[Federal Register Volume 62, Number 99 (Thursday, May 22, 1997)]
[Notices]
[Pages 28015-28017]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-13411]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission
[Docket No. EL95-3-000]


MidAmerican Energy Company (Formerly Midwest Power Systems Inc; 
Order Clarifying Filing Requirements for Changes in Depreciation Rates 
for Accounting Purposes, Dismissing Petition for Declaratory Order, and 
Providing Amnesty Period

May 15, 1997.
    On October 14, 1994, Midwest Power, a division of Midwest Power 
Systems Inc. (Midwest Power or Applicant), filed a request for 
declaratory order authorizing it to reduce its annual composite rate of 
depreciation from 3.54 percent to 3.49 percent.\1\ We will dismiss the 
petition as moot for the reasons given below.
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    \1\ By order issued June 22, 1995, the Commission authorized the 
merger of Midwest Power and Iowa-Illinois Gas and Electric Company. 
MidAmerican Energy Company is the surviving corporation. See Midwest 
Power Systems, Inc. and Iowa-Illinois Gas and Electric Company, 71 
FERC para. 61,386 (1995).
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    We also take this opportunity to clarify our order, issued April 
19, 1994, in Midwest Power Systems Inc., 67 FERC para. 61,076 (1994) 
(Midwest Power), which noted that the clear provisions of section 
302(a) of the Federal Power Act, 16 U.S.C. Sec. 825a(a) (1994), require 
public utilities and licensees to file for this Commission's approval 
proposed depreciation rate changes for accounting purposes.
    Nothwithstanding the clear language of section 302(a), there 
apparently has been some confusion in the industry as to the 
appropriate filing requirements. Accordingly, we will not require 
public utilities and licensees to file for formal approval of 
depreciation rate changes for accounting purposes where the 
depreciation rate changes were based on sound depreciation accounting 
practices and implemented prior to April 19, 1994.
    In addition, for changes in depreciation rates for accounting 
purposes implemented on or after April 19, 1994, and prior to the date 
of publication of this order in the Federal Register, we will accord 
public utilities and licensees an amnesty period extending to and 
including December 31, 1997, to make the required filings to change 
their depreciation rates for accounting purposes.\2\ We also clarify

[[Page 28016]]

that requests for depreciation rate changes for accounting purposes may 
be made under Rule 204 of the Commission's Rules of Practice and 
Procedure, 18 CFR Sec. 385.204 (1996), which does not require payment 
of a filing fee.
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    \2\ For depreciation rate changes for accounting purposes that 
are implemented on or after the date of publication of this order in 
the Federal Register, public utilities and licensees must receive 
Commission approval prior to changing their depreciation rates.
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Background

    In an October 20, 1993 letter, Midwest Power informed the 
Commission that it had reduced its annual composite rate of 
depreciation for accounting purposes from 3.54 percent to 3.49 percent, 
effective January 1, 1993, resulting in a reduction in its annual 
depreciation expense of just over $1 million. (Midwest Power did not 
reflect this change in its wholesale and retail electric rates.)
    In an unpublished January 4, 1994 letter order, the Chief 
Accountant notified Midwest Power that it was ``inappropriate for 
[Midwest Power] to reduce its depreciation rates for accounting 
purposes without a corresponding change in the depreciation rates 
embedded in its wholesale and retail electric rates.''
    On February 1, 1994, Midwest Power filed a request for rehearing of 
the January 4, 1994 letter order. On April 19, 1994, in Midwest Power, 
the Commission denied Applicant's request for rehearing, reasoning, in 
part, as follows:

    Midwest Power did not seek prior approval from the Commission 
[under section 302(a) of the FPA] before changing its depreciation 
rates, nor has it sought approval retroactively. It merely gave 
notice of its change in depreciation rates, and only after the fact. 
Midwest Power's course of action here is inconsistent with the 
applicable statutory requirements, and is also contrary to the 
Commission's duty under the Federal Power Act to review the adequacy 
of depreciation rates and depreciation reserves.

67 FERC at 61,209.\3\
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    \3\ Section 302(a) of the Federal Power Act states in pertinent 
part:
    The Commission may * * * by order fix, the proper and adequate 
rates of depreciation of the several classes of property of each 
licensee and public utility. Each licensee and public utility shall 
conform its depreciation accounts to the rates so ascertained, 
determined, and fixed. The licensees and public utilities subject to 
the jurisdiction of the Commission shall not * * * charge with 
respect to any class of property a percentage of depreciation other 
than that prescribed therefor by the commission
    See 16 U.S.C. Sec. 825a(a) (1994).
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    The Commission found that Midwest Power should have submitted a 
formal request to the Commission asking for approval of its proposed 
change to its depreciation rate so that the Commission would have an 
opportunity to review the proposal in terms of whether it was 
consistent with the applicable statutory provisions. Id. The Commission 
outlined courses of action that Midwest Power could follow to change 
its depreciation rates:

    The most common vehicle for a proposed change in depreciation 
rates is as part of a filing of proposed revised electric rates; 
such a filing allows a comprehensive examination of a utility's cost 
of providing service, including the appropriate amounts of 
depreciation. As an alternative, a utility could file a request for 
a declaratory order asking for approval of its proposed revised 
depreciation rates.

Id.
    In accordance with Midwest Power, Applicant filed the instant 
request for declaratory order seeking approval of its depreciation rate 
change.
    Notice of Midwest Power's filing was published in the Federal 
Register, 59 FR 55,472 (1994), with comments, protests or interventions 
due on or before November 16, 1994. On November 14, 1994, the Iowa 
Utilities Board (Iowa Board) filed a notice of intervention, raising no 
substantive issues.

Discussion

A. Procedural Matter

    Under Rule 214 of the Commission's Rules of Practice and 
Procedure,\4\ the notice of intervention of the Iowa Board serves to 
make it a party to this proceeding.
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    \4\ 18 CFR 385.214 (1996).
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B. Depreciation Rate Changes for Accounting Purposes Made Prior to 
April 19, 1994

    As noted above, we believe that it is appropriate to accept all 
depreciation rate changes for accounting purposes made by public 
utilities and licensees prior to April 19, 1994 that were based on 
sound depreciation accounting practices.\5\
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    \5\ See generally Barton Village, Inc., et al. v. Citizens 
Utilities Co., 63 FERC para. 61,329 AT 63, 189-90 (1993), reh'g 
denied, 68 FERC para. 61,005 (1994), reh'g denied, 73 FERC para. 
61,303 (1995), aff'd in relevant part, No. 96-1049 (D.C. Cir. Dec. 
11, 1996) (unpublished opinion).
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    Because Midwest Power's depreciation rate change for accounting 
purposes was effective prior to Midwest Power, and was based on sound 
depreciation accounting practices, we will dismiss Midwest Power's 
request for declaratory order as moot.

C. Depreciation Rate Changes for Accounting Purposes Made on or After 
April 19, 1994

    While Midwest Power clarified section 302(a)'s requirement that 
public utilities and licensees obtain formal Commission approval of 
depreciation rate changes for accounting purposes, we have found, as a 
result of audits conducted by the Office of the Chief Accountant, that 
several public utilities have recently revised their depreciation rates 
for accounting purposes without obtaining Commission approval. In most 
cases, these public utilities have obtained state regulatory commission 
approval for the depreciation rate changes.\6\ We find it appropriate 
to offer public utilities and licensees an amnesty period through the 
end of the year, i.e., on or before December 31, 1997, to file for this 
Commission's approval of depreciation rate changes for accounting 
purposes implemented on or after April 19, 1994 and prior to the date 
of publication of this order in the Federal Register.\7\ These 
depreciation rate change filing should include supporting depreciation 
studies, copies of relevant state commission orders or approvals, and 
explanatory statements of the reasons for and effects of the proposed 
changes.\8\
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    \6\ We emphasize that utilities and licensees cannot charge to 
operating expenses any depreciation charges other than those 
prescribed by the Commission. See 16 U.S.C. Sec. 825a(a) (1994).
    \7\ See supra note 2 (addressing changes implemented on or after 
date of publication in Federal Register).
    \8\ It is our expectation that the Office of the Chief 
Accountant will process uncontested requests for approval of 
proposed depreciation rate changes for accounting purposes under 
delegated authority, unless the requests involve unique, or 
controversial proposals. 18 CFR Sec. 375.303 (1996).
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D. Filings Under Rule 204

    Additionally, while we stated in Midwest Power that utilities could 
make a request for approval of proposed depreciation rate changes for 
accounting purposes by means of a petition for declaratory order under 
Rule 207 of the Commission's Rules of Practice and Procedure, 18 CFR 
Sec. 385.207 (1996), we clarify that public utilities and licensees are 
not required to file such petitions and incur the filing fees 
associated with them. Instead, we will allow public utilities and 
licensees to request approval of proposed depreciation rate changes for 
accounting purposes by means of an application under Rule 204 of the 
Commission's Rules of Practice and Procedure, 18 CFR Sec. 385.204 
(1996), which does not require payment of a filing fee.

The Commission Orders

    (A) Midwest Power's request for a declaratory order is hereby 
dismissed as moot, as discussed in the body of this order.
    (B) Acceptance of depreciation rate changes for accounting purposes 
is

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hereby granted to public utilities and licensees for depreciation rate 
changes effective before April 19, 1994, as discussed in the body of 
this order.
    (C) Public utilities and licensees are hereby granted until 
December 31, 1997, to file for Commission approval of depreciation rate 
changes for accounting purposes implemented on or after April 19, 1994 
and prior to the date of publication of this order in the Federal 
Register, as discussed in the body of this order.
    (D) The Secretary shall promptly publish a copy of this order in 
the Federal Register.
    (E) The Secretary shall promptly serve copies of this order on all 
State commissions, as defined in section 3(15) of the Federal Power 
Act.

    By the Commission.
Lois D. Cashell,
Secretary.
[FR Doc. 97-13411 Filed 5-21-97; 8:45 am]
BILLING CODE 6717-01-M