[Federal Register Volume 60, Number 199 (Monday, October 16, 1995)]
[Proposed Rules]
[Pages 53572-53573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-25581]



=======================================================================
-----------------------------------------------------------------------

FEDERAL MARITIME COMMISSION

46 CFR Part 552

[Docket No. 95-15]


Availability of the Annual Financial and Operating Statements 
Filed by Domestic Offshore Carriers

AGENCY: Federal Maritime Commission.

ACTION: Notice of Proposed Rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Federal Maritime Commission proposes amending its 
regulations governing the availability of the annual financial and 
operating statements filed by vessel-operating common carriers by water 
in the domestic offshore trades. Comments are sought on a proposal to 
allow access to the annual statements by the attorneys general of the 
non-contiguous states, territories, and possessions having ports in the 
trade served by the carrier. The proposed rule addresses a comment made 
in a prior proceeding by the State of Hawaii, and is intended to 
improve parties' access to the information while avoiding harm to a 
regulated carrier's competitive position.

DATES: Comments due November 15, 1995.

ADDRESSES: Comments (original and fifteen copies) to: Joseph C. 
Polking, Secretary, Federal Maritime Commission, 800 North Capitol 
Street, N.W., Washington D.C. 20573-0001, 202-523-5725.

FOR FURTHER INFORMATION CONTACT:
Anne M. McAloon, Bureau of Economics and Agreement Analysis, Federal 
Maritime Commission, 800 North Capitol Street, N.W., Washington D.C. 
20573-0001, 202-523-5790
C. Douglass Miller, Office of the General Counsel, Federal Maritime 
Commission, 800 North Capitol Street, N.W., Washington D.C. 20573-0001, 
202-523-5740

SUPPLEMENTARY INFORMATION: On September 5, 1995, the Federal Maritime 
Commission (``FMC'' or ``Commission'') published a final rule in FMC 
Docket No. 94-07, Financial Reporting Requirements and Rate of Return 
Methodology in the Domestic Offshore Trades (``Docket 94-07''), which 
amended the provisions governing carriers' financial reporting 
requirements and rate of return methodology in the domestic offshore 
trades (60 FR 46047). Among other things, the rule changed the method 
of determining the reasonableness of a carrier's return on rate base 
from the comparable earnings test to the before-tax weighted average 
cost of capital methodology (``BTWACC'').
    In comments on the proposed rule in Docket 94-07, the State of 
Hawaii (``Hawaii'') argued that the proposed BTWACC methodology would 
require that all interested parties have access to complete and 
accurate information regarding a carrier's financing and 
capitalization. Hawaii pointed out that the comparable earnings test, 
which was previously required to be used, does not rely on company-
specific data because it uses a cost of capital estimate based on the 
rate of return of U.S. manufacturing firms in general. However, under 
the BTWACC methodology, Hawaii noted that carriers would be using 
company-specific data to compute their cost of capital and thus any 
meaningful rebuttal would require access to such information. Hawaii 
concluded therefore that: ``The Commission's current ruling that a 
carrier's annual financial report need not be made available to all 
parties, places the parties at a disadvantage because it is impossible 
to present meaningful rebuttal testimony without a carrier's cost of 
capital data.'' (Hawaii Initial Comments at 5).
    The Commission's current regulations require the domestic offshore 
carriers to file financial and operating data under two circumstances--
annually within 150 days after the close of the carrier's fiscal year 
and in support of any general rate increases. The annual statement of 
financial and operating data consists of a rate base exhibit and 
supporting schedules, an income account exhibit and supporting 
schedules, and a rate of return exhibit and supporting schedules. The 
annual statement is to be accompanied by a company wide balance sheet 
and income statement. The Commission's regulations, at 46 CFR 552.4(c), 
protect the carriers' annual reports from public disclosure and treats 
them as confidential information in the files of the Commission.
    In support of general rate increases, domestic offshore carriers 
are required to file, pursuant to 46 CFR 552.2(f), the following 
material: an actual midyear rate base exhibit and supporting schedules 
for a twelve-month period commencing not more than fifteen months prior 
to the proposed increase; a projected midyear rate base exhibit and 
supporting schedules for a twelve-month period commencing on the first 
day of the month following the date on which the proposed increase will 
become effective; a projected income account exhibit and supporting 
schedules for the same period as the projected midyear rate base 
exhibit; actual and projected rate of return exhibits; and associated 
workpapers. In 

[[Page 53573]]
the event the general increase in rates is filed within six months of 
the end of the carrier's fiscal year, the regulated carrier may submit 
its annual report in lieu of the actual and projected income account 
exhibit. In addition, Rule 67 of the Commission's Rules of Practice and 
Procedure, 46 CFR 502.67, requires the carrier to file, under oath, 
testimony and exhibits constituting its direct case. Both the material 
submitted pursuant to 46 CFR 552.2(f) and the testimony and exhibits 
submitted pursuant to Rule 67 (which includes the 46 CFR 552.2(f) 
material) are public.
    The Commission has traditionally recognized that disclosing the 
information contained in the domestic offshore carriers' annual reports 
(FMC Forms 377 and 378) to third parties may cause harm to the 
regulated carrier's competitive position. However, given the changes to 
the rate of return methodology made in Docket 94-07, the Commission 
believes that Hawaii's statement merits further consideration. For 
example, the BTWACC methodology prescribes the use of a proxy group to 
determine the cost of common-stock equity for a company that does not 
issue its own common-stock equity, and requires selection criteria for 
proxy group members which are based on information that may be 
available only from the annual reports (e.g., annual income in the 
trade). Further, proxy group selection would most probably require 
historical information beyond that accompanying a general rate increase 
filing. Even if a carrier were to include all historical information it 
used in choosing a proxy group, other historical annual report 
information might suggest a different proxy group selection.
    The Commission has found that most federal and state regulatory 
agencies do not consider the regulated companies' annual reports to be 
confidential. On the federal level, both the Federal Energy Regulatory 
Commission and the Federal Communications Commission consider the 
annual financial and operating reports of the regulated companies as 
public information. Likewise, of those state regulatory agencies 
requiring public utilities to file annual financial reports, the 
majority regard the contents of those reports to be public 
information.\1\

    \1\ See ``Table 59, Annual Accounting Report Forms,'' in Utility 
Regulatory Policy in the United States and Canada Compilation 1992-
1993, National Association of Utility Regulatory Commissioners 
(``NAURC''), Washington, D.C., 1993, pp. 126-7.
---------------------------------------------------------------------------

    The Commission, therefore, is proposing to amend its rules to allow 
access to the annual reports by the attorneys general of noncontiguous 
states, commonwealths, possessions or territories having ports in the 
relevant trade served by the regulated carrier. The government officers 
and employees given access to the annual statements would be required 
to certify to the Commission that the information will not be disclosed 
to the public and will only be used in connection with analyzing the 
allowable rate of return for the regulated carrier in FMC proceedings. 
This should allow entities charged with protecting consumer welfare 
access to complete financial information concerning the carrier, while 
at the same time avoiding harm to the regulated carrier.
    Commenters on this proposal are directed to specifically address 
the necessity of obtaining the information contained in the carriers' 
annual reports and whether that information may be obtained from other 
sources.
    The Federal Maritime Commission certifies pursuant to section 
605(b) of the Regulatory Flexibility Act, 5 U.S.C. 605(n), that this 
rule will not have a significant economic impact on a substantial 
number of small entities, including small businesses, small 
organizational units and small government jurisdictions. The rule is 
procedural only and will provide certain parties with more complete 
information upon which to base a protest under section 3 of the 
Intercoastal Shipping Act, 1933, 46 U.S.C. app. 845. This proposed rule 
does not contain a collection of information within the meaning of the 
Paperwork Reduction Act of 1995, 44 U.S.C. 3501, et seq., as 
implemented by regulations prescribed within 5 CFR Part 1320. 
Accordingly, OMB review is not required.

List of Subjects in 46 CFR Part 552

    Maritime carriers, Reporting and recordkeeping requirements, 
Uniform system of accounts.
    Therefore, pursuant to 5 U.S.C. 553, sections 18 and 43 of the 
Shipping Act, 1916, 46 U.S.C. app. 817 and 841a, and sections 2 and 3 
of the Intercoastal Shipping Act, 1933, 46 U.S.C. app. 844 and 845, 
Part 552 of Title 46, Code of Federal Regulations, is proposed to be 
amended as follows:

PART 552--FINANCIAL REPORTS OF VESSEL OPERATING COMMON CARRIERS BY 
WATER IN THE DOMESTIC OFFSHORE TRADES

    1. The authority citation for Part 552 continues to read as 
follows:

    Authority: 5 U.S.C. 553; 46 U.S.C. app. 817(a), 820, 841(a), 
843, 844, 845, 845a and 847.

    2. In Sec. 552.4 a new paragraph (d) is added to read as follows.


Sec. 552.4  Access to and audit of records

* * * * *
    (d). The annual statements filed by the carriers with the 
Commission may be obtained from the Commission by the attorneys general 
of every noncontiguous State, Commonwealth, possession or territory 
having ports in the relevant trade that are served by the carrier, and 
the employees of such attorneys general, upon the submission of the 
following certification, under oath, to the Commission:

CERTIFICATION

    I, (Name and title if applicable), of (Full name of entity), 
having been duly sworn, certify that the annual statements of (Name 
of Carrier) will be used solely in order to prepare protests to the 
Federal Maritime Commission (``FMC'') or to participate in FMC 
proceedings relating to (Name of Carrier) and that their contents 
will not be disclosed to any person who has not signed, under oath, 
a certification in the form prescribed, which has been filed with 
the Federal Maritime Commission, unless public disclosure is 
specifically authorized by an order of the Commission or the 
presiding officer in an FMC proceeding.
Signature:-------------------------------------------------------------
Date:------------------------------------------------------------------
Signed and sworn before me this ________ day of __________, 
19______.
Notary Public:---------------------------------------------------------
My Commission expires:-------------------------------------------------

    By the Commission.
Joseph C. Polking,
Secretary.
[FR Doc. 95-25581 Filed 10-13-95; 8:45 am]
BILLING CODE 6730-01-M