[Federal Register Volume 60, Number 43 (Monday, March 6, 1995)]
[Rules and Regulations]
[Pages 12137-12139]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-5187]



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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 32, 36 and 65

[CC Docket No. 93-50; FCC 95-56]


Accounting and Rate Treatment of Allowance for Funds Used During 
Construction (``AFUDC'') and Telephone Plant Under Construction 
(``TPUC'')

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: The Commission has adopted a report and order to amend its 
rules regarding the accounting and ratemaking treatment for TPUC and 
interest costs incurred to finance construction projects. This action 
is to make FCC rules consistent with generally accepted accounting 
principles and as fair and reasonable as possible for ratemaking 
purposes.

EFFECTIVE DATE: September 6, 1995.

FOR FURTHER INFORMATION CONTACT:
Kim Yee, Common Carrier Bureau, Accounting and Audits Division, (202) 
418-0810.

SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's 
Report and Order in CC Docket No. 93-50, adopted February 13, 1995 and 
released February 28, 1995. The complete text of this Report and Order 
is available for inspection and copying during normal business hours in 
the FCC Dockets Branch (Room 230), 1919 M Street NW., Washington, DC, 
and may also be purchased from the Commission's copy contractor, 
International Transcription Service, Inc., at 2100 M Street, NW., Suite 
140, Washington, DC 20037, or call (202) 857-3800.

Synopsis of Report and Order

    1. This Report and Order amends Part 32, Uniform Systems of 
Accounts, and 65, Interstate Rate of Return Prescription Procedures and 
Methodologies, with respect to the proper accounting and ratemaking 
treatment for telephone plant under construction and allowance for 
funds used during construction.
    2. Specifically, this Report and Order amended Part 32 to require 
carriers to capitalize AFUDC for both short-term and long-term TPUC 
using a capitalization rate based on the carrier's average cost of 
debt. It amended Part 65 to include the interstate portion of the TPUC 
balances in the interstate rate base and to require carriers to reduce 
their interstate revenue requirement by the amount of AFUDC capitalized 
in the current year. [[Page 12138]] 
    3. This Report and Order eliminates Account 2004, Telecommunication 
Plant Under Construction-long term. All plant under construction will 
be record in Account 2003. The distinction between long-term and short-
term construction is eliminated.
    4. The Report and Order will be effective six months after it is 
published in the Federal Register.

Rule Changes

    5. Accordingly, it is ordered that, pursuant to Section 1, 4(i), 
201-205, 219, and 220 of the Communications Act of 1934, as amended, 47 
U.S.C. 151, 154(i), 201-205, 219, and 220, parts 32, 36, and 65 of our 
Rules, 47 CFR parts 32, 36, and 65 are amended, as set forth below.
    6. It is further ordered that, pursuant to Section 220(g) of the 
Communication Act of 1934, as amended, 47 U.S.C. 220(g) and Section 
1.427(c) of the Commission's Rules, 47 CFR 1.427(c), the amendments to 
parts 32, 36, and 65 of the Commission's Rules, 47 C.F.R. parts 32, 36, 
and 65 as set forth below, shall be effective September 6, 1995.

List of Subjects

47 CFR Part 32

    Uniform system of accounts.

47 CFR Part 36

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

47 CFR Part 65

    Communications common carriers, Reporting and recordkeeping 
requirements, Telephone.
Federal Communication Commission.
William F. Caton,
Acting Secretary.

    Parts 32, 36 and 65 of Title 47 of the CFR are amended as follows:

PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS 
COMPANIES

    1. The authority citation for part 32 continues to read as follows:
    Authority: Secs. 4(i), 4(j) and 220 as amended; 47 U.S.C. secs. 
154(i), 154(j) and 220 unless otherwise noted.

    2. Paragraph 32.2000(c)(2)(x) is revised to read as follows:


Sec. 32.2000  Instructions for telecommunications plant accounts.

* * * * *
    (c) * * *
    (2) * * *
    (x) Allowance for funds used during construction (``AFUDC'') 
provides for the cost of financing the construction of 
telecommunications plant. AFUDC shall be charged to Account 2003, 
Telecommunications Plant Under Construction, and credited to Account 
7340. The rate for calculating AFUDC shall be determined as follows: If 
financing plans associate a specific new borrowing with an asset, the 
rate on that borrowing may be used for the asset; if no specific new 
borrowing is associated with an asset or if the average accumulated 
expenditures for the asset exceed the amounts of specific new borrowing 
associated with it, the capitalization rate to be applied to such 
excess shall be weighted average of the rates applicable to other 
borrowing of the enterprise. The amount of interest cost capitalized in 
an accounting period shall not exceed the total amount of interest cost 
incurred by the company in that period.
* * * * *
    3. Section 32.2003 is amended by revising the section heading and 
paragraphs (a) and (c) to read as follows:


Sec. 32.2003  Telecommunications plant under construction.

    (a) This account shall include the original cost of construction 
projects. (Note also Sec. 32.2000(c).)
* * * * *
    (c) If a construction project has been suspended for six months or 
more, the cost of the project included in this account shall be 
transferred to Account 2006, Nonoperating Plant, without further 
direction or approval of this Commission. If a project is abandoned, 
the cost included in this account shall be charged to Account 7370, 
Special Charges.
* * * * *


Sec. 32.2004  [Removed]

    4. Section 32.2004 is removed.
    5. Section 32.7340 is revised in its entirety to read as follows:


Sec. 32.7340  Allowance for funds used during construction.

    This account shall be credited with amounts charged to the 
telecommunications plant under construction account. (See 
Sec. 32.2000(c)(2)(x).)

PART 36--JURISDICTIONAL SEPARATIONS PROCEDURES; STANDARD PROCEDURES 
FOR SEPARATING TELECOMMUNICATIONS PROPERTY COSTS, REVENUES, 
EXPENSES, TAXES AND RESERVES FOR TELECOMMUNICATIONS COMPANIES

    1. The authority citation for part 36 continues to read as follows:

    Authority: 47 U.S.C. Secs. 151, 154 (i) and (j), 205, 221(c), 
403 and 410.

    2. Section 36.101 is revised to read as follows:


Sec. 36.101  Section arrangement.

    (a) This subpart is arranged in sections as follows:

General

Telecommunications Plant in Service--Account 2001--36.101 and 
36.102.
General Support Facilities--Account 2110--36.111 and 36.112.
Central Office Equipment--Accounts 2210, 2220, 2230--36.121 thru 
36.126.
Information Origination/Termination Equipment--Account 2310--36.141 
and 36.142.
Cable and Wire Facilities--Account 2410--36.151 thru 36.157.
Amortization Assets--Accounts 2680 and 2690--36.161 and 36.162.
Telecommunications Plant--Other Accounts 2002 thru 2005--36.171.
Rural Telephone Bank Stock--36.172.
Material and Supplies--Accounts 1220, and Cash Working Capital--
36.181 and 36.182.
Equal Access Equipment--36.191.

    3. Section 36.171 is revised to read as follows:


Sec. 36.171  Property held for future telecommunications use--Account 
2002; Telecommunications plant under construction--Account 2003; and 
Telecommunications plant adjustment--Account 2005.

    The amounts carried in Accounts 2002, 2003, and 2005 are 
apportioned among the operations on the basis of the apportionment of 
Account 2001, Telecommunications Plant in Service.
    4. Section 36.222(c) is revised to read as follows:


Sec. 36.222  Nonoperating income and expenses--Account 7300.

* * * * *
    (c) The portion reflecting allowance for funds used during 
construction is apportioned on the basis of the cost of 
Telecommunications Plant Under Construction--Account 2003. The portion 
reflecting costs for social and community welfare contributions and 
fees is apportioned on the basis of the apportionment of corporate 
operations expenses.

PART 65--INTERSTATE RATE OF RETURN PRESCRIPTION PROCEDURES AND 
METHODOLOGIES

    1. The authority citation for part 65 continues to read as follows:

    Authority: Secs. 4, 201, 202, 203, 205, 218, 403, 48 Stat., 
1066, 1072, 1077, 1094, as amended, 47 U.S.C. 154, 201, 202, 203, 
205, 218, 403.

    2. Section 65.450(d) is revised to read as follows: [[Page 12139]] 


Sec. 65.450  Net income.

* * * * *
    (d) Except for the allowance for funds used during construction, 
reasonable charitable deductions and interest related to customer 
deposits, the amounts recorded as nonoperating income and expenses and 
taxes (Accounts 7300-7450) and interest and related items (Accounts 
7500-7540) and extraordinary items (Accounts 7600-7640) shall not be 
included unless this Commission specifically determines that particular 
items recorded in those accounts shall be included.
    3. Section 65.820(a) is revised to read as follows:


Sec. 65.820  Included items.

    (a) Telecommunications Plant. The interstate portion of all assets 
summarized in Account 2001 (Telecommunications Plant in Service) and 
Account 2002 (Property Held for Future Use), net of accumulated 
depreciation and amortization, and Account 2003 (Telecommunications 
Plant Under Construction), and, to the extent such inclusions are 
allowed by this Commission, Account 2005 (Telecommunications Plant 
Adjustment), net of accumulated amortization. Any interest cost for 
funds used during construction capitalized on assets recorded in these 
accounts shall be computed in accordance with the procedures in 
Sec. 32.2000(c)(2)(x) of this chapter.

[FR Doc. 95-5187 Filed 3-3-95; 8:45 am]
BILLING CODE 6712-01-M