[Federal Register Volume 67, Number 152 (Wednesday, August 7, 2002)]
[Proposed Rules]
[Pages 51150-51156]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-20016]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 101, 201, and 352

[Docket No. RM02-14-000]


Regulation of Cash Management Practices

August 1, 2002.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In order to protect the customers of jurisdictional companies, 
the Federal Energy Regulatory Commission is proposing to establish 
limits on the amount of funds that can be swept from a regulated 
subsidiary to a non-regulated parent under so-called ``cash 
management'' programs, as well as certain other requirements.

DATES: Comments are due 15 days after publication in the Federal 
Register.

ADDRESS: File written comments with the Office of the Secretary, 
Federal Energy Regulatory Commission, 888 First Street, NE., Washington 
DC, 20426. Comments should reference Docket No. RM02-14-000. Comments 
may be filed electronically or by paper (an original and 14 copies with 
an accompanying computer diskette in the prescribed format requested).

[[Page 51151]]


FOR FURTHER INFORMATION CONTACT:
Mark Klose (Technical Information), Office of the Executive Director, 
Division of Regulatory Accounting Policy, Federal Energy Regulatory 
Commission, 888 First Street NE, Washington, DC 20426, (202) 219-2595.
Mary Lauermann (Technical Information), Office of the Executive 
Director, Division of Regulatory Audits, Federal Energy Regulatory 
Commission, 888 First Street NE, Washington, DC 20426, (202) 208-0087.
Peter Roidakis (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202)208-1213.

SUPPLEMENTARY INFORMATION:

I. Introduction

    1. In this Notice of Proposed Rulemaking (NOPR), the Federal Energy 
Regulatory Commission (Commission) proposes to amend its Uniform 
Systems of Accounts \1\ for public utilities,\2\ natural gas companies 
\3\ and oil pipeline companies \4\ by establishing the documentation 
necessary ``to furnish readily full information'' \5\ concerning the 
management of funds from a FERC-regulated subsidiary by a non-FERC-
regulated parent.\6\ Specifically, the Commission is requiring that all 
such arrangements be in writing. Such arrangements must specify the 
duties and responsibilities of cash management participants and 
administrators, the methods of calculating interest and for allocating 
interest income and expenses, and the restrictions on deposits or 
borrowings by money pool members.
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    \1\ Section 301(a) of the Federal Power Act (FPA), 16 U.S.C. 
825(a), section 8 of the Natural Gas Act (NGA), 15 U.S.C. 717g, and 
section 20 of the Interstate Commerce Act (ICA), 49 App. U.S.C. 20 
(1998), authorize the Commission to prescribe rules and regulations 
concerning accounts, records and memoranda as necessary or 
appropriate for the purposes of administering the FPA, NGA and the 
ICA. The Commission may prescribe a system of accounts for 
jurisdictional companies and, after notice and opportunity for 
hearing, may determine the accounts in which particular outlays and 
receipts will be entered, charged or credited.
    \2\ Part 101 Uniform System of Accounts Prescribed for Public 
Utilities and Licensees Subject to the Provisions of the Federal 
Power Act. 18 CFR part 101 (2002).
    \3\ Part 201 Uniform System of Accounts Prescribed for Natural 
Gas Companies Subject to the Provisions of the Natural Gas Act. 18 
CFR part 201 (2002).
    \4\ Part 352 Uniform System of Accounts Prescribed for Oil 
Pipeline Companies Subject to the Provisions of the Interstate 
Commerce Act. 18 CFR part 352 (2002).
    \5\ See General Instructions--Records under Parts 101, 201, and 
352 of the Commission's Uniform System of Accounts for public 
utilities, licensees, natural gas companies, and oil pipeline 
companies.
    \6\ The proposed regulations would apply to all public utilities 
subject to the Uniform System of Accounts, all natural gas companies 
subject to the Uniform System of Accounts, and all oil pipeline 
carriers subject to the Uniform System of Accounts.
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    2. Under the proposed rule, such cash management or money pool 
agreements must provide documentation for all deposits into, borrowings 
from, interest income from, and interest expenses to such money pools. 
Such documentation shall include evidences of: (1) Each deposit with a 
money pool, including the date of the deposit, the amount of the 
deposit, the maturity date, if any, of the deposit, and the interest 
earning rate on the deposit; (2) each borrowing from a money pool, 
including the date of the borrowing, the amount of the borrowing, the 
maturity date, if any, of the borrowing and the interest rate on the 
borrowing; (3) the security provided by the money pool for repayment of 
deposits into the money pool and the security required by the money 
pool in support of borrowings from the money pool; and (4) daily 
balances of deposits with and borrowings from the money pool for each 
individual deposit or borrowing. Cash deposits and borrowings may not 
be netted.
    3. Finally, the Commission is proposing that as a condition for 
participating in a cash management or money pool arrangement, the FERC-
regulated entity must maintain a minimum proprietary capital balance 
(stockholder's equity) of 30 percent, and the FERC-regulated entity and 
its parent must maintain investment grade credit ratings. If either of 
these conditions is not met, the FERC-regulated entity may not 
participate in the cash management or money pool arrangement.
    4. The proposed rule is in the public interest because it will 
permit FERC-regulated entities to benefit from properly structured cash 
management programs, while protecting customer interests.

II. Background

Cash Management Programs Generally

    5. The overall objective of a cash management program is to enhance 
owner value. Cash management arrangements can provide participants with 
greater financing flexibility and a lower cost of borrowing than would 
otherwise be available to small entities. These arrangements can help 
smaller affiliates within the group receive the same favorable rates as 
larger entities.
    6. There are several types of cash management programs. Some 
concentrate and transfer funds from multiple accounts into a single 
bank account in the parent company's name. Another type is known as 
``cash pooling'' or ``money pooling.'' This system uses a single 
summary account with interest earned or charged on the net cash balance 
position. There is no movement of funds between accounts of the 
entities participating in the pool. All accounts must be in the same 
bank, but not at the same branch. A third type, known as ``zero balance 
accounts,'' empty or fill the balances in affiliated companies' 
accounts at a bank into or out of a parent's account each day.
    7. In a typical zero balance program, excess funds are swept to a 
corporate concentration account every night from the regulated 
company's zero balance accounts, and an account receivable from the 
parent is established at the regulated company while an account payable 
is established at the parent company to record the transfer of funds. 
As part of the cash management program, the parent company provides the 
funds for payment of payroll and other expenditures of its subsidiaries 
from the funds that have been swept to the parent. The parent invests 
unspent funds in overnight investments so that the money of all the 
subsidiaries will be working for the company rather than being idle.
    8. Cash management programs are not without risk, however. Problems 
can arise over the respective rights to the concentration or pooled 
account when the parent company or its subsidiaries file for 
bankruptcy. Courts have ruled that funds swept into a parent company's 
concentration account become the property of the parent, and the 
subsidiary loses all interest in those funds.\7\
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    \7\ See, e.g., In the Matter of Southmark Corporation, 49 F.3d 
1111 (5th Cir. 1995), and In re Amdura Corporation, 75 F.3d 1447 
(10th Cir. 1996).
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    9. There is thus a potential for degradation of the financial 
solvency of regulated entities if non-regulated parent companies 
declare bankruptcy and default on the accounts payable, advances or 
borrowings owed to their regulated subsidiaries.

FERC Regulated Entities' Cash Management Programs

    10. In the fall of 2001, the Commission's Chief Accountant began a 
review of transactions between unregulated parent companies and their 
jurisdictional subsidiaries. Specifically, the balances in the cash 
account and accounts related to associated companies, reported in the 
FERC Forms 1, 2, and 6, were reviewed for the years 1997 through 2001. 
This review revealed that many companies had significant balances in 
Account 146--

[[Page 51152]]

Accounts Receivable from Associated Companies, and Account 13--
Receivables from Affiliated Companies, and that the balances in these 
accounts were significantly increasing over the period under review.
    11. As a result of the use of cash management programs and the 
increased balances in Account 146 identified by this initial review, 
the Chief Accountant began an audit in January 2002, to determine 
compliance with the Commission's accounting and reporting requirements 
for the years 2000 through 2001.
    12. In March 2002, the Commission initiated a non-public 
investigation by the Chief Accountant, Office of the Executive 
Director, and the Market Oversight and Enforcement section, Office of 
the General Counsel, regarding financial data related to transactions, 
activities and accounting practices that may have impaired the 
financial condition of entities subject to the Commission's 
jurisdiction to the benefit of corporate parents or other affiliates or 
associated entities of jurisdictional companies.
    13. The investigators reviewed transactions affecting Account 146--
Accounts Receivable from Associated Companies for gas and electric 
companies, and Account 13--Receivables from Affiliated Companies for 
oil companies. Based on FERC Forms 1, 2 and 6 data from 2001, balances 
in Accounts 146 and 13 totaled approximately $16 billion ($8.2 billion 
in public utility accounts, $2 billion in natural gas company accounts, 
and $5.7 billion in oil and product pipeline accounts). The preliminary 
results of the audit/investigation also revealed severe record-keeping 
deficiencies:
     Cash management agreements, generally and across the 
electric, gas and oil industries, have not been formalized in writing 
to stipulate the terms of the programs and the interest associated with 
the loans of the subsidiaries' cash.
     Interest may or may not have been paid to subsidiary 
companies by the parents.
     Budgets are not developed at the subsidiary level for 
capital expenditures and operations and maintenance expenses.
     Inter-company billings between parents and subsidiaries 
may have occurred at preferential rates not given to non-affiliated 
customers.

III. Legal Authority and Proposed Regulations

    14. The Commission is proposing to require clearly defined roles 
and responsibilities of all parties regarding transfers of cash, 
payments of bills, payments of interest, and the limitations to which 
funds can be taken from FERC-regulated subsidiaries. Cash management 
agreements must be reviewed and updated periodically to ensure that 
changes in corporate structure have not made the agreements obsolete.
    15. The Natural Gas Act (NGA) with respect to natural gas 
companies, and the Federal Power Act (FPA) with respect to public 
utilities, and the Interstate Commerce Act (ICA) with respect to oil 
pipeline carriers authorize the Commission to prescribe rules and 
regulations concerning accounts, records and memoranda as necessary or 
appropriate for the purposes of administering the FPA, NGA, and the 
ICA.\8\ The NGA and the FPA also empower the Commission, with respect 
to natural gas pipelines and public utilities, to ``perform any and all 
acts, and to prescribe, issue, make, amend, and rescind such orders, 
rules and regulations as it may find necessary or appropriate to carry 
out the provisions of [the] Act.'' Section 16 of the NGA, 15 U.S.C. 
717o, and section 309 of the FPA, 16 U.S.C. 825(h). Under the 
Interstate Commerce Act (ICA), the Commission may, with respect to oil 
and product pipelines ``prescribe the forms of any and all accounts, 
records, and memoranda to be kept by carriers * * * as well as of the 
receipts and expenditures of monies.'' ICC, Title 49 Appendix section 
20 (5), 49 App. U.S.C. 20 (5) (1988). The Commission also has the 
authority to perform the duties for which it was created ``to inquire 
into and report on the business of persons controlling, controlled by, 
or under a common control with such 
carriers * * *.'' ICA, Title 49 Appendix section 12, 49 App. U.S.C. 12 
(1988).
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    \8\ See n.1, supra.
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    16. The Commission proposes to revise Account 146 in parts 101 and 
201, and Account 13 in part 352 to provide instructions and conditions 
for the maintenance of cash management arrangements. Specifically, the 
Commission is requiring that all such arrangements be in writing. Such 
arrangements must specify the duties and responsibilities of cash 
management participants and the administrator, the methods of 
calculating interest and for allocating interest income and expenses, 
and the restrictions on deposits or borrowings by money pool members.
    17. Under the proposed rule, such cash management agreements must 
provide documentation for all deposits into, borrowings from, interest 
income from, and interest expenses related to such agreements. Such 
documentation shall include evidence of: (1) Each deposit with a money 
pool, including the date of the deposit, the amount of the deposit, the 
maturity date, if any, of the deposit, and the interest earning rate on 
the deposit; (2) each borrowing from a money pool, including the date 
of the borrowing, the amount of the borrowing, the maturity date, if 
any, of the borrowing and the interest rate on the borrowing; (3) the 
security provided by the money pool for repayment of deposits into the 
money pool and the security required by the money pool in support of 
borrowings from the money pool; and (4) daily balances of deposits with 
and borrowings from the money pool for each individual deposit or 
borrowing. Cash deposits and borrowings may not be netted.
    18. Because of the Commission's concern that such accounts not be 
used improperly so as to cause serious financial harm to FERC-regulated 
entities, and ultimately cause harm to the ratepayers, the Commission 
proposes that as a prerequisite to participating in a cash management 
arrangement, a FERC-regulated entity shall maintain a minimum 
proprietary capital balance of 30 percent,\9\ and the FERC-regulated 
entity and its parent must maintain investment grade credit 
ratings.\10\ If either of these conditions is no longer met, the FERC-
regulated entity may not participate in the cash management or money 
pool arrangement.
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    \9\ See Niagara Mohawk Holdings, Inc, 99 FERC para. 61,323 
(2002), where the Commission conditionally approved a requirement 
that a company maintain an equity balance equal to at least 30 
percent of capital.
    \10\ The term ``investment grade'' was originally used by 
regulatory bodies to connote obligations eligible for investment by 
institutions such as banks, insurance companies, and savings and 
loan associations. Over time, this term became widespread throughout 
the investment community. Debt issues rated in four highest 
categories (e.g., Standard & Poor's AAA, AA, A, and BBB rating, or 
Moody's Investors Service Aaa, Aa, and A and Baa rating are 
generally recognized as being investment grade. Lower rating 
categories are generally considered speculative.
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IV. Information Collection Statement

    19. The following collection of information contained in this 
proposed rule has been submitted to the Office of Management and Budget 
for emergency review under section 3507(j)(1) of the Paperwork 
Reduction Act of 1995, 44 U.S.C. 3507(j)(1). Comments are solicited on 
the Commission's need for this information, whether the information 
will have practical utility, the accuracy of provided burden estimates, 
ways to enhance quality, utility, and clarity of the information to

[[Page 51153]]

be collected, and any suggested methods for minimizing respondents' 
burden, including the use of automated information techniques.

Estimated Annual Burden

    At present it is unclear how many companies already have written 
agreements in place and would not be impacted by this rule. But there 
are a significant number of FERC-regulated entities that could be 
impacted by this rule because of their membership in consolidated 
groups and their participation in cash management arrangements. For 
this reason, the Commission projects the total hours for the following 
collections of information:

----------------------------------------------------------------------------------------------------------------
                                                          Estimated % that are
            Data collection                Number of          members of a            No. of       Total  annual
                                          respondents      consolidated group        responses         hrs.
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FERC-Form 1...........................             268  51% or 137 (approx).....             137             274
FERC Form 2...........................             133  85% or 113 (approx).....             113             226
FERC Form 6...........................             201  98.5% or 198 (approx)...             198             396
                                                                                                 ---------------
Totals................................                    ......................                             896
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Total Annual Hours for Collection

(Reporting + Recordkeeping, (if appropriate)) = 896 hours

    * This estimate is based on an average of 2 hours per respondent to 
convert verbal agreements into written agreements.
    Information Collection Costs: The Commission seeks comments on the 
costs to comply with these requirements. It has projected the cost for 
compliance to be the following: 896 hours  2,080  x  $117,041 = 
$50,418.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Annualized capital/startup costs.............................         $0
Annualized costs (Operations & Maintenance)..................    $50,418
                                                              ----------
  Total annualized costs.....................................    $50,418
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    The Office of Management and Budget's (OMB) regulations \11\ 
require OMB to approve certain information collection requirements 
imposed by agency rule. The Commission is submitting notification of 
this proposed rule to OMB.
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    \11\ 5 CFR 1320.11 (1996).
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    Title: FERC Form 1 Annual Report of Major Electric Utilities, 
Licensees and Others; FERC Form 2 Annual Report for Major Natural Gas 
Companies; FERC Form No. 6 Annual Report of Oil Pipeline Companies.
    Action: Proposed Collections.
    OMB Control No: 1902-0021; 1902-0028; and 1902-0022. [Note: The 
collections of information contained in this proposed rule are being 
submitted to OMB under OMB's emergency clearance procedures. These 
collections of information are also the subject of a separate 
proceeding in Docket No. RM02-3-000, and to avoid any delay in OMB's 
review of this proposed rule, the collections of information in this 
proposed rule will have a temporary designation of FERC-907. When the 
Commission issues a final rule, the collections of information will 
revert to their normal identifiers and control numbers.]
    Respondents: Business or other for profit.
    Frequency of Responses: On occasion.
    Necessity of the Information: The Commission proposes to revise its 
Uniform System of Accounts to establish the documentation necessary to 
disclose information on the management of funds from a FERC-regulated 
subsidiary by a non-regulated parent. Specifically, the Commission is 
requiring that all such cash management arrangements be in writing. 
Such arrangements must specify the duties and responsibilities of cash 
management participants and administrators, the methods of calculating 
the interest and for allocating interest income and expenses, and the 
restrictions on deposits and/or borrowing of money pool members. The 
Commission is also proposing that as a condition for participating in 
cash management arrangements, the FERC-regulated entity must maintain a 
minimum proprietary capital balance of 30 percent and the FERC-
regulated entity and its parent must maintain investment grade ratings.
    As a result of the Commission's investigations, it was found that 
cash management agreements, generally and across the electric, gas and 
oil industries have not been formalized in writing stipulating both the 
terms of the programs and the interest associated with the loans of the 
subsidiaries' cash. In addition, budgets are not developed at the 
subsidiary level for capital expenditures, operations and maintenance 
expenses and the interest that may or may not have been paid to 
subsidiary companies by the parent.
    The Commission is concerned that such accounts may be used so as 
create severe financial risk to FERC-regulated entities, and cause harm 
to rate payers should the subsidiaries attempt to pass through costs 
that result from defaults by unregulated parent companies, resulting in 
higher costs of capital.
    Internal Review: The Commission has reviewed the requirements 
pertaining to the Uniform System of Accounts and to the three financial 
reports it prescribes and has determined that the proposed revisions 
are necessary because the Commission needs to establish uniform 
accounting and reporting requirements for cash management arrangements.
    These requirements conform to the Commission's plan for efficient 
information collection, communication, and management within the 
electric, natural gas and oil pipeline industries. The Commission has 
assured itself, by means of internal review, that there is objective 
support for the burden estimates associated with the information 
requirements.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE, Washington, DC 20426, [Attention: 
Michael Miller, Office of the Chief Information Officer, Phone: (202) 
502-8415, fax: (202) 208-2425, e-mail: [email protected]]
    For submitting comments concerning the collection of information(s) 
and the associated burden estimate(s), please send your comments to the 
contact listed above and to the Office of Management and Budget, Office 
of Information and Regulatory Affairs, 725 17th Street, NW, Washington, 
DC 20503 [Attention: Desk Officer for the Federal Energy Regulatory 
Commission, phone (202) 395-7856, fax: (202) 395-7285.

V. Environmental Analysis

    20. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human

[[Page 51154]]

environment.\12\ The Commission excludes certain actions not having a 
significant effect on the human environment from the requirement to 
prepare an environmental impact statement.\13\ No environmental 
consideration is raised by the promulgation of a rule that is 
procedural or does not substantially change the effect of legislation 
or regulations being amended.\14\ The proposed rule updates Parts 101, 
201, and 352 of the Commission's regulations, and does not 
substantially change the effect of the underlying legislation or the 
regulations being revised or eliminated. Accordingly, no environmental 
consideration is necessary.
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    \12\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Prambles 1986-1990 para. 30,783 (1987).
    \13\ 18 CFR 380.4.
    \14\ 18 CFR 380.4(a)(2)(ii).
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VI. Regulatory Flexibility Act Statement

    21. The Regulatory Flexibility Act of 1980 (RFA) \15\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities. 
The Commission is not required to make such analyses if a rule would 
not have such an effect. The Commission concludes that this rule would 
not have such an impact on small entities. Most filing companies 
regulated by the Commission do not fall within the RFA's definition of 
a small entity, and the data required by this rule are already being 
captured by their accounting systems. However, if the reporting 
requirements represent an undue burden on small businesses, the entity 
affected may seek a waiver of the requirements from the Commission.
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    \15\ 5 U.S.C. 601-612.
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VII. Comment Procedures

    22. The Commission invites interested persons to submit written 
comments on the matters and issues proposed in this notice to be 
adopted, including any related matters or alternative proposals that 
commenters may wish to discuss. Comments are due 15 days from 
publication in the Federal Register. Comments must refer to Docket No. 
RM02-14-000, and may be filed either in electronic or paper format. 
Those filing electronically do not need to make a paper filing.
    23. Documents filed electronically via the Internet can be prepared 
in a variety of formats, including WordPerfect, MS Word, Portable 
Document Format, Real Text Format, or ASCII format, as listed on the 
Commission's web site at 
http://ferc.gov, under the e-Filing link. The e-Filing link provides 
instructions for how to Login and complete an electronic filing. First 
time users will have to establish a user name and password. The 
Commission will send an automatic acknowledgment to the sender's E-Mail 
address upon receipt of comments. User assistance for electronic filing 
is available at 202-208-0258 or by E-Mail to [email protected]. Comments 
should not be submitted to the E-Mail address.
    24. For paper filings, the original and 14 copies of such comments 
should be submitted to the Office of the Secretary, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington DC 20426.
    25. All comments will be placed in the Commission's public files 
and will be available for inspection in the Commission's Public 
Reference Room at 888 First Street, NE., Washington DC 20426, during 
regular business hours. Additionally, all comments may be viewed, 
printed, or downloaded remotely via the Internet through FERC's 
Homepage using the FERRIS link.

VIII. Document Availability

    26. 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 FERC's Home Page (http://www.ferc.gov) and in FERC's 
Public Reference Room during normal business hours (8:30 a.m. to 5 p.m. 
Eastern time) at 888 First Street, NE., Room 2A, Washington, DC 20426.
    27. From FERC's Home Page on the Internet, this information is 
available in the Federal Energy Regulatory Records Information System 
(FERRIS). The full text of this document is available on FERRIS in PDF 
and WordPerfect format for viewing, printing, and/or downloading. To 
access this document in FERRIS, type the docket number excluding the 
last three digits of this document in the docket number field.
    28. User assistance is available for FERRIS and the FERC's website 
during normal business hours from our Help line at (202) 208-2222 or 
the Public Reference Room at (202) 208-1371 Press 0, TTY (202) 208-
1659. E-Mail the Public Reference Room at 
[email protected].

List of Subjects

18 CFR Part 101

    Electric power, Electric utilities, Reporting and recordkeeping 
requirements, Uniform System of Accounts.

18 CFR Part 201

    Natural gas, Reporting and recordkeeping requirements, Uniform 
System of Accounts.

18 CFR Part 352

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

    By direction of the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
parts 101, 201, and 352, Title 18 of the Code of Federal Regulations, 
as follows:

PART 101--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR PUBLIC 
UTILITIES AND LICENSEES SUBJECT TO THE PROVISIONS OF THE FEDERAL 
POWER ACT

    1. The authority citation for part 101 continues to read as 
follows:

    Authority: 16 U.S.C. 791a-825r, 2601-2645; 31 U.S.C. 9701; 42 
U.S.C. 7101-7352, 7651-7651o.

    2. In part 101, Balance Sheet Accounts, account 146 is revised to 
read as follows:

Balance Sheet Accounts

* * * * *
    146  Accounts receivable from associated companies.
    A. These accounts shall include notes and drafts upon which 
associated companies are liable, and which mature and are expected to 
be paid in full not later than one year from the date of issue, 
together with any interest thereon, and debit balances subject to 
current settlement in open accounts with associated companies. Items 
which do not bear a specified due date but which have been carried for 
more than twelve months and items which are not paid within twelve 
months from the due date shall be transferred to account 123, 
Investment in Associated Companies.
    B. As a prerequisite for participating in a cash management or 
money pool arrangement, a utility shall maintain a minimum proprietary 
capital balance of 30 percent, and a utility and its parent must 
maintain an investment grade credit rating. If either of these 
requirements is not met, the utility may not participate in the cash 
management or money pool arrangement. A utility participating in a cash 
management or money pool arrangement shall maintain supporting 
documentation for all deposits into, borrowings from, interest income 
from, and interest expense to such money pool. The written 
documentation shall include evidences

[[Page 51155]]

of: (1) Each deposit with the money pool, including the date of the 
deposit, the amount of the deposit, the maturity date, if any, of the 
deposit, and the interest earning rate on the deposit; (2) each 
borrowing from a money pool, including the date of the borrowing, the 
amount of the borrowing, the maturity date, if any, of the borrowing 
and the interest rate on the borrowing; (3) the security provided by 
the money pool for repayment deposits into the money pool and the 
security required by the money pool in support of borrowings from the 
money pool; and (4) daily balances of deposits with and borrowings from 
the money pool for each individual deposit or borrowing. Cash deposits 
and borrowings may not be netted.
    C. The utility shall also maintain current and up-to-date copies of 
the documents authorizing the establishment of the cash management or 
money pool arrangement that specifies the following: (1) The duties and 
responsibilities of the money pool, its administrator and the other 
participants in the money pool; (2) the restrictions on deposits or 
borrowings by pool members, (3) the method used to determine the 
interest earning rates and interest borrowing rates by pool members; 
and (4) the method used to allocate interest income and expenses among 
the pool members.

    Note A: On the balance sheet, accounts receivable from an 
associated company may be set off against accounts payable to the 
same company.


    Note B: The face amount of notes receivable discounted, sold or 
transferred without releasing the utility from liability as endorser 
thereon, shall be credited to a separate subdivision of this account 
and appropriate disclosure shall be made in financial statements of 
any contingent liability arising from such transactions.

* * * * *

PART 201--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR NATURAL GAS 
COMPANIES SUBJECT TO THE PROVISIONS OF THE NATURAL GAS ACT

    3. The authority citation for part 201 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352, 
7651-7651o.

    4. In part 201, Balance Sheet Accounts, account 146 is revised to 
read as follows:

Balance Sheet Accounts

* * * * *
    146  Accounts receivable from associated companies.
    A. These accounts shall include notes and drafts upon which 
associated companies are liable, and which mature and are expected to 
be paid in full not later than one year from the date of issue, 
together with any interest thereon, and debit balances subject to 
current settlement in open accounts with associated companies. Items 
which do not bear a specified due date but which have been carried for 
more than twelve months and items which are not paid within twelve 
months from the due date shall be transferred to account 123, 
Investment in Associated Companies.
    B. As a prerequisite for participating in a cash management or 
money pool arrangement, a utility shall maintain a minimum proprietary 
capital balance of 30 percent and a utility and its parent must 
maintain an investment grade credit rating. If either of these 
requirements is not met, the utility may not participate in the cash 
management or money pool arrangement. A utility participating in a cash 
management or money pool arrangement shall maintain supporting 
documentation for all deposits into, borrowings from, interest income 
from, and interest expense to such money pool. The written 
documentation shall include evidences of: (1) Each deposit with the 
money pool, including the date of the deposit, the amount of the 
deposit, the maturity date, if any, of the deposit, and the interest 
earning rate on the deposit; (2) each borrowing from a money pool, 
including the date of the borrowing, the amount of the borrowing, the 
maturity date, if any, of the borrowing and the interest rate on the 
borrowing; (3) the security provided by the money pool for repayment 
deposits into the money pool and the security required by the money 
pool in support of borrowings from the money pool; and (4) daily 
balances of deposits with and borrowings from the money pool for each 
individual deposit or borrowing. Cash deposits and borrowings may not 
be netted.
    C. The utility shall also maintain current and up-to-date copies of 
the documents authorizing the establishment of the money pool that 
specifies the following: (1) The duties and responsibilities of the 
money pool, its administrator and the other participants in the money 
pool; (2) the restrictions on deposits or borrowings by pool members, 
(3) the method used to determine the interest earning rates and 
interest borrowing rates by pool members; and (4) the method used to 
allocate interest income and expenses among the pool members.

    Note A: On the balance sheet, accounts receivable from an 
associated company may be set off against accounts payable to the 
same company.


    Note B: The face amount of notes receivable discounted, sold or 
transferred without releasing the utility from liability as endorser 
thereon, shall be credited to a separate subdivision of this account 
and appropriate disclosure shall be made in financial statements of 
any contingent liability arising from such transactions.

* * * * *

PART 352--UNIFORM SYSTEM OF ACCOUNTS PRESCRIBED FOR OIL PIPELINE 
COMPANIES SUBJECT TO THE PROVISIONS OF THE INTERSTATE COMMERCE ACT

    5. The authority citation for part 352 continues to read as 
follows:

    Authority: 49 U.S.C. 60502; 49 App. U.S.C. 1-85 (1988).
* * * * *
    6. In part 352, Balance Sheet Accounts, account 13 is revised to 
read as follows:

Balance Sheet Accounts

* * * * *
    13  Receivables from affiliated companies.
    (a) This account shall include amounts receivable due and accrued 
from affiliated companies subject to settlement within one year from 
date of the balance sheet. This includes receivables for items such as 
revenue for services rendered, material furnished, rent, interest and 
dividends, advances and notes.
    (b) As a prerequisite for participating in a cash management or 
money pool arrangement, a carrier shall maintain a minimum proprietary 
capital balance of 30 percent, and a carrier and its parent must 
maintain an investment grade credit rating. If either of these 
requirements is not met, the carrier may not participate in the cash 
management or money pool arrangement. A carrier participating in a 
money pool arrangement shall maintain supporting documentation for all 
deposits into, borrowings from, interest income from, and interest 
expense to such money pool. The written documentation shall include 
evidences of: (1) Each deposit with the money pool, including the date 
of the deposit, the amount of the deposit, the maturity date, if any, 
of the deposit, and the interest earning rate on the deposit; (2) each 
borrowing from a money pool, including the date of the borrowing, the 
amount of the borrowing, the maturity date, if any, of the borrowing 
and the interest rate on the borrowing; (3) the security provided by 
the money pool for repayment deposits into the money pool and the 
security

[[Page 51156]]

required by the money pool in support of borrowings from the money 
pool; and (4) daily balances of deposits with and borrowings from the 
money pool for each individual deposit or borrowing. Cash deposits and 
borrowings may not be netted.
    (c) The carrier shall also maintain current and up-to-date copies 
of the documents authorizing the establishment of the money pool that 
specifies the following: (1) The duties and responsibilities of the 
money pool, its administrator and the other participants in the money 
pool; (2) the restrictions on deposits or borrowings by pool members, 
(3) the method used to determine the interest earning rates and 
interest borrowing rates by pool members; and (4) the method used to 
allocate interest income and expenses among the pool members.

[FR Doc. 02-20016 Filed 8-6-02; 8:45 am]
BILLING CODE 6717-01-P