[Federal Register Volume 68, Number 76 (Monday, April 21, 2003)]
[Rules and Regulations]
[Pages 19610-19701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-9260]



[[Page 19609]]

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Part II





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Parts 35, et al.



Accounting, Financial Reporting, and Rate Filing Requirements for Asset 
Retirement Obligations; Final Rule

  Federal Register / Vol. 68, No. 76 / Monday, April 21, 2003 / Rules 
and Regulations  

[[Page 19610]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 35, 101, 154, 201, 346, and 352

[Docket No. RM02-7-000, Order No. 631]


Accounting, Financial Reporting, and Rate Filing Requirements for 
Asset Retirement Obligations

Issued April 9, 2003.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission (Commission) is 
amending its regulations to update the accounting and financial 
reporting requirements for asset retirement obligations under its 
Uniform Systems of Accounts for public utilities and licensees, natural 
gas and oil pipeline companies.
    The Commission is establishing uniform accounting and financial 
reporting for the recognition and measurement of liabilities arising 
from retirement and decommissioning obligations of tangible long-lived 
assets, and related costs. More specifically, the Commission is adding 
new balance sheet accounts to record the liability and the related 
asset, new income statement accounts to record the accretion of the 
liability and the depreciation of the related asset, adding and 
revising as necessary the definitions, general and plant instructions 
contained in the Uniform Systems of Accounts. The Commission is also 
revising the following Annual Reports: FERC Form Nos. 1, 1-F, 2, 2-A, 
and 6 to include the new accounts contained in the Final Rule. Finally, 
the Commission is revising its rate filing requirements to address the 
above-mentioned changes.
    An important objective of the rule is to provide sound and uniform 
accounting and financial reporting for the above types of transactions 
and events. The new accounts and changes to the FERC Forms will add 
visibility, completeness and consistency of the accounting and 
reporting of liabilities for asset retirement obligations and the 
related asset retirement costs, the accretion expense on the liability 
and the depreciation expense on the capitalized asset retirement costs.

EFFECTIVE DATE: The rule will become effective May 21, 2003.

FOR FURTHER INFORMATION CONTACT: 
Mark Klose (Project Manager), Office of the Executive Director, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426, (202) 502-8283.
Raymond Reid (Technical Information), Office of the Executive Director, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6125.
Robert T. Catlin (Technical Information), Office of Markets, Tariffs, 
and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8754.
Julia A. Lake (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8370.

SUPPLEMENTARY INFORMATION: 
I. Introduction
II. Background
III. Discussion
    A. Accounting for the Cumulative Effect Adjustment
    B. Recognition of Regulatory Assets and Liabilities
    C. Authority To Adjust Accumulated Depreciation (Accounts 108 
and 110)
    D. Accounting for Cost of Removal That Does Not Constitute a 
Legal Obligation
    E. Accounts Established for Recording Accretion of Asset 
Retirement Obligations and Depreciation of Asset Retirement Costs
    F. Accounts for Recording Asset Retirement Costs
    G. Accounting for Gains and Losses for the Settlement of Asset 
Retirement Obligations Related to Electric and Gas Utility Plant
    H. Accounting for Gains and Losses for the Settlement of Asset 
Retirement Obligations Related to Nonutility Plant
    I. Other Accounting Matters
    J. Tariff Filing Requirements
    1. Tariff Filing Requirements Under 18 CFR part 35 and 18 CFR 
part 154
    2. Tariff Filing Requirements Under 18 CFR part 346
    K. Implementation for Accounting and Reporting Purposes
IV. FERC Annual Report Forms
V. Regulatory Flexibility Act Certification
VI. Environmental Impact Statement
VII. Information Collection Statement
VIII. Document Availability
IX. Effective Date and Congressional Notification
Regulatory Text
Appendix A--List of Commenters
Appendix B--Summary of Changes to Schedules for Forms 1, 1-F, 2, 2-
A, and 6
Appendix C--Revised Schedules for Forms 1, 1-F, 2, 2-A, and 6

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission) is 
revising its regulations to update the accounting, reporting and rate 
filing requirements. In a Notice of Proposed Rulemaking (NOPR) issued 
on October 30, 2002,\1\ the Commission proposed to revise its Uniform 
Systems of Accounts \2\ for public utilities and licensees,\3\ natural 
gas companies \4\ and oil pipeline companies \5\ by establishing 
uniform accounting requirements for the recognition of liabilities for 
legal obligations associated with the retirement of tangible long-lived 
assets and the associated capitalization of these amounts as part of 
the cost of the asset giving rise to the obligation.
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    \1\ 67 FR 69816 (Nov. 19, 2002) and 67 FR 70890 (Nov. 27, 2002), 
IV FERC Stats. & Regs. ] 32,565 (Oct. 30, 2002).
    \2\ 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 
(1988), 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 entities and, after notice and opportunity for 
hearing, may determine the accounts in which particular outlays and 
receipts will be entered, charged or credited.
    \3\ Part 101 Uniform System of Accounts Prescribed for Public 
Utilities and Licensees Subject to the Provisions of the Federal 
Power Act. See 18 CFR part 101 (2002).
    \4\ Part 201 Uniform System of Accounts Prescribed for Natural 
Gas Companies Subject to the Provisions of the Natural Gas Act. See 
18 CFR part 201 (2002).
    \5\ Part 352 Uniform System of Accounts Prescribed for Oil 
Pipeline Companies Subject to the Provisions of the Interstate 
Commerce Act. See 18 CFR part 352 (2002).
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    2. An asset retirement obligation is a liability resulting from a 
legal obligation to retire or decommission a plant asset. The types of 
work activities typically include removing or dismantling the asset. 
For example, public utilities have a legal liability to decommission 
nuclear plants under certain Nuclear Regulatory Commission (NRC) 
regulations. The type of activities may include the dismantlement and 
removal of the reactor vessel and the related contaminated facilities.
    3. After carefully considering the comments received, the 
Commission has determined that a Final Rule revising its accounting 
regulations, Annual Report Forms (FERC Form Nos. 1, 1-F, 2, 2-A and 6), 
and rate filing requirements for asset retirement obligations should be 
issued.
    4. The purpose of this Final Rule is to improve the usefulness and 
transparency of financial information provided to the Commission and 
other users of the FERC Forms by establishing uniform accounting and 
reporting requirements for legal obligations associated with the 
retirement of tangible long-lived assets. The Commission is of the view 
that such

[[Page 19611]]

requirements are needed because these types of transactions and events 
are not clearly or consistently reported. This rule is part of the 
Commission's ongoing effort to address emerging accounting developments 
within the context of the Uniform Systems of Accounts.
    5. The accounting for asset retirement obligations in this rule is 
consistent with the accounting and reporting requirements that 
jurisdictional entities will use in their general purpose financial 
statements provided to shareholders and the Securities Exchange 
Commission (e.g., companies will separately account and report the 
liability for the asset retirement obligations, capitalize the asset 
retirement costs, charge earnings for depreciation of the asset and 
charge operating expense for the accretion of the liability).
    6. The Commission is also revising its rate filing requirements to 
accommodate the above-mentioned changes. In that regard, the accounting 
for asset retirement obligations will not affect jurisdictional 
entities' ability to seek recovery of costs arising from asset 
retirement obligations in rates. However, if billings under formula 
rate tariffs are affected by the adoption of these accounting 
requirements, the jurisdictional entity must obtain approval from the 
Commission prior to implementing the change for tariff billing 
purposes.
    7. Finally, the Commission is revising the following Annual 
Reports: FERC Form No. 1, Annual Report of Major Public Utilities, 
Licensees and Others (Form 1); FERC Form No. 1-F, Annual Report of 
Nonmajor Public Utilities and Licensees (Form 1-F); FERC Form No. 2, 
Annual Report of Major Natural Gas Companies (Form 2); FERC Form No. 2-
A, Annual Report of Nonmajor Natural Gas Companies (Form 2-A); and FERC 
Form No. 6, Annual Report of Oil Pipeline Companies (Form 6) to include 
the new accounts and the revised schedules.\6\
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    \6\ The FERC Annual Reports bear the following OMB approval 
control numbers: Form 1 has OMB approval number 1902-0021; Form 1-F 
has OMB approval number 1902-0029; Form 2 has OMB approval number 
1902-0028; Form 2-A has OMB approval number 1902-0030; and Form 6 
has OMB approval number 1902-0022.
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II. Background

    8. The recognition and measurement of legal liabilities associated 
with the retirement and decommissioning of long-lived assets by various 
entities, including Commission jurisdictional entities, have been 
inconsistent over the years. Some jurisdictional entities do not 
recognize asset retirement obligations in their accounts while other 
jurisdictional entities only recognize the amounts included in the rate 
setting process as a component of accumulated depreciation. The 
Commission, in an effort to eliminate the inconsistencies in accounting 
practices by jurisdictional entities for asset retirement obligations, 
issued its October 30, 2002 Notice of Proposed Rulemaking to revise the 
accounting regulations, FERC Annual Report Forms and rate filing 
requirements for asset retirement obligations.\7\
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    \7\ See supra note 1.
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    9. The scope of the NOPR covered certain legal obligations 
associated with the future retirement of long-lived assets. These 
obligations, generally referred to as asset retirement obligations, are 
legal obligations associated with the retirement of a tangible long-
lived asset that an entity is required to settle as a result of an 
existing enacted law, statute, ordinance, or written or oral contract 
or by legal construction of a contract under the doctrine of promissory 
estoppel.\8\
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    \8\ See Financial Accounting Standards Statement (FAS) No. 143, 
Accounting for Asset Retirement Obligations, issued in June 2001. 
The accounting publication may be obtained from FASB at http://www.fasb.org/. Appendix A, paragraphs A2 through A5, contains a 
discussion of legal obligations.
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    10. In the NOPR, the Commission broadly set forth the proposed 
accounting framework for asset retirement obligations as follows:
    11. An entity essentially recognizes a liability for the fair value 
of an asset retirement obligation at the time the asset is constructed, 
acquired, or when a change in the law creates a legal obligation to 
perform the retirement activities. Upon initial recognition of that 
liability, an entity also increases the cost of the related asset that 
gives rise to the legal obligation by the same amount. The liability is 
increased over time until the actual retirement activity commences. 
Additionally, the asset retirement cost capitalized is depreciated over 
the same life of the related asset giving rise to the obligation. An 
entity is required to re-measure the liability due to the passage of 
time and certain other changes in the estimate of the liability.
    12. Entities will be required to recognize the liabilities for 
asset retirement obligations and the related costs as if the new 
standard had been in effect for all prior periods. The difference 
between the amounts at the date of adoption and the amounts previously 
recorded for these items are to be included in net income unless the 
criteria for recognition of regulatory assets or liabilities are met 
under Order No. 552.\9\
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    \9\ See Order No. 552, 58 FR 17982 (Apr. 7, 1993), FERC Stats. & 
Regs., Regulations Preambles January 1991-June 1996 ] 30,967 at pp. 
30,823-26 (Mar. 31, 1993) for guidance on the recognition of 
regulatory assets and regulatory liabilities when certain conditions 
are met.
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III. Discussion

    13. The Commission received 16 comments concerning various aspects 
of the proposed rule.\10\ The majority of the commenters were generally 
supportive of the Commission's effort to provide interpretative 
guidance on the application of generally accepted accounting principles 
to jurisdictional entities that presently file financial information 
with the Commission in Annual Report Forms 1, 1-F, 2, 2-A, and 6.\11\
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    \10\ See Appendix A for Listing of Commenters.
    \11\ See Arkansas PSC at p. 2, Deloitte & Touche at p. 1, 
FirstEnergy at p. 2, NASUCA at pp. 2-3, NRECA at pp. 3-4, Progress 
Energy at p. 1 and Southern at p. 1.
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    14. After careful consideration of the comments received, the 
Commission is adopting the changes and revisions as proposed with 
certain modifications and clarifications as discussed below.

A. Accounting for the Cumulative Effect Adjustment

    15. Upon initial implementation of the new accounting requirements 
for asset retirement obligations the Commission proposed that 
jurisdictional entities establish in their accounts all of the amounts 
that would have been recorded therein had these new requirements always 
been in effect. The NOPR referred to the accounting entries required to 
implement this part of the proposal as ``transition adjustments.'' In 
certain instances, the transition adjustments could result in a charge 
or credit to net income. This charge or credit is referred to as the 
``cumulative effect adjustment'' because it represents the cumulative 
difference between all amounts charged to net income for asset 
retirement obligations in past periods under the prior accounting 
method and what would have been charged to net income in those periods 
had these new accounting requirements set forth in the NOPR always been 
in effect. For rate regulated entities the cumulative effect adjustment 
amounts will be recognized as a regulatory asset or liability if the 
requirements of Commission Order No. 552 are met.\12\
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    \12\ See Order No. 552, supra note 9, for guidance on the 
recognition of regulatory assets and regulatory liabilities when 
certain conditions are met.
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    16. The Commission proposed to record the cumulative effect 
adjustment

[[Page 19612]]

in two separate amounts. The first portion of the cumulative effect 
adjustment assumes that all amounts included in the accumulated 
depreciation accounts for previously recognized legal retirement 
obligations will be considered depreciation of the asset retirement 
costs capitalized under the proposed rule. The difference between the 
amount included in the accumulated depreciation for previously 
recognized legal retirement obligations and the accumulated 
depreciation on the capitalized asset retirement costs recognized under 
the new accounting requirements will be charged or credited, as 
appropriate, to net income or recognized as a regulatory asset or 
liability if the requirements of Order No. 552 are met. The second 
portion of the cumulative effect adjustment assumes that all amounts 
related to the accretion of the liability for the asset retirement 
obligation under the new requirements would be charged to net income or 
recognized as a regulatory asset if the requirements of Order No. 552 
are met.
Comments Received
    17. Two commenters assert that the NOPR was unclear as to the 
initial implementation details of the proposed accounting rules and 
seek clarification of this matter in the final rule.\13\ The commenters 
request the Commission to clarify the components included in the 
cumulative effect adjustment. FirstEnergy asserts that the components 
of the cumulative effect adjustment may consist of the net of the 
cumulative accretion on the asset retirement obligation, the 
accumulated depreciation on the related capitalized asset retirement 
cost, and the reversal of any previously accrued legal retirement 
obligation.
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    \13\ See FirstEnergy at p. 2 and Progress Energy at p. 2.
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    18. FirstEnergy notes that the NOPR only addresses amounts included 
in accumulated depreciation for accruals of previously recognized legal 
retirement obligations of long-lived assets. The commenter submits that 
the Commission has permitted amounts related to legal liabilities 
associated with the retirement of assets to be recorded in a deferred 
credit or liability account rather than in accumulated depreciation. 
The commenter asserts further that accruals of previously recognized 
legal retirement obligations that were recorded in a deferred credit or 
in a liability account should be included in the computation of the 
cumulative effect adjustment in the final rule.
Commission Response
    19. The proposal to establish the cumulative effect adjustment was 
intended to simplify implementation of the accounting for asset 
retirement obligations. However, based on the comments received the 
Commission recognizes that the implementation proposal may have been 
confusing because the steps were somewhat different than the ones 
contained in FAS 143. However, the Commission notes that the cumulative 
effect determination under FAS 143 and this final rule will result in 
the use of the same components and produce the same cumulative effect 
adjustment amount.
    20. The Commission finds that since both approaches produce the 
same cumulative effect adjustment for asset retirement obligations, 
jurisdictional entities may recognize the initial application of the 
new accounting rules for the cumulative effect adjustment as the 
difference between the amounts of previously accrued accumulated legal 
obligations associated with the retirement of the asset recognized in 
the balance sheet prior to adopting the new accounting requirements and 
the amount that will be recognized on the balance sheet under the new 
accounting requirements. The Commission also finds that in order to 
properly determine the proper cumulative effect adjustment, 
jurisdictional entities must include the amounts of previously accrued 
accumulated legal obligations associated with the retirement of assets 
recorded in other deferred credits accounts or other liability accounts 
in the computation of the cumulative effect adjustment.

B. Recognition of Regulatory Assets and Liabilities

    21. The Commission proposed that public utilities, licensees and 
natural gas companies recognize regulatory assets and liabilities 
related to asset retirement obligations if the accounting requirements 
under Order No. 552 are met.\14\
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    \14\ See Order No. 552, supra note 9, for guidance on the 
recognition of regulatory assets and regulatory liabilities when 
certain conditions are met.
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Comments Received
    22. Several commenters request that the Commission clarify in the 
final rule the accounting for the recognition of regulatory assets and 
liabilities for the effects on financial operations related to the 
initial implementation and the period-to-period accounting for any 
difference between amounts charged to net income for expenses related 
to asset retirement obligations and the amounts recovered in rates for 
asset retirement obligation costs.\15\ The commenters assert that the 
proposed accounting for the recognition of the debit cumulative effect 
adjustment in account 182.3, Other regulatory assets, as a regulatory 
asset is not consistent with the accounting for the recognition of the 
credit cumulative effect adjustment as a regulatory liability in 
account 254, Other regulatory liabilities.\16\ The commenters suggest 
that inconsistency arises because the Commission required that a credit 
cumulative effect adjustment must be recorded as a regulatory liability 
in account 254, Other regulatory liabilities, while a debit cumulative 
effect adjustment must be charged to net income in account 435, 
Extraordinary deductions, or recorded as a regulatory asset in account 
182.3, Other regulatory assets, for part or all of the cumulative 
effect adjustment if the requirements of Order No. 552 are met. One 
commenter suggests that the Commission should provide for the recording 
of regulatory assets for debit cumulative effect adjustments as being 
probable of recovery as a general rule consistent with the Commission's 
proposed treatment of recording credit cumulative effect adjustments as 
regulatory liabilities.
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    \15\ See Deloitte & Touche at p. 1, EEI at pp. 3-4, Progress 
Energy at p. 2, and RUS at p. 3.
    \16\ See Deloitte & Touche at p. 1, EEI at pp. 3-4, Progress 
Energy at p. 2, and RUS at p. 3.
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    23. Additionally, one commenter recommends that the Commission 
incorporate the accounting for the recognition of regulatory assets and 
liabilities for the initial adoption and the period-to-period 
accounting for asset retirement obligations in the requirements of the 
Uniform Systems of Accounts under Parts 101 and 201.\17\
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    \17\ See EEI at p. 6.
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Commission Response
    24. The Commission declines to adopt the commenter's recommendation 
to amend the Uniform System of Accounts under part 101 and part 201 of 
the Commission regulations to include specific accounting instructions 
for the recognition of regulatory assets and liabilities for the 
initial adoption and the period-to-period accounting for asset 
retirement obligations. The accounting instruction for regulatory 
assets and liabilities as prescribed in the Uniform Systems of Accounts 
in part 101 and part 201 adequately addresses the requirements for 
regulatory assets or liabilities related to differences in the timing 
of recognition of asset retirement obligation expenses for financial

[[Page 19613]]

accounting purposes and their recovery in rates.
    25. The Commission established the accounting requirements for 
recording regulatory assets and liabilities as set forth in the Uniform 
Systems of Accounts in part 101 and part 201 pursuant to Commission 
Order No. 552.\18\ Under these requirements regulatory assets and 
liabilities are defined as assets and liabilities that result from 
ratemaking actions of regulators.\19\ Regulatory assets and liabilities 
generally arise from specific revenues, expenses, gains, or losses that 
would have been included in net income determinations in one period 
under the general requirements of the Uniform System of Accounts but 
for it being probable they will be included in a different period(s) 
for purposes of developing the rates the utility is authorized to 
charge for its utility services or in the case of regulatory 
liabilities, for refunds to customers, not provided for in other 
accounts, that will be required.\20\ The term ``probable,'' as used in 
Order No. 552 for the definition of regulatory assets or regulatory 
liabilities, refers to that which can be reasonably be expected or 
believed on the basis of available evidence or logic but is neither 
certain nor proved.\21\
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    \18\ See Order No. 552, supra note 9, for guidance on the 
recognition of regulatory assets and regulatory liabilities when 
certain conditions are met.
    \19\ See paragraph A of account 182.3, Other regulatory assets, 
and paragraph A of account 254, Other regulatory liabilities, in 18 
CFR part 101 (Public Utilities and Licensees), and paragraph A of 
account 182.3, Other regulatory assets, and paragraph A of account 
254, Other regulatory liabilities, in 18 CFR part 201 (Natural Gas 
Companies).
    \20\ See Definition 30 in 18 CFR part 101 (Public Utilities and 
Licensees), and Definition 30 in 18 CFR part 201 (Natural Gas 
Companies).
    \21\ See FERC Stats. & Regs., Regulations Preambles January 
1991-June 1996 ] 30,967 at 30,826 (1993).
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    26. Jurisdictional entities will initially recognize a cumulative 
effect adjustment and thereafter record the depreciation of the asset 
retirement costs in account 403.1, Depreciation expense for asset 
retirement costs, and the accretion of the liability for the asset 
retirement obligations in account 411.10, Accretion expense. The 
amounts for depreciation and accretion expense that will be recognized 
under the general requirements of the Uniform Systems of Accounts and 
the amount of asset retirement obligation costs included in cost of 
service for ratemaking purposes may be different. Recognition of such 
differences as regulatory assets and liabilities may be appropriate in 
some instances, but not in others. This determination however cannot be 
made in a generic accounting rulemaking proceeding. It must instead be 
made by each individual entity taking into consideration the 
jurisdictional entity's rate setting bodies, the specific agreements 
entered into between the jurisdictional entity and certain customers 
regarding the manner in which costs will be allocated among the parties 
or other relevant evidence. Therefore, if the requirements of Order No. 
552 are met, a jurisdictional entity must recognize regulatory assets 
and liabilities for the cumulative effect adjustment and any 
differences between the recognition of asset retirement obligation 
expenses for financial accounting purposes and their recovery in rates.

C. Authority To Adjust Accumulated Depreciation (Accounts 108 and 110)

    27. The Commission proposed granting public utilities, licensees 
and natural gas companies the requisite authority to remove any excess 
amounts \22\ from accounts 108 and 110 provided that the amounts were 
transferred to account 254, Other regulatory liabilities.\23\
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    \22\ This excess amount results when the amount of accumulated 
depreciation recognized for prior accrued legal retirement 
obligations is greater than the accumulated depreciation recognized 
on the capitalized asset retirement costs under the new 
requirements.
    \23\ See paragraph E to account 108, Accumulated provision for 
depreciation of electric utility plant (Major only), and paragraph E 
to account 110, Accumulated provision for depreciation and 
amortization of electric utility plant (Nonmajor only), in 18 CFR 
part 101 (Public Utilities and Licensees).
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Comments Received
    28. Certain commenters request that the Commission clarify the 
authority granted to jurisdictional entities to adjust the balances in 
accounts 108 and 110 for existing long-lived assets with legal 
retirement obligations.\24\ However, one commenter requests that the 
Commission provide explicit authority to remove all of the previously 
accrued amounts for legal obligations to retire or dispose of the long-
lived assets recorded in accounts 108 and 110. Another commenter 
requests the Commission allow transferring from accounts 108 and 110 to 
the new proposed account 230, Asset retirement obligations, any 
remaining amounts for previously accrued legal obligations to retire or 
dispose of the long-lived assets.
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    \24\ See EEI at pp. 2-3 and Progress Energy at p. 2.
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    29. Another commenter agrees with the Commission's pregranting 
authority to public utilities, licensees and natural gas companies for 
the removal of amounts from accumulated depreciation accounts 
associated with asset retirement obligations. However, the commenter 
asserts that the Commission should still require public utilities, 
licensees and natural gas companies to notify the Commission by 
submitting a description and journal entries related to such 
adjustments to the Commission for amounts transferred from accounts 108 
and 110 to account 254, Other regulatory liabilities, related to any 
existing asset with a legal retirement obligation.\25\
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    \25\ See MoPSC at p. 6.
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Commission Response
    30. After considering the comments, the Commission will grant 
jurisdictional entities the authority to adjust accounts 108, 110 and 
253 to properly recognize and record the liabilities for legal 
retirement obligations for existing assets, the asset retirement costs 
and related accumulated depreciation on the capitalized costs when the 
amounts that would otherwise be included in net income determinations 
meet the criteria for recognition as regulatory asset or liability.
    31. The Commission notes that there may be instances where 
adjustments to accounts 108, 110 and 253 may be required as a result of 
this final rule but the criteria for the recognition of a regulatory 
asset or liability for the net income effect is not met. While we 
permit jurisdictional entities to make such adjustments our actions 
here should not be construed as approval.\26\ Therefore, the Commission 
will require that jurisdictional entities file with the Commission 
their journal entries along with supporting information to record any 
adjustment that affects net income within 60 days of the effective date 
of this final rule. The filing must include a description and 
explanation of the full particulars for including the amounts in net 
income.
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    \26\ The income accounts used to record the cumulative effect 
adjustments are account 434, Extraordinary income, and account 435, 
Extraordinary deductions.
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    32. The filing must also include a statement by the public utility, 
licensee or natural gas company of the facts and circumstances and the 
explicit determinations made by the jurisdictional entity demonstrating 
that the amounts credited to net income are not required to be refunded 
to customers or required to be recorded as a regulatory liability and 
must be credited to net income and not included in account 254, Other 
regulatory liabilities.

[[Page 19614]]

D. Accounting for Cost of Removal That Does Not Constitute a Legal 
Obligation

    33. The Commission did not propose to change its accounting under 
parts 101, 201 and 352 for the cost of removal for amounts that result 
from other than asset retirement obligations.
Comments Received
    34. Several commenters request that the Commission specify in the 
final rule that any cost of removal for non-legal retirement 
obligations remain in accumulated depreciation.\27\ Certain other 
commenters suggest that the Commission should make certain 
modifications to the Uniforms Systems of Accounts under part 101 and 
part 201 to include the amount of cost of removal for non-legal 
obligations as regulatory liabilities in account 254, Other regulatory 
liabilities, instead of accumulated depreciation for public utilities, 
licensees and natural gas companies.\28\
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    \27\ See EEI at p. 3 and Southern at p. 2.
    \28\ See Deloitte & Touche at p. 2 and NASUCA at pp. 2-3.
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    35. One commenter recommends that the Commission exclude the cost 
of removal that does not qualify as a legal retirement obligation from 
the depreciation accrual and instead capitalize any removal costs 
related to the asset replaced as part of the costs of replacing the 
utility plant and if no replacement of the asset occurs, the cost of 
removal for non-legal retirement obligations should be expensed in the 
income statement.\29\
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    \29\ See NASUCA at pp. 15-17.
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Commission Response
    36. As proposed in the NOPR, the rule applies to legal obligations 
associated with the retirement of tangible long-lived assets. Under the 
existing requirements of the Uniform Systems of Accounts removal costs 
that are not asset retirement obligations are included as a component 
of the depreciation expense and recorded in accumulated 
depreciation.\30\ The Commission notes that certain jurisdictional 
entities may have been receiving specific allowances for cost of 
removal for non-legal retirement obligations as a specific component in 
their rates approved by their regulators. The Commission did not 
propose any changes to its existing accounting requirements for cost of 
removal for non-legal retirement obligations. Accordingly, 
jurisdictional entities are accounting for such costs consistent with 
the requirements of the Uniform Systems of Accounts under part 101 for 
public utilities and licensees, part 201 for natural gas companies and 
part 352 for oil pipeline companies.
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    \30\ See Definition 10 in 18 CFR part 101 (Public Utilities and 
Licensees), Definition 10 in 18 CFR part 201 (Natural Gas 
Companies), and Definition 12 in 18 CFR part 352 (Oil Pipeline 
Companies).
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    37. The purpose of this rule is to establish uniform accounting 
requirements for the recognition of liabilities for legal obligations 
associated with the retirement of tangible long-lived assets. The 
accounting for removal costs that do not qualify as legal retirement 
obligations falls outside the scope of this rule. The Commission is 
aware that there is an ongoing discussion in the accounting community 
as to whether the cost of removal should be considered as a component 
of depreciation. However, this issue is beyond the scope of this rule 
and we are not convinced that there is a need to fundamentally change 
accounting concepts at this time.
    38. Instead we will require jurisdictional entities to maintain 
separate subsidiary records for cost of removal for non-legal 
retirement obligations that are included as specific identifiable 
allowances recorded in accumulated depreciation in order to separately 
identify such information to facilitate external reporting and for 
regulatory analysis, and rate setting purposes. Therefore, the 
Commission is amending the instructions of accounts 108 and 110 in 
parts 101, 201 and account 31, Accrued depreciation--Carrier property, 
in part 352 to require jurisdictional entities to maintain separate 
subsidiary records for the purpose of identifying the amount of 
specific allowances collected in rates for non-legal retirement 
obligations included in the depreciation accruals.
    39. Jurisdictional entities must identify and quantify in separate 
subsidiary records the amounts, if any, of previous and current accrued 
accumulated removal costs for other than legal retirement obligations 
recorded as part of the depreciation accrual in accounts 108 and 110 
for public utilities and licensees, account 108 for natural gas 
companies, and account 31 for oil pipeline companies. If jurisdictional 
entities do not have the required records to separately identify such 
prior accruals for specific identifiable allowances collected in rates 
for non-legal asset retirement obligations recorded in accumulated 
depreciation, the Commission will require that the jurisdictional 
entities separately identify and quantify prospectively the amount of 
current accruals for specific allowances collected in rates for non-
legal retirement obligations.

E. Accounts Established for Recording Accretion of Asset Retirement 
Obligations and Depreciation of Asset Retirement Costs

    40. The Commission proposed to add a new income statement account 
entitled account 411.10, Accretion expense, in the Uniform Systems of 
Accounts in part 101 and part 201 to record the accretion of the 
liability for the asset retirement obligation. The Commission also 
proposed to add a new income statement account entitled account 403.1, 
Depreciation expense for asset retirement costs, in part 101 and part 
201 to identify the depreciation expense recorded for capitalized asset 
retirement costs.
Comments Received
    41. Certain commenters recommend that the Commission's proposed new 
account 411.10, Accretion expense, should be renumbered as either 
account 411.11 or an account number within the range of account 405, 
Amortization of other electric plant, through account 407, Amortization 
of property losses, unrecovered plant and regulatory study costs, which 
relate to the amortization of utility plant.
    42. Two commenters suggest that the Commission renumber its 
proposed new account 403.1 because it is already being used in the 
Rural Utilities Service's (RUS) Uniform System of Accounts.\31\ The 
commenters suggest that the Commission use account 403.9 to accommodate 
the Uniform System of Accounts of RUS for its electric 
cooperatives.\32\
---------------------------------------------------------------------------

    \31\ See RUS at p. 2 and NRECA at p. 6.
    \32\ See Rural Utilities Service of the United States Department 
of Agriculture (RUS) Uniform System of Accounts, 7 CFR part 1767, 
Accounting Requirements for RUS Electric Borrowers.
---------------------------------------------------------------------------

Commission Response
    43. The Commission will not renumber the chart of accounts. The 
accounting structure of the Uniform Systems of Accounts in part 101 and 
part 201 is designed to meet the accounting and reporting needs of this 
Commission. Users are permitted to adapt the Commission's Uniforms 
Systems of Accounts for their own needs by allowing them to create new 
accounts and subaccounts. Such company generated accounts however, must 
be reconciled if and when the Commission subsequently determines to use 
that account number for its regulatory purposes. Therefore, 
jurisdictional entities must reconcile their account numbers 
accordingly, to

[[Page 19615]]

the account numbers established by this rule.\33\
---------------------------------------------------------------------------

    \33\ See General Instruction 3.C, Account Numbering System, in 
18 CFR part 101 (Public Utilities and Licensees) and 18 CFR part 201 
(Natural Gas Companies).
---------------------------------------------------------------------------

F. Accounts for Recording Asset Retirement Costs

    44. The Commission proposed to add new primary plant accounts 
within each plant function to record the asset retirement costs.
Comments Received
    45. Certain commenters object to the Commission's proposed new 
primary plant accounts within account 101 in part 101 and part 201\34\ 
One commenter suggests the Commission create a new separate asset group 
called ``Asset Retirement Costs'' that separately identifies asset 
retirement costs in financial statements and would facilitate the 
exclusion of the asset retirement costs from the rate base in a rate 
change filing.
---------------------------------------------------------------------------

    \34\ See FirstEnergy at p. 1, MoPSC at pp. 4-5 and RUS at p. 2.
---------------------------------------------------------------------------

    46. Another commenter suggests that capitalizing asset retirement 
costs in the new primary plant accounts could result in increasing 
personal property taxes for three of its utility operating companies 
that operate in one state. The commenter recommends that the asset 
retirement costs should be recorded as an intangible cost within 
account 101 under part 101 and part 201 in primary plant account 303, 
Miscellaneous intangible plant. As an alternative, the commenter also 
recommends that the Commission include the word ``intangible'' in the 
account instructions of the new asset retirement cost primary plant 
accounts proposed by the Commission.
    47. One commenter suggests that the Commission's proposed new 
primary plant accounts entitled account 359.1, Asset retirement costs 
for transmission plant, and account 399.1, Asset retirement costs for 
general plant, should be renumbered to avoid leading users to expect 
these are subaccounts of account 359, Roads and trails, under the 
transmission plant function and 399, Other intangible plant, under the 
general plant function in part 101.\35\ The commenter suggests that the 
Commission use account 351 which is currently a reserved account in the 
list of accounts for the transmission plant function. The commenter 
also suggests that the Commission use account 388 which is currently 
not an account used in the list of accounts for the general plant 
function.
---------------------------------------------------------------------------

    \35\ See RUS at p. 2.
---------------------------------------------------------------------------

Commission Response
    48. The Commission finds that these recommendations are not 
consistent with the view that asset retirement costs are considered an 
integral part of the costs of the particular asset that gives rise to 
the asset retirement obligations, rather than separate and distinct 
assets.
    49. The Commission notes that commenters' suggestions will not 
result in properly classifying asset retirement costs within the 
utility plant function associated with the actual plant assets that 
give rise to the legal retirement obligations. This result would be at 
odds with one of the objectives of the final rule, which is to provide 
proper accounting for legal obligations associated with the retirement 
costs.

G. Accounting for Gains and Losses for the Settlement of Asset 
Retirement Obligations Related to Electric and Gas Utility Plant

    50. The Commission proposed to record gains or losses resulting 
from the settlement of asset retirement obligations for electric and 
gas utility plant in account 411.6, Gains from disposition of utility 
plant, and the account 411.7, Losses from disposition of utility plant, 
respectively.
Comments Received
    51. Many of the commenters did not object the Commission's proposed 
treatment for gains and losses resulting from the settlement of asset 
retirement obligations for electric and gas utility plant.\36\ Two 
commenters believe that the Commission's proposed treatment is 
inappropriate in the situation in which a jurisdictional entity has 
recorded, at the date of adoption of the final rule, a regulatory asset 
or liability for the full difference (including third party risk 
factor) between the asset retirement obligation determined for 
accounting purposes and the asset retirement obligation allowed for 
ratemaking purposes.\37\ In this situation the commenters assert it is 
appropriate to offset any remaining regulatory asset or liability 
balance associated with the specific asset retirement obligation 
against the remaining asset retirement obligation liability balance 
before recording a gain or loss.
---------------------------------------------------------------------------

    \36\ See EEI at p. 6 and Southern at p. 2.
    \37\ See FAS 143, paragraph A20, for a discussion of third party 
risk.
---------------------------------------------------------------------------

Commission Response
    52. The Commission notes that the offsetting of any remaining 
regulatory asset or liability balance associated with the specific 
asset retirement obligation against the remaining associated asset 
retirement obligation liability balance before recording a gain or loss 
on the settlement is not appropriate because each of these transactions 
is a separate and distinct accounting transaction, and accordingly, 
should be accounted for as such. Therefore, the Commission will adopt 
the accounting as provided for in the NOPR.

H. Accounting for Gains and Losses for the Settlement of Asset 
Retirement Obligations Related to Nonutility Plant

    53. The Commission proposed that any gains or losses relating to 
the settlement of asset retirement obligations for nonutility plant 
must be recorded directly in account 421, Miscellaneous nonoperating 
income, and account 426.5, Other deductions, respectively. The 
Commission also proposed to revise the text of accounts 421 and 426.5 
in part 101 and part 201 of the Commission's regulations.
Comments Received
    54. One commenter suggests that, although the use of these accounts 
are not necessarily objectionable, it would be more appropriate to 
record a gain or loss resulting from the settlement of asset retirement 
obligations for nonutility plant directly in account 421.1, Gain on 
disposition of property, or account 421.2, Loss on disposition of 
property, respectively.\38\
---------------------------------------------------------------------------

    \38\ See EEI at p. 6.
---------------------------------------------------------------------------

Commission Response
    55. The instructions to Accounts 421.1 and 421.2 provide for gains 
or losses on the sale, conveyance, exchange, or transfer of utility or 
other property to another.\39\ The settlement of an asset retirement 
obligation related to nonutility property does not result in the sale, 
conveyance, exchange, or transfer of such property to another party. 
Therefore, the Commission is of the view that the accounting for gains 
or losses resulting in the settlement of asset retirement obligations 
for nonutility property should be accounted for in accounts 421 and 
426.5 as provided for in the NOPR.
---------------------------------------------------------------------------

    \39\ See account 421.1, Gain on disposition of property, or 
account 421.2, Loss on disposition of property, in 18 CFR part 101 
(Public Utilities and Licensees) and 18 CFR part 201 (Natural Gas 
Companies).
---------------------------------------------------------------------------

I. Other Accounting Matters

    56. Certain commenters raised concerns or seek Commission guidance 
concerning the use of group depreciation for asset retirement

[[Page 19616]]

obligations, and on how a jurisdictional entity should estimate a 
credit-adjusted risk-free rate where an entity has not found a need to 
obtain a credit rating.\40\
---------------------------------------------------------------------------

    \40\ See Ferguson at p. 5 and NRECA at p. 6.
---------------------------------------------------------------------------

    57. The Commission will not make policy calls in this final rule 
concerning the above matters. These matters are better resolved on a 
case-by-case basis based on the facts and circumstances of each 
jurisdictional entity. Additionally, jurisdictional entities may seek 
clarification from the Commission's Chief Accountant concerning the 
proper application or implementation of any accounting standard under 
the Commission's regulations.\41\
---------------------------------------------------------------------------

    \41\ See General Instruction 5, Submittal of Questions, in 18 
CFR part 101 (Public Utilities and Licensees), General Instruction 
5, Submittal of Questions, in 18 CFR part 201 (Natural Gas 
Companies), and General Instruction 1-11, Interpretation of rules, 
in 18 CFR part 352 (Oil Pipeline Companies).
---------------------------------------------------------------------------

    58. Finally, one commenter suggests that the NOPR does not address 
the current accounting for realized earnings from trust funds that have 
been established for the purpose of ultimately discharging the 
liability for asset retirement obligations.\42\ The commenter notes 
that jurisdictional entities currently account for realized earnings on 
trust funds by crediting account 419, Interest and dividend income. The 
commenter recommends that the realized earnings on trust funds should 
be recorded to an appropriate above-the-line account.
---------------------------------------------------------------------------

    \42\ See EEI at p. 5.
---------------------------------------------------------------------------

    59. The Commission notes that under certain circumstances 
jurisdictional entities have placed in a special fund amounts deposited 
with a trustee for future activities such as the decommissioning of a 
nuclear plant. Amounts placed in a special fund for this type of 
activity are recorded in account 128, Other special funds. 
Additionally, under the requirements of the Uniform Systems of 
Accounts, interest revenues on securities, special deposits, and all 
other interest bearing assets included in other special fund accounts 
are recorded in Account 419, Interest and dividend income. Realized 
earnings on trust funds are nonoperating in nature and are properly 
included in account 419. Therefore, the Commission declines to amend 
the Uniform Systems of Accounts.

J. Tariff Filing Requirements

1. Tariff Filing Requirements Under 18 CFR Part 35 and 18 CFR Part 154
    60. In the NOPR, the Commission stated that the proposed rule will 
require public utilities, licensees or natural gas companies for 
accounting purposes to recognize asset retirement obligations. The 
Commission is not requiring jurisdictional entities with stated rate 
tariffs to make any tariff filings with the Commission due to this 
final rule at this time. However, public utilities, licensees and 
natural gas companies with formula rate tariffs must not include any 
cost components related to asset retirement obligations in their 
formula rate billing tariffs for automatic recovery in their billing 
determinations without obtaining Commission approval.
    61. Various commenters have expressed support and concerns or asked 
for Commission decisions with respect to issues concerning the possible 
rate impact of the proposed rule. Two commenters state their support 
for the Commission's proposed rate treatment of asset retirement 
obligations.\43\ Other commenters raised concerns or seek Commission 
policy calls concerning regulatory certainty for disposition of 
transition costs, external funds for amounts collected in rates for 
asset retirement obligations, adjustments to book depreciation rates 
for companies collecting cost of removal through current depreciation 
rates, the exclusion of accumulated depreciation and accretion for 
asset retirement obligations from rate base, recognizing previously 
established negative salvage allowances whether or not these retirement 
costs are recognized as asset retirement obligations, and the 
requirement of a detailed study in support of tariff filings reflecting 
asset retirement obligations.\44\
---------------------------------------------------------------------------

    \43\ See MoPSC at p. 4 and NRECA at p. 7.
    \44\ See Northern Natural at pp. 1-2, MoPSC at p. 5, Deloitte & 
Touche at pp. 1-2, EEI at p. 9, Southern at pp. 2-3, and Ferguson at 
pp. 5 and 8.
---------------------------------------------------------------------------

    62. The Commission finds that the issue of whether, and to what 
extent, a particular asset retirement cost must be recovered through 
jurisdictional rates should be addressed on a case-by-case basis in the 
individual rate change filed by public utilities, licensees, and 
natural gas companies. To ensure that all rate base amounts related to 
asset retirement obligations can be identified and excluded from the 
rate base calculation in a rate change filing, the Commission adds 
Sec.  Sec.  35.18 and 154.315 to its rate change filing requirements. 
These new regulations require that public utilities, licensees, and 
natural gas companies who have recorded an asset retirement obligation 
on their books in accordance with this rule must, as part of any 
initial rate filing or general rate change filing, provide a schedule 
identifying all cost components related to the asset retirement 
obligation that are included in the book balances of all accounts 
reflected in the cost of service computation supporting the proposed 
rates. In addition, the regulations require that all asset retirement 
obligations related rate base items be removed from the rate base 
computation through an adjustment. If the public utility, licensee or 
natural gas company is seeking recovery of an asset retirement 
obligation in rates, it must also provide a detailed study supporting 
the amounts proposed to be collected in rates. If the public utility, 
licensee or natural gas company is not seeking recovery of the asset 
retirement obligation in rates, then it must remove all asset 
retirement obligation related cost components from its cost of service.
    63. For natural gas companies currently collecting a negative 
salvage allowance in jurisdictional rates, negative salvage allowances 
that are not established due to an asset retirement obligation must be 
identified for rate making purposes separately from asset retirement 
obligation allowances. The current rate change filing requirement for 
natural gas companies at Sec.  154.312(d), Statement D, requires that 
any authorized negative salvage must be maintained in a separate 
subaccount of account 108, Accumulated provision for depreciation of 
gas utility plant. The Commission is amending this section to ensure 
that this subaccount does not include any amounts related to asset 
retirement obligations.
    64. The Commission will decline to make policy calls concerning 
regulatory certainty for disposition of transition costs, external 
funds for amounts collected in rates for asset retirement obligations, 
adjustments to book depreciation rates, and the exclusion of 
accumulated depreciation and accretion for asset retirement obligations 
from rate base are matters that are not subject to a one size fits all 
approach and are better resolved on a case-by-case basis in rate 
proceedings. The Commission is of the view that utilities will have the 
opportunity to seek recovery of qualified costs for asset retirement 
obligations in individual rate proceedings. This rule should not be 
construed as pregranted authority for rate recovery in a rate 
proceeding.
    65. Finally this rule requires nothing new and nothing more with 
respect to the requirement for a detailed study. Complex depreciation 
and negative salvage studies are routinely filed or otherwise made 
available for review in rate proceedings. When utilities perform 
depreciation studies, a certain amount of detail is expected. It is 
incumbent upon the utility to provide sufficient detail to support 
depreciation rates, cost

[[Page 19617]]

of removal, and salvage estimates included in rates.\45\ To the extent 
a utility believes materials are entitled to be non-public, protective 
orders are available to preserve confidentiality.
---------------------------------------------------------------------------

    \45\ When an electric utility files for a change in its 
jurisdictional rates, the Commission requires detailed studies in 
support of changes in annual depreciation rates if they are 
different from those supporting the utility's prior approved 
jurisdictional rate. (18 CFR 35.13(h)(10)(iv)).
---------------------------------------------------------------------------

2. Tariff Filing Requirements Under 18 CFR Part 346
    66. No comments were received objecting to the Commission's 
proposal to add a new Sec.  346.3 to cost-of-service filing 
requirements for oil pipelines. Therefore, the Commission is 
implementing the provisions as noticed in the NOPR.

K. Implementation for Accounting and Reporting Purposes

    67. The Commission proposed to implement the rule January 1, 2003, 
for accounting and reporting purposes for public utilities, licensees, 
natural gas companies and oil pipeline companies. This is the date 
jurisdictional entities that file FERC Forms 1, 1-F, 2, 2-A and 6, will 
measure the transition amounts for the asset retirement 
obligations.\46\ The Commission also proposed that the reporting will 
be implemented for the FERC Forms 1, 1-F, 2, 2-A and 6 for the 
reporting year 2003.\47\
---------------------------------------------------------------------------

    \46\ On February 20, 2002, the Commission's Chief Accountant 
issued interim guidance stating that jurisdictional entities may not 
adopt FAS 143 for financial accounting and reporting to the 
Commission before Commission action on this matter. See All 
Jurisdictional Public Utilities, Licensees, Natural Gas Companies, 
and Oil Pipeline Companies, 98 FERC ] 62,222 (2002).
    \47\ The FERC Forms 1-F and 2-A and 6 annual reports for the 
year 2003 are due on or before March 31, 2004. The FERC Forms 1 and 
2 annual reports for the year 2003 are due on or before April 30, 
2004.
---------------------------------------------------------------------------

Comments Received
    68. The majority of the commenters did not object to the 
Commission's proposed implementation date of January 1, 2003, for 
accounting and reporting purposes for public utilities, licensees, 
natural gas companies and oil pipeline companies. Two commenters assert 
that their fiscal year begins on April 1, 2003, rather than January 1, 
2003. The commenters request the Commission clarify this requirement 
given that their fiscal year does not coincide with the calendar year, 
which they use for FERC reporting purposes. Both commenters request 
that the Commission consider allowing them to implement the proposed 
rule for accounting and reporting purposes on April 1, 2003, rather 
than the earlier date of January 1, 2003. The commenters assert that 
this would avoid the issue of retroactively applying the accounting 
rule to fiscal years prior to January 1, 2003.
    69. One commenter recommends that the Commission allow 
jurisdictional entities to determine the differential in amounts 
between the two implementation dates, January 1, 2003 and the start of 
their fiscal year for FERC reporting purposes and footnote the 
difference in their FERC Annual Report.
Commission Response
    70. The Commission is adopting the provisions in the NOPR for 
implementing the final rule for accounting and reporting purposes on 
January 1, 2003, except as clarified below for jurisdictional entities 
whose fiscal year begins after January 1, 2003. Upon considering the 
comments on this issue, the Commission will permit a jurisdictional 
entity for whose fiscal year begins after January 1, 2003, to apply the 
final rule on the first day of their fiscal year rather than on January 
1, 2003 for accounting purposes and reporting in the FERC Forms 1, 1-F, 
2, 2-A and 6 for the reporting year 2003. In adopting this provision, 
the Commission will require jurisdictional entities to determine the 
differential in amounts between the two implementation dates, January 
1, 2003 and the jurisdictional entity's first day of their fiscal year 
of the adoption of the final rule in calendar year 2003 for accounting 
and FERC reporting purposes and footnote the difference in the FERC 
Annual Report for the reporting year 2003. Jurisdictional entities with 
fiscal years will continue to report to the Commission in FERC Annual 
Reports on a calendar year basis.

IV. FERC Annual Report Forms

    71. The Commission proposed changes revising the existing schedules 
in the FERC Forms 1, 1-F, 2, 2-A, and 6 filed with the Commission. A 
table summarizing the changes to the various schedules is shown in 
Appendix B. The Commission also proposed that jurisdictional entities 
include certain disclosure for asset retirement obligations in the 
``Notes to Financial Statements'' in the FERC Forms 1, 1-F, 2, 2-A and 
6.\48\
---------------------------------------------------------------------------

    \48\ See the instructions to the Notes to Financial Statements 
schedule for FERC Forms 1, 1-F, 2, 2-A and 6 that requires 
respondents to report important notes and information related to the 
financial statements.
---------------------------------------------------------------------------

    72. No commenters object to the Commission's proposed revisions to 
the existing schedules in the FERC Annual Report and the proposed 
disclosure for asset retirement obligations in the ``Notes to Financial 
Statements'' in FERC Annual Reports. Therefore, the Commission will 
adopt the provisions as noticed.

V. Regulatory Flexibility Act Certification

    73. The Regulatory Flexibility Act (RFA) requires agencies to 
prepare certain statements, descriptions, and analyses of rules that 
will have a significant economic impact on a substantial number of 
small entities.\49\ The Commission is not required to make such 
analyses if a rule would not have such an effect.
---------------------------------------------------------------------------

    \49\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    74. The Commission does not believe that this rule will 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.\50\ Further, the Commission concludes that this reporting would 
not be a significant burden because the information jurisdictional 
entities will be required to report to the Commission specifically 
focuses on the activities of the jurisdictional entities that will be 
captured in their accounting systems and generally be reported to their 
shareholders and others at a company, or at a consolidated business 
level. Therefore, the Commission certifies that this rule will not have 
a significant economic impact on a substantial number of small 
entities.
---------------------------------------------------------------------------

    \50\ 5 U.S.C. 601(3), citing to section 3 of the Small Business 
Act, 15 U.S.C. 632. Section 3 of the Small Business Act defines a 
``small-business concern'' as a business which is independently 
owned and operated and which is not dominant in its field of 
operation.
---------------------------------------------------------------------------

    75. However, if the reporting requirements represent an undue 
burden on small businesses, the entity affected may seek a waiver of 
the disclosure requirements from the Commission.

VI. Environmental Impact Statement

    76. Commission regulations require that an environmental assessment 
or an environmental impact statement be prepared for any Commission 
action that may have a significant adverse effect on the human 
environment.\51\ No environmental consideration is necessary for the 
promulgation of a rule that is clarifying, corrective, or procedural or 
does not substantially change the effect of legislation or regulation 
being amended,\52\ and also

[[Page 19618]]

for information gathering, analysis, and dissemination.\53\ The rule 
updates the Parts 35, 101, 154, 201, 346 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. 
In addition, the final rule involves information gathering, analysis 
and dissemination. Therefore, this final rule falls within categorical 
exemptions provided in the Commission's regulations. Consequently, 
neither an environmental impact statement nor an environmental 
assessment is required.
---------------------------------------------------------------------------

    \51\ Regulations Implementing National Environmental Policy Act, 
52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. ] 30,783 (1987).
    \52\ 18 CFR 380.4(a)(2)(ii).
    \53\ 18 CFR 380.4(a)(5).
---------------------------------------------------------------------------

VII. Information Collection Statement

    77. The Office of Management and Budget's (OMB) regulations in 5 
CFR 1320.11 require that it approve certain reporting and recordkeeping 
requirements (collections of information) imposed by an agency. Upon 
approval of a collection of information, OMB will assign an OMB control 
number and an expiration date. Respondents subject to the filing 
requirements of this Rule will not be penalized for failing to respond 
to these collections of information unless the collections of 
information display a valid OMB control number.
    78. The final rule will affect the following current data 
collections: FERC Form(s) 1, 1-F, 2, 2-A and 6, FERC-516 and FERC-545. 
In accordance with Section 3507(d) of the Paperwork Reduction Act of 
1995,\54\ the data requirements in the subject rule have been submitted 
to OMB for review.
---------------------------------------------------------------------------

    \54\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    Public Reporting Burden: The Commission provided burden estimates 
in order to implement the proposed requirements. Of the 16 commenters 
who responded to the NOPR, only one made specific comment concerning 
the Commission's burden estimates. This one commenter has misconstrued 
the intent of the rule to impose more time consuming requirements 
(e.g., group depreciation method) than the final rule actually imposes. 
The Commission's responses to these comments are being addressed 
elsewhere in the final rule. The proposed requirements coincide with 
procedures already established by FAS 143 for companies to recognize a 
liability at fair value on their financial statements for a retirement 
obligation when it has occurred. The Commission is merely adjusting 
these industry standards to coordinate with its Uniform Systems of 
Accounts.

----------------------------------------------------------------------------------------------------------------
                                                                      No. of
                 Data collection                      No. of       responses per     Hours per     Total annual
                                                    respondents     respondent       response          hours
----------------------------------------------------------------------------------------------------------------
Form 1..........................................             216             216              17           3,672
Form 1-F........................................              27              27               8             216
Form 2..........................................              57              57              13             741
Form 2-A........................................              53              53               8             424
Form 6..........................................             159             159              10           1,590
                                                 -----------------
Totals..........................................             512             512  ..............           6,643
----------------------------------------------------------------------------------------------------------------

    The total annual hours for these collections is 6,643 hours.
    Information Collection Costs: The Commission is projecting only the 
costs associated with implementing the requirements of this rule.
    Annualized Capital/Startup Costs: 6,643 hours / 2,080 hours x 
$117,041 = $373,800.
    Annualized Costs (Operations & Maintenance): It should be noted 
that the burden and corresponding costs of this final rule are to be 
implemented by jurisdictional entities to comply with the Commission's 
Uniform System of Accounts. These entities must already maintain much 
of this information in order to implement generally accepted accounting 
principles. The burden and corresponding costs are to account for only 
where there are differences between the generally accepted accounting 
principles and the Uniform System of Accounts.
    79. FERC Information Collections FERC-516 and FERC-545 are also 
referenced because jurisdictional entities will be required to provide 
supporting documentation for the amounts to be collected in their rates 
when an asset retirement obligation has been recorded. This 
documentation is no different than jurisdictional entities already 
prepare in their detailed studies as currently required by the 
Commission to support changes in annual depreciation rates. The 
Commission is not requiring additional information as jurisdictional 
entities already prepare this information when quantifying studies and 
analyses on the cost of removal of an asset retirement obligation. 
Therefore, the Commission does anticipate that additional burden will 
be imposed under these two information collections.
    80. The Commission has assured itself, by means of internal review, 
that there is specific, objective support for the burden estimates 
associated with the information requirements.
    Title: FERC Form 1 ``Annual Report of Major Electric Utilities, 
Licensees and Others''; FERC Form 1-F ``Annual Report of Nonmajor 
Public Utilities and Licensees''; FERC Form 2 ``Annual Report of Major 
Natural Gas Companies''; FERC Form 2-A ``Annual Report of Nonmajor 
Natural Gas Companies''; FERC Form 6 ``Annual Report of Oil Pipeline 
Companies''; FERC-516 ``Electric Rate Schedule Filings''; FERC-545 
``Gas Pipeline Rates: Rate Change.''
    Action: Proposed data collections.
    OMB Control Nos.: 1902-0021; 1902-0029; 1902-0028; 1902-0030; 1902-
0022, 1902-0016 and 1902-0154.
    Respondents: Public Utilities; Natural Gas Companies; oil pipeline 
companies (Business or other for profit, including small businesses).
    Frequency of the information: Annually.
    Necessity of the Information: The final rule amends the 
Commission's regulations to revise parts 35, 101, 154, 201, 346 and 352 
of its regulations. The final rule amends the Commission's Uniform 
System of Accounts to revise or create definitions, instructions, 
balance sheet and income statement accounts. The addition of new 
accounts and changes to FERC Forms will add visibility, completeness 
and consistency of the accounting and reporting of liabilities for 
asset retirement obligations and the related asset retirement costs 
capitalized. The implementation of these requirements will enable the 
Commission to carry out its responsibilities under the FPA, NGA and ICA 
to ensure the protection of ratepayers. The Commission is of the view 
that such requirements are needed because the disclosures of these lack 
uniformity. For example, jurisdictional

[[Page 19619]]

entities subject to the Commission's requirements use different 
approaches for accounting for retirement costs. Public utilities 
perform depreciation studies to support changes in their rates for the 
decommissioning of a nuclear facility as periodic depreciation expense 
while oil pipeline companies have used depletion rates for abandonment 
and removal of offshore facilities. The final rule will improve the 
consistency in the accounting and reporting of legal obligations to 
retire tangible long-lived assets by requiring entities to recognize at 
the onset the fair value of the liability. This information will 
provide a more transparent financial statement disclosure of the costs 
related to the legal obligation in the FERC Annual Reports.
    81. 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 Executive Director, ED-30, (202) 502-
8415, or [email protected]] or by sending comments on the 
collections of information to the Office of Management and Budget, 
Office of Information and Regulatory Affairs, Attention: Desk Officer 
for the Federal Energy Regulatory Commission, 725 17th Street, NW., 
Washington, DC 20503. The Desk Officer can also be reached at (202) 
395-7856, or fax: (202) 395-7285.

VIII. Document Availability

    82. 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.
    83. 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 of this 
document, excluding the last three digits in the docket number field. 
User assistance is available for FERRIS and the FERC's Web site during 
normal business hours from FERC Online Support at 
[email protected] or toll free at (866) 208-3676 or for TTY, 
contact (202) 502-8659.

IX. Effective Date and Congressional Notification

    84. This Final Rule will take effect May 21, 2003. The Commission 
has determined, with the concurrence of the Administrator of the Office 
of Information and Regulatory Affairs of the Office of Management and 
Budget, that this rule is not a ``major rule'' within the meaning of 
section 251 of the Small Business Regulatory Enforcement Fairness Act 
of 1996.\55\ The Commission will submit the Final Rule to both houses 
of Congress and the General Accounting Office.\56\
---------------------------------------------------------------------------

    \55\ 5 U.S.C. 804(2).
    \56\ 5 U.S.C. 801(a)(1)(A).
---------------------------------------------------------------------------

List of Subjects

18 CFR Part 35

    Electric power rates, Electric utilities, Electricity, Reporting 
and recordkeeping requirements.

18 CFR Part 101

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

18 CFR Part 154

    Alaska, Natural gas, Natural gas companies, Pipelines, Rate 
schedules and tariffs, Reporting and recordkeeping requirements.

18 CFR Part 201

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

18 CFR Part 346

    Pipelines, Reporting and recordkeeping requirements.

18 CFR Part 352

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

    By the Commission.
Magalie R. Salas,
Secretary.

    In consideration of the foregoing, the Commission amends parts 35, 
101, 154, 201, 346 and 352, Chapter I, Title 18, Code of Federal 
Regulations, as follows.

Regulatory Text

PART 35--FILING OF RATE SCHEDULES

0
1. The authority citation for part 35 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.


0
2. Section 35.18 is added to read as follows:


Sec.  35.18  Asset retirement obligations.

    (a) A public utility that files a rate schedule under Sec.  35.12 
or Sec.  35.13 and has recorded an asset retirement obligation on its 
books must provide a schedule, as part of the supporting work papers, 
identifying all cost components related to the asset retirement 
obligations that are included in the book balances of all accounts 
reflected in the cost of service computation supporting the proposed 
rates. However, all cost components related to asset retirement 
obligations that would impact the calculation of rate base, such as 
electric plant and related accumulated depreciation and accumulated 
deferred income taxes, may not be reflected in rates and must be 
removed from the rate base calculation through a single adjustment.
    (b) A public utility seeking to recover nonrate base costs related 
to asset retirement costs in rates must provide, with its filing under 
Sec.  35.12 or Sec.  35.13, a detailed study supporting the amounts 
proposed to be collected in rates.
    (c) A public utility that has recorded asset retirement obligations 
on its books, but is not seeking recovery of the asset retirement costs 
in rates, must remove all asset-retirement-obligations-related cost 
components from the cost of service supporting its proposed rates.

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

0
3. 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.

0
4. In Definitions, Definition 10 is revised to read as follows:

Definitions

* * * * *
    10. Cost of removal means the cost of demolishing, dismantling, 
tearing down or otherwise removing electric plant, including the cost 
of transportation and handling incidental thereto. It does not include 
the cost of removal activities associated with asset retirement 
obligations that are capitalized as part of the tangible long-lived 
assets that give rise to the obligation. (See General Instruction 25).
* * * * *

[[Page 19620]]


0
5. In General Instructions, Instruction 20, paragraphs C. and D. are 
redesignated as paragraphs D. and E. and new paragraph C. is added; and 
a new Instruction 25 is added to read as follows:

General Instructions

* * * * *
    20. Accounting for leases.
* * * * *
    C. The utility, as a lessee, shall recognize an asset retirement 
obligation (See General Instruction 25) arising from the plant under a 
capital lease unless the obligation is recorded as an asset and 
liability under a capital lease. The utility shall record the asset 
retirement cost by debiting account 101.1, Property under capital 
leases, or account 120.6, Nuclear fuel under capital leases, or account 
121, Nonutility property, as appropriate, and crediting the liability 
for the asset retirement obligation in account 230, Asset retirement 
obligations. Asset retirement costs recorded in account 101.1, account 
120.6, or account 121 shall be amortized by charging rent expense (See 
Operating Expense Instruction 3), or account 518, Nuclear fuel expense 
(Major only), or account 421, Miscellaneous nonoperating income, as 
appropriate, and crediting a separate subaccount of the account in 
which the asset retirement costs are recorded. Charges for the periodic 
accretion of the liability in account 230, Asset retirement 
obligations, shall be recorded by a charge to account 411.10, Accretion 
expense, for electric utility plant, and account 421, Miscellaneous 
nonoperating income, for nonutility plant and a credit to account 230, 
Asset retirement obligations.
* * * * *
    25. Accounting for asset retirement obligations.
    A. An asset retirement obligation represents a liability for the 
legal obligation associated with the retirement of a tangible long-
lived asset that a company is required to settle as a result of an 
existing or enacted law, statute, ordinance, or written or oral 
contract or by legal construction of a contract under the doctrine of 
promissory estoppel. An asset retirement cost represents the amount 
capitalized when the liability is recognized for the long-lived asset 
that gives rise to the legal obligation. The amount recognized for the 
liability and an associated asset retirement cost shall be stated at 
the fair value of the asset retirement obligation in the period in 
which the obligation is incurred.
    B. The utility shall initially record a liability for an asset 
retirement obligation in account 230, Asset retirement obligations, and 
charge the associated asset retirement costs to electric utility plant 
(including accounts 101.1 and 120.6), and nonutility plant, as 
appropriate, related to the plant that gives rise to the legal 
obligation. The asset retirement cost shall be depreciated over the 
useful life of the related asset that gives rise to the obligations. 
For periods subsequent to the initial recording of the asset retirement 
obligation, a utility shall recognize the period to period changes of 
the asset retirement obligation that result from the passage of time 
due to the accretion of the liability and any subsequent measurement 
changes to the initial liability for the legal obligation recorded in 
account 230, Asset retirement obligations, as follows:
    (1) The utility shall record the accretion of the liability by 
debiting account 411.10, Accretion expense, for electric utility plant, 
account 413, Expenses of electric plant leased to others, for electric 
plant leased to others, and account 421, Miscellaneous nonoperating 
income, for nonutility plant and crediting account 230, Asset 
retirement obligations; and
    (2) The utility shall recognize any subsequent measurement changes 
of the liability initially recorded in account 230, Asset retirement 
obligations, for each specific asset retirement obligation as an 
adjustment of that liability in account 230 with the corresponding 
adjustment to electric utility plant, electric plant leased to others, 
and nonutility plant, as appropriate. The utility shall on a timely 
basis monitor any measurement changes of the asset retirement 
obligations.
    C. Gains or losses resulting from the settlement of asset 
retirement obligations associated with utility plant resulting from the 
difference between the amount of the liability for the asset retirement 
obligation included in account 230, Asset retirement obligations, and 
the actual amount paid to settle the obligation shall be accounted for 
as follows:
    (1) Gains shall be credited to account 411.6, Gains from 
disposition of utility plant, and;
    (2) Losses shall be charged to account 411.7, Losses from 
disposition of utility plant.
    D. Gains or losses on the settlement of asset retirement 
obligations associated with nonutility plant resulting from the 
difference between the amount of the liability for the asset retirement 
obligation in account 230, Asset retirement obligations, and the amount 
paid to settle the obligation, shall be accounted for as follows:
    (1) Gains shall be credited to account 421, Miscellaneous 
nonoperating income, and;
    (2) Losses shall be charged to account 426.5, Other deductions.
    E. Separate subsidiary records shall be maintained for each asset 
retirement obligation showing the initial liability and associated 
asset retirement cost, any incremental amounts of the liability 
incurred in subsequent reporting periods for additional layers of the 
original liability and related asset retirement cost, the accretion of 
the liability, the subsequent measurement changes to the asset 
retirement obligation, the depreciation and amortization of the asset 
retirement costs and related accumulated depreciation, and the 
settlement date and actual amount paid to settle the obligation. For 
purposes of analyses a utility shall maintain supporting documentation 
so as to be able to furnish accurately and expeditiously with respect 
to each asset retirement obligation the full details of the identity 
and nature of the legal obligation, the year incurred, the identity of 
the plant giving rise to the obligation, the full particulars relating 
to each component and supporting computations related to the 
measurement of the asset retirement obligation.
* * * * *

0
6. In Electric Plant Instructions, paragraph 3.A.(17)(a) the W element 
is revised; and a new paragraph 3.A.(21) is added to read as follows:

Electric Plant Instructions

* * * * *
    3. Components of construction cost.
    A. * * *
    (17) * * *
    (a) * * *
    W = Average balance in construction work in progress plus nuclear 
fuel in process of refinement, conversion, enrichment and fabrication, 
less asset retirement costs (See General Instruction 25) related to 
plant under construction.
* * * * *
    (21) Asset retirement costs. The costs recognized as a result of 
asset retirement obligations incurred during the construction and 
testing of utility plant shall constitute a component of construction 
costs.
* * * * *

0
7. Balance Sheet Accounts are amended as follows:
0
(a) Account 101.1 is amended by adding a sentence to the end of 
paragraph C.;
0
(b) Account 103 paragraph C. is revised;

[[Page 19621]]

0
(c) Account 108 paragraph A.(2) through A.(7) are redesignated as 
paragraphs A.(3) through A.(8), a new paragraph A.(2) is added, and 
paragraph C. is amended by adding a sentence to the end of the 
paragraph;
0
(d) Account 110 paragraph A.(2) through A.(4) are redesignated as 
paragraphs A.(3) through A.(5), a new paragraph A.(2) is added, and 
paragraph C. is amended by adding a sentence to the end of the 
paragraph;
0
(e) Account 121, paragraph A. is amended by adding a sentence to the 
end of the paragraph; and
0
(f) Account 230 is added.
    The revision and additions read as follows:

Balance Sheet Accounts

* * * * *

101.1 Property under capital leases.

* * * * *
    C. * * * Records shall also be maintained for plant under a lease, 
to identify the asset retirement obligation and cost originally 
recognized for each lease and the periodic charges and credits made to 
the asset retirement obligations and asset retirement costs.
* * * * *

103 Experimental electric plant unclassified (Major only).

* * * * *
    C. The depreciation on plant in this account shall be charged to 
account 403, Depreciation expense, and account 403.1, Depreciation 
expense for asset retirement costs, as appropriate, and credited to 
account 108, Accumulated provision for depreciation of electric utility 
plant (Major only). The amounts herein shall be depreciated over a 
period which corresponds to the estimated useful life of the relevant 
project considering the characteristics involved. However, when 
projects are transferred to account 101, Electric plant in service, a 
new depreciation rate based on the remaining service life and 
undepreciated amounts, will be established.
* * * * *

108 Accumulated provision for depreciation of electric utility plant 
(Major only).

    A. * * *
    (2) Amounts charged to account 403.1, Depreciation expense for 
asset retirement costs, for current depreciation expense related to 
asset retirement costs in electric plant in service in a separate 
subaccount.
* * * * *
    C. * * * Separate subsidiary records shall be maintained for the 
amount of accrued cost of removal other than legal obligations for the 
retirement of plant recorded in account 108, Accumulated provision for 
depreciation of electric utility plant (Major only).
* * * * *

110 Accumulated provision for depreciation and amortization of electric 
utility plant (Nonmajor only).

    A. * * *
    (2) Amounts charged to account 403.1, Depreciation expense for 
asset retirement costs, in electric utility plant in service in a 
separate subaccount.
* * * * *
    C. * * * Separate subsidiary records shall be maintained for the 
amount of accrued cost of removal other than legal obligations for the 
retirement of plant recorded in account 110, Accumulated provision for 
depreciation of electric utility plant (Nonmajor only).
* * * * *

121 Nonutility property.

    A. * * * This account shall also include, where applicable, amounts 
recorded for asset retirement costs associated with nonutility plant.
* * * * *

230 Asset retirement obligations.

    A. This account shall include the amount of liabilities for the 
recognition of asset retirement obligations related to electric utility 
plant and nonutility plant that gives rise to the obligations. This 
account shall be credited for the amount of the liabilities for asset 
retirement obligations with amounts charged to the appropriate electric 
utility plant accounts or nonutility plant account to record the 
related asset retirement costs.
    B. The utility shall charge the accretion expense to account 
411.10, Accretion expense, for electric utility plant, account 413, 
Expenses of electric plant leased to others, for electric plant leased 
to others, or account 421, Miscellaneous nonoperating income, for 
nonutility plant, as appropriate, and credit account 230, Asset 
retirement obligations.
    C. This account shall be debited with amounts paid to settle the 
asset retirement obligations recorded herein.
    D. The utility shall clear from this account any gains or losses 
resulting from the settlement of asset retirement obligations in 
accordance with the instructions prescribed in General Instruction 25.
* * * * *

0
8. In Electric Plant Accounts, new primary plant accounts, 317, 326, 
337, 347, 359.1, 374, and 399.1 are added to read as follows:

Electric Plant Accounts

* * * * *

317 Asset retirement costs for steam production plant.

    This account shall include asset retirement costs on plant included 
in the steam production function.
* * * * *

326 Asset retirement costs for nuclear production plant (Major only).

    This account shall include asset retirement costs on plant included 
in the nuclear production function.
* * * * *

337 Asset retirement costs for hydraulic production plant.

    This account shall include asset retirement costs on plant included 
in the hydraulic production function.
* * * * *

347 Asset retirement costs for other production plant.

    This account shall include asset retirement costs on plant included 
in the other production function.
* * * * *

359.1 Asset retirement costs for transmission plant.

    This account shall include asset retirement costs on plant included 
in the transmission plant function.
* * * * *

374 Asset retirement costs for distribution plant.

    This account shall include asset retirement costs on plant included 
in the distribution plant function.
* * * * *

399.1 Asset retirement costs for general plant.

    This account shall include asset retirement costs on plant included 
in the general plant function.
* * * * *

0
9. Amend Income Accounts as follows:
0
a. Account 403.1 is added,
0
b. Accounts 411.6 and 411.7 are amended by designating the current 
paragraph as A., and adding a new paragraph B.,
0
c. Account 411.10 is added,
0
d. In account 421, paragraphs 4. through 6. are added, and
0
e. In account 426.5 paragraph 6 is added.
    The additions read as follows:

Income Accounts

* * * * *

[[Page 19622]]

403.1 Depreciation expense for asset retirement costs.

    This account shall include the depreciation expense for asset 
retirement costs included in electric utility plant in service.
* * * * *

411.6 Gains from disposition of utility property.

    A. * * *
    B. The utility shall record in this account gains resulting from 
the settlement of asset retirement obligations related to utility plant 
in accordance with the accounting prescribed in General Instruction 25.
* * * * *

411.7 Losses from disposition of utility property.

    A. * * *
    B. The utility shall record in this account losses resulting from 
the settlement of asset retirement obligations related to utility plant 
in accordance with the accounting prescribed in General Instruction 25.
* * * * *

411.10 Accretion expense.

    This account shall be charged for accretion expense on the 
liabilities associated with asset retirement obligations included in 
account 230, Asset retirement obligations, related to electric utility 
plant.
* * * * *

421 Miscellaneous nonoperating income.

* * * * *
    4. This account shall include the accretion expense on the 
liability for an asset retirement obligation included in account 230, 
Asset retirement obligations, related to nonutility plant.
    5. This account shall include the depreciation expense for asset 
retirement costs related to nonutility plant.
    6. The utility shall record in this account gains resulting from 
the settlement of asset retirement obligations related to nonutility 
plant in accordance with the accounting prescribed in General 
Instruction 25.
* * * * *

426.5 Other deductions.

* * * * *
    6. The utility shall record in this account losses resulting from 
the settlement of asset retirement obligations related to nonutility 
plant in accordance with the accounting prescribed in General 
Instruction 25.
* * * * *

PART 154--RATE SCHEDULES AND TARIFFS

0
10. The authority citation for part 154 continues to read as follows:

    Authority: 15 U.S.C. 717-717w; 31 U.S.C. 9701; 42 U.S.C. 7102-
7352.


0
11. In Sec.  154.312 paragraph (d), introductory text, is amended by 
removing the sentence ``Any authorized negative salvage must be 
maintained in a separate subaccount of account 108,'' and adding in its 
place the following sentence to read as follows:


Sec.  154.312  Composition of Statements.

* * * * *
    (d)* * * Any authorized negative salvage must be maintained in a 
separate subaccount of account 108, and shall not include any amounts 
related to asset retirement obligations. * * *
* * * * *

0
12. Section 154.315 is added to subpart D to read as follows:


Sec.  154.315  Asset retirement obligations.

    (a) A natural gas company that files a tariff change under this 
part and has recorded an asset retirement obligation on its books must 
provide a schedule, as part of the supporting workpapers, identifying 
all cost components related to the asset retirement obligations that 
are included in the book balances of all accounts reflected in the cost 
of service computation supporting the proposed rates. However, all cost 
components related to asset retirement obligations that would impact 
the calculation of rate base, such as gas plant and related accumulated 
depreciation and accumulated deferred income taxes, may not be 
reflected in rates and must be removed from the rate base calculation 
through a single adjustment.
    (b) A natural gas company seeking to recover nonrate base costs 
related to asset retirement obligations in rates must provide, with its 
filing under Sec.  154.312 or Sec.  154.313, a detailed study 
supporting the amounts proposed to be collected in rates.
    (c) A natural gas company who has recorded asset retirement 
obligations on its books but is not seeking recovery of the asset 
retirement costs in rates, must remove all asset retirement obligations 
related cost components from the cost of service supporting its 
proposed rates.

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

0
13. 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.

0
14. In Definitions, Definition 10 is revised to read as follows:

Definitions

* * * * *
    10. Cost of removal means the cost of demolishing, dismantling, 
tearing down or otherwise removing gas plant, including the cost of 
transportation and handling incidental thereto. It does not include the 
cost of removal activities associated with asset retirement obligations 
that are capitalized as part of the tangible long-lived assets that 
give rise to the obligation. (See General Instruction 24).
* * * * *

0
15. In General Instructions, Instruction 20 paragraphs C. and D. are 
redesignated as paragraphs D. and E. and a new paragraph C. is added; 
and a new Instruction 24 is added to read as follows:

General Instructions

* * * * *
    20. Accounting for leases.
* * * * *
    C. The utility, as a lessee, shall recognize an asset retirement 
obligation (See General Instruction 24) arising from the plant under a 
capital lease unless the obligation is recorded as an asset and 
liability under a capital lease. The utility shall record the asset 
retirement cost by debiting account 101.1, Property under capital 
leases, or account 121, Nonutility property, as appropriate, and 
crediting the liability for the asset retirement obligation in account 
230, Asset retirement obligations. Asset retirement costs recorded in 
account 101.1 or account 121 shall be amortized by charging rent 
expense (See Operating Expense Instruction 3) or account 421, 
Miscellaneous nonoperating income, as appropriate, and crediting a 
separate subaccount of the account in which the asset retirement costs 
are recorded. Charges for the periodic accretion of the liability in 
account 230, Asset retirement obligations, shall be recorded by a 
charge to account 411.10, Accretion expense, for gas utility plant, and 
account 421, Miscellaneous nonoperating income, for nonutility plant 
and a credit to account 230, Asset retirement obligations.
* * * * *
    24. Accounting for asset retirement obligations.
    A. An asset retirement obligation represents a liability for the 
legal obligation associated with the retirement of a tangible long-
lived asset that a utility is required to settle as a result of an 
existing or enacted law,

[[Page 19623]]

statute, ordinance, or written or oral contract or by legal 
construction of a contract under the doctrine of promissory estoppel. 
An asset retirement cost represents the amount capitalized when the 
liability is recognized for the long-lived asset that gives rise to the 
legal obligation. The amount recognized for the liability and an 
associated asset retirement cost shall be stated at the fair value of 
the asset retirement obligation in the period in which the obligation 
is incurred.
    B. The utility shall initially record a liability for an asset 
retirement obligation in account 230, Asset retirement obligations, and 
charge the associated asset retirement costs to gas utility plant and 
nonutility plant, as appropriate, related to the plant that gives rise 
to the legal obligation. The asset retirement cost shall be depreciated 
over the useful life of the related asset that gives rise to the 
obligations. For periods subsequent to the initial recording of the 
asset retirement obligation, a utility shall recognize the period to 
period changes of the asset retirement obligation that result from the 
passage of time due to the accretion of the liability and any 
subsequent measurement changes to the initial liability for the legal 
obligation recorded in account 230, Asset retirement obligations, as 
follows:
    (1) The utility shall record the accretion of the liability by 
debiting account 411.10, Accretion expense, for gas utility plant, 
account 413, Expenses of gas plant leased to others, for gas plants 
leased to others, and account 421, Miscellaneous nonoperating income, 
for nonutility plant and crediting account 230, Asset retirement 
obligations; and
    (2) The utility shall recognize any subsequent measurement changes 
of the liability initially recorded in account 230, Asset retirement 
obligations, for each specific asset retirement obligation as an 
adjustment of that liability in account 230 with the corresponding 
adjustment to gas utility plant, gas plant leased to others, and 
nonutility plant, as appropriate. The utility shall on a timely basis 
monitor any measurement changes of the asset retirement obligations.
    C. Gains or losses resulting from the settlement of asset 
retirement obligations associated with utility plant resulting from the 
difference between the amount of the liability for the asset retirement 
obligation included in account 230, Asset retirement obligations, and 
the actual amount paid to settle the obligation shall be accounted for 
as follows:
    (1) Gains shall be credited to account 411.6, Gains from 
disposition of utility plant, and;
    (2) Losses shall be charged to account 411.7, Losses from 
disposition of utility plant.
    D. Gains or losses on the settlement of the asset retirement 
obligations associated with nonutility plant resulting from the 
difference between the amount of the liability for the asset retirement 
obligation in account 230, Asset retirement obligations, and the amount 
paid to settle the obligation, shall be accounted for as follows:
    (1) Gains shall be credited to account 421, Miscellaneous 
nonoperating income, and;
    (2) Losses shall be charged to account 426.5, Other deductions.
    E. Separate subsidiary records shall be maintained for each asset 
retirement obligation showing the initial liability and associated 
asset retirement cost, any incremental amounts of the liability 
incurred in subsequent reporting periods for additional layers of the 
original liability and related asset retirement cost, the accretion of 
the liability, the subsequent measurement changes to the asset 
retirement obligation, the depreciation and amortization of the asset 
retirement costs and related accumulated depreciation, and the 
settlement date and actual amount paid to settle the obligation. For 
purposes of analyses a utility shall maintain supporting documentation 
so as to be able to furnish accurately and expeditiously with respect 
to each asset retirement obligation the full details of the identity 
and nature of the legal obligation, the year incurred, the identity of 
the plant giving rise to the obligation, the full particulars relating 
to each component and supporting computations related to the 
measurement of the asset retirement obligation.
* * * * *

0
16. In Gas Plant Instructions, paragraph 3.A.(17)(a) the W element is 
revised; and new paragraph 3.A.(23) is added to read as follows:

Gas Plant Instructions

* * * * *
    3. Components of construction cost.
    A. * * *
    (17) * * *
    (a) * * *
    W = Average balance in construction work in progress less asset 
retirement costs (See General Instruction 24) related to plant under 
construction.
* * * * *
    (23) ``Asset retirement costs.'' The costs recognized as a result 
of asset retirement obligations incurred during the construction and 
testing of utility plant shall constitute a component of construction 
costs.
* * * * *

0
17. Balance Sheet Accounts are amended as follows:
0
(a) Account 101.1, is amended by adding a sentence to the end of 
paragraph C.;
0
(b) Account 103, paragraph C. is revised;
0
(c) Account 108, paragraphs A.(2) through A.(7) are redesignated as 
paragraphs A.(3) through A.(8), a new paragraph A.(2) is added, and 
paragraph C. is amended by adding a sentence to the end of the 
paragraph;
0
(d) Account 121, paragraph A. is amended by adding a sentence to the 
end of the paragraph; and
0
(e) Account 230 is added.
    The additions and revisions read as follows:

Balance Sheet Accounts

* * * * *

101.1 Property under capital leases.

* * * * *
    C. * * * Records shall also be maintained for plant under a lease, 
to identify the asset retirement obligation and cost originally 
recognized for each lease and the periodic charges and credits made to 
the asset retirement obligations and asset retirement costs.
* * * * *

103 Experimental gas plant unclassified.

* * * * *
    C. The depreciation on plant in this account shall be charged to 
account 403, Depreciation expense, and account 403.1, Depreciation 
expense for asset retirement costs, as appropriate, and credited to 
account 108, Accumulated provision for depreciation of gas utility 
plant. The amounts herein shall be depreciated over a period which 
corresponds to the estimated useful life of the relevant project 
considering the characteristics involved. However, when projects are 
transferred to account 101, Gas plant in service, a new depreciation 
rate based on the remaining service life and undepreciated amounts, 
will be established.
* * * * *

108 Accumulated provision for depreciation of gas utility plant.

    A. * * *
    (2) Amounts charged to account 403.1, Depreciation expense for 
asset retirement costs, for current

[[Page 19624]]

depreciation expense related to asset retirement costs in gas plant in 
service in a separate subaccount.
* * * * *
    C. * * * Separate subsidiary records shall be maintained for the 
amount of accrued cost of removal other than legal obligations for the 
retirement of plant recorded in account 108, Accumulated provision for 
depreciation of gas utility plant.
* * * * *

121 Nonutility property.

    A. * * * This account shall also include, where applicable, amounts 
recorded for asset retirement costs associated with nonutility plant.
* * * * *

230 Asset retirement obligations.

    A. This account shall include the amount of liabilities for the 
recognition of asset retirement obligations related to gas utility 
plant and nonutility plant that gives rise to the obligations. This 
account shall be credited for the amount of the liabilities for asset 
retirement obligations with amounts charged to the appropriate gas 
utility plant accounts or nonutility plant accounts to record the 
related asset retirement costs.
    B. This account shall also include the period to period changes for 
the accretion of the liabilities in account 230, Asset retirement 
obligations. The utility shall charge the accretion expense to account 
411.10, Accretion expense, for gas utility plant, account 413, Expenses 
of gas plant leased to others, for gas plant leased to others, or 
account 421, Miscellaneous nonoperating income, for nonutility plant, 
as appropriate, and credit account 230, Asset retirement obligations.
    C. This account shall be debited with amounts paid to settle the 
asset retirement obligations recorded herein.
    D. The utility shall clear from this account any gains or losses 
resulting from the settlement of asset retirement obligations in 
accordance with the instructions prescribed in General Instruction 24.
* * * * *

0
18. In Gas Plant Accounts, new primary plant accounts, 321, 339, 348, 
358, 363.6, 372, 388, and 399.1 are added to read as follows:

Gas Plant Accounts

* * * * *

321 Asset retirement costs for manufactured gas production plant.

    This account shall include asset retirement costs on plant included 
in the manufactured gas production plant function.
* * * * *

339 Asset retirement costs for natural gas production and gathering 
plant.

    This account shall include asset retirement costs on plant included 
in the natural gas production and gathering plant function.
* * * * *

348 Asset retirement costs for products extraction plant.

    This account shall include asset retirement costs on plant included 
in the products extraction plant function.
* * * * *

358 Asset retirement costs for underground storage plant.

    This account shall include asset retirement costs on plant included 
in the underground storage plant function.
* * * * *

363.6 Asset retirement costs for other storage plant.

    This account shall include asset retirement costs on plant included 
in the other storage plant function.
* * * * *

372 Asset retirement costs for transmission plant.

    This account shall include asset retirement costs on plant included 
in the transmission plant function.
* * * * *

388 Asset retirement costs for distribution plant.

    This account shall include asset retirement costs on plant included 
in the distribution plant function.
* * * * *

399.1 Asset retirement costs for general plant.

    This account shall include asset retirement costs on plant included 
in the general plant function.
* * * * *

0
19. Income Accounts are amended as follows:
0
a. Account 403.1 is added,
0
b. Accounts 411.6 and 411.7 are amended by designating the current 
paragraph as A. and adding a new paragraph B.,
0
c. Account 411.10 is added,
0
d. In Account 421, paragraphs 4. through 6. are added, and
0
e. In Account 426.5 paragraph 6. is added.
    The additions read as follows:

Income Accounts

* * * * *

403.1 Depreciation expense for asset retirement costs.

    This account shall include the depreciation expense for asset 
retirement costs included in gas utility plant in service.
* * * * *

411.6 Gains from disposition of utility property.

    A. * * *
    B. The utility shall record in this account gains resulting from 
the settlement of asset retirement obligations related to utility plant 
in accordance with the accounting prescribed in General Instruction 24.
* * * * *

411.7 Losses from disposition of utility property.

    A. * * *
    B. The utility shall record in this account losses resulting from 
the settlement of asset retirement obligations related to utility plant 
in accordance with the accounting prescribed in General Instruction 24.
* * * * *

411.10 Accretion expense.

    This account shall be charged for accretion expense on the 
liabilities associated with asset retirement obligations included in 
account 230, Asset retirement obligations, related to gas utility 
plant.
* * * * *

421 Miscellaneous nonoperating income.

* * * * *
    4. This account shall include the accretion expense on the 
liability for an asset retirement obligation included in account 230, 
Asset retirement obligations, related to nonutility plant.
    5. This account shall include the depreciation expense for asset 
retirement costs related to nonutility plant.
    6. The utility shall record in this account gains resulting from 
the settlement of asset retirement obligations related to nonutility 
plant in accordance with the accounting prescribed in General 
Instruction 24.
* * * * *

426.5 Other deductions.

* * * * *
    6. The utility shall record in this account losses resulting from 
the settlement of asset retirement obligations related to nonutility 
plant in

[[Page 19625]]

accordance with the accounting prescribed in General Instruction 24.
* * * * *

PART 346-OIL PIPELINE COST-OF-SERVICE FILING REQUIREMENTS

0
20. The authority citation for part 346 continues to read as follows:

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85.

0
21. Section 346.3 is added to read as follows:


Sec.  346.3  Asset retirement obligations.

    (a) A carrier that files material in support of initial rates or 
change in rates under Sec.  346.2 and has recorded asset retirement 
obligations on its books must provide a schedule, as part of the 
supporting workpapers, identifying all cost components related to the 
asset retirement obligations that are included in the book balances of 
all accounts reflected in the cost of service computation supporting 
the proposed rates. However, all cost components related to asset 
retirement obligations that would impact the calculation of rate base, 
such as carrier property and related accumulated depreciation and 
accumulated deferred income taxes, may not be reflected in rates and 
must be removed from the rate base calculation through a single 
adjustment.
    (b) A carrier seeking to recover nonrate base costs related to 
asset retirement costs in rates must provide, with its filing under 
Sec.  346.2 of this part, a detailed study supporting the amounts 
proposed to be collected in rates.
    (c) A carrier who has recorded asset retirement obligations on its 
books but is not seeking recovery of the asset retirement costs in 
rates, must remove all asset retirement obligations related cost 
components from the cost of service supporting its proposed rates.

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

0
22. 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).

0
23. In List of Instructions and Accounts, under Definitions, Definition 
12 is revised to read as follows:
    Definitions. * * *
    12. Cost of removal means cost of demolishing, dismantling, tearing 
down, or otherwise removing property including costs of handling and 
transportation. It does not include the cost of removal activities 
associated with asset retirement obligations that are capitalized as 
part of the tangible long-lived assets that give rise to the 
obligation. (See General Instruction 1-19).
* * * * *

0
24. In General Instructions, paragraph 1-19 is added to read as 
follows:

General Instructions

* * * * *
    1-19 Accounting for asset retirement obligations.
    (a) An asset retirement obligation represents a liability for the 
legal obligation associated with the retirement of a tangible long-
lived asset that a utility is required to settle as a result of an 
existing or enacted law, statute, ordinance, or written or oral 
contract or by legal construction of a contract under the doctrine of 
promissory estoppel. An asset retirement cost represents the amount 
capitalized when the liability is recognized for the long-lived asset 
that gives rise to the legal obligation. The amount recognized for the 
liability and an associated asset retirement cost shall be stated at 
the fair value of the asset retirement obligation in the period in 
which the obligation is incurred.
    (b) The carrier shall initially record a liability for an asset 
retirement obligation in account 67, Asset retirement obligations, and 
charge the associated asset retirement costs to account 30, Carrier 
property, and account 34, Noncarrier property, as appropriate, related 
to the property that gives rise to the legal obligation. The asset 
retirement cost shall be depreciated over the useful life of the 
related asset that gives rise to the obligations. For periods 
subsequent to the initial recording of the asset retirement obligation, 
a carrier shall recognize the period to period changes of the asset 
retirement obligation that result from the passage of time due to the 
accretion of the liability and any subsequent measurement revisions to 
the initial liability for the legal obligation recorded in account 67, 
Asset retirement obligations, as follows:
    (1) The carrier shall record the accretion of the liability by 
debiting account 591, Accretion expense, for carrier property, account 
620, Income (net) from noncarrier property, for noncarrier property and 
crediting account 67, Asset retirement obligations; and
    (2) The carrier shall recognize any subsequent measurement changes 
of the liability initially recorded in account 67, Asset retirement 
obligations, for each specific asset retirement obligation as an 
adjustment of that liability in account 67 with the corresponding 
adjustment to carrier property and noncarrier property accounts, as 
appropriate. The utility shall on a timely basis monitor any 
measurement changes of the asset retirement obligations.
    (c) Gains or losses resulting from the final settlement of asset 
retirement obligations for carrier plant resulting from the difference 
between the amount of the liability for the asset retirement obligation 
in account 67, Asset retirement obligations, and the actual amount to 
settle the obligation, shall be recorded in account 592, Gains or 
losses on asset retirement obligations.
    (d) Gains or losses resulting from the final settlement of asset 
retirement obligations for noncarrier plant resulting from the 
difference between the amount of the liability for the asset retirement 
obligation in account 67, Asset retirement obligations, and the actual 
amount to settle the obligation, shall be recorded in account 620, 
Income (net) from noncarrier property.
    (e) Separate subsidiary records shall be maintained for each asset 
retirement obligation showing the initial liability and associated 
asset retirement cost, any incremental amounts of the liability 
incurred in subsequent reporting periods for additional layers of the 
original liability and related asset retirement cost, the accretion of 
the liability, the subsequent measurement changes to the asset 
retirement obligation, the depreciation and amortization of the asset 
retirement costs and related accumulated depreciation, and the 
settlement date and actual amount paid to settle the obligation. For 
purposes of analyses a carrier shall maintain supporting documentation 
so as to be able to furnish accurately and expeditiously with respect 
to each asset retirement obligation the full details of the identity 
and nature of the legal obligation, the year incurred, the identity of 
the plant giving rise to the obligation, the full particulars relating 
to each component and supporting computations related to the 
measurement of the asset retirement obligation.
* * * * *

0
25. In Instructions for Carrier Property Accounts, Instruction 3-3, 
paragraph (11)(iii) and paragraph (13) are added to read as follows:

Instructions for Carrier Property Accounts

* * * * *
    3-3 Cost of property constructed. * * *

[[Page 19626]]

    (11) * * *
    (iii) Interest during construction shall not be recognized on the 
asset retirement costs incurred during the construction of carrier and 
noncarrier property.
* * * * *
    (13) Asset retirement costs that are recognized as a result of 
asset retirement obligations incurred during construction shall be 
included in the cost of construction costs.
* * * * *

0
26. In Balance Sheet Accounts, account 31 is amended by adding a 
sentence to the end of paragraph, account 34 is amended by adding a 
sentence to the end of paragraph and account 67 is added to read as 
follows:

Balance Sheet Accounts

* * * * *
    31 * * * Separate subsidiary records shall be maintained for the 
amount of accrued cost of removal other than legal obligations for the 
retirement of property recorded in account 31, Accrued depreciation--
Carrier property.
* * * * *
    34 * * * This account shall also include, amounts recorded for 
asset retirement costs associated with noncarrier property.
* * * * *

67 Asset retirement obligations.

    (a) This account shall include liabilities arising from the 
recognition of asset retirement obligations. The carrier shall credit 
account 67, Asset retirement obligations, for the liabilities for asset 
retirement obligations and charge the appropriate carrier property 
accounts or noncarrier property accounts to record the related asset 
retirement costs.
    (b) This account shall also include the period to period changes 
for the accretion of the liabilities in account 67, Asset retirement 
obligations. The carrier shall charge the accretion expense to account 
591, Accretion expense, for carrier property, and account 620, Income 
(net) from noncarrier property, for noncarrier property, as 
appropriate, and credit account 67, Asset retirement obligations.
    (c) This account shall be debited with amounts paid to settle the 
asset retirement obligations recorded herein.
    (d) The utility shall clear from this account any gains or losses 
resulting from the settlement of asset retirement obligations in 
accordance with the instructions prescribed in General Instruction 1-
19.
* * * * *

0
27. In Carrier Property Accounts, accounts 117, 167, and 186.1 are 
added to read as follows:

Carrier Property Accounts

* * * * *
    117, 167, 186.1 Asset retirement costs.
    This account shall include asset retirement costs on plans included 
in carrier property.
* * * * *

0
28. In Operating Expenses, accounts 541, 591 and 592 are added to read 
as follows:

Operating Expenses

* * * * *

541 Depreciation expense for asset retirement costs.

    This account shall include charges for the depreciation of asset 
retirement costs related to transportation property.
* * * * *

591 Accretion expense.

    This account shall be charged for accretion expense on the 
liabilities associated with asset retirement obligations included in 
account 67, Asset retirement obligations. The carrier shall record in 
this account the settlement amounts for asset retirement obligations 
related to carrier property in accordance with the accounting 
prescribed in General Instruction 1-19.

592 Gains or losses on asset retirement obligations.

    The carrier shall record in this account gains or losses resulting 
from the settlement amounts for asset retirement obligations related to 
carrier property plant. (See General Instruction 1-19).
* * * * *
    Note: The following appendices will not be published in the Code of 
Federal Regulations.

APPENDIX A

                           List of Commenters
------------------------------------------------------------------------
                Respondent                          Abbreviation
------------------------------------------------------------------------
1. Arkansas Public Service Commission.....  Arkansas PSC.
2. Don Bjerke.............................  Bjerke.
3. Deloitte & Touche LLP..................  Deloitte & Touche.
4. Edison Electric Institute..............  EEI.
5. FirstEnergy Corp.......................  FirstEnergy.
6. John S. Ferguson.......................  Ferguson.
7. K. C. Martin...........................  K.C. Martin.
8. Missouri Public Service Commission.....  MoPSC.
9. National Association of State Utility    NASUCA.
 Consumer Advocates.
10. National Grid USA.....................  National Grid.
11. National Rural Electric Cooperative     NRECA.
 Assn..
12. Northern Natural Gas Company..........  Northern Natural.
13. PacifiCorp............................  PacifiCorp.
14. Progress Energy, Inc..................  Progress Energy.
15. Rural Utilities Service...............  RUS.
16. Southern Company......................  Southern.
------------------------------------------------------------------------

Appendix B

                                             Summary of Changes to Schedules for Forms 1, 1-F, 2, 2-A and 6
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                        Forms 1 and 1-F public utilities and
            Schedule title                           licensees                Forms 2 and 2A natural gas companies      Form 6 oil pipeline companies
--------------------------------------------------------------------------------------------------------------------------------------------------------
1 List of Schedules                    Revise to show schedule changes.       Same as Public Utilities and          Same as Public Utilities and
                                                                               Licensees.                            Licensees.
2 Comparative Balance Sheet            Add new account 230 to report asset    Same as Public Utilities and          Add account 67 to report asset
                                        retirement obligations.                Licensees.                            retirement obligations.
3 Statement of Income for the Year     Add new accounts 403.1, to report      Same as Public Utilities and          Add accounts 541, to report
                                        depreciation expense and 411.10, to    Licensees.                            depreciation expense, 591, to
                                        report accretion expense.                                                    report accretion expense, and 592,
                                                                                                                     to report gains or losses on asset
                                                                                                                     retirement obligations.

[[Page 19627]]

 
4 Plant in Service                     Add new Instruction 4. For revisions   Same as Public Utilities and          N/A
                                        to the amount of initial asset         Licensees.
                                        retirement costs capitalized,
                                        included by primary plant account,
                                        increases in column (c) addition and
                                        reductions in column (e)
                                        adjustments.
                                       Add new primary asset retirement       Add new primary asset retirement      N/A
                                        accounts, 317, 326, 337, 347, 359.1,   accounts, 339, 348, 358, 363.6,
                                        374 and 399.1, for each plant          364.9, 372, 388, 399.1, for each
                                        function.                              plant function.
5 Undivided Joint Interest Property    N/A                                    N/A                                   Add new primary asset retirement
                                                                                                                     accounts, 117, 167, and 186.1, for
                                                                                                                     each carrier property account
                                                                                                                     function.
6 Accumulated Provision for            Added lines to report ``403.1          Same as Public Utilities and          N/A
 Depreciation of Utility Plant          Depreciation Expense for Asset         Licensees.
                                        Retirement Costs'' and ``Book Cost
                                        of Asset Retirement Costs Retired.''
7 Accrued Depreciation--Carrier        N/A                                    N/A                                   Add new primary asset retirement
 Property                                                                                                            accounts, 117, 167, and 186.1, for
                                                                                                                     each carrier property account
                                                                                                                     function and revise column (c) to
                                                                                                                     read Debits to Accounts 540 and 541
                                                                                                                     of USofA (in dollars).
8 Accrued Depreciation--Undivided      N/A                                    N/A                                   Same as above for Accrued
 Joint Interest Property                                                                                             Depreciation--Carrier Property.
9 Depreciation and Amortization of     Add new Column (c), Depreciation       Same as Public Utilities and          N/A
 Plant (Except Amortization of          Expense for Asset Retirement Costs     Licenses.
 Acquisition Adjustments)               (403.1).                              Form 2-A N/A
10 Amortization Base and Reserve       N/A                                    N/A                                   Revise header over columns (b), (c),
                                                                                                                     (d) and (e) to read (Base 540 and
                                                                                                                     541).
11 Steam-Electric Generating Plant     Form 1--Revise to report Asset         N/A                                   N/A
 Statistics (Large Plants)              Retirement Costs. Form 1-F N/A
12 Hydroelectric Generating Plant      Form 1--Revise to report Asset         N/A                                   N/A
 Statistics (Large Plants)              Retirement Costs. Form 1-F N/A
13 Pumped Storage Generating Plant     Form 1--Revise to report Asset         N/A                                   N/A
 Statistics (Large Plants)              Retirement Costs. Form 1-F N/A
14 Generating Plant Statistics (Small  Form 1--Revise Column (g), to read     N/A                                   N/A
 Plants) (Continued)                    ``Plant Cost (Including Asset
                                        Retirement Costs) Per MW Installed
                                        Capacity.'' Form 1-F N/A
15 Transmission Lines Added During     Form 1--Add column (o) ``Asset         N/A                                   N/A
 the Year                               Retirement Costs'' to report asset
                                        retirement costs as part of line
                                        cost. Form 1-F N/A
--------------------------------------------------------------------------------------------------------------------------------------------------------

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[FR Doc. 03-9260 Filed 4-18-03; 8:45 am]
BILLING CODE 6717-01-C