials purchased cannot be
directly assigned to particular purchases, they may be charged to a
stores expense clearing account (account 163, Stores expense
undistributed (Sec. 367.1630)), and distributed from there to the
appropriate account.
(e) When materials and supplies are purchased for immediate use,
they need not be carried through this account, but may be charged
directly to the appropriate service company property or expense account.

Sec. 367.1630 Account 163, Stores expense undistributed.

(a) This account must include the cost of supervision, labor and
expenses incurred in the operation of general storerooms, including
purchasing, storage, handling and distribution of materials and supplies.
(b) This account must be cleared by adding to the cost of materials
and supplies issued a suitable loading charge that will distribute the
expense equitably over stores issues. The balance in the account at the
close of the calendar year must not exceed the amount of stores
expenses reasonably attributable to the inventory of materials and
supplies exclusive of fuel, as any amount applicable to fuel costs
should be included in account 152, Fuel stock expenses undistributed
(Sec. 367.1520).
(c) This account must include the following labor items:
(1) Inspecting and testing materials and supplies when not
assignable to specific items.
(2) Unloading from shipping facility and putting in storage.
(3) Supervision of purchasing and stores department to extent
assignable to materials handled through stores.
(4) Getting materials from stock and in readiness to go out.
(5) Inventorying stock received or stock on hand by stores
employees but not including inventories by general department employees
as part of internal or general audits.
(6) Purchasing department activities in checking material needs,
investigating sources of supply, analyzing prices, preparing and
placing orders, and related activities to extent applicable to
materials handled through stores. (Optional. Purchasing department
expenses may be included in administrative and general expenses.)
(7) Maintaining stores equipment.
(8) Cleaning and tidying storerooms and stores offices.
(9) Keeping stock records, including recording and posting of
material receipts and issues and maintaining inventory record of stock.
(10) Collecting and handling scrap materials in stores.
(d) This account must include the following supplies and expenses items:
(1) Adjustments of inventories of materials and supplies, but not
including large differences that can readily be assigned to important
classes of materials and equitably distributed among the accounts to which
the classes of materials have been charged since the previous inventory.
(2) Cash and other discounts not practically assignable to specific
materials.
(3) Freight, express, and similar items, when not assignable to
specific items.
(4) Heat, light and power for storerooms and store offices.
(5) Brooms, brushes, sweeping compounds and other supplies used in
cleaning and tidying storerooms and stores offices.
(6) Injuries and damages.
(7) Insurance on materials and supplies and on stores equipment.
(8) Losses due to breakage, leakage, evaporation, fire or other
causes, less credits for amounts received from insurance,
transportation companies or others in compensation of the losses.
(9) Postage, printing, stationery and office supplies.
(10) Rent of storage space and facilities.
(11) Communication service.
(12) Excise and other similar taxes not assignable to specific materials.
(13) Transportation expense on inward movement of stores and on
transfer between storerooms, but not including charges on materials
recovered from retirements that must be accounted for as part of cost
of removal.
(e) A physical inventory of each class of materials and supplies
must be made at least every two years.

Sec. 367.1650 Account 165, Prepayments.

This account must include amounts representing prepayments of
insurance, rents, taxes, interest and miscellaneous items, and must be
kept or supported in a manner so as to disclose the amount of each
class of prepayment.

Sec. 367.1710 Account 171, Interest and dividends receivable.

(a) This account must include the amount of interest on bonds,
mortgages, notes, commercial paper, loans, open accounts, deposits, and
other similar items, the payment of which is reasonably assured, and
the amount of dividends declared or guaranteed on stocks owned.
(b) Interest that is not subject to current settlement must not be
included in this account, but in the account in which is carried the
principal on which the interest is accrued.
(c) Interest and dividends receivable from associate companies must be

[[Page 28492]]

included in account 146, Accounts receivable from associate companies
(Sec. 367.1460).

Sec. 367.1720 Accounts 172, Rents receivable.

(a) This account must include rents receivable or accrued on
property rented or leased by the service company to others.
(b) Rents receivable from associate companies must be included in
account 146, Accounts receivable from associate companies (Sec. 367.1460).

Sec. 367.1730 Account 173, Accrued revenues.

At the option of the service company, the estimated amount accrued
for service rendered, but not billed at the end of any accounting
period, may be included in this account. In case accruals are made for
unbilled revenues, they must be made likewise for unbilled expenses,
such as for the purchase of energy.

Sec. 367.1740 Account 174, Miscellaneous current and accrued assets.

This account must include the book cost of all other current and
accrued assets, appropriately designated and supported so as to show
the nature of each asset included in the account.

Deferred Debits

Sec. 367.1810 Account 181, Unamortized debt expense.

This account must include expenses related to the issuance or
assumption of debt securities. Amounts recorded in this account must be
amortized over the life of each respective issue under a plan that will
distribute the amount equitably over the life of the security. The
amortization must be on a monthly basis, and the related amounts must
be charged to account 428, Amortization of debt discount and expense
(Sec. 367.4280). Any unamortized amounts outstanding at the time that
the related debt is prematurely reacquired must be accounted for as
indicated in General Instructions in Sec. 367.16.

Sec. 367.1830 Account 183, Preliminary survey and investigation charges.

(a) This account must be charged with all expenditures for
preliminary surveys, plans, investigations, and other similar items,
made for the purpose of determining the feasibility of service company
projects under contemplation. If construction results, this account
must be credited and the appropriate service company property account
charged. If the work is abandoned, the charge must be made to account
426.5, Other deductions (Sec. 367.4265), or to the appropriate
operating expense account.
(b) The records supporting the entries to this account must be kept
so that the service company can furnish complete information as to the
nature and the purpose of the survey, plans, or investigations and the
nature and amounts of the several charges.
(c) The amount of preliminary survey and investigation charges
transferred to service company property must not exceed the
expenditures that may reasonably be determined to contribute directly
and immediately and without duplication to service company property.

Sec. 367.1840 Account 184, Clearing accounts.

This account must include undistributed balances in clearing
accounts at the date of the balance sheet. Balances in clearing
accounts must be substantially cleared not later than the end of the
calendar year unless the items held relate to a future period.

Sec. 367.1850 Account 185, Temporary facilities.

This account must include amounts shown by work orders for property
installed for temporary use for a period of less than one year. Such
work orders must be charged with the cost of temporary facilities and
credited with payments received from customers and net salvage realized
on removal of the temporary facilities. Any net credit or debit
resulting must be cleared to the construction or service work order to
which the facilities relate.

Sec. 367.1860 Account 186, Miscellaneous deferred debits.

(a) This account must include all debits not provided for
elsewhere, such as miscellaneous work in progress, and unusual or
extraordinary expenses, not included in other accounts, that are in the
process of amortization and items the proper final disposition of which
is uncertain.
(b) The records supporting the entries to this account must be kept
so that the service company can furnish full information as to each
deferred debit included in this account.

Sec. 367.1880 Account 188, Research, development, or demonstration
expenditures.

(a) This account must be charged with the cost of all expenditures
coming within the meaning of research, development and demonstration
(RD&D) of this Uniform System of Accounts (See Definitions Sec.
367.1(a)(37)), except those expenditures properly chargeable to account
107, Construction work in progress (Sec. 367.1070).
(b) Costs that are minor or of a general or recurring nature must
be transferred from this account to the appropriate operating expense
function or, if the costs are common to the overall operations or
cannot be feasibly allocated to the various operating accounts, then
the costs must be recorded in account 930.2, Miscellaneous general
expenses (Sec. 367.9302).
(c) In certain instances, a service company may incur large and
significant research, development, and demonstration expenditures that
are nonrecurring and that would distort the annual research,
development, and demonstration charges for the period. In such a case,
the portion of such amounts that causes the distortion may be amortized
to the appropriate operating expense account over a period not to
exceed five years, unless otherwise authorized by the Commission.
(d) The entries in this account must be maintained so as to show
separately each project along with complete detail of the nature and
purpose of the research, development, and demonstration project
together with the related costs.

Sec. 367.1900 Account 190, Accumulated deferred income taxes.

(a) This account must be debited and account 411.1, Provision for
deferred income taxes--Credit, operating income (Sec. 367.4111), or
account 411.2, Provision for deferred income taxes--Credit, other
income and deductions (Sec. 367.4112), as appropriate, must be
credited with an amount equal to that by which income taxes payable for
the year are higher because of the inclusion of certain items in income
for tax purposes, which items for general accounting purposes will not
be fully reflected in the service company's determination of annual net
income until subsequent years.
(b) This account must be credited and account 410.1, Provision for
deferred income taxes, operating income (Sec. 367.4101), or account
410.2, Provision for deferred income taxes, other income and deductions
(Sec. 367.4102), as appropriate, must be debited with an amount equal
to that by which income taxes payable for the year are lower because of
prior payment of taxes as provided by paragraph (a) of this section,
because of difference in timing for tax purposes of particular items of
income or income deductions from that recognized by the utility for
general accounting purposes. The credit to this account and debit to
account 410.1 (Sec. 367.4101), or 410.2 (Sec. 367.4102) must, in
general, represent the effect on taxes payable in the current year of the

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smaller amount of book income recognized for tax purposes as compared
to the amount recognized in the service company's current accounts with
respect to the item or class of items for which deferred tax accounting
by the service company was authorized by the Commission.
(c) The service company is restricted in its use of this account to
the purpose provided in paragraphs (a) and (b) of this section. The
service company must not make use of the balance in this account or any
related portion except as provided in the text of this account, without
prior approval of the Commission. Any remaining deferred tax account
balance with respect to an amount for any prior year's tax deferral,
the amortization of which or other recognition in the service company's
income accounts has been completed, or other disposition made, must be
debited to account 410.1, Provision for deferred income taxes,
operating income (Sec. 367.4101), or account 410.2, Provision for
deferred income taxes, other income and deductions (Sec. 367.4102), as
appropriate, or otherwise disposed of as the Commission may authorize
or direct. (See General Instructions in Sec. 367.17.)

Proprietary Capital

Sec. 367.2010 Account 201, Common stock issued.

This account must include the par or stated value of all common
capital stock issued and outstanding.

Sec. 367.2040 Account 204, Preferred stock issued.

This account must include the par or stated value of all preferred
stock issued and outstanding.

Sec. 367.2110 Account 211, Miscellaneous paid-in capital.

This account must include the balance of all other credits for
paid-in capital that is not properly included in proprietary capital
accounts. This account may include all commissions and expenses
incurred in connection with the issuance of capital stock.

Sec. 367.2150 Account 215, Appropriated retained earnings.

This account must include the amount of retained earnings that has
been appropriated or set aside for special purposes. Separate
subaccounts must be maintained under titles that will designate the
purpose for which each appropriation was made.

Sec. 367.2160 Account 216, Unappropriated retained earnings.

This account must include the balances, either debit or credit, of
unappropriated retained earnings arising from earnings of the service
company. This account must not include any amounts representing the
undistributed earnings of subsidiary companies.

Sec. 367.2161 Account 216.1, Unappropriated undistributed subsidiary
earnings.

This account must include the balances, either debit or credit, of
undistributed retained earnings of subsidiary companies since their
acquisition. When dividends are received from subsidiary companies
relating to amounts included in this account, this account must be
debited and account 216, Unappropriated retained earnings (Sec.
367.2160), credited.

Sec. 367.2190 Account 219, Accumulated other comprehensive income.

(a) This account must include revenues, expenses, gains, and losses
that are properly includable in other comprehensive income during the
period. Examples of other comprehensive income include, but are not
limited to, minimum pension liability adjustments, and unrealized gains
and losses on certain investments in debt and equity securities.
Records supporting the entries to this account must be maintained so
that the service company can furnish the amount of other comprehensive
income for each item included in this account.
(b) This account also must be debited or credited, as appropriate,
with amounts of accumulated other comprehensive income that have been
included in the determination of net income during the period and in
accumulated other comprehensive income in prior periods. Separate
records for each category of items must be maintained to identify the
amount of the reclassification adjustments from accumulated other
comprehensive income to earnings made during the period.

Long-Term Debt

Sec. 367.2230 Account 223, Advances from associate companies.

(a) This account must include the face value of notes payable to
associate companies and the amount of open book accounts representing
advances from associate companies. It does not include notes and open
accounts representing indebtedness subject to current settlement that
are includible in account 233, Notes payable to associate companies
(Sec. 367.2330), or account 234, Accounts payable to associate
companies (Sec. 367.2340).
(b) The records supporting the entries to this account must be kept
so that the service company can furnish complete information concerning
each note and open account.

Sec. 367.2240 Account 224, Other long-term debt.

(a) This account must include, until maturity, all long-term debt
not otherwise provided for. This covers items such as receivers'
certificates, real estate mortgages executed or assumed, assessments
for public improvements, notes and unsecured certificates of
indebtedness not owned by associate companies, receipts outstanding for
long-term debt, and other obligations maturing more than one year from
date of issue or assumption.
(b) Separate accounts must be maintained for each class of
obligation, and records must be maintained to show for each class all
details as to date of obligation, date of maturity, interest dates and
rates, security for the obligation, and other similar items.

Sec. 367.2250 Account 225, Unamortized premium on long-term debt.

(a) This account must include the excess of the cash value of
consideration received over the face value upon the issuance or
assumption of long-term debt securities.
(b) Amounts recorded in this account must be amortized over the
life of each respective issue under a plan that will distribute the
amount equitably over the life of the security. The amortization must
be on a monthly basis, with the related amounts credited to account
429, Amortization of premium on debt--Credit (Sec. 367.4290). (See
General Instructions in Sec. 367.16.)

Sec. 367.2260 Account 226, Unamortized discount on long-term debt--Debit.

(a) This account must include the excess of the face value of long-
term debt securities over the related cash value of consideration received,
related to the issue or assumption of all types and classes of debt.
(b) Amounts recorded in this account must be amortized over the
life of the respective issues under a plan that will distribute the
amount equitably over the life of the securities. The amortization must
be on a monthly basis, with the related amounts charged to account 428,
Amortization of debt discount and expense (Sec. 367.4280). (See
General Instructions in Sec. 367.16.)

Other Noncurrent Liabilities

Sec. 367.2270 Account 227, Obligations under capital lease--Non-current.

This account must include the portion not due within one year, of
the obligations recorded for the amounts

[[Page 28494]]

applicable to leased property recorded as assets in account 101.1,
Property under capital leases (Sec. 367.1011).

Sec. 367.2300 Account 230, Asset retirement obligations.

(a) This account must include the amount of liabilities for the
recognition of asset retirement obligations related to service company
property. This account must be credited for the amount of the
liabilities for asset retirement obligations with amounts charged to
the appropriate property account to record the related asset retirement
costs.
(b) The service company must charge the accretion expense to
account 411.10, Accretion expense (Sec. 367.4116), and credit account
230, Asset retirement obligations (Sec. 367.2300).
(c) This account must be debited with amounts paid to settle the
asset retirement obligations recorded in this account.
(d) The service company must clear from this account any gains or
losses resulting from the settlement of asset retirement obligations in
accordance with the instructions prescribed in the General Instructions
in Sec. 367.22.

Current and Accrued Liabilities

Sec. 367.2310 Account 231, Notes payable.

This account must include the face value of all notes, drafts,
acceptances, or other similar evidences of indebtedness, payable on
demand or within a time not exceeding one year from date of issue, to
other than associate companies.

Sec. 367.2320 Account 232, Accounts payable.

This account must include all amounts payable by the service
company within one year, that are not provided for in other accounts.

Sec. 367.2330 Account 233, Notes payable to associate companies.

(a) This account must include amounts owing to associate companies
on notes, drafts, acceptances, or other similar evidences of
indebtedness, and open accounts payable on demand or not more than one
year from date of issue or creation.
(b) Exclude from this account notes and accounts that are includible
in account 223, Advances from associate companies (Sec. 367.2230).

Sec. 367.2340 Account 234, Accounts payable to associate companies.

(a) This account must include amounts owing to associate companies
on notes, drafts, acceptances, or other similar evidences of
indebtedness, and open accounts payable on demand or not more than one
year from date of issue or creation.
(b) Exclude from this account notes and accounts that are included
in account 223, Advances from associate companies (Sec. 367.2230).

Sec. 367.2360 Account 236, Taxes accrued.

(a) This account must be credited with the amount of taxes accrued
during the accounting period, corresponding debits being made to the
appropriate accounts for tax charges. The credits may be based upon
estimates, but from time to time during the year as the facts become
known, the amount of the periodic credits must be adjusted so as to
include as nearly as can be determined in each year the related
applicable taxes. Any amount representing a prepayment of taxes
applicable to the period subsequent to the date of the balance sheet,
must be shown under account 165, Prepayments (Sec. 367.1650).
(b) If accruals for taxes are found to be insufficient or
excessive, corrections must be made through current tax accruals.
(c) Accruals for taxes must be based upon the net amounts payable
after credit for any discounts, and must not include any amounts for
interest on tax deficiencies or refunds. Interest received on refunds
must be credited to account 419, Interest and dividend income (Sec.
367.4190), and interest paid on deficiencies must be charged to account
431, Other interest expense (Sec. 367.4310).
(d) The records supporting the entries to this account must be kept
so as to show for each class of taxes, the amount accrued, the basis
for the accrual, the accounts to which charged, and the amount of tax paid.

Sec. 367.2370 Account 237, Interest accrued.

This account must include the amount of interest accrued but not
matured on all liabilities of the service company not including,
however, interest that is added to the principal of the debt on which
it is incurred. Supporting records must be maintained so as to show the
amount of interest accrued on each obligation.

Sec. 367.2380 Account 238, Dividends declared.

This account must include the amount of dividends that have been
declared but not paid. Dividends must be credited to this account when
they become a liability.

Sec. 367.2410 Account 241, Tax collections payable.

(a) This account must include the amount of taxes collected by the
service company through payroll deductions or otherwise pending
transmittal of the taxes to the proper taxing authority.
(b) Do not include liability for taxes assessed directly against
the service company that is accounted for as part of the service
company's own tax expense.

Sec. 367.2420 Account 242, Miscellaneous current and accrued
liabilities.

This account must include the amount of all other current and
accrued liabilities not provided for in accounts 231 through 243
(Sec. Sec. 367.2310 through 367.2430), appropriately designated and
supported so as to show the nature of each liability.

Sec. 367.2430 Account 243, Obligations under capital leases--current.

This account must include the portion, due within one year, of the
obligations recorded for the amounts applicable to leased property
recorded as assets in account 101.1, Property under capital leases
(Sec. 367.1011).

Deferred Credits

Sec. 367.2530 Account, 253, Other deferred credits.

This account must include advance billings and receipts and other
deferred credit items, not provided for elsewhere, including amounts
which cannot be entirely cleared or disposed of until additional
information has been received.

Sec. 367.2550 Account 255, Accumulated deferred investment tax credits.

This account must be credited with all investment tax credits
deferred by companies that have elected to follow deferral accounting,
partial or full, rather than recognizing in the income statement the
total benefits of the tax credit as realized. After this election, a
company may not transfer amounts from this account, except as
authorized in this account and in accounts 411.4, Investment tax credit
adjustments, service company property (Sec. 367.4114) or 411.5,
Investment tax credit adjustments, other income and deductions (Sec.
367.4115), or with approval of the Commission.

Sec. 367.2820 Account 282, Accumulated deferred income taxes--Other
property.

(a) This account must include the tax deferrals resulting from
adoption of the principle of comprehensive inter-period income tax
allocation described in the General Instructions in Sec. 367.17 that
are related to all property other than accelerated amortization
property.
(b) This account must be credited and accounts 410.1, Provision for
deferred income taxes, operating income (Sec. 367.4101), or 410.2,
Provision for deferred income taxes, Other income and deductions (Sec.
367.4102), as appropriate, must be debited with tax

[[Page 28495]]

effects related to property described in paragraph (a) of this section
where taxable income is lower than pretax accounting income due to
differences between the periods in which revenue and expense
transactions affect taxable income and the periods in which they enter
into the determination of pretax accounting income.
(c) This account must be debited, and accounts 411.1, Provision for
deferred income taxes--credit, operating income (Sec. 367.4111), or
411.2, Provision for deferred income taxes--credit, other income and
deductions (Sec. 367.4112), as appropriate, must be credited with tax
effects related to property described in paragraph (a) of this section
where taxable income is higher than pretax accounting income due to
differences between the periods in which revenue and expense
transactions affect taxable income and the periods in which they enter
into the determination of pretax accounting income.
(d) The service company is restricted in its use of this account to
the purposes described in paragraphs (a) through (c) of this account.
It must not transfer the balance in this account or any related portion
to retained earnings or make any other use of the balance except as
provided in paragraph (a) through (c) of this account without prior
approval of the Commission. Upon the disposition by sale, exchange,
transfer, abandonment or premature retirement of property on which
there is a related balance, this account must be charged with an amount
equal to the related income tax expense, if any, arising from the
disposition and accounts 411.1, Income taxes deferred in prior years--
Credit (Sec. 367.4111), or 411.2, Income taxes deferred in prior
years--Credit, other income and deductions (Sec. 367.4112), must be
credited. When property is disposed of by transfer to a wholly-owned
subsidiary, the related balance in this account also must be
transferred. When the disposition relates to retirement of an item or
items under a group method of depreciation where there is no tax effect
in the year of retirement, no entries are required in this account if
it can be determined that the related balance must be retained to
offset future group item tax deficiencies.

Sec. 367.2830 Account 283, Accumulated deferred income taxes--Other.

(a) This account must include all credit tax deferrals resulting
from the adoption of the principles of comprehensive inter-period
income tax allocation described in the General Instructions in Sec.
367.17 other than those deferrals that are includible in accounts and
account 282, Accumulated deferred income taxes--Other property (Sec.
367.2820).
(b) This account must be credited, and accounts 410.1 Provision for
deferred income taxes, operating income (Sec. 367.4101), or 410.2
Provision for deferred income taxes, other income and deductions (Sec.
367.4102), as appropriate, must be debited with tax effects related to
items described in paragraph (a) of this account where taxable income
is lower than pretax accounting income due to differences between the
periods in which revenue and expense transactions affect taxable income
and the periods in which they enter into the determination of pretax
accounting income.
(c) This account must be debited, and accounts 411.1, Provision for
deferred income taxes--Credit, operating income (Sec. 367.4111), or
411.2, Provision for deferred income taxes--Credit, other income and
deductions (Sec. 367.4112), as appropriate, must be credited with tax
effects related to items described in paragraph (a) of this account
where taxable income is higher than pretax accounting income due to
differences between the periods in which revenue and expense
transactions affect taxable income and the periods in which they enter
into the determination of pretax accounting income.
(d) Records with respect to entries to this account, as described
in paragraphs (a) through (c) of this account, and the account balance,
must be maintained so as to show the factors of calculation with
respect to each annual amount of the item or class of items.
(e) The service company is restricted in its use of this account to
the purposes described in paragraphs (a) through (c) of this account.
It must not transfer the balance in the account or any portion of the
account to retained earnings or to any other account or make any use of
the account except as provided in the text of this account, without
prior approval of the Commission. Upon the disposition by sale,
exchange, transfer, abandonment or premature retirement of items on
which there is a related balance herein, this account must be charged
with an amount equal to the related income tax effect, if any, arising
from the disposition and accounts 411.1, Provision for deferred income
taxes--Credit, operating income (Sec. 367.4111), or 411.2, Provision
for deferred income taxes--Credit, other income and deductions (Sec.
367.4112), as appropriate, must be credited.
(f) When property is disposed of by transfer to a wholly-owned
subsidiary, the related balance in this account also must be
transferred. When the disposition relates to retirement of an item or
items under a group method of depreciation where there is no tax effect
in the year of retirement, no entries are required in this account if
it can be determined that the related balance must be retained to
offset future group item tax deficiencies.

Subpart G--Service Company Property Chart of Accounts

Sec. 367.3010 Account 301, Organization.

(a) This account must include all fees paid to federal or state
governments for the privilege of incorporation and expenditures
incident to organizing the corporation, partnership, or other
enterprise and putting it into readiness to do business
(b) This account must include the following items:
(1) Cost of obtaining certificates authorizing the service company
to engage in its business.
(2) Fees and expenses for incorporation.
(3) Fees and expenses for mergers or consolidations.
(4) Office expenses incident to organizing the service company.
(5) Stock and minute books and corporate seal.
(c) This account must not include any discounts upon securities
issued or assumed; nor may it include any costs incident to negotiating
loans, selling bonds or other evidences of debt or expenses in
connection with the authorization, issuance or sale of capital stock.
(d) Exclude from this account and include in the appropriate
expense account, the cost of preparing and filing papers in connection
with the extension of the term of incorporation unless the first
organization costs have been written off. When charges are made to this
account for expenses incurred in mergers, consolidations, or
reorganizations, amounts previously included in this account or in
similar accounts in the books of the companies concerned must be
excluded from this account.

Sec. 367.3030 Account 303, Miscellaneous intangible property.

(a) This account must include the cost of patent rights, licenses,
privileges, and other intangible property necessary or valuable in the
conduct of service company operations and not specifically chargeable
to any other account.
(b) When any item included in this account is retired or expires,
the related book cost must be credited to this account and charged to
account 426.5, Other deductions (Sec. 367.4265), or account 111,
Accumulated provision for amortization of property (Sec. 367.1110).

[[Page 28496]]

(c) This account must be maintained in a manner so that the service
company can furnish full information with respect to the amounts
included in this account.

Sec. 367.3890 Account 389, Land and land rights.

This account must include the cost of land and land rights used for
service company purposes, the cost of which is not properly includible
in other land and land rights accounts. (See Service Company Property
Instructions in Sec. 367.55.)

Sec. 367.3900 Account 390, Structures and improvements.

This account must include the cost in place of structures and
improvements used for service company purposes, the cost of which is
not properly includible in other structures and improvements accounts
(See Service Company Property Instructions in Sec. 367.56).

Sec. 367.3910 Account 391, Office furniture and equipment.

(a) This account must include the cost of office furniture and
equipment owned by the service company and devoted to service company
operations, and not permanently attached to buildings, except the cost
of the furniture and equipment that the service company elects to
assign to other property accounts on a functional basis.
(b) This account must include the following items:
(1) Bookcases and shelves.
(2) Desks, chairs, and desk equipment.
(3) Drafting-room equipment.
(4) Filing, storage, and other cabinets.
(5) Floor covering.
(6) Library and library equipment.
(7) Mechanical office equipment, such as accounting machines,
typewriters, and other similar items.
(8) Safes.
(9) Tables.

Sec. 367.3920 Account 392, Transportation equipment.

(a) This account must include the cost of transportation vehicles
used for service company purposes.
(b) This account must include the following items:
(1) Airplanes.
(2) Automobiles.
(3) Bicycles.
(4) Electrical vehicles.
(5) Motor trucks.
(6) Motorcycles.
(7) Repair cars or trucks.
(8) Tractors and trailers.
(9) Other transportation vehicles.

Sec. 367.3930 Account 393, Stores equipment.

(a) This account must include the cost of equipment used for the
receiving, shipping, handling, and storage of materials and supplies.
(b) This account must include the following items:
(1) Chain falls.
(2) Counters.
(3) Cranes (portable).
(4) Elevating and stacking equipment (portable).
(5) Hoists.
(6) Lockers.
(7) Scales.
(8) Shelving.
(9) Storage bins.
(10) Trucks, hand and power driven.
(11) Wheelbarrows.

Sec. 367.3940 Account 394, Tools, shop and garage equipment.

(a) This account must include the cost of tools, implements, and
equipment used in construction, repair work, general shops and garages
and not specifically provided for or includible in other accounts.
(b) This account must include the following items:
(1) Air compressors.
(2) Anvils.
(3) Automobile repair shop equipment.
(4) Battery charging equipment.
(5) Belts, shafts and countershafts.
(6) Boilers.
(7) Cable pulling equipment.
(8) Concrete mixers.
(9) Drill presses.
(10) Derricks.
(11) Electric equipment.
(12) Engines.
(13) Forges.
(14) Furnaces.
(15) Foundations and settings specially constructed for equipment in
this account and not expected to outlast the equipment for which provided.
(16) Gas producers.
(17) Gasoline pumps, oil pumps and storage tanks.
(18) Greasing tools and equipment.
(19) Hoists.
(20) Ladders.
(21) Lathes.
(22) Machine tools.
(23) Motor-driven tools.
(24) Motors.
(25) Pipe threading and cutting tools.
(26) Pneumatic tools.
(27) Pumps.
(28) Riveters.
(29) Smithing equipment.
(30) Tool racks.
(31) Vises.
(32) Welding apparatus.
(33) Work benches.

Sec. 367.3950 Account 395, Laboratory equipment.

(a) This account must include the cost installed of laboratory
equipment used for general laboratory purposes.
(b) This account must include the following items:
(1) Ammeters.
(2) Balances and scales.
(3) Barometers.
(4) Calorimeters-bomb, flow, recording types, and other similar items.
(5) Current batteries.
(6) Electric furnaces.
(7) Frequency changers.
(8) Galvanometers.
(9) Gas burning equipment.
(10) Gauges.
(11) Glassware, beakers, burettes, and other similar items.
(12) Humidity testing apparatus.
(13) Inductometers.
(14) Laboratory hoods.
(15) Laboratory standard millivolt meters.
(16) Laboratory standard volt meters.
(17) Laboratory tables and cabinets.
(18) Meter-testing equipment.
(19) Millivolt meters.
(20) Motor generator sets.
(21) Muffles.
(22) Oil analysis apparatus.
(23) Panels.
(24) Phantom loads.
(25) Piping.
(26) Portable graphic ammeters, voltmeters, and wattmeters.
(27) Portable loading devices.
(28) Potential batteries.
(29) Potentiometers.
(30) Rotating standards.
(31) Specific gravity apparatus.
(32) Standard bottles for meter prover testing.
(33) Standard cell, reactance, resistor, and shunt.
(34) Stills.
(35) Sulphur and ammonia apparatus.
(36) Switchboards.
(37) Synchronous timers.
(38) Tar analysis apparatus.
(39) Testing panels.
(40) Testing resistors.
(41) Thermometers-indicating and recording.
(42) Transformers.
(43) Voltmeters.
(44) Other testing, laboratory, or research equipment not provided
for elsewhere.
(45) Other items of equipment for testing gas, fuel, flue gas,
water, residuals, and other similar items.

Sec. 367.3960 Account 396, Power operated equipment.

(a) This account must include the cost of power operated equipment
used in construction or repair work exclusive of equipment includible
in other accounts. Include, also, the tools and accessories acquired for
use with the equipment and the vehicle on which the equipment is mounted.

[[Page 28497]]

(b) This account must include the following items:
(1) Air compressors, including driving unit and vehicle.
(2) Back filling machines.
(3) Boring machines.
(4) Bulldozers.
(5) Cranes and hoists.
(6) Diggers.
(7) Engines.
(8) Pile drivers.
(9) Pipe cleaning machines.
(10) Pipe coating or wrapping machines.
(11) Tractors--Crawler type.
(12) Trenchers.
(13) Other power operated equipment.
(b) It is intended that this account include only the large units
that are generally self-propelled or mounted on movable equipment.

Sec. 367.3970 Account 397, Communication equipment.

(a) This account must include the cost installed of telephone,
telegraph, and wireless equipment for general use in connection with
service company operations.
(b) This account must include the following items:
(1) Amplifiers.
(2) Antennae.
(3) Booths.
(4) Cables.
(5) Carrier terminal equipment.
(6) Conductors.
(7) Distributing boards.
(8) Extension cords.
(9) Gongs.
(10) Hand sets, manual and dial.
(11) Insulators.
(12) Intercommunicating sets.
(13) Loading coils.
(14) Microwave equipment.
(15) Operators' desks.
(16) Paraboloids.
(17) Poles and fixtures used wholly for telephone or telegraph wire.
(18) Power supply equipment.
(19) Radio transmitting and receiving sets.
(20) Reflectors.
(21) Repeaters.
(22) Remote control equipment and lines.
(23) Sending keys.
(24) Storage batteries.
(25) Switchboards.
(26) Telautograph circuit connections.
(27) Telegraph receiving sets.
(28) Telephone and telegraph circuits.
(29) Testing instruments.
(30) Towers.
(31) Underground conduit used wholly for telephone or telegraph
wires and cable wires.

Sec. 367.3980 Account 398, Miscellaneous equipment.

(a) This account must include the cost of equipment, apparatus, and
other similar items, used in the service company's operations, that is
not included in any other account of this system of accounts.
(b) This account must include the following items:
(1) Hospital and infirmary equipment.
(2) Kitchen equipment.
(3) Employees' recreation equipment.
(4) Radios.
(5) Restaurant equipment.
(6) Soda fountains.
(7) Operators' cottage furnishings.
(8) Other miscellaneous equipment.

Sec. 367.3990 Account 399, Other tangible property.

This account must include the cost of tangible service company
property not provided for elsewhere.

Sec. 367.3991 Account 399.1, Asset retirement costs for service
company property.

This account must include asset retirement cost on service company
property.

Subpart H--Income Statement Chart of Accounts

Service Company Operating Income

Sec. 367.4000 Account 400, Operating revenues.

There must be shown under this caption the total amount included in
the service company operating revenue accounts 457 through 459
(Sec. Sec. 367.4570 through 367.4590).

Sec. 367.4010 Account 401, Operation expense.

There must be shown under this caption the total amount included in
the service company operation expense accounts 500 through 589
(Sec. Sec. 367.5000 through 367.5890), 800 through 881 (Sec. Sec.
367.8000 through 367.8810) and 901 through 931 (Sec. Sec. 367.9010
through 367.9310).

Sec. 367.4020 Account 402, Maintenance expense.

There must be shown under this caption the total amount included in
the service company maintenance expense accounts 500 through 598
(Sec. Sec. 367.5000 through 367.5890), 800 though 894 (Sec. Sec.
367.8000 through 367.8810), and 935 (Sec. 367.9350).

Sec. 367.4030 Account 403, Depreciation expense.

(a) This account must include the amount of depreciation for all
service company property, the cost of which is included in accounts 390
through 399.1 (Sec. Sec. 367.3900 through 367.3991). Provide
subaccounts by each class of service company property owned or leased
except the depreciation expense that is charged to clearing accounts or
to account 416, Costs and expenses of merchandising, jobbing and
contract work (Sec. 367.4160).
(b) The service company must keep the records of property and
property retirements that will reflect the service life of property
that has been retired and aid in estimating probable service life by
mortality, turnover, or other appropriate methods; and also the records
that will reflect the percentage of salvage and costs of removal for
property retired from each account, or related subaccount, for
depreciable property.
(c) Depreciation expenses applicable to transportation equipment,
shop equipment, tools, work equipment, power operated equipment and
other general equipment may be charged to clearing accounts as
necessary in order to obtain a proper distribution of expenses between
construction and operation.

Sec. 367.4031 Account 403.1, Depreciation expense for asset
retirement costs.

This account must include the depreciation expense for asset
retirement costs included in service company property.

Sec. 367.4040 Account 404, Amortization of limited-term property.

This account must include amortization charges applicable to
amounts included in the service company property's accounts for
limited-term franchises, licenses, patent rights, limited-term
interests in land, and expenditures on leased property where the
service life of the improvements is terminable by action of the lease.
The charges to this account must be sufficient to distribute the book
cost of each investment as evenly as may be over the period of its
benefit. (See account 111, Accumulated provision for amortization of
service company property (Sec. 367.1110).)

Sec. 367.4050 Account 405, Amortization of other property.

(a) When authorized by the Commission, this account must include
charges for amortization of intangible or other property that does not
have a definite or terminable life and that is not subject to charges
for depreciation expense.
(b) This account must be supported in sufficient detail to show the
amortization applicable to each investment being amortized, together
with the book cost of the investment and the period over which it is
being written off.

[[Page 28498]]

Sec. 367.4081 Account 408.1, Taxes other than income taxes, operating
income.

This account must include those taxes, other than income taxes,
that relate to service company operating income. This account must be
maintained so as to allow ready identification of the various classes
of taxes.

Sec. 367.4082 Account 408.2, Taxes other than income taxes, other
income and deductions.

This account must include those taxes, other than income taxes,
that relate to other income and deductions.

Sec. 367.4091 Account 409.1, Income taxes, operating income.

This account must include the amount of those local, state and
Federal income taxes that relates to service company operating income.

Sec. 367.4092 Account 409.2, Income taxes, other income and deductions.

This account must include the amount of those local, state and
Federal income taxes (both positive and negative), that relate to other
income and deductions.

Sec. 367.4093 Account 409.3, Income taxes, extraordinary items.

This account must include the amount of those local, state and
Federal income taxes (both positive and negative), that relate to
extraordinary items.

Sec. 367.4101 Account 410.1, Provision for deferred income taxes,
operating income.

This account must include the amounts of those deferrals of taxes
and allocations of deferred taxes that relate to service company
operating income.

Sec. 367.4102 Account 410.2, Provision for deferred income taxes,
other income and deductions.

This account must include the amounts of those deferrals of taxes and
allocations of deferred taxes that relate to other income and deductions.

Sec. 367.4111 Account 411.1, Provision for deferred income taxes--
Credit, operating income.

This account must include the amounts of those allocations of
deferred taxes and deferrals of taxes, credit, that relate to service
company operating income.

Sec. 367.4112 Account 411.2, Provision for deferred income taxes--
Credit, other income and deductions.

This account must include the amounts of those allocations of
deferred taxes and deferrals of taxes, credit, that relate to other
income and deductions.

Sec. 367.4114 Account 411.4, Investment tax credit adjustments,
service company property.

This account must include the amount of those investment tax credit
adjustments that relate to service company property.

Sec. 367.4115 Account 411.5, Investment tax credit adjustments, other.

This account must include the amount of those investment tax credit
adjustments not properly included in other accounts.

Sec. 367.4116 Account 411.10, Accretion expense.

This account must be charged for accretion expense on the
liabilities associated with asset retirement obligations included in
account 230, Asset retirement obligations (Sec. 367.2300), related to
service company property.

Sec. 367.4150 Account 415, Revenues from merchandising, jobbing and
contract work.

(a) These accounts shall include respectively, all revenues derived
from the sale of merchandise and jobbing or contract work, including
any profit or commission accruing to the service company on jobbing
work performed by it as agent under contracts whereby it does jobbing
work for another for a stipulated profit or commission, and all
expenses incurred in such activities. Interest related income from
installment sales must be recorded in Account 419, Interest and
Dividend income (Sec. 367.4190).
(b) Records in support of this account must be so kept as to permit
ready summarization of revenues by such major items as are feasible.
(c) This account must include revenues from the sale of merchandise
and from jobbing and contract work, and discounts and allowances made
in settlement of bills for merchandise and jobbing work.
(d) Related taxes must be recorded in account 408.2, Taxes other
than income taxes, other income and deductions (Sec. 367.4082), or
account 409.2, Income taxes, other income and deductions (Sec.
367.4092), as appropriate.

Sec. 367.4160 Account 416, Costs and expenses of merchandising,
jobbing and contract work.

(a) This account must include the following labor items:
(1) Canvassing and demonstrating appliances in homes and other
places for the purpose of selling appliances.
(2) Demonstrating and selling activities in sales rooms.
(3) Installing appliances on customer premises where the work is
done only for purchasers of appliances from the utility.
(4) Installing wiring, piping, or other property work, on a jobbing
or contract basis.
(5) Preparing advertising materials for appliance sales purposes.
(6) Receiving and handling customer orders for merchandise or for
jobbing services.
(7) Cleaning and tidying sales rooms.
(8) Maintaining display counters and other equipment used in
merchandising.
(9) Arranging merchandise in sales rooms and decorating display windows.
(10) Reconditioning repossessed appliances.
(11) Bookkeeping and other clerical work in connection with
merchandise and jobbing activities.
(12) Supervising merchandise and jobbing operations.
(b) This account must include the following materials and expenses
items:
(1) Advertising in newspapers, periodicals, radio, television, and
other similar items.
(2) Cost of merchandise sold and of materials used in jobbing work.
(3) Stores expenses on merchandise and jobbing stocks.
(4) Fees and expenses of advertising and commercial artists' agencies.
(5) Printing booklets, dodgers, and other advertising data.
(6) Premiums given as inducement to buy appliances.
(7) Light, heat and power.
(8) Depreciation on equipment used primarily for merchandise and
jobbing operations.
(9) Rent of sales rooms or of equipment.
(10) Transportation expense in delivery and pick-up of appliances
by the utility's facilities or by others.
(11) Stationery and office supplies and expenses.
(12) Losses from uncollectible merchandise and jobbing accounts.
(c) Records in support of this account shall be so kept as to
permit ready summarization of costs and expenses by such major items as
are feasible.
(d) Related taxes must be recorded in account 408.2, Taxes other
than income taxes, other income and deductions (Sec. 367.4082), or
account 409.2, Income taxes, other income and deductions (Sec.
367.4092), as appropriate.

Sec. 367.4171 Account 417.1, Expenses of non-utility related operations.

(a) This account will include expenses incurred in providing
services to non-utility companies where the revenues from which are
included in Account 459, Services rendered to non-utility companies
(Sec. 367.4590).

[[Page 28499]]

Expenses related to providing customer, sales or administrative and
general services to non-utility companies will initially be recorded in
the 900 series of accounts and transferred to Account 417.1 (Sec.
367.4171), through credit to Account 922, Administrative expenses
transferred--Credit (Sec. 367.9220). The cost of other services
provided to non-utility companies will be charged directly to Account
417.1 (Sec. 367.4171).
(b) Related taxes must be recorded in account 408.1, Taxes other
than income taxes, operating income (Sec. 367.4081), or account 409.1,
Income taxes, operating income (Sec. 367.4091).

Sec. 367.4181 Account 418.1, Equity in earnings of subsidiary companies.

This account must include the service company's equity in the
earnings or losses of subsidiary companies for the year.

Sec. 367.4190 Account 419, Interest and dividend income.

(a) This account must include interest revenues on securities,
loans, notes, advances, special deposits, tax refunds and all other
interest-bearing assets, and dividends on stocks of other companies,
whether the securities on which the interest and dividends are received
are carried as investments or included in sinking or other special fund
accounts.
(b) This account may include the pro rata amount necessary to
extinguish (during the interval between the date of acquisition and the
date of maturity) the difference between the cost to the service
company and the face value of interest-bearing securities. The amounts
credited or charged must be concurrently included in the accounts in
which the securities are carried.
(c) Where significant in amount, expenses, excluding operating
taxes and income taxes, applicable to security investments and to interest
and dividend revenues on the account must be charged in this account.
(d) Related taxes must be recorded in account 408.2, Taxes other
than income taxes, other income and deductions (Sec. 367.4082), or
account 409.2 Income taxes, other income and deductions (Sec. 367.4092).
(e) Interest accrued, the payment of which is not reasonably
assured, dividends receivable that have not been declared or
guaranteed, and interest or dividends upon reacquired securities issued
or assumed by the service company must not be credited to this account.

Sec. 367.4191 Account 419.1, Allowance for other funds used during
construction.

This account must include concurrent credits for allowance for
other funds used during construction.

Sec. 367.4210 Account 421, Miscellaneous income or loss.

This account must include all revenue and expense items except
taxes properly includible in the income account and not provided for
elsewhere. Related taxes must be recorded in account 408.2, Taxes other
than income taxes, other income and deductions (Sec. 367.4082), or
account 409.2, Income taxes, other income and deductions (Sec. 367.4092).

Sec. 367.4211 Account 421.1, Gain on disposition of property.

This account must be credited with the gain on the sale,
conveyance, exchange, or transfer of service or other property to
another. Income taxes on gains recorded in this account must be
recorded in account 409.2, Income taxes, other income and deductions
(Sec. 367.4092).

Sec. 367.4212 Account 421.2, Loss on disposition of property.

This account must be charged with the loss on the sale, conveyance,
exchange or transfer of service or other property to another. The
reduction in income taxes relating to losses recorded in this account
must be recorded in account 409.2 Income taxes, other income and
deductions (Sec. 367.4092).

Sec. 367.4250 Account 425, Miscellaneous amortization.

(a) This account must include amortization charges not includible
in other accounts which are properly deductible in determining the
income of the service company before interest charges. Charges included
in this account, if significant in amount, must be in accordance with
an orderly and systematic amortization program.
(b) This account must include the following items:
(1) Amortization of intangibles included in service company property.
(2) Other miscellaneous amortization charges authorized to be
included in this account by the Commission.

Sec. 367.4261 Account 426.1, Donations.

This account must include all payments or donations for charitable,
social or community welfare purposes.

Sec. 367.4262 Account 426.2, Life insurance.

This account must include all payments for life insurance of
officers and employees where the service company is beneficiary (net
premiums less increase in cash surrender value of policies).

Sec. 367.4263 Account 428.3, Penalties.

This account must include payments by the service company for
penalties or fines for violation of any regulatory statutes by the
service company or its officials.

Sec. 367.4264 Account 426.4, Expenditures for certain civic,
political and related activities.

(a) This account must include expenditures for the purpose of
influencing public opinion with respect to the election or appointment
of public officials, referenda, legislation, or ordinances (either with
respect to the possible adoption of new referenda, legislation or
ordinances or repeal or modification of existing referenda, legislation
or ordinances) or approval, modification, or revocation of franchises;
or for the purpose of influencing the decisions of public officials.
(b) This account must not include expenditures that are directly
related to appearances before regulatory or other governmental bodies
in connection with an associate utility company's existing or proposed
operations.

Sec. 367.4265 Account 426.5, Other deductions.

This account must include other miscellaneous expenses that are not
properly included in service company operations.

Sec. 367.4270 Account 427, Interest on long-term debt.

(a) This account must include the amount of interest on outstanding
long-term debt issued or assumed by the service company, the liability
for which is included in account 224, Other long-term debt (Sec. 367.2240).
(b) This account must be kept or supported so as to show the
interest accruals on each class and series of long-term debt.
(c) This account must not include interest on nominally issued or
nominally outstanding long-term debt, including securities assumed.

Sec. 367.4280 Account 428, Amortization of debt discount and expense.

(a) This account must include the amortization of unamortized debt
discount and expense on outstanding long-term debt. Amounts charged to
this account must be credited concurrently to accounts 181, Unamortized
debt expense (Sec. 367.1810), and 226, Unamortized discount on long-
term debt--Debit (Sec. 367.2260).
(b) This account must be kept or supported so as to show the debt

[[Page 28500]]

discount and expense on each class and series of long-term debt.

Sec. 367.4290 Account 429, Amortization of premium on debt--Credit.

(a) This account must include the amortization of unamortized net
premium on outstanding long-term debt. Amounts credited to this account
must be charged concurrently to account 225, Unamortized premium on
long-term debt (Sec. 367.2250).
(b) This account must be kept or supported so as to show the
premium on each class and series of long-term debt.
(c) This account must include the following items:
(1) Loss relating to investments in securities written-off or
written-down.
(2) Loss on sale of investments.
(3) Loss on reacquisition, resale or retirement of service
company's debt securities.
(4) Preliminary survey and investigation expenses related to
abandoned projects, when not written-off to the appropriate operating
expense account.

Sec. 367.4300 Account 430, Interest on debt to associate companies.

This account must include interest accrued on amounts included in
account 223, Advances from associate companies (Sec. 367.2230), and
account 233, Notes payable to associate companies (Sec. 367.2330). The
records supporting the entries to this account must be kept so as to
show to whom the interest is to be paid, the period covered by the
accrual, the rate of interest and the principal amount of the advances
or other obligations on which the interest is accrued. Separate
subaccounts must be maintained for each related debt account.

Sec. 367.4310 Account 431, Other interest expense.

This account must include all interest charges not provided for
elsewhere.

Sec. 367.4320 Account 432, Allowance for borrowed funds used during
construction--Credit.

This account must include concurrent credits for allowance for
borrowed funds used during construction.

Subpart I--Retained Earnings Accounts

Sec. 367.4330 Account 433, Balance transferred from income.

This account must include the net credit or debit transferred from
income for the year.

Sec. 367.4340 Account 434, Extraordinary income.

This account must be credited with gains of unusual nature and
infrequent occurrence, that would significantly distort the current
year's income computed before extraordinary items, if reported other
than as extraordinary items. Income tax relating to the amounts
recorded in this account must be recorded in account 409.3, Income
taxes, extraordinary items (Sec. 367.4093). (See General Instructions
in Sec. 367.8.)

Sec. 367.4350 Account 435, Extraordinary deductions.

This account must be debited with losses of unusual nature and
infrequent occurrence that would significantly distort the current
year's income computed before extraordinary items, if reported other
than as extraordinary items. Income tax relating to the amounts
recorded in this account must be recorded in account 409.3, Income
taxes, extraordinary items (Sec. 367.4093). (See General Instructions
in Sec. 367.8.)

Sec. 367.4360 Account 436, Appropriations of retained earnings.

This account must include appropriations of retained earnings as
follows:
(a) Appropriations required under terms of mortgages, orders of
courts, contracts, or other agreements.
(b) Appropriations required by action of regulatory authorities.
(c) Other appropriations made at option of the service company for
specific purposes.

Sec. 367.4370 Account 437, Dividends declared--preferred stock.

(a) This account must include amounts declared payable out of
retained earnings as dividends on actually outstanding preferred or
prior lien capital stock issued by the service company.
(b) Dividends must be segregated for each class and series of
preferred stock as to those payable in cash, stock, and other forms. If
not payable in cash, the medium of payment must be described with
sufficient detail to identify it.

Sec. 367.4380 Account 438, Dividends declared--common stock.

(a) This account must include amounts declared payable out of
retained earnings as dividends on actually outstanding common capital
stock issued by the service company.
(b) Dividends must be segregated for each class of common stock as
to those payable in cash, stock and other forms. If not payable in
cash, the medium of payment must be described with sufficient detail to
identify it.

Sec. 367.4390 Account 439, Adjustments to retained earnings.

(a) This account must, with prior Commission approval, include
significant non-recurring transactions accounted for as prior period
adjustments, as follows:
(1) Correction of an error in the financial statements of a prior year.
(2) Adjustments that result from realization of income tax benefits
of reacquisition operating loss carry forwards of purchased
subsidiaries. All other items of profit and loss recognized during a
year must be included in the determination of net income for that year.
(b) Adjustments, charges, or credits due to losses on
reacquisition, resale or retirement of the company's own capital stock
must be included in this account.

Subpart J--Operating Revenue Chart of Accounts

Sec. 367.4570 Account 457, Services rendered to associate utility
companies.

This account must include amounts billed to associate utility
companies for services rendered at cost. (See accounts 457.1 through
457.3 in Sec. Sec. 367.4571 through 367.4573). Overbillings or
underbillings arising from adjustments of estimated costs to actual
costs must be cleared through this account and concurrent adjustments
made to other accounts involved.

Sec. 367.4571 Account 457.1, Direct costs charged to associate
utility companies.

This account must include those direct costs that can be identified
through a work order system as being applicable to services performed
for associate utility companies. This account must not include any
compensation for use of equity capital or inter-company interest on
indebtedness.

Sec. 367.4572 Account 457.2, Indirect costs charged to associate
utility companies.

This account must include recovery of those indirect costs that
cannot be separately identified to a single or group of associate
companies and therefore must be allocated. Only journal or memorandum
entries should be prepared monthly, by departments, for all such cost
accumulated and billed to customers. Amounts billed to associate
utility companies must be included in this account. This account must
not include any compensation for use of equity capital or inter-company
interest on indebtedness.

[[Page 28501]]

Sec. 367.4573 Account 457.3, Compensation for use of capital-
associate utility companies.

Sec. 367.4580 Account 458, Services rendered to non-associate utility
companies.

This account must include amounts billed for services rendered to
non-associate utility companies. (See accounts 458.1 through 458.4
(Sec. Sec. 367.4581 through 367.4584).)

Sec. 367.4581 Account 458.1, Direct costs charged to non-associate
utility companies.

This account must include those direct costs that can be identified
through a work order system as being applicable to services performed
for non-associate utility companies. This account must not include any
compensation for use of equity capital or interest on indebtedness.

Sec. 367.4582 Account 458.2, Indirect costs charged to non-associate
utility companies.

This account must include recovery of those indirect costs of
services performed for non-associate utility companies that cannot be
specifically assigned and therefore must be allocated. This account
must not include any compensation for use of equity capital or inter-
company interest on indebtedness.

Sec. 367.4583 Account 458.3, Compensation for use of capital--Non-
associate utility companies.

This account must include only the portion of compensation for use
of equity capital and inter-company interest on indebtedness before
income taxes that is properly allocable to services rendered to non-
associate utility companies. A statement to support the basis for the
compensation and how it was calculated must be attached to a separate
journal entry, ledger system, or memorandum file.

Sec. 367.4584 Account 458.4, Excess or deficiency on servicing non-
associate utility companies.

This account must include the amount by which the aggregate price
received for services rendered to non-associate utility companies
differs from the sum of the total direct and indirect costs and
compensation for use of capital which are properly allocable to such
services. (See accounts 458.1 through 458.3 (Sec. Sec. 367.4581
through 367.4583) and General Instructions in Sec. 367.23.)

Sec. 367.4590 Account 459, Services rendered to non-utility companies.

This account must include amounts billed for services rendered to
non-utility companies. (See accounts 459.1 through 459.4 (Sec. Sec.
367.4591 through 367.4594).)

Sec. 367.4591 Account 459.1, Direct costs charged to non-utility
companies.

This account must include those direct costs that can be identified
through a work order system as being applicable to services performed
for associate and non-associate companies except utility companies.
This account must not include any compensation for use of equity
capital or interest on indebtedness.

Sec. 367.4592 Account 459.2, Indirect costs charged to non-utility
companies.

This account must include recovery of those indirect costs of
services performed for associate and non-associate companies except
utility companies that cannot be separately identified and therefore
must be allocated. This account must exclude amounts billed to
associate and non-associate utility companies. This account must not
include any compensation for use of equity capital or inter-company
interest on indebtedness.

Sec. 367.4593 Account 459.3, Compensation for use of capital--non-
utility companies.

This account must include only the portion of compensation for use
of equity capital and inter-company interest on indebtedness before
income taxes that is properly allocable to services rendered to
associate and non-associate companies except utility companies. A
statement to support the basis for the compensation and how it was
calculated must be attached to a separate journal entry, ledger system,
or memorandum file.

Sec. 367.4594 Account 459.4, Excess or deficiency on servicing non-
associate non-utility companies.

This account must include the amount by which the aggregate price
received for services rendered to non-associate companies except
utility companies differs from the sum of the total direct and indirect
costs and compensation for use of capital which are properly allocable
to such services. (See Accounts 459.1 through 459.3 (Sec. Sec.
367.4591 through 367.4593) and General Instructions (Sec. 367.23).)

Subpart K--Operation and Maintenance Expense Chart of Accounts

Sec. 367.5000 Accounts 500-598, Electric operation and maintenance
accounts.

Service companies must use accounts 500 through 598 in part 101 of
this chapter.

Sec. 367.8000 Accounts 800-894, Gas operation and maintenance
accounts.

Service companies must use accounts 800 through 894 in part 201 of
this chapter.

Sec. 367.9010 Account 901, Supervision.

This account must include the cost of labor and expenses incurred
in the general direction and supervision of customer accounting and
collecting activities. Direct supervision of a specific activity must
be charged to account 902, Meter reading expenses (Sec. 367.9020), or
account 903, Customer records and collection expenses (Sec. 367.9030),
as appropriate. (See Operating Expense Instructions in Sec. 367.80.)

Sec. 367.9020 Account 902, Meter reading expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in reading customer meters, and determining
consumption when performed by employees engaged in reading meters.
(b) This account must include the following labor items:
(1) Addressing forms for obtaining meter readings by mail.
(2) Changing and collecting meter charts used for billing purposes.
(3) Inspecting time clocks, checking seals, and other similar
items, when performed by meter readers and the work represents a minor
activity incidental to regular meter reading routine.
(4) Reading meters, including demand meters, and obtaining load
information for billing purposes. Exclude and charge to account 586,
Meter expenses (Sec. 367.5860), account 878, Meter and house regulator
expenses (Sec. 367.8780), or to account 903, Customer records and
collection expenses (Sec. 367.9030), as applicable, the cost of
obtaining meter readings, first and final, if incidental to the
operation of removing or resetting, sealing, or locking, and
disconnecting or reconnecting meters.
(5) Computing consumption from meter reader's book or from reports
by mail when done by employees engaged in reading meters.
(6) Collecting from prepayment meters when incidental to meter reading.

[[Page 28502]]

(7) Maintaining record of customers' keys.
(8) Computing estimated or average consumption when performed by
employees engaged in reading meters.
(c) This account must include the following materials and expenses
items:
(1) Badges, lamps, and uniforms.
(2) Demand charts, meter books and binders and forms for recording
readings, but not the cost of preparation.
(3) Postage and supplies used in obtaining meter readings by mail.
(4) Transportation, meals, and incidental expenses.

Sec. 367.9030 Account 903, Customer records and collection expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in work on customer applications, contracts, orders,
credit investigations, billing and accounting, collections and complaints.
(b) This account must include the following labor items:
(1) Receiving, preparing, recording and handling routine orders for
service, disconnections, transfers or meter tests initiated by the
customer, excluding the cost of carrying out the orders, that is
chargeable to the account appropriate for the work called for by the orders.
(2) Investigations of customers' credit and keeping of records
pertaining to the investigations, including records of uncollectible
accounts written off.
(3) Receiving, refunding or applying customer deposits and maintaining
customer deposit, line extension, and other miscellaneous records.
(4) Checking consumption shown by meter readers' reports where
incidental to preparation of billing data.
(5) Preparing address plates and addressing bills and delinquent notices.
(6) Preparing billing data.
(7) Operating billing and bookkeeping machines.
(8) Verifying billing records with contracts or rate schedules.
(9) Preparing bills for delivery, and mailing or delivering bills.
(10) Collecting revenues, including collection from prepayment
meters unless incidental to meter-reading operations.
(11) Balancing collections, preparing collections for deposit, and
preparing cash reports.
(12) Posting collections and other credits or charges to customer
accounts and extending unpaid balances.
(13) Balancing customer accounts and controls.
(14) Preparing, mailing, or delivering delinquent notices and
preparing reports of delinquent accounts.
(15) Final meter reading of delinquent accounts when done by
collectors incidental to regular activities.
(16) Disconnecting and reconnecting service because of nonpayment
of bills.
(17) Receiving, recording, and handling of inquiries, complaints,
and requests for investigations from customers, including preparation
of necessary orders, but excluding the cost of carrying out such
orders, which is chargeable to the account appropriate for the work
called for by the orders.
(18) Statistical and tabulating work on customer accounts and
revenues, but not including special analyses for sales department, rate
department, or other general purposes, unless incidental to regular
customer accounting routines.
(19) Preparing and periodically rewriting meter reading sheets.
(20) Determining consumption and computing estimated or average
consumption when performed by employees other than those engaged in
reading meters.
(c) This account must include the following materials and expenses
items:
(1) Address plates and supplies.
(2) Cash overages and shortages.
(3) Commissions or fees to others for collecting.
(4) Payments to credit organizations for investigations and reports.
(5) Postage.
(6) Transportation expenses (Major only), including transportation
of customer bills and meter books under centralized billing procedure.
(7) Transportation, meals, and incidental expenses.
(8) Bank charges, exchange, and other fees for cashing and
depositing customers' checks.
(9) Forms for recording orders for services removals, and other
similar forms.
(10) Rent of mechanical equipment.
(d) The cost of work on meter history and meter location records is
chargeable to account 586, Meter expenses (Sec. 367.5860) or account
878, Meter and house regulator expenses (Sec. 367.8780).

Sec. 367.9040 Account 904, Uncollectible accounts.

This account must be charged with amounts sufficient to provide for
losses from uncollectible service company revenues. Concurrent credits
must be made to account 144, Accumulated provision for uncollectible
accounts--Credit (Sec. 367.1440). Losses from uncollectible accounts
also must be charged to account 144 (Sec. 367.1440).

Sec. 367.9050 Account 905, Miscellaneous customer accounts expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred not provided for in other accounts.
(b) This account must include the following labor items:
(1) General clerical and stenographic work.
(2) Miscellaneous labor.
(c) This account must include the following materials and expenses
items:
(1) Communication service.
(2) Miscellaneous office supplies and expenses and stationery and
printing other than those specifically provided for in accounts 902 and
903 (Sec. Sec. 367.9020 and 367.9030).

Sec. 367.9070 Account 907, Supervision.

This account must include the cost of labor and expenses incurred
in the general direction and supervision of customer service
activities, the object of which is to encourage safe, efficient and
economical use of the associate utility company's service. Direct
supervision of a specific activity within customer service and
informational expense classification must be charged to the account
wherein the costs of such activity are included. (See Operating Expense
Instructions in Sec. 367.80.)

Sec. 367.9080 Account 908, Customer assistance expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in providing instructions or assistance to customers,
the object of which is to encourage safe, efficient and economical use
of the associate utility company's service.
(b) This account must include the following labor items:
(1) Direct supervision of department.
(2) Processing customer inquiries relating to the proper use of
electric equipment, the replacement of such equipment and information
related to the equipment.
(3) Advice directed to customers as to how they may achieve the
most efficient and safest use of electric equipment.
(4) Demonstrations, exhibits, lectures, and other programs designed
to instruct customers in the safe, economical or efficient use of
electric service, and/or oriented toward conservation of energy.
(5) Engineering and technical advice to customers, the object of
which is to promote safe, efficient and economical use of the associate
utility company's service.
(c) This account must include the following materials and expenses
items:
(1) Supplies and expenses pertaining to demonstrations, exhibits,
lectures, and other programs.
(2) Loss in value on equipment and appliances used for customer
assistance programs.

[[Page 28503]]

(3) Office supplies and expenses.
(4) Transportation, meals, and incidental expenses.
(d) Do not include in this account expenses that are provided for
elsewhere, such as accounts 416, Costs and expenses of merchandising,
jobbing and contract work (Sec. 367.4160), 587, Customer installations
expenses (Sec. 368.5870), 879, Customer installations expenses (Sec.
367.8790), and 912, Demonstrating and selling expenses (Sec.
367.9120).

Sec. 367.9090 Account 909, Informational and instructional
advertising expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in activities which primarily convey information as
to what the associate utility company urges or suggests customers
should do in utilizing service to protect health and safety, to
encourage environmental protection, to utilize their equipment safely
and economically, or to conserve energy.
(b) This account must include the following labor items:
(1) Direct supervision of informational activities.
(2) Preparing informational materials for newspapers, periodicals,
billboards, and other similar forms of advertisement, and preparing and
conducting informational motion pictures, radio and television
programs.
(3) Preparing informational booklets, bulletins, and other similar
forms of advertisement, used in direct mailings.
(4) Preparing informational window and other displays.
(5) Employing agencies, selecting media and conducting negotiations
in connection with the placement and subject matter of information programs.
(c) This account must include the following materials and expenses
items:
(1) Use of newspapers, periodicals, billboards, radio, and other
similar forms of advertisement, for informational purposes.
(2) Postage on direct mailings to customers exclusive of postage
related to billings.
(3) Printing of informational booklets, dodgers, bulletins, and
other similar items.
(4) Supplies and expenses in preparing informational materials for
the associate utility company.
(5) Office supplies and expenses.
(d) Exclude from this account and charge to account 930.2,
Miscellaneous general expenses, the cost of publication of stockholder
reports, dividend notices, bond redemption notices, financial
statements, and other notices of a general corporate character. Also
exclude all expenses of a promotional, institutional, goodwill or
political nature, that are included in accounts 913, Advertising
expenses (Sec. 367.9130), 930.1, General advertising expenses (Sec.
367.9301), and 426.4, Expenditures for certain civic, political, and
related expenses (Sec. 367.4264).
(e) Entries relating to informational advertising included in this
account must contain or refer to supporting documents that identify the
specific advertising message. If references are used, copies of the
advertising message must be readily available.

Sec. 367.9100 Account 910, Miscellaneous customer service and
informational expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in connection with customer service and informational
activities that are not includible in other customer information
expense accounts.
(b) This account must include the following labor items:
(1) General clerical and stenographic work not assigned to specific
customer service and informational programs.
(2) Miscellaneous labor.
(c) This account must include the following materials and expenses
items:
(1) Communication service.
(2) Printing, postage and office supplies expenses.

Sec. 367.9110 Account 911, Supervision.

This account must include the cost of labor and expenses incurred
in the general direction and supervision of sales activities, except
merchandising. Direct supervision of a specific activity, such as
demonstrating, selling, or advertising, must be charged to the account
wherein the costs of such activity are included. (See Operating Expense
Instructions in Sec. 367.80.)

Sec. 367.9120 Account 912, Demonstrating and selling expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in promotional, demonstrating, and selling
activities, except by merchandising, the object of which is to promote
or retain the use of utility services by present and prospective customers.
(b) This account must include the following labor items:
(1) Demonstrating uses of utility services.
(2) Conducting cooking schools, preparing recipes, and related home
service activities.
(3) Exhibitions, displays, lectures, and other programs designed to
promote use of utility services.
(4) Experimental and development work in connection with new and
improved appliances and equipment, prior to general public acceptance.
(5) Solicitation of new customers or of additional business from
old customers, including commissions paid employees.
(6) Engineering and technical advice to present or prospective
customers in connection with promoting or retaining the use of utility
services.
(7) Special customer canvasses when their primary purpose is the
retention of business or the promotion of new business.
(c) This account must include the following materials and expenses
items:
(1) Supplies and expenses pertaining to demonstration and
experimental and development activities.
(2) Booth and temporary space rental.
(3) Loss in value on equipment and appliances used for
demonstration purposes.
(4) Transportation, meals, and incidental expenses.

Sec. 367.9130 Account 913, Advertising expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in advertising designed to promote or retain the use
of utility service, except advertising the sale of merchandise by the
utility company.
(b) This account must include the following labor items:
(1) Direct supervision of department.
(2) Preparing advertising material for newspapers, periodicals,
billboards, and other similar forms of advertisement, and preparing and
conducting motion pictures, radio and television programs.
(3) Preparing booklets, bulletins, and other similar forms of
advertisement, used in direct mail advertising.
(4) Preparing window and other displays.
(5) Clerical and stenographic work.
(6) Investigating advertising agencies and media and conducting
negotiations in connection with the placement and subject matter of
sales advertising.
(c) This account must include the following materials and expenses
items:
(1) Advertising in newspapers, periodicals, billboards, radio, and
other similar forms of advertisement, for sales promotion purposes, but
not including institutional or goodwill advertising included in account
930.1, General advertising expenses.
(2) Materials and services given as prizes or otherwise in
connection with civic lighting contests, canning, or cooking contests,
bazaars, and other similar materials and services, in order to
publicize and promote the use of utility services.

[[Page 28504]]

(3) Fees and expenses of advertising agencies and commercial artists.
(4) Novelties for general distribution.
(5) Postage on direct mail advertising.
(6) Premiums distributed generally, such as recipe books, and other
similar items, when not offered as inducement to purchase appliances.
(7) Printing booklets, dodgers, bulletins, and other similar forms
of advertisement.
(8) Supplies and expenses in preparing advertising material.
(9) Office supplies and expenses.
(d) The cost of advertisements which set forth the value or
advantages of utility service without reference to specific appliances
or, if reference is made to appliances invites the reader to purchase
appliances from his dealer or refer to appliances not carried for sale
by the utility company, must be considered sales promotion advertising
and charged to this account. However, advertisements that are limited
to specific makes of appliances sold by the utility company and prices,
terms, and other similar items, without referring to the value or
advantages of utility service, must be considered as merchandise
advertising and the cost must be charged to account 416, Costs and
expenses of merchandising, jobbing and contract work.
(e) Advertisements that substantially mention or refer to the value
or advantages of utility service, together with specific reference to
makes of appliances sold by the utility company and the price, terms,
and other similar items, and designed for the joint purpose of
increasing the use of utility service and the sales of appliances, must
be considered as a combination advertisement and the costs must be
distributed between this account and account 416 (Sec. 367.4160) on
the basis of space, time, or other proportional factors.
(f) Exclude from this account and charge to account 930.2,
Miscellaneous general expenses (Sec. 367.9302), the cost of
publication of stockholder reports, dividend notices, bond redemption
notices, financial statements, and other notices of a general corporate
character. Exclude also all institutional or goodwill advertising. (See
account 930.1, General advertising expenses (Sec. 367.9301).)

Sec. 367.9160 Account 916, Miscellaneous sales expenses.

(a) This account must include the cost of labor, materials used and
expenses incurred in connection with sales activities, except
merchandising, which are not includible in other sales expense accounts.
(b) This account must include the following labor items:
(1) General clerical and stenographic work not assigned to specific
functions.
(2) Special analysis of customer accounts and other statistical
work for sales purposes not a part of the regular customer accounting
and billing routine.
(3) Miscellaneous labor.
(c) This account must include the following materials and expenses
items:
(1) Communication service.
(2) Printing, postage, and office supplies and expenses applicable
to sales activities, except those chargeable to account 913,
Advertising expenses (Sec. 367.9130).

Sec. 367.9200 Account 920, Administrative and general salaries.

(a) This account must include salaries, wages, bonuses and other
consideration for services, with the exception of director's fees paid
directly to officers and employees of the service company.
(b) This account must be supported by time records and
appropriately referenced to detailed records subdividing salaries and
wages by departments or other functional organization units.

Sec. 367.9210 Account 921, Office supplies and expenses.

(a) This account must include office supplies and expenses incurred
in connection with the general administration of service company
operations assignable to specific administrative or general departments
and not specifically provided for in other accounts. This includes the
expenses of the various administrative and general departments, the
salaries and wages of which are included in account 920 (Sec. 367.9200).
(b) This account may be subdivided in accordance with a
classification appropriate to the departmental or other functional
organization of the service company. The following items must be
included in this account:
(1) Automobile service, including charges through clearing account.
(2) Bank messenger and service charges.
(3) Books, periodicals, bulletins and subscriptions to newspapers,
newsletters, tax service, and other similar items.
(4) Building service expenses for customer accounts, sales, and
administrative and general purposes.
(5) Communication service expenses to include telephone, telegraph,
wire transfer, micro-wave, and other similar items.
(6) Cost of individual items of office equipment used by general
departments which are of small value or short life.
(7) Membership fees and dues in trade, technical, and professional
associations paid by a utility for employees. (Company memberships must
be included in account 930.2 in Sec. 367.9302.)
(8) Office supplies and expenses.
(9) Payment of court costs, witness fees, and other expenses of
legal department.
(10) Postage, printing and stationery.
(11) Meals, traveling, entertainment and incidental expenses.
(c) Records must be so maintained to permit ready analysis by item
showing the nature of the expense and identity of the person furnishing
the service.

Sec. 367.9220 Account 922, Administrative expenses transferred--Credit.

This account must be credited with administrative expenses recorded
in accounts 920 and 921 (Sec. Sec. 367.9200 and 367.9210) that are
transferred to construction costs or to other accounts. (See Service
Company Property Instructions in Sec. 367.51.) Also, this account must
be credited with the amount of operating expenses related to services
provided to non-utility companies and account 417.1, Expenses of non-
utility company related operations (Sec. 367.4171), must be debited.

Sec. 367.9230 Account 923, Outside services employed.

(a) This account must include the fees and expenses of professional
consultants and others for general services with the exception of fees
and expenses for outside services of account 928, Regulatory commission
expense (Sec. 367.9280), and account 930.1, General advertising
expenses (Sec. 367.9301). Separate subaccounts must be provided for
auditing, legal, engineering, management consulting fees and any other
fees for professional or outside services.
(b) Records must be maintained so as to permit ready analysis
showing nature of service, identity of the person furnishing the
service, affiliation to the service company, and, if allocated to more
than one company, the specific method of allocation.

Sec. 367.9240 Account 924, Property insurance.

(a) This account must include the cost of insurance or reserve
accruals to protect the service company against losses and damages to
owned or leased property used in service company operations. It also
must include the cost of labor and related supplies and

[[Page 28505]]

expenses incurred in property insurance activities.
(b) Recoveries from insurance companies or others for property
damages must be credited to the account charged with the cost of the
damage. If the damaged property has been retired, the credit must be to
the appropriate account for accumulated provision for depreciation.
(c) Records must be kept so as to show the amount of coverage for
each class of insurance carried, the property covered, and the
applicable premiums. Any dividends distributed by mutual insurance
companies must be credited to the accounts to which the insurance
premiums were charged. The following items must be included in this account:
(1) Premiums payable to insurance companies for fire, storm, burglary,
boiler explosion, lightning, fidelity, riot, and similar insurance.
(2) Special costs incurred in procuring insurance.
(3) Insurance inspection service.
(4) Insurance counsel, brokerage fees, and expenses.
(d) The cost of insurance or reserve accruals capitalized must be
charged to construction either directly or by transfer to construction
work orders from this account.
(e) The cost of insurance or reserve accruals for the following
classes of property must be charged as indicated.
(1) Materials and supplies and stores equipment, to account 163,
Stores expense undistributed (Sec. 367.1630), or appropriate materials
account.
(2) Transportation and other general equipment to appropriate
clearing accounts that may be maintained.
(3) Merchandise and jobbing property, to account 416, Costs and
expenses of merchandising, jobbing and contract work (Sec. 367.4160).
(f) The cost of labor and related supplies and expenses of
administrative and general employees who are only incidentally engaged
in property insurance work may be included in accounts 920 and 921
(Sec. Sec. 367.9200 and 367.9210), as appropriate.

Sec. 367.9250 Account 925, Injuries and damages.

(a) This account must include the cost of insurance or reserve
accruals to protect the service company against injuries and damages
claims of employees or others, losses of such character not covered by
insurance, and expenses incurred in settlement of injuries and damages
claims. It also must include the cost of labor and related supplies and
expenses incurred in injuries and damages activities.
(b) Reimbursements from insurance companies or others for expenses
charged to this account because of injuries and damages and insurance
dividends or refunds must be credited to this account. The following
items must be included in this account:
(1) Premiums payable to insurance companies for protection against
claims from injuries and damages by employees or others, such as public
liability, property damages, casualty, employee liability, and other
similar items.
(2) Losses not covered by insurance or reserve accruals on account
of injuries or deaths to employees or others and damages to the
property of others.
(3) Fees and expenses of claim investigators.
(4) Payment of awards to claimants for court costs and attorneys'
services.
(5) Medical and hospital service and expenses for employees as the
result of occupational injuries, or resulting from claims of others.
(6) Compensation payments under workmen's compensation laws.
(7) Compensation paid while incapacitated as the result of
occupational injuries. (See paragraph (c) of this section.)
(8) Cost of safety, accident prevention and similar educational
activities.
(c) Payments to or on behalf of employees for accident or death
benefits, hospital expenses, medical supplies or for salaries while
incapacitated for service or on leave of absence beyond periods
normally allowed, when not the result of occupational injuries, must be
charged to account 926, Employee pensions and benefits (Sec.
367.9260). (See also paragraph (e) of account 926 (Sec. 367.9260).)
(d) The cost of injuries and damages or reserve accruals
capitalized must be charged to construction directly or by transfer to
construction work orders from this account.
(e) Exclude the time and expenses of employees (except those
engaged in injuries and damages activities) spent in attendance at
safety and accident prevention educational meetings, if occurring
during the regular work period.
(f) The cost of labor and related supplies and expenses of
administrative and general employees who are only incidentally engaged
in injuries and damages activities may be included in accounts 920 and
921 (Sec. Sec. 367.9200 and 367.9210), as appropriate.

Sec. 367.9260 Account 926, Employee pensions and benefits.

(a) This account must include pensions paid to, or on behalf of,
retired employees, or accruals to provide for pensions, or payments for
the purchase of annuities for this purpose, when the service company
has definitely, by contract, committed itself to a pension plan under
which the pension funds are irrevocably devoted to pension purposes,
and payments for employee accident, sickness, hospital, and death
benefits, or insurance related to this account. Include, also, expenses
incurred in medical, educational or recreational activities for the
benefit of employees, and administrative expenses in connection with
employee pensions and benefits.
(b) The service company must maintain a complete record of accruals
or payments for pensions and be prepared to furnish full information to
the Commission of the plan under which it has created or proposes to
create a pension fund and a copy of the declaration of trust or
resolution under which the pension plan is established.
(c) Records in support of this account must be kept so that the
total pensions expense, the total benefits expense, the administrative
expenses included in this account, and the amounts of pensions and
benefits expenses transferred to construction or other accounts will be
readily available. The following items must be included in this account:
(1) Payment of pensions under a non-accrual or non-funded basis.
(2) Accruals for or payments to pension funds or to insurance
companies for pension purposes.
(3) Group and life insurance premiums (credit dividends received).
(4) Payments for medical and hospital services and expenses of
employees when not the result of occupational injuries.
(5) Payments for accident, sickness, hospital, and death benefits
or insurance.
(6) Payments to employees incapacitated for service or on leave of
absence beyond periods normally allowed, when not the result of
occupational injuries, or in excess of statutory awards.
(7) Expenses in connection with educational and recreational
activities for the benefit of employees.
(d) The cost of labor and related supplies and expenses of
administrative and general employees who are only incidentally engaged
in employee pension and benefit activities may be included in accounts
920 and 921 (Sec. Sec. 367.9200 and 367.9210), as appropriate.
(e) Salaries paid to employees during periods of non-occupational
sickness may be charged to the appropriate labor

[[Page 28506]]

account rather than to employee benefits.

Sec. 367.9280 Account 928, Regulatory commission expense.

(a) This account must include all expenses, properly included in
service company operating expenses, incurred by the service company in
connection with formal cases before regulatory commissions, or other
regulatory bodies, on its own behalf or on behalf of associate
companies, including payments made to a regulatory commission for fees
assessed to the service company for pay and expenses of such
commission, its officers, agents and employees, and for filings or
reports made under regulations of regulatory commissions. The service
company must be prepared to show the cost of each formal case. The
following items must be included in this account:
(1) Salaries, fees, retainers, and expenses of counsel, solicitors,
attorneys, accountants, engineers, clerks, attendants, witnesses, and
others engaged in the prosecution of, or defense against petitions or
complaints presented to regulatory bodies.
(2) Office supplies and expenses, payments to public service or
other regulatory commissions, stationery and printing, traveling
expenses, and other expenses incurred directly in connection with
formal cases before regulatory commissions.
(b) Exclude from this account and include in other appropriate
operating expense accounts, expenses incurred in the improvement of
service, additional inspection, or rendering reports, which are made
necessary by the rules and regulations, or orders, of regulatory bodies.

Sec. 367.9301 Account 930.1, General advertising expenses.

(a) This account must include the cost of labor, materials used,
and expenses incurred in advertising and related activities, the cost
of which by their content and purpose are not provided for elsewhere.
(b) This account must include the following labor items:
(1) Supervision.
(2) Preparing advertising material for newspapers, periodicals,
billboards, and other similar items, and preparing or conducting motion
pictures, radio and television programs.
(3) Preparing booklets, bulletins, and other similar forms of
advertisement, used in direct mail advertising.
(4) Preparing window and other displays.
(5) Clerical and stenographic work.
(6) Investigating and employing advertising agencies, selecting
media and conducting negotiations in connection with the placement and
subject matter of advertising.
(c) This account must include the following materials and expenses
items:
(1) Advertising in newspapers, periodicals, billboards, radio, and
other similar forms of advertisement.
(2) Advertising matter such as posters, bulletins, booklets, and
related items.
(3) Fees and expenses of advertising agencies and commercial artists.
(4) Postage and direct mail advertising.
(5) Printing of booklets, dodgers, bulletins, and other related items.
(6) Supplies and expenses in preparing advertising materials.
(7) Office supplies and expenses.
(d) Properly includible in this account is the cost of advertising
activities on a local or national basis of a good will or institutional
nature, which is primarily designed to improve the image of the
associate utility company or the industry, including advertisements
which inform the public concerning matters affecting the associate
utility company's operations, such as, the cost of providing service,
the associate utility company's efforts to improve the quality of
service, the company's efforts to improve and protect the environment,
and other similar forms of advertisement. Entries relating to
advertising included in this account must contain or refer to
supporting documents which identify the specific advertising message.
If references are used, copies of the advertising message must be
readily available.
(e) Exclude from this account and include in account 426.4,
Expenditures for certain civic, political and related activities (Sec.
367.4264), expenses for advertising activities that are designed to
solicit public support or the support of public officials in matters of
a political nature.

Sec. 367.9302 Account 930.2, Miscellaneous general expenses.

(a) This account must include the cost of expenses incurred in
connection with the general management of the service company not
provided for elsewhere.
(b) This account must include labor items including miscellaneous
labor not elsewhere provided for.
(c) This account must include the following expenses items:
(1) Industry association dues for company memberships.
(2) Contributions for conventions and meetings of the industry.
(3) Research, development, and demonstration expenses not charged
to other operation and maintenance expense accounts on a functional basis.
(4) Communication service not chargeable to other accounts.
(5) Trustee, registrar, and transfer agent fees and expenses.
(6) Stockholders meeting expenses.
(7) Dividend and other financial notices.
(8) Printing and mailing dividend checks.
(9) Directors' fees and expenses.
(10) Publishing and distributing annual reports to stockholders.
(11) Public notices of financial, operating and other data required
by regulatory statutes, not including, however, notices required in
connection with security issues or acquisitions of property.
(d) Records must be maintained so as to permit ready analysis by
item showing the nature of the expense and identity of the person
furnishing the service.

Sec. 367.9310 Account 931, Rents.

This account must include rents, including taxes, paid for the
property of others used, occupied or operated in connection with
service company functions. Provide subaccounts for major groupings such
as office space, warehouses, other structure, office furniture,
fixtures, computers, data processing equipment, microwave and
telecommunication equipment, airplanes, automobiles, and other similar
groupings of property. The cost, when incurred by the lessee, of
operating and maintaining leased property, must be charged to the
accounts appropriate for the expense as if the property were owned.

Sec. 367.9350 Account 935, Maintenance of structures and equipment.

This account must include materials used and expenses incurred in
the maintenance of property owned, the cost of which is included in
accounts 390 through 399 (Sec. Sec. 367.3900 through 367.3990), and of
property leased from others. Provide subaccounts by major classes of
structures and equipment, owned and leased.
6. Part 368 is added to read as follows:

PART 368--PRESERVATION OF RECORDS OF HOLDING COMPANIES AND SERVICE COMPANIES

Sec.
368.1 Promulgation.
368.2 General instructions.
368.3 Schedule of records and periods of retention.

Authority: 42 U.S.C. 16451-16463.

Sec. 368.1 Promulgation.

This part is prescribed and promulgated as the regulations

[[Page 28507]]

governing the preservation of records by any holding company and by any
service company within a holding company system subject to the
jurisdiction of the Commission under the PUHCA 2005.

Sec. 368.2 General instructions.

(a) Scope of this part. (1) The regulations in this part apply to
all books of account and other records prepared, maintained or held by
any agent or employee on behalf of the company. The specification in
the schedule in Sec. 368.3 of a record related to a type of
transaction includes all documents and correspondence, not redundant or
duplicative of other records retained, needed to explain or verify the
transaction.
(2) Company means a service company or a holding company as defined
in Sec. 367.1 of this chapter. Public utilities, licensees, and
natural gas companies must continue to use parts 125 and 225 of this
chapter.
(3) Any company subject to this regulation, that, as agent,
operator, lessor or otherwise, maintains or has possession of any
records relating to the operation, property or obligations of a public
utility, licensee, or natural gas company, as defined in the Federal
Power Act, the Natural Gas Act, or the laws of any state within which
the public utility, licensee, or natural gas company operates, must
comply with the laws or regulations as to record retention and
destruction which would apply to the records if they were records of
the public utility, licensee, or natural gas company as codified in
parts 125 and 225 of the Commission's regulations.
(4) The regulations in this part should not be construed as
excusing compliance with other lawful requirements of any other
governmental body, Federal or State, prescribing other record keeping
requirements or for preservation of records longer than those
prescribed in this part.
(5) To the extent that any Commission regulations may provide for a
different record retention period, the records must be retained for the
longer of the retention periods.
(6) Records, other than those listed in the schedule, may be
destroyed at the option of the company. However, records that are used
in lieu of those listed must be preserved for the periods prescribed
for the records used for substantially similar purposes. Additionally,
retention of records pertaining to added services, functions, plant,
and other similar service, the establishment of which cannot be presently
foreseen, must conform to the principles embodied in this section.
(7) Notwithstanding the provisions of the records retention
schedule in this section, the Commission may, upon the request of the
company, authorize a shorter period of retention for any record listed
in the schedule upon a showing by the company that preservation of the
record for a longer period is not necessary or appropriate, in the
public interest or for the protection of investors or consumers.
(b) Designation of supervisory official. Each company subject to
these record retention regulations must designate one or more officials
to supervise the preservation or authorized destruction of its records.
(c) Protection and storage of records. The company must provide
reasonable protection from damage by fire, flood, and other hazards for
records required by these record retention regulations to be preserved
and, in the selection of storage space, safeguard such records from
unnecessary exposure to deterioration from excessive humidity, dryness,
or lack of proper ventilation.
(d) Index of records. At each site or location where company
records are kept or stored, the records must be arranged, filed, and
currently indexed so that records may be readily identified and made
available for inspection by authorized representatives of any
regulatory agency concerned, including the Commission.
(e) Record storage media. Each company has the flexibility to
select its own storage media subject to the following conditions.
(1) The storage media must have a life expectancy at least equal to
the applicable record retention period provided in Sec. 368.3 unless
there is a quality transfer from one media to another with no loss of data.
(2) Each company is required to implement internal control
procedures that assure the reliability of, and ready access to, data
stored on machine readable media. Internal control procedures must be
documented by a responsible supervisory official.
(3) Each transfer of data from one media to another must be
verified for accuracy and documented. Software and hardware required to
produce readable records must be retained for the same period the media
format is used.
(f) Destruction of records. At the expiration of the retention
period, the company may use any appropriate method to destroy records.
Precautions should be taken, however, to macerate or otherwise destroy
the legibility of records, the content of which is forbidden by law to
be divulged to unauthorized persons.
(g) Premature destruction or loss of records. When records are
destroyed or lost before the expiration of the prescribed period of
retention, a certified statement listing, as far as may be determined,
the records destroyed and describing the circumstances of accidental or
other premature destruction or loss must be filed with the Commission
within 90 days from the date of discovery of the destruction.
(h) Schedule of records and periods of retention. The schedule of
records retention periods constitutes a part of these record retention
regulations. The schedule prescribes the periods of time that
designated records must be preserved. Plant records related to public
utilities and licensees and natural gas companies must be retained in
accordance with Sec. Sec. 125.3 and 225.3 of this chapter.
(i) Retention periods designated ``Destroy at option''. ``Destroy
at option'' constitutes authorization for destruction of records at
managements' discretion if the destruction does not conflict with other
legal retention requirements or usefulness of the records in satisfying
pending regulatory actions or directives. ``Destroy at option after
audit'' requires retention until the company has received an opinion
from its independent accountants with respect to the financial
statements including the transactions to which the records relate.
(j) Records of services performed by associate companies. Holding
companies and service companies must assure the availability of records
of services performed by and for public utilities and licensees and
natural gas companies with supporting cost information for the periods
indicated in Sec. Sec. 125.3 and 225.3 of this chapter as necessary to
be able to readily furnish detailed information as to the nature of the
transaction, the amounts involved, and the accounts used to record the
transactions.
(k) Rate case. Notwithstanding the minimum retention periods
provided in these regulations, the company must retain the appropriate
records to support the costs and adjustments proposed in any rate case.
(l) Pending complaint litigation or governmental proceedings.
Notwithstanding the minimum requirements, if a company is involved in
pending litigation, complaint procedures, proceedings remanded by the
court, or governmental proceedings, it must retain all relevant records.
(m) Life or mortality study data. Life or mortality study data for
depreciation purposes must be retained for 25 years

[[Page 28508]]

or for 10 years after property is retired, whichever is longer.

Sec. 368.3 Schedule of records and periods of retention.

Schedule of Records and Periods of Retention
------------------------------------------------------------------------
Item No. and description Retention period
------------------------------------------------------------------------
Corporate and General

1. Reports to stockholders: Annual 5 years.
reports or statements to stockholders.
2. Organizational documents:
(a) Minute books of stockholders, 5 years or termination of the
directors' and directors' corporation's existence,
committee meetings. whichever occurs first.
(b) Title, franchises, and 6 years after final non-
licenses: Copies of formal orders appealable order.
of regulatory commissions served
upon the company.
(1) Certificates of Life of corporation.
incorporation, or equivalent
agreements and amendments
thereto.
(2) Deeds, leases and other 6 years after property or
title papers (including investment is disposed of
abstracts of title and unless delivered to
supporting data), and transferee.
contracts and agreements
related to the acquisition or
disposition of property or
investments.
3. Contracts and agreements: Contracts,
including amendments and agreements
(except contracts provided for
elsewhere):
(a) Service contracts, such as for All contracts, related
management, consulting, memoranda, and revisions
accounting, legal, financial or should be retained for 4 years
engineering services. after expiration or until the
conclusion of any contract
disputes pertaining to such
contracts, whichever is later.
(b) Memoranda essential to clarify For same period as contract to
or explain provisions of contracts which they relate.
and agreements.
(c) Card or book records of For the same periods as
contracts, leases, and agreements contracts to which they
made, showing dates of expirations relate.
and of renewals, memoranda of
receipts, and payments under such
contracts.
(d) Contracts and other agreements All contracts, related
relating to services performed in memoranda, and revisions
connection with construction of should be retained for 4 years
property (including contracts for after expiration or until the
the construction of property by conclusion of any contract
others for the company and for disputes or governmental
supervision and engineering proceedings pertaining to such
relating to construction work). contracts, whichever is later.
4. Accountants' and auditors' reports:
(a) Reports of examinations and 5 years after the date of the
audits by accountants and auditors report.
not in the regular employ of the
company (such as reports of public
accounting firms and commission
accountants).
(b) Internal audit reports and 5 years after the date of the
working papers. report.

Information Technology Management

5. Automatic data processing records Retain as long as it represents
(retain original source data used as an active viable program or
input for data processing and data for periods prescribed for
processing report printouts for the related output data, whichever
applicable periods prescribed is shorter.
elsewhere in the schedule): Software
program documentation and revisions
thereto.

General Accounting Records

6. General and subsidiary ledgers:
(a) Ledgers:
(1) General ledgers............ 10 years.
(2) Ledgers subsidiary or 10 years.
auxiliary to general ledgers
except ledgers provided for
elsewhere.
(b) Indexes:
(1) Indexes to general ledgers. 10 years.
(2) Indexes to subsidiary 10 years.
ledgers except ledgers
provided for elsewhere.
(c) Trial balance sheets of general 2 years.
and subsidiary ledgers.
7. Journals: General and subsidiary.... 10 years.
8. Journal vouchers and journal entries
including supporting detail:
(a) Journal vouchers and journal 10 years.
entries.
(b) Analyses, summarization,
distributions, and other
computations which support journal
vouchers and journal entries:
(1) Charging property accounts. 25 years. See Sec. Sec.
125.2(g) and 225.2(g) of this
chapter for public utilities
and licensees and natural gas
companies.
(2) Charging all other accounts 6 years.
9. Cash books: General and subsidiary 5 years after close of fiscal
or auxiliary books. year.
10. Voucher registers: Voucher 5 years. See Sec. Sec.
registers or similar records when used 125.2(g) and 225.2(g) of this
as a source document. chapter for public utilities
and licensees and natural gas
companies.
11. Vouchers:
(a) Paid and canceled vouchers (one 5 years. See Sec. Sec.
copy-analysis sheets showing 125.2(g) and 225.2(g) of this
detailed distribution of charges chapter for public utilities
on individual vouchers and other and licensees and natural gas
supporting papers). companies.
(b) Original bills and invoices for 5 years. See Sec. Sec.
materials, services, etc., paid by 125.2(g) and 225.2(g) of this
vouchers. chapter for public utilities
and licensees and natural gas
companies.
(c) Paid checks and receipts for 5 years.
payments of specific vouchers.

[[Page 28509]]

(d) Authorization for the payment 5 years. See Sec. Sec.
of specific vouchers. 125.2(g) and 225.2(g) of this
chapter for public utilities
and licensees and natural gas
companies.
(e) Lists of unaudited bills Destroy at option.
(accounts payable), list of
vouchers transmitted, and
memoranda regarding changes in
audited bills.
(f) Voucher indexes................ Destroy at option.
(g) Purchases and stores records 5 years.
related to disbursement vouchers.

Insurance

12. Insurance records:
(a) Records of insurance policies Destroy at option after
in force, showing coverage, expiration of such policies.
premiums paid, and expiration
dates.
(b) Records of amounts recovered 6 years. See Sec. Sec.
from insurance companies in 125.2(g) and 225.2(g) of this
connection with losses and of chapter for public utilities
claims against insurance and licensees and natural gas
companies, including reports of companies.
losses, and supporting papers.
(c) Records of self-insurance
against:
(1) Losses from fire and 6 years after date of last
casualty. accounting entry with respect
thereto.
(2) Damage to property of 6 years after date of last
others, and. accounting entry with respect
thereto.
(3) personal injuries.......... 6 years after date of last
accounting entry with respect
thereto.
(d) Inspectors' reports and reports Destroy when superseded.
of condition of property.

Maintenance

13. Maintenance work orders and job
orders:
(a) Authorizations for expenditures 5 years.
for maintenance work to be covered
by work orders, including
memoranda showing the estimates of
costs to be incurred.
(b) Work order sheets to which are 5 years.
posted in detail the entries for
labor, material, and other charges
in connection with maintenance,
and other work pertaining to
company operations.
(c) Summaries of expenditures on 5 years.
maintenance and job orders and
clearances to operating other
accounts (exclusive of property
accounts).

Property, Depreciation and Investments

14. Property records, excluding
documents included in Item 2(a)(2):
(a) Ledgers of property accounts 25 years. See Sec. Sec.
including land and other detailed 125.2(g) and 225.2(g) of this
ledgers showing the cost of chapter for public utilities
property by classes. and licensees and natural gas
companies.
(b) Continuing property inventory 25 years. See Sec. Sec.
ledger, book or card records 125.2(g) and 225.2(g) of this
showing description, location, chapter for public utilities
quantities, cost, etc., of and licensees and natural gas
physical units (or items) of companies.
property owned.
(c) Operating equipment records.... 3 years after disposition,
termination of lease, or write-
off of property or investment.
(d) Office furniture and equipment 3 years after disposition,
records. termination of lease or write-
off of property or investment.
(e) Automobiles, other vehicles and 3 years after disposition,
related garage equipment records. termination of lease or write-
off of property or investment.
(f) Aircraft and airport equipment 3 years after disposition,
records. termination of lease or write-
off of property or investment.
(g) Other property records not 3 years after disposition,
defined elsewhere. termination of lease or write-
off of property or investment.
15. Construction work in progress
ledgers, work orders, and supplemental
records:
(a) Construction work in progress 5 years after clearance to
ledgers. property account, provided
continuing inventory records
are maintained; otherwise 5
years after property is
retired.
(b) Work orders sheets to which are 5 years after clearance to
posted in summary form or in property account, provided
detail the entries for labor, continuing inventory records
materials, and other charges for are maintained; otherwise 5
property additions and the entries years after property is
closing the work orders to retired.
property records at completion.
(c) Authorizations for expenditures 5 years after clearance to
for additions to property, property account.
including memoranda showing the
detailed estimates of cost, and
the bases therefore (including
original and revised or subsequent
authorizations).
(d) Requisitions and registers of 5 years after clearance to
authorizations for property property account.
expenditures.
(e) Completion or performance 5 years after clearance to
reports showing comparison between property account.
authorized estimates and actual
expenditures for property
additions.
(f) Analysis or cost reports 5 years after clearance to
showing quantities of materials property account.
used, unit costs, number of man-
hours etc., in connection with
completed construction project.

[[Page 28510]]

(g) Records and reports pertaining Destroy at option.
to progress of construction work,
the order in which jobs are to be
completed, and similar records
which do not form a basis of
entries to the accounts.
16. Retirement work in progress
ledgers, work orders, and supplemental
records:
(a) Work order sheets to which are 5 years after the property is
posted the entries for removal retired.
costs, materials recovered, and
credits to property accounts for
cost of property retirement.
(b) Authorizations for retirement 5 years after the property is
of property, including memoranda retired.
showing the basis for
determination to be retired and
estimates of salvage and removal
costs.
(c) Registers of retirement work... 5 years.
17. Summary sheets, distribution 5 years.
sheets, reports, statements, and
papers directly supporting debits and
credits to property accounts not
covered by construction or retirement
work orders and their supporting
records.
18. Appraisals and valuations:
(a) Appraisals and valuations made 3 years after appraisal.
by the company of its properties
or investments or of the
properties or investments of any
associated companies. (Includes
all records essential thereto.).
(b) Determinations of amounts by
which properties or investments of
the company or any of its
associated companies will be
either written up or written down
as a result of:
(1) Mergers or acquisitions.... 10 years after completion of
transaction or as ordered by
the Commission.
(2) Asset impairments.......... 10 years after recognition of
asset impairment.
(3) Other bases................ 10 years after the asset was
written up or down.
19. Production maps, geological maps, 6 years after completion of
reproductions, including aerial work order.
photographs, showing the location of
all facilities the subject matter of
which falls within the work orders of
the company.
20. Engineering records, drawings, 6 years after completion of
supporting data to include diagrams, work order.
profiles, photographs, field-survey
notes, plot plans, detail drawings,
and records of engineering studies
that are part of or performed by the
company within the work order system.
21. Records of building space occupied 6 years.
by various departments of the company.
22. Contracts relating to property:
(a) Contracts relating to acquisition 6 years after property is
or sale of property. retired or sold.
(b) Contracts and other agreements 6 years after property is
relating to services performed in retired or sold.
connection with construction of
property (including contracts for the
construction of property by others for
the company and for supervision and
engineering relating to construction
work).
23. Records pertaining to 6 years.
reclassification of property accounts
to conform to prescribed systems of
accounts including supporting papers
showing the bases for such
reclassifications.
24. Records of accumulated provisions
for depreciation and depletion of
property and amortization of
intangible property and supporting
computation of expense:
(a) Detailed records or analysis 25 years.
sheets segregating the accumulated
depreciation according to the
classification of property.
(b) Records reflecting the service 25 years.
life of property and the
percentage of salvage and cost of
removal for property retired from
each account for depreciable
company property.
25. Investment records:
(a) Records of investment in 3 years after disposition of
associate companies. investment.
(b) Records of other investments, 3 years after disposition of
including temporary investments of investment.
cash.

Purchase and Stores

26. Procurement:
(a) Agreements entered into for the
acquisition of goods or the
performance of services. Includes
all forms of agreements such as
but not limited to: Letters of
intent, exchange of
correspondence, master agreements,
term contracts, rental agreements,
and the various types of purchase
orders:
(1) For goods or services 6 years. See Sec. Sec.
relating to property 125.2(g) and 225.2(g) of this
construction. chapter for public utilities
and licensees and natural gas
companies.
(2) For other goods or services 6 years.
(b) Supporting documents including 6 years. See Sec. Sec.
accepted and unaccepted bids or 125.2(g) and 225.2(g) of this
proposals (summaries of unaccepted chapter for public utilities
bids or proposals may be kept in and licensees and natural gas
lieu of originals) evidencing all companies.
relevant elements of the
procurement.

[[Page 28511]]

27. Material ledgers: Ledger sheets of 6 years after the date the
materials and supplies received, records/ledgers were created.
issued, and on hand.
28. Materials and supplies received and 6 years. See Sec. Sec.
issued: Records showing the detailed 125.2(g) and 225.2(g) of this
distribution of materials and supplies chapter for public utilities
issued during accounting periods. and licensees and natural gas
companies).

Revenue Accounting

29. Miscellaneous billing data: Billing 5 years.
department's copies of contracts with
customers (other than contracts in
general files).
30. Revenue summaries: Summaries of 5 years.
monthly revenues according to classes
of service. Including summaries of
forfeited discounts and penalties.
Tax

31. Tax records:
(a) Copies of tax returns and
supporting schedules filed with
taxing authorities, supporting
working papers, records of appeals
of tax bills, and receipts for
payment. See Item 11 for vouchers
evidencing disbursements:
(1) Income tax returns......... 2 years after final tax
liability is determined.
(2) Agreements between and 2 years after final tax
schedule of allocation by liability is determined.
associate companies of
consolidated Federal income
taxes.
(b) Other taxes, including State or
local property or income taxes.
(1) Property tax returns....... 2 years after final tax
liability is determined.
(2) Sales and other use taxes.. 2 Years.
(3) Other Taxes................ 2 years after final tax
liability is determined.
(c) Filings with taxing authorities 5 years after discontinuance of
to qualify employee benefit plans. plan.
(d) Information returns and reports 3 years after final tax
to taxing authorities. liability is determined.
Treasury

32. Statements of funds and deposits:
(a) Summaries and periodic Destroy at option after
statements of cash balances on completion of audit by
hand and with depositories for independent accountants.
company or associate.
(b) Requisitions and receipts for Destroy at option after funds
funds furnished associates and have been returned or
others. accounted for.
(c) Statements of periodic deposits Retain records for the most
with external fund administrators recent 3 years.
or trustees.
(d) Statements of periodic Retain records for the most
withdrawals from external fund. recent 3 years.
33. Records of deposits with banks and
others:
(a) Statements from depositories Destroy at option after
showing the details of funds completion of audit by
received, disbursed, transferred, independent accountants.
and balances on deposit, bank
reconcilement papers and
statements of interest credits.
(b) Check stubs, registers, or 6 years.
other records of checks issued.

Payroll Records

34. Payroll records:
(a) Payroll sheets or registers of 6 years.
payments of salaries and wages,
pensions and annuities paid by
company or by contractors of its
account.
(b) Records showing the 6 years.
distribution of salaries and wages
paid for each payroll period and
summaries or recapitulations of
such distribution.

Miscellaneous

35. Financial, operating and 5 years.
statistical annual reports
regularly prepared in the course
of business for internal
administrative or operating
purposes.
36. Budgets and other forecasts 3 years.
(prepared for internal
administrative or operating
purposes) of estimated future
income, receipts and expenditures
in connection with financing,
construction and operations,
including acquisitions and
disposals of properties or
investments.
37. Periodic or special reports filed
by the company on its own behalf with
the Commission or with any other
Federal or State rate-regulatory
agency, including exhibits or
amendments to such reports:
(a) Reports to Federal and State 5 years.
regulatory commissions including
annual financial, operating and
statistical reports.
(b) Monthly and quarterly reports 5 years.
of operating revenues, expenses,
and statistics.

[[Page 28512]]

38. Advertising: Copies of 2 years.
advertisements by or for the company
on behalf of itself or any associate
company in newspapers, magazines, and
other publications, including costs
and other records relevant thereto
(excluding advertising of appliances,
employment opportunities, routine
notices, and invitations for bids all
of which may be destroyed at option).
------------------------------------------------------------------------

7. Part 369 is added to read as follows:

PART 369--STATEMENTS AND REPORTS (SCHEDULES)

Authority: Sections 1261 et seq. Pub. L. 109-58, 119 Stat. 594.

Sec. 369.1 FERC Form No. 60, Annual report of service company.

(a) Prescription. The Form of Annual Report for Centralized Service
Companies, designated as FERC Form No. 60, is prescribed for the
reporting year 2007 and each subsequent year.
(b) Filing requirements--(1) Who must file. Each centralized
service company (See Sec. 367.2 of this chapter) in a holding company
system must prepare and file electronically with the Commission the
FERC Form No. 60 pursuant to the General Instructions set out in the form.
(2) When to file and what to file. (i) The annual report for the
year ending December 31, 2005 and 2006 must be filed by May 1, 2006 and
May 1, 2007, respectively. The annual report for each year thereafter
must be filed by April 18 of the subsequent years.
(ii) This report must be filed with the Commission as prescribed in
Sec. 385.2011 of this chapter and as indicated in the General
Instructions set out in the form, and must be properly completed and
verified. Filing on electronic media pursuant to Sec. 385.2011 of this
chapter is required.

PART 375--THE COMMISSION

8. The authority citation for part 375 continues to read as follows:

Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16
U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.

9. In Sec. 375.303, paragraphs (c), (d), (e), (f), (g) and (h) are
revised to read as follows:

Sec. 375.303 Delegations to the Chief Accountant.

* * * * *
(c) Issue interpretations of the Uniform System of Accounts for
public utilities and licensees, centralized service companies, natural
gas companies and oil pipeline companies.
(d) Pass upon any proposed accounting matters submitted by or on
behalf of jurisdictional companies that require Commission approval
under the Uniform Systems of Accounts, except that if the proposed
accounting matters involve unusually large transactions or unique or
controversial features, the Chief Accountant must present the matters
to the Commission for consideration.
(e) Pass upon applications to increase the size or combine property
units of jurisdictional companies.
(f) Accept for filing FERC Form No. 60 and Quarterly Financial
Report Form Nos. 3-Q and 6-Q if such filings are in compliance with
Commission orders or decisions, and when appropriate, notify the party
of such acceptance. Issue and sign deficiency letters if the filing
fails to comply with applicable statutory requirements, and with all
applicable Commission rules, regulations, and orders for which a waiver
has not been granted.
(g) Deny or grant, in whole or in part, requests for waiver of the
reporting requirements for the forms under Sec. Sec. 141.400, 260.300,
357.4, 366.23 and 369 of this chapter and the filing of these forms on
electronic media under Sec. 385.2011 of this chapter.
(h) Deny or grant, in whole or in part, requests for waiver of the
requirements of parts 352, 356, 367 and 368 of this chapter, except if
the matters involve unusually large transactions or unique or
controversial features, the Chief Accountant must present the matters
to the Commission for consideration.

[FR Doc. 06-4043 Filed 5-15-06; 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

Financial Accounting, Reporting and Records Retention Requirements Under the Public Utility Holding Company Act of 2005

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