FERC Proposes Revised Accounting Rules to Address Renewables | Troutman Pepper

On July 28, 2022, FERC proposed modifications to its Uniform System of Accounts (“USofA”) in response to the expansion of non-hydro renewable era comparable to wind, photo voltaic, and storage and codify accounting for renewable vitality credit (“RECs”). FERC’s Notice of Proposed Rulemaking (“NOPR”) follows a Notice of Inquiry issued in January 2021 in search of touch upon the suitable accounting remedy for sure renewable vitality belongings (see January 28, 2021 version of the WER). Comments on the NOPR are due 45 days from its publication within the Federal Register.

FERC’s predecessor, the Federal Power Commission, created the USofA to facilitate its ratemaking obligations by uniformly capturing electrical utilities’ and pure gasoline pipelines’ monetary and operational data. The USofA has been modified over time to account for altering technological, authorized, and market circumstances, however has not been considerably modified since 2013. In the NOPR, FERC proposes 4 fundamental modifications to the USofA to handle the speedy progress of renewable era, and to present clear pointers on the right accounting remedy of sure non-hydro renewable vitality belongings and RECs.

First, the NOPR proposes to create three new manufacturing accounts (termed “subfunctions”) for photo voltaic, wind, and different renewables: “Solar Production,” “Wind Production,” and “Other Non-Hydro Renewable Production.” Currently, the UsofA comprises “Steam,” “Nuclear,” “Hydraulic,” and “Other Production” manufacturing accounts, the latter of which utilities use to report non-hydro renewable belongings. FERC famous within the NOPR that this method seems to be insufficient and leads to disputes about which gear belongs wherein account. FERC acknowledged its perception that creating new accounts for renewable era will make reporting on these belongings extra uniform and clear. FERC seeks touch upon how to rename the “Other Production” subfunction in mild of the brand new additions and whether or not to embody tidal vitality as a part of the prevailing Hydraulic accounts or within the newly proposed Other Non-Hydro Renewable Production accounts.

Second, the NOPR proposes to create a brand new purposeful class for vitality storage. Currently, vitality storage belongings are recorded in serval accounts in separate features (era, transmission, and distribution) based mostly on how the storage asset is used. The NOPR states that the present accounting remedy is impractical and imposes a big burden as in contrast to creating a brand new, devoted storage perform. Additionally, the NOPR proposes to transfer the prices of pumped storage plant, that are at the moment recorded inside the Hydraulic Production subfunction, to the brand new vitality storage perform.

Third, the NOPR proposes to codify the accounting remedy of RECs. FERC pointed to precedent concerning the jurisdictional standing of RECs based mostly on whether or not they’re a part of a transaction bundled with, or unbundled from, a wholesale vitality transaction. Unbundled RECs don’t fall inside FERC’s jurisdiction, however bundled RECs do. To account for this, and to mirror FERC’s perception that RECs are “extra akin to stock,” the NOPR proposes two separate stock accounts for recording bundled and unbundled RECs.

Fourth, the NOPR proposes to add new accounts for laptop {hardware}, software program, and communication gear for every perform, together with these newly created features and subfunctions, as a result of current accounts solely apply to Regional Transmission Organizations. The Commission seeks touch upon whether or not to create comparable accounts for pure gasoline and oil pipelines, and a holding firm’s service corporations.

Finally, though not proposed as a change to the USofA, FERC seeks touch upon whether or not the Chief Accountant ought to situation steering on the accounting for hydrogen.

A duplicate of the NOPR will be discovered right here.


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