Notice of Inquiry

Notice of Inquiry_RM21-11.PDF

FERC-3-Q, Quarterly Financial Report of Electric Utilities, Licensees, and Natural Gas Companies (Final Rule in RM21-11-000)

Notice of Inquiry

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Document Accession #: 20210119-3044

Filed Date: 01/19/2021

174 FERC ¶ 61,032
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
[Docket No. RM21-11-000]
Accounting and Reporting Treatment of Certain Renewable Energy Assets
(January 19, 2021)
AGENCY: Federal Energy Regulatory Commission.
ACTION: Notice of Inquiry.
SUMMARY: In this Notice of Inquiry, the Federal Energy Regulatory Commission
(Commission) seeks comments on the accounting and reporting treatment of certain
renewable energy generating assets and renewable energy credits. In addition, the
Commission seeks comments on the ratemaking implications of these accounting and
reporting changes.
DATES: Initial Comments are due [INSERT DATE 60 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTER], and Reply Comments are due
[INSERT DATE 90 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL
REGISTER].
ADDRESSES: Comments, identified by docket number, may be filed in the following
ways:
 Electronic Filing through http://www.ferc.gov. Documents created electronically
using word processing software should be filed in native applications or
print-to-PDF format and not in a scanned format.
 Mail/Hand Delivery: Those unable to file electronically may mail or hand-deliver

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comments to: Federal Energy Regulatory Commission, Secretary of the
Commission, 888 First Street NE, Washington, DC 20426.
 Instructions: For detailed instructions on submitting comments, see the Comment
Procedures Section of this document.
FOR FURTHER INFORMATION CONTACT:
Daniel Birkam (Technical Information)
Office of Enforcement
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-8035
[email protected]
Sarah Greenberg (Legal Information)
Office of the General Counsel
Federal Energy Regulatory Commission
888 First Street, NE
Washington, DC 20426
(202) 502-6230
[email protected]
SUPPLEMENTARY INFORMATION:

Document Accession #: 20210119-3044

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174 FERC ¶ 61,032
UNITED STATES OF AMERICA
FEDERAL ENERGY REGULATORY COMMISSION
Before Commissioners: James P. Danly, Chairman;
Neil Chatterjee, Richard Glick,
Allison Clements, and Mark C. Christie.
Accounting and Reporting Treatment of Certain
Renewable Energy Assets

Docket No. RM21-11-000

NOTICE OF INQUIRY
(January 19, 2021)
1.

In this Notice of Inquiry (NOI), the Federal Energy Regulatory Commission

(Commission) seeks comments on the appropriate accounting treatment for certain
renewable energy assets. First, the Commission seeks comments on whether to create
new accounts within the Uniform System of Accounts (USofA) for non-hydro renewable
energy generating assets,1 and, if so, how such accounts should be organized. Second,
the Commission seeks comments on how to modify FERC Form No. 1 to reflect any new
accounts. Third, the Commission seeks comments on whether to codify the proper

1

Non-hydro renewable assets, as referred to in this notice, are production assets
other than hydroelectric generators such as solar, wind energy, geothermal, biomass, etc.,
that rely on the heat or motion of the earth or sun’s radiation to produce energy.
Specifically, these are denoted as renewable because the power production is based on a
fuel source that is not consumed or destroyed by the generation process, such as buried
hydrocarbons (coal, oil, natural gas), or the decay of rare irradiated heavy metals
(nuclear). Biomass (trees, nut shells, grain husks and stalks, etc.) is considered
renewable, despite its hydrocarbon source being consumed, due to its carbon release
being offset by regrowth of carbon capturing equivalent biomass.

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accounting treatment of the purchase, generation, and use of renewable energy credits
(RECs). Finally, the Commission seeks comments on the rate setting implications of
these potential accounting and reporting changes.
I.

Background

2.

The USofA contains discrete accounts for steam production, nuclear production,

hydraulic production, and other production.2 However, the USofA does not contain any
accounts designed specifically for solar, wind, or other non-hydro renewable generating
assets. Therefore, electric utilities currently record non-hydro renewable assets in the
Other Production accounts of the USofA. Commenters have indicated that companies
exercise “reasonable judgment” when determining in which Other Production account to
book these assets.3
3.

Recently, parties have expressed disagreement regarding which Other Production

accounts should be used to book non-hydro renewable assets. In Docket No. AC20-103,
the Commission received a request for confirmation that the costs of certain wind and
solar generating equipment are properly booked to the Other Production Accounts 343
(Prime Movers), 344 (Generators), and 345 (Accessory Electric Equipment). In that
proceeding, commenters argued that the proposal booked an inappropriate amount of

2

18 CFR Part 101; Accounting and Financial Reporting for Public Utilities
Including RTOs, Order No. 668, 113 FERC ¶ 61,276 at 59 (2005).
3

Comments of the Edison Electric Institute, Docket No. AC20-103-000, at 3
(filed May 28, 2020).

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costs to Account 345, which are included in reactive power rates pursuant to the
AEP Methodology.4 Commenters, including the Edison Electric Institute, suggested that
the Commission consider creating new accounts for wind, solar, and other non-hydro
renewables to resolve this issue.5 Concurrently with the issuance of this Notice of
Inquiry, the Commission is issuing an order in Docket No. AC20-103, denying the
request and explaining that this Notice of Inquiry will begin a proceeding in which the
Commission will evaluate the need for further guidance regarding the proper accounting
treatment of non-hydro renewable generating assets.
4.

In addition, the existing USofA accounts do not explicitly address the accounting

treatment of the purchase, generation, or use of RECs. However, the Commission has
stated that RECs are analogous to the sulfur dioxide emission allowances created by
Title IV of the Clean Air Act Amendments of 1990, which the Commission addressed in
Order No. 552.6 Order No. 552 classified emission allowances as inventoriable items and
established new inventory and expense accounts to record the allowances.7 In keeping

4

Comments of Ameren Services Company, Docket No. AC20-103-000, at 8-9
(filed May 28, 2020).
5

Id. at 6-7; Comments of Edison Electric Institute at 4.

6

Ameren Illinois Co., 170 FERC ¶ 61,267, at P 52 (2020) (citing Revisions to
Uniform Systems of Accounts to Account for Allowances under the Clean Air Act
Amendments of 1990 and Regulatory-Created Assets and Liabilities and to Form
Nos. 1, 1-F, 2 and 2-A, Order No. 552, FERC Stats. and Regs. ¶ 30,967 (1993)
(cross-referenced at 62 FERC ¶ 61,299)).
7

Revisions to Uniform Systems of Accounts to Account for Allowances under the
Clean Air Act Amendments of 1990 and Regulatory-Created Assets and Liabilities and to

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with Order No. 552, the Commission has found that RECs that are purchased or
generated should be recorded in Account 158.1 (Allowance Inventory) and expensed to
Account 509 (Allowances) as they are utilized.8 In addition to examining the issues
identified above, we believe further consideration of whether to clarify and codify this
accounting practice by modifying the account instructions of these inventory and expense
accounts to explicitly include RECs is warranted at this time.
II.

Discussion
A.

5.

Creation of New USofA Accounts

Currently, electric utilities record non-hydro renewable assets, and associated

operations and maintenance (O&M) expenses, in the “Other Production” function within
the USofA.9 Within the USofA, the existing plant and associated O&M account

Form Nos. 1, 1-F, 2 and 2-A, Order No. 552, FERC Stats. and Regs. ¶ 30,967
(cross-referenced at 62 FERC ¶ 61,299).
8
9

Ameren Illinois Co., 170 FERC ¶ 61,267 at P 52.

18 CFR Part 101 Other Production includes the following Plant in Service
Accounts: 340 (Land and Land Rights), 341 (Structures and Improvements),
342 (Fuel Holders, Producers, and Accessories), 343 (Prime Movers), 344 (Generators),
345 (Accessory Electric Equipment), 346 (Miscellaneous Power Plant Equipment),
347 (Asset Retirement Costs for Other Production Plant), and 348 (Energy Storage
Equipment - Production). Also included are the following O&M Accounts:
546 (Operation Supervision and Engineering), 547 (Fuel), 548 Generation expenses
(Major only), 548.1 (Operation of Energy Storage Equipment), 549 (Miscellaneous Other
Power Generation Expenses) (Major only)), 550 (Rents), 550.1 (Operation Supplies and
Expenses (Nonmajor only)), 551 (Maintenance Supervision and Engineering) (Major
only)), 552 (Maintenance of Structures (Major only)), 553 (Maintenance of Generating
and Electric Plant (Major only)), 553.1 (Maintenance of Energy Storage Equipment),

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definitions do not provide instructions or examples of items that are used in non-hydro
renewable energy production, specifically for wind and solar powered production.10 This
may be viewed as either a problem of insufficient account instructions, insufficient
existing accounts, or insufficient existing functional categories.
6.

For instance, there is no account that clearly captures solar panels. Solar panels

are not fuel holders (Account 342), prime movers (Account 343) or generators
(Account 344).11 Account 342 includes:
[T]he cost installed of fuel handling and storage equipment
used between the point of fuel delivery to the station and the
intake pipe through which fuel is directly drawn to the engine,
also the cost of gas producers and accessories devoted to the
production of gas for use in prime movers driving main
electric generators.12

554 (Maintenance of Miscellaneous Other Power Generation Plant (Major only)), and
554.1 (Maintenance of Other Power Production Plant (Nonmajor only)).
10

In contrast, geothermal and biomass generation generally operate based on
either floor mounted steam turbines or floor mounted fuel cycle turbines much like buried
hydrocarbon generation, and thus, these plant in service assets can be fitted more readily
into the existing descriptions of production accounts.
11

18 CFR Part 101, Instructions for Accounts 342, 343, and 344.

12

Id., Instructions for Account 342.

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Solar panels do not store sunlight, and they have no moving parts; instead, solar energy is
captured passively as radiation and is then converted electrochemically into electricity.
Therefore, solar panels are not fuel holders. Similarly, Account 343 “include[s] the cost
installed of Diesel or other prime movers devoted to the generation of electric energy,
together with their auxiliaries,” while Account 344 “include[s] the cost installed of Diesel
or other power driven main generators.”13 Both of these accounts describe equipment
that operates like a diesel-powered turbine. Solar panels, which capture and convert a
radiated energy source, are not prime movers or power-driven main generators.
7.

Photovoltaic (PV) inverters also do not fit within any of the definitions of the

Other Production accounts. Inverters convert the direct current output of a PV solar
panel into alternating current. None of the existing Other Production accounts
accommodate such a component in their current form.
8.

Similarly, there is no account that includes wind generation towers. Such towers

do not meet the definition of structures and improvements (Account 341), miscellaneous
power plant equipment (Account 346) or accessory electric equipment (Account 345).14
Specifically, the height of wind generation towers is central to the capture of wind

13

Id., Instructions for Accounts 343 and 344. These are not defined in the USofA,
but from common usage a “prime mover” would be the source of the initial force that
moves the turbine or similar device (the diesel here). The “power driven main generator”
would be the turbine, from the tines or blades to the dynamo, including the pressure
casing and the shaft.
14

Id., Instructions for Accounts 341, 345, and 346.

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energy; therefore, it is not simply a sheltering structure or a miscellaneous or accessory
system. While wind generation towers do provide structural support for the turbine and
blades, this is only a part of the towers’ function, not its primary role. The Commission
has previously created separate categories for plant assets that did not fit into existing
accounts due to unique features or functionality; such an approach may be appropriate
here as well.15
9.

Additionally, there are no accounts for computer hardware and software required

to operate wind and solar generation remotely. Also, Account 553, major maintenance of
generating and electric plant, which only includes costs associated with Accounts 343,
344, and 345, does not accommodate costs to record maintenance of solar panels, wind
turbine blades, or wind generation towers.16 Similarly, some of the O&M accounts do
not apply to the related non-hydro renewable energy assets. For example, Account 547
(Fuel) is not applicable to wind and solar generation.17

15

The Hydraulic Production category contains accounts created for hydro-related
items that do not fit in as sheltering structures, such as a hydro dam that is central to the
capture of the flow of water includable in Account 332 (Reservoirs, Dams, and
Waterways). The instructions to Account 332 state: “This account shall include the cost
in place of facilities used for impounding, collecting, storage, diversion, regulation, and
delivery of water used primarily for generating electricity. For Major utilities, it shall also
include the cost in place of facilities used in connection with (a) the conservation of fish
and wildlife, and (b) recreation.”
16

18 CFR Part 101, Instructions for Account 553.

17

Id., Instructions for Account 547.

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10.

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Because the Commission’s USofA does not include accounts that clearly

accommodate non-hydro renewable generating plants and associated O&M expenses, we
seek input from interested entities on whether to create new accounts to accommodate
these resources. If the Commission determines that non-hydro renewables should be
recorded as separate generating functions, then plant and O&M accounts for each new
generation function will need to be developed where appropriate. This is necessary both
for the correct categorization and correct cost causation attributes of the accounts.
11.

Within each item below, interested entities should specify whether the response

applies to wind, solar, other, or some combination of these technologies.
Q1)

Interested entities should comment on whether the Commission

should establish separate plant and O&M expense accounts for each major
type of non-hydro renewable plant, including separate accounts for solar,
wind, and other non-hydro renewable technologies.
Q2)

Interested entities should provide examples of proposed new

accounts related to non-hydro renewable plant and related O&M expenses
for the Commission to consider. Interested entities should also include
proposed examples of the corresponding account instructions.
Q3)

Creating new accounts related to non-hydro renewable plant would

require reclassification of assets from existing accounts to newly created
plant asset accounts. This would also require reclassification of related
accumulated reserves for depreciation. In addition, there would be other
impacts related to associated accumulated deferred income tax (ADIT)

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balances. Finally, related O&M expenses would need to be reclassified to
the newly created expense accounts. Interested entities should address the
potential burden that these reclassification requirements would create.
B.
12.

Modifications to FERC Form No. 1

Adding new non-hydro renewable plant and related O&M expenses to the USofA

would require changes to the FERC Form No. 1 to report these accounts in an organized
and transparent manner. Thus, we seek input from interested entities on how the
Commission could modify FERC Form No. 1 to accommodate any such changes.
Q4)

We invite interested entities to submit comments regarding

proposals for reporting the new accounts for non-hydro renewable plant and
related O&M expenses in FERC Form No. 1 and whether new reporting
schedules and footnote disclosures would be required. Interested entities
should provide examples of any new reporting schedules and footnote
disclosures.
Q5)

We encourage interested entities to address the type of

non-accounting information related to non-hydro renewable plant and
related O&M expenses that could be included in the modified FERC Form
No. 1 to support rate development and to provide useful information to
parties who utilize the financial reports.
C.
13.

Addressing Renewable Energy Credits

The USofA does not provide instructions for recording the purchase, generation or

use of RECs. However, for accounting purposes, RECs are analogous to sulfur dioxide

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emission allowances, for which the Commission has developed accounting guidance. In
Order No. 552, the Commission concluded that the sulfur dioxide emission allowances
are appropriately classified as inventoriable items.18 To that end, the Commission
established new inventory and expense accounts to record these emission allowances.
Account 158.1 (Allowance Inventory) includes the cost of allowances owned by the
utility. The instructions to Account 158.1 provide for allowances to be expensed to
Account 509 (Allowances) as allowances are used.19
14.

More recently, the Commission found it appropriate to apply the Order No. 552

accounting construct to the costs of RECs.20 Specifically, the Commission has found that
RECs should be recorded in Account 158.1 when they are purchased or generated, and
then expensed to Account 509 as they are used.21
15.

We are considering updating the instructions for allowances recorded in

Accounts 158.1 and 158.2 (Allowance Withheld), and associated revenues and expenses
recorded in Accounts 456 (Other Electric Revenues) and 509 to explicitly include

18

See Revisions to Uniform Systems of Accounts to Account for Allowances under
the Clean Air Act Amendments of 1990 and Regulatory-Created Assets and Liabilities
and to Form Nos. 1, 1-F, 2 and 2-A, Order No. 552, FERC Stats. and Regs. ¶ 30,967
(cross-referenced at 62 FERC ¶ 61,299).
19

See 18 CFR Part 101, General Instruction 21.

20

Ameren Illinois Co., 170 FERC ¶ 61,267 at P 52.

21

Id.

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activities related to RECs.22 Thus, we seek input from interested entities regarding
updates to existing inventory accounts to accommodate RECs.
Q6)

We are considering modifying Accounts 158.1, 158.2, and 509 to

include the cost of RECs and modifying Account 456 to include revenues
from the sale of RECs.23 We invite interested entities to comment on these
potential modifications.
D.
16.

Assessing Rate Implications

It is possible that the proposed additions and modifications to the USofA and the

corresponding changes to the FERC Form No. 1 could have a significant and measurable
impact on rates for existing utilities. In addition to changes to the accounting and
reporting systems, entities may have corresponding changes to their existing
cost-of-service schedules for ratemaking purposes. For instance, entities that reclassify
assets into the new non-hydro renewable accounts may need to include or exclude certain
account balances from their rates to remain consistent with Commission approved rate
schedules. For this reason, we seek input from interested entities.
Q7)

We would like to receive input from interested entities as to how

electric utilities with formula rates would be impacted if the
Commission creates new plant and O&M expense accounts related to

22

Account 158.2 represents allowances withheld by the EPA to be later
reclassified in Account 158.1 as they are released. Account 456 represents the account in
which gross sales of RECs are to be recorded.
23

18 CFR Part 101, Instructions for Accounts 158.1, 158.2, 456, and 509.

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non-hydro renewables. We invite interested persons to submit
comments regarding how affected utilities would address any such
changes.
III.

Comment Procedures

17.

The Commission invites interested persons to submit comments on the matters

and issues proposed in this notice, including any related matters or alternative
proposals that commenters may wish to discuss. Comments are due [INSERT DATE
60 DAYS AFTER DATE OF PUBLICATION IN THE FEDERAL REGISTER],
and Reply Comments are due [INSERT DATE 90 DAYS AFTER DATE OF
PUBLICATION IN THE FEDERAL REGISTER]. Comments must refer to Docket
No. RM21-11-000, and must include the commenter’s name, the organization they
represent, if applicable, and their address.
18.

The Commission encourages comments to be filed electronically via the eFiling

link on the Commission’s web site at http://www.ferc.gov. The Commission accepts
most standard word-processing formats. Documents created electronically using
word-processing software should be filed in native applications or print-to-PDF format
and not in a scanned format. Commenters filing electronically do not need to make a
paper filing.
19.

Commenters that are not able to file comments electronically must send an

original of their comments to: Federal Energy Regulatory Commission, Secretary of the
Commission, 888 First Street NE, Washington, DC 20426.

Document Accession #: 20210119-3044

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Docket No. RM20-19-000
20.

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All comments will be placed in the Commission’s public files and may be viewed,

printed, or downloaded remotely as described in the Document Availability section
below. Commenters on this proposal are not required to serve copies of their comments
on other commenters.
IV.

Document Availability

21.

In addition to publishing the full text of this document in the Federal Register, the

Commission provides all interested persons an opportunity to view and/or print the
contents of this document via the Internet through the Commission’s Home Page
(http://www.ferc.gov). At this time, the Commission has suspended access to the
Commission’s Public Reference Room due to the President’s March 13, 2020
proclamation declaring a National Emergency concerning the Novel Coronavirus Disease
(COVID-19).
22.

From the Commission’s Home Page on the Internet, this information is available

on eLibrary. The full text of this document is available on eLibrary in PDF and
Microsoft Word format for viewing, printing, and/or downloading. To access this
document in eLibrary, type the docket number excluding the last three digits of this
document in the docket number field.
23.

User assistance is available for eLibrary and the Commission’s website during

normal business hours from the Commission’s Online Support at (202) 502-6652
(toll free at 1-866-208-3676) or email at [email protected], or the Public
Reference Room at (202) 502-8371, TTY (202) 502-8659. E-mail the Public Reference
Room at [email protected].

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By direction of the Commission.

Nathaniel J. Davis, Sr.,
Deputy Secretary.

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