[Federal Register Volume 68, Number 129 (Monday, July 7, 2003)]
[Proposed Rules]
[Pages 40340-40426]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16811]



[[Page 40339]]

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Part II





Department of Energy





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Federal Energy Regulatory Commission



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18 CFR Parts 141, 260, 357 and 375



Quarterly Financial Reporting and Revisions to the Annual Reports; 
Proposed Rule

  Federal Register / Vol. 68, No. 129 / Monday, July 7, 2003 / Proposed 
Rules  

[[Page 40340]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 141, 260, 357 and 375

[Docket No. RM03-8-000]


Quarterly Financial Reporting and Revisions to the Annual Reports

June 26, 2003.
AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Energy Regulatory Commission proposes to revise 
its regulations by establishing quarterly financial reporting 
requirements for jurisdictional public utilities, licensees, natural 
gas and oil pipeline companies. Additionally, the Commission proposes 
to make certain changes to the existing FERC Annual Reports to improve 
the quality of financial information filed with the Commission and to 
provide consistency in the reporting of financial information for all 
periods.
    The Commission proposes to add two quarterly financial report 
forms: FERC Form No. 3-Q, Quarterly Financial Report of Electric 
Companies, Licensees, and Natural Gas Companies, and FERC Form No. 6-Q, 
Quarterly Financial Report of Oil Pipeline Companies. These two new 
reports will collect financial and certain financial related 
information from jurisdictional entities on a more frequent basis.
    The Commission also proposes to update FERC Annual Report Forms 1, 
1-F, 2, 2-A, and 6. The updates include the reporting of fourth quarter 
financial data, adding a management discussion and analysis schedule, 
allowing the submission of the CPA certification electronically, 
updating the officer's certification, and accelerating the filing 
dates.
    The Commission has determined that dependable, affordable, 
competitive wholesale energy markets require an adequate 
infrastructure, balanced market rules, and vigilant oversight. This 
rulemaking helps in achieving the goal of vigilant oversight by 
providing the Commission with more timely, relevant, reliable and 
understandable financial information from major participants in the 
energy market. This proposed rule provides the needed transparency of 
financial information from FERC-jurisdictional entities at a level of 
detail that is not obtainable from other sources. This proposed rule 
will allow the Commission, as well as customers, investors, and others 
to identify and evaluate financial trends and emerging issues facing 
the energy industry. More frequent financial reporting will aid the 
Commission in assessing the economic consequences of transactions and 
events on jurisdictional entities, measuring the effects of regulatory 
initiatives, evaluating the adequacy of existing traditional cost-based 
rates and aid in the development of needed changes to existing 
regulatory initiatives.
    Finally, Congress recognized the importance of financial 
transparency and better financial disclosures resulting in the passage 
of the Sarbanes-Oxley Act of 2002 which requires public companies to 
disclose financial information on a rapid and current basis. The 
Commission therefore proposes to accelerate the filing dates of its 
FERC Annual Reports, and revise its officer's certification statement 
contained in these reports consistent with the Sarbanes-Oxley Act of 
2002.

DATES: Comments are due August 6, 2003.

ADDRESSES: Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. Commenters unable to 
file comments electronically must send an original and 14 copies of 
their comments to: Federal Energy Regulatory Commission, Office of the 
Secretary, 888 First Street, NE., Washington, DC 20426. Refer to the 
Comment Procedures section of the preamble for additional information 
on how to file comments.

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.
Julie Kuhns, (Technical Information), Office of the Executive Director, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-6287.
Christopher Bublitz, (Technical Information), Office of Administrative 
Litigation, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426, (202) 502-8542.
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: 

Table of Contents

I. Introduction
II. Background
    A. General
    B. Basic Financial Statements
    C. Relevancy of Periodic Financial Information
III. Discussion
    A. General
    B. Proposed Quarterly Financial Reports
    1. Set of Financial Statements and Other Selected Information
    2. Management Discussion and Analysis
    3. Electric Transmission Peak Loads
    4. Corporate Officers Certification
    5. CPA Review Letter
    6. Who Must File and When
    7. Update Delegations
    C. Proposed Changes to the FERC Annual Report Forms
    1. Fourth Quarter Financial Information
    2. New Ancillary Service Schedule
    3. Update Corporate Officers Certification
    4. Acceleration of Annual Report Form Submission
    5. Changes to the CPA Certification Requirements
    6. Miscellaneous
IV. Regulatory Flexibility Act Statement
V. Environmental Analysis
VI. Information Collection Statement
VII. Comment Procedures
VIII. Document Availability
Regulatory Text
Appendix A--Proposed FERC Forms 3-Q, and 6-Q
Appendix B--Proposed New Schedule for FERC Forms 1 and 1-F

I. Introduction

    1. In this notice of proposed rulemaking (NOPR), the Federal Energy 
Regulatory Commission (Commission) proposes to amend its financial 
reporting requirements for public utilities and licensees,\1\ natural 
gas companies,\2\ and oil pipeline companies.\3\ The Commission 
proposes to require quarterly reporting of financial and certain 
financial related information from jurisdictional entities that are 
subject to the Commission's Uniform Systems of Accounts and file FERC 
Annual Report Forms 1, 1-F, 2, 2-A or 6.\4\
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    \1\ Part 141 Statements and Reports (Schedules). 18 CFR part 
141.
    \2\ Part 260 Statements and Reports (Schedules). 18 CFR part 
260.
    \3\ Part 357 Annual Special or Periodic Reports: Carriers 
Subject to part 1 of the Interstate Commerce Act. 18 CFR part 357.
    \4\ FERC Form No. 1, Annual Report of Major Public Utilities, 
Licensees and Others; FERC Form No. 1-F, Annual Report of Nonmajor 
Public Utilities and Licensees; FERC Form No. 2, Annual Report of 
Major Natural Gas Companies; FERC Form No. 2-A, Annual Report of 
Nonmajor Natural Gas Companies and Form No. 6, Annual Report of Oil 
Pipeline Companies.
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    2. The persons and entities subject to the Federal Power, Natural 
Gas and Interstate Commerce Acts are engaged in the production of 
electricity, its transmission to ultimate customers, and the 
transportation and storage of natural

[[Page 40341]]

gas and petroleum products. Congress granted the Commission authority 
under these Acts to prescribe periodic financial and non-financial 
reporting pursuant to sections 4, 304 and 309 of the Federal Power Act, 
sections 10(a) and 16 of the Natural Gas Act, and section 20 of the 
Interstate Commerce Act.\5\ The Commission has implemented its long 
standing statutory authority to collect financial information by 
requiring electric, natural gas and oil pipeline companies to submit 
financial statements only on an annual basis, and until recently, in a 
paper format.
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    \5\ See 16 U.S.C. 797, 825c and 825h; 15 U.S.C. 717i(a) and 
717o; and 49 App. U.S.C. 1-85 (1988).
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    3. However, the information and market demands of the 21st century 
require that the Commission, as well as other users of financial data, 
receive timely, relevant and reliable information to make informed 
decisions about matters affecting the energy industry. Quarterly 
financial reporting will aid the Commission in assessing the economic 
consequences of transactions and events on jurisdictional entities, 
measuring the effects of regulatory initiatives, evaluating the 
adequacy of existing traditional cost-based rates and aid in the 
development of needed changes to existing regulatory initiatives. 
Financial statements are a primary source of this critical information.
    4. Financial accounting information provides needed information 
concerning a company's past performance and its future prospects. The 
need for current and better disclosures drives the increasing demand 
for timely financial information. These needs have never been more 
evident. Enron and other widely reported financial accounting scandals 
have shaken public and investor confidence in the U.S. financial 
reporting system generally, and in our capital and energy markets. This 
crisis in confidence, unless reversed, will continue to compromise the 
energy industry's financial health and inhibit investments in critical 
energy infrastructure.
    5. During the past year, the Commission has listened to Wall 
Street, representatives of investment and commercial banks, financial 
analysts, credit rating agencies, accounting standard setting bodies, 
and preparers of financial statements including the Chief Credit Risk 
Officers which represents companies that account for approximately half 
of the power and natural gas transactions in the United States. These 
groups delivered many messages, but all agreed that accounting 
transparency and better disclosure requirements are essential for the 
functioning of efficient markets and strengthening investor confidence. 
Rapid and current dissemination of financial information is essential 
to the efficient functioning of capital markets and strengthening 
investor confidence is crucial in a highly capital intensive energy 
industry that needs to attract funds in the market place to improve and 
expand the necessary infrastructure.
    6. Congress recognized the importance of financial transparency and 
passed the Sarbanes-Oxley Act of 2002 which ordered public companies to 
disclose financial information on a rapid and current basis.\6\ 
Additionally, this legislation requires executive officers to review 
and certify that the financial statements do not contain any untrue 
statement of material fact, are not misleading, and fairly represent 
the financial condition of the company. As a result of this legislation 
the United States Securities and Exchange Commission (SEC) has issued 
numerous regulations to implement this legislation including the 
acceleration of filing requirements for publicly held companies, and a 
new officer's certification statement attesting to the reliability of 
the information presented in the financial statements.
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    \6\ Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, 116 Stat. 
745-810 (2002).
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    7. In order to improve transparency of the financial information 
related to FERC jurisdictional entities in a parallel fashion, the 
Commission is proposing to require financial reporting for FERC 
purposes on a quarterly basis. The proposed action taken today will 
allow the Commission, as well as other users, to identify and evaluate 
financial trends and emerging issues facing the energy industry. More 
frequent financial reporting will give the Commission and the public 
another tool to improve decision making. It will aid the Commission in 
assessing the economic consequences of transactions and events on 
jurisdictional entities, measuring the effects of regulatory 
initiatives, evaluating the adequacy of existing traditional cost-based 
rates and aid in the development of needed changes to existing 
regulatory initiatives.
    8. We conclude that the benefits obtained from jurisdictional 
entities reporting financial information on a quarterly basis far 
outweigh any additional burden. The benefits to the Commission, as well 
as the public, of greater transparency and understandability of 
financial statements far outweigh the costs to an individual company. 
In fact, we find that the burden should be minimal. It is standard 
practice for companies to compile and summarize accounting transactions 
on a monthly basis, or even more frequently depending on the 
operational need for selected data. Thus, the information needed to 
compile quarterly financial statements is readily available.
    9. Currently, the public can access financial information through 
the Commission's FERRIS system or by using Commission-developed 
software. To improve access to FERC-held financial information, we will 
make it easier for users to electronically access financial information 
filed with this Commission. It is also our intent to collaborate with 
the SEC to establish new Web links between our respective Web home 
pages so that all users can access FERC-held financial information in a 
timely and efficient manner.
    10. The increased transparency of financial information will be 
accomplished by adding the following two new quarterly financial report 
forms: FERC Form No. 3-Q, Quarterly Financial Report of Electric 
Utilities, Licensees, and Natural Gas Companies (Form 3-Q), and FERC 
Form No. 6-Q, Quarterly Financial Report of Oil Pipeline Companies 
(Form 6-Q). The proposed quarterly reports will require companies to 
file with the Commission a complete set of quarterly financial 
statements including appropriate notes to the financial statements, a 
management's discussion and analysis of financial condition and results 
of operations (commonly referred to as an ``MD&A''), and ancillary 
service purchase and sales information.
    11. The proposed quarterly reports will also require company 
officers to sign a certification statement attesting to the reliability 
of the filed information. Additionally, when a certified public 
accountant (CPA) has reviewed the quarterly report, this certification 
must also be filed with the Commission.
    12. The Commission also proposes to update the financial reporting 
and disclosure requirements of the FERC Annual Reports to be consistent 
with the requirements contained in the quarterly reports. 
Jurisdictional entities will be required to include certain fourth 
quarter financial data in the FERC Annual Reports, including an MD&A 
schedule, and officers will be required to sign a certification 
statement attesting to the reliability of the filed information. 
Finally, the Commission is proposing to accelerate the filing dates for 
the FERC Annual Reports.
    13. The Commission has determined that dependable, affordable, 
competitive wholesale energy markets require an

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adequate infrastructure, balanced market rules, and vigilant 
oversight.\7\ This rulemaking helps in achieving the goal of vigilant 
oversight by providing the Commission with more timely, relevant, 
reliable and understandable financial information from certain 
participants in the energy market.
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    \7\ See the Commission's Strategic Plan FY 2002 through 2007, 
and the Chairman's March 5, 2003, testimony before the Subcommittee 
on Energy and Air Quality of the Commerce, United States House of 
Representatives, available online at http://www.ferc.gov/.
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    14. Quarterly reporting of financial information will provide the 
Commission with an important tool to help identify emerging trends and 
issues affecting jurisdictional entities within the energy industry. It 
will aid the Commission is assessing the economic consequences of 
transactions and events on jurisdictional entities, measuring the 
effects of regulatory initiatives, evaluating the adequacy of existing 
traditional cost-based rates and aid in the development of needed 
changes to existing regulatory initiatives. In conclusion, full 
disclosure of all material facts to the Commission, as well as, other 
users of financial information is necessary if competitive markets are 
to function efficiently. Transparent reporting of information proposed 
in this rulemaking will help the Commission to achieve the above 
objectives.

II. Background

A. General

    15. The primary objective of financial reporting is to provide 
financial statements to the Commission that accurately measure the 
results of operations and the financial condition of a company. 
Financial statements are the foundation for understanding the financial 
position of a business and are used to assess a company's past, 
present, and future performance. One of the principle means that 
jurisdictional entities use to communicate financial information to the 
Commission is through the filing of FERC Annual Report Forms 1, 1-F, 2, 
2-A and 6. Additionally, jurisdictional entities file certain 
registration statements individually, or as part of a consolidated 
group, with the SEC and issue annual reports on a consolidated basis to 
shareholders. These registration statements and annual reports provide 
information about the financial condition of the parent company and its 
corporate family.
    16. The FERC Annual Reports filed with the Commission report on the 
financial condition of a company at a jurisdictional entity level, and 
are compiled using a standard chart of accounts contained in the 
Commission's Uniform Systems of Accounts.\8\ The use of a uniform chart 
of accounts permit public utilities and licensees,\9\ natural gas 
companies,\10\ and oil pipeline companies,\11\ to account for similar 
transactions and events in a consistent manner, and communicate those 
results to the Commission on a periodic basis.
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    \8\ 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 purpose of administering the FPA, NGA, and the 
ICA. The Commission may prescribe a system of accounts for 
jurisdictional companies and, after notice and opportunity for 
hearing, may determine the accounts in which particular outlays and 
receipts will be entered, charged or credited.
    \9\ Part 101 Uniform System of Accounts Prescribed for Public 
Utilities and Licensees Subject to the Provisions of the Federal 
Power Act. 18 CFR part 101 (2003).
    \10\ Part 201 Uniform System of Accounts Prescribed for Natural 
Gas Companies Subject to the Provisions of the Natural Gas Act. 18 
CFR part 201 (2003).
    \11\ Part 352 Uniform System of Accounts Prescribed for Oil 
Pipeline Companies Subject to the Provisions of the Interstate 
Commerce Act. 18 CFR part 352 (2003).
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    17. Additionally, it helps in presenting accurately the entity's 
financial condition and produces comprehensive data related to the 
entity's financial history helping to act as a guide for future action. 
The uniformity provided by the Commission's chart of accounts and 
related accounting instructions permits comparability and financial 
statement analysis of data provided by jurisdictional entities. 
Comparability of data and financial statement analysis for a particular 
entity from one period to the next, or between entities within the same 
industry, would be difficult to achieve if each company maintained its 
own accounting records using dissimilar accounting methods and 
classifications to record similar transactions and events.
    18. The benefits of a standardized and uniform accounting system 
however, would not be realized if the financial information once 
compiled were withheld from public view. To ensure that these benefits 
are realized, and to provide transparency of economic consequences to 
all affected interests, the Commission has prescribed a program of 
periodic financial reporting that makes financial and non-financial 
information publicly available to all interested parties.

B. Basic Financial Statements

    19. Under existing regulations, jurisdictional entities subject to 
the Uniform Systems of Accounts must annually file with the Commission 
a complete set of financial statements, along with other selected 
financial and non financial data through the submission of FERC Annual 
Report Forms 1, 1-F, 2, 2-A, or 6.\12\ The basic financial statements 
contained in the FERC Annual Report Forms are the Comparative Balance 
Sheet, the Statement of Income, the Statement of Cash Flows, the 
Statement of Retained Earnings, and the Statement of Accumulated 
Comprehensive Income and Hedging Activities.
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    \12\ See 18 CFR parts 141, 260, and 357.
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    20. The Comparative Balance Sheet's primary focus is on the 
financial position of the entity. This information is comprised of the 
entity's assets, liabilities and equity. Assets represent the valuable 
resources (e.g. probable future economic benefits) used by the entity. 
The liabilities (e.g. probable future economic sacrifices) are the 
obligations such as debt, accounts payable, and other amounts owed to 
creditors and others. The equity section of the Comparative Balance 
Sheet shows the other source of funds (e.g. common stock, preferred 
stock, and retained earnings) that the entity used to acquire its 
assets.
    21. The equity section of the balance sheet is broadly divided into 
three sections. One section shows the amounts of equity provided by 
shareholders through the sale of common and preferred stock. A second 
part shows the amount of earnings resulting from profitable operations 
that have been retained by the entity commonly referred to as retained 
earnings. The third section of equity reflects changes in the fair 
value of certain assets and liabilities resulting from transactions and 
events from nonowner sources. For example, this section shows the 
changes in fair value of certain financial instruments due to changes 
in the market price of those instruments, and changes in the fair value 
of certain cash flow hedge transactions. This section of equity is 
generally referred to as accumulated other comprehensive income and is 
separately shown in the FERC Annual Report Forms in the Statement of 
Accumulated Comprehensive Income and Hedging Activities schedule.\13\
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    \13\ See 67 FR 67692 (Nov. 6, 2002), III FERC Statutes and 
Regulations ]31,134 (Oct. 10. 2002).
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    22. The Income Statement explains how income was earned during the 
period and is prepared on the accrual

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basis of accounting. Net income, which is essentially the difference 
between revenues and expenses for the period, is added to retained 
earnings on a periodic basis. The Income Statement's primary focus is 
on the entity's financial performance or profitability.
    23. The Statement of Cash Flows reports the inflow and outflow of 
cash during the period. While the Income Statement focuses primarily on 
profitability, the Statement of Cash Flows primarily focuses on 
liquidity and solvency. Liquidity represents the ability of the entity 
to meet its current obligations when due, while solvency represents its 
ability to meet its long-term obligations. The Statement of Cash Flows 
provides information about a company's ability to generate cash flows 
in future periods, its capacity to meet obligations, its expected 
external financing requirements, and how successful investment and 
financing activities have been managed.
    24. Additionally, jurisdictional entities include in the FERC 
Annual Report Forms a Notes to the Financial Statement schedule which 
provides additional explanations on the items and amounts reported in 
the above mentioned financial statements. The Comparative Balance 
Sheet, Statement of Income, the Cash Flow Statement, the Notes to the 
Financial Statements, and other schedules contained in the FERC Annual 
Reports are attested to by an officer of the company. Public utilities 
and licensees, and natural gas companies also file an auditor's report 
with the Commission certifying that the financial information contained 
in the FERC Annual Report Forms conform in all material respects with 
the requirements of Uniform Systems of Accounts and published 
accounting releases. In addition to collecting financial information, 
the FERC Annual Report Forms collect non-financial information about 
the operations of the entity. These reports are considered non-
confidential in nature and therefore made available to the general 
public.

C. Relevancy of Periodic Financial Information

    25. The FERC Annual Report Forms provide the Commission, as well as 
others, with an informative picture of the jurisdictional entities' 
financial condition along with other relevant data that is used by the 
Commission, as well as others, in making economic judgements about the 
entity or its industry.
    26. For financial information to be useful to the Commission, as 
well as customers, investors and others it must be understandable, 
relevant, reliable, and timely. As financial reporting has evolved over 
the years, users of financial data have been willing to forgo some 
precision in reliability for the ability to obtain the information on 
more timely intervals, such as on a quarterly basis.
    27. Quarterly financial reporting is not a new requirement for 
public corporations.\14\ It began in 1902 when the United States Steel 
Corporation first published quarterly financial information and by 1910 
the New York Stock Exchange added quarterly financial reporting to its 
listing requirements.\15\ Additionally, over the decades public 
companies have been expanding their financial disclosures to meet the 
needs of the user community.
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    \14\ See President's Ten-Point Plan to Improve Corporate 
Responsibility and Protect America's Shareholders issued on March 7, 
2002. The first two points of the plan state that each investor 
should have quarterly access to the information needed to judge a 
firms financial performance, condition, and risks. Additionally, 
each investor should have prompt access to critical information.
    \15\ See Robert S. Kay and D. Gerald Searfoss, Handbook of 
Accounting and Auditing (2nd ed. 1989).
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    28.The trend toward more frequent and better financial disclosures 
has increased in reaction to highly publicized corporate scandals, 
business failures and the resulting losses incurred by investors and 
others. In 2002 Congress passed the Sarbanes-Oxley Act, the most 
important piece of recent legislation affecting corporate governance, 
financial disclosure and the practice of public accounting.\16\ This 
act requires public companies to disclose on a rapid and current basis 
such additional information concerning material changes in the 
financial condition or operations in plain English for the protection 
of investors and the public. As a result of this legislation, dates for 
periodic reporting of financial information have been accelerated, and 
principle executive and financial officers must each attest to the 
validity of the financial and other information contained in the 
periodic reports, including information concerning off-balance sheet 
arrangements, contingent obligations and comments and other significant 
items.
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    \16\ Supra Note 6.
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    29. While some jurisdictional entities may file similar information 
with the SEC, the level of detail concerning assets, liabilities, 
stockholder's equity along with the revenues, expenses, gains and 
losses is different for the Commission and the SEC. The financial 
statements filed with the SEC are on a consolidated, or parent company 
basis. The Commission notes that a majority of the jurisdictional 
entities that it regulates file financial information with the SEC that 
consolidates their assets, liabilities and profits with their parent 
company, or combine the regulated and unregulated operations in the 
reports to the SEC. While consolidation is appropriate for SEC 
reporting, the Commission requires more detailed information concerning 
the results of operations, and the financial position of each 
jurisdictional entity in order to meet its regulatory needs. Therefore, 
the Commission has required jurisdictional entities to file financial 
information on a jurisdictional entity level basis using a uniform 
system of accounts.
    30. Although the Commission requires jurisdictional entities to 
file financial information, a general weakness in this reporting 
program has been the frequency with which the financial reports are 
required. In a rapidly changing business environment, annual reporting 
is simply insufficient. For financial information to be useful to the 
Commission it must be collected on a more timely basis. In order to 
improve the decision making of the Commission and other users of the 
information, we are proposing quarterly reporting of financial and 
financial related information.
    31. Quarterly reporting of financial information will provide the 
Commission, as well as customers, investors, and others with an 
important tool to help identify emerging trends and issues affecting 
jurisdictional entities within the energy industry. It will also 
provide timely disclosures of the impacts that new accounting standards 
or changes in existing standards have on jurisdictional entities, as 
well as the economic effects of significant transactions, events, and 
circumstances.
    32. Furthermore, as the Commission considers implementing new 
accounting standards it is important that the Commission have timely 
financial data so that an appropriate assessment can be made of the 
impact these changes have on jurisdictional entities. The use of 
financial analytical tools and financial statements, together with the 
disclosures made in the notes to the financial statements and the MD&A, 
and other relevant data help staff, as well as, others to assess the 
credit quality, liquidity, solvency, and the impact that regulatory 
actions and economic events will have on jurisdictional entities.
    33. Quarterly reporting will permit the Commission to better 
understand trends and other factors that may affect an entity's 
liquidity position, its commitments of capital expenditures, its 
sources of financing, along with changes in the amount and types of

[[Page 40344]]

assets, liabilities, debt and equity used in its business.\18\ 
Transparent accounting and more frequent financial reporting play an 
important role in achieving vigilant oversight of market participants. 
More frequent financial reporting will provide needed insight into the 
opportunities and risks facing the energy industry as the Commission 
considers and assess the affects of its regulatory initiatives. The 
Commission shares the view that quarterly reporting will enhance its 
overall decision making process by providing more timely, useful and 
relevant data to the decision making process. Therefore, the Commission 
proposes that jurisdictional entities that are subject to the 
Commission's Uniform System of Accounts and file a FERC Annual Report 
Form 1, 1-F, 2, 2-A, or 6 also file quarterly financial statements and 
related financial information as discussed below.

III. Discussion

A. General

    34. The proposed changes will require the filing of quarterly 
financial statements and certain supplemental information. 
Additionally, the Commission proposes to update its existing FERC 
Annual Reports filing requirements in response to the passage of the 
Sarbanes-Oxley Act of 2002.\17\
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    \17\ Supra note 6.
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B. Proposed Quarterly Financial Reports

    35. The proposed changes will require certain forms currently filed 
annually to be filed on a quarterly basis. The Commission proposes that 
public utilities and licensees, and natural gas companies that file a 
FERC Annual Report Forms 1, 1-F, 2 or 2-A, provide quarterly financial 
and financial related information in the new FERC Form No. 3-Q, 
Quarterly Financial Report of Electric Utilities, Licensees, and 
Natural Gas Companies. Additionally, the Commission proposes that oil 
pipeline companies that file FERC Annual Report Form No. 6 provide 
quarterly financial and other information in the new FERC Form No. 6-Q, 
Quarterly Financial Report of Oil Pipeline Companies. Although these 
quarterly forms are new, most of the information contained in these 
forms is the same information currently submitted on an annual basis. 
Examples of the proposed quarterly report forms are provided in 
Appendix A.
1. Set of Financial Statements and Other Selected Information
    36. Under the proposed rule, public utilities and licensees, 
natural gas companies and oil pipeline companies will be required to 
file a set of financial statements on a quarterly basis. The financial 
statements will be developed using the Commission's Uniform System of 
Accounts and will be presented in a similar manner as those already 
filed with the Commission on an annual basis. The financial statements 
proposed to be included in the quarterly reports are the Comparative 
Balance Sheet, the Statement of Income and Retained Earnings, the 
Statement of Cash Flows, and the Statement of Other Comprehensive 
Income and Hedging Activities. These statements will show the activity 
for the current quarter as compared to the same quarter of the prior 
year.
    37. As part of collecting a complete set of financial statements, 
the Commission is proposing to collect certain detailed information 
already collected on an annual basis. This information includes 
revenues and the related quantities sold or transported, the operating 
and maintenance expenses, selected plant cost data, and regulatory 
asset and liability data which has become more significant in recent 
years. The quarterly reports will collect information on quantities and 
volumes sold or transported as is currently collected in the annual 
reports. Public utilities and licensees will report the amount of 
megawatt hours sold, natural gas companies will report the amount of 
dekatherms transported, and oil pipeline companies will report the 
amount of barrels of crude oil and each kind of product delivered 
during the period. This data will aid the Commission in monitoring the 
business conditions and changing events in these industries. The 
supplementary schedules will also provide the Commission, as well as 
customers, investors, and others with valuable financial information on 
more a timely basis, and allow for additional transparency into the 
financial activities of the entity.
    38. The table below summarizes the information that jurisdictional 
public utilities and licensees, natural gas and oil pipeline companies 
currently file with the Commission on an annual basis and will be filed 
in the proposed quarterly report forms.

------------------------------------------------------------------------
                                   Public
                                  utilities    Natural gas  Oil pipeline
           Schedules                 and        companies     companies
                                  licensees
------------------------------------------------------------------------
 1 Important Changes During        [bcheck]      [bcheck]      [bcheck]
 the Period...................
 2 Comparative Balance Sheet..     [bcheck]      [bcheck]      [bcheck]
 3 Statement of Income and         [bcheck]      [bcheck]      [bcheck]
 Retained Earnings............
 4 Statement of Cash Flows....     [bcheck]      [bcheck]      [bcheck]
 5 Statement of Accumulated        [bcheck]      [bcheck]      [bcheck]
 Comprehensive Income and
 Hedging Activities...........
 6 Notes to the Financial          [bcheck]      [bcheck]      [bcheck]
 Statements...................
 7 Summary of Utility Plant        [bcheck]      [bcheck]      [bcheck]
 and Accumulated Provisions
 for Depre., Amort. and
 Depletion....................
 8 Electric Plant in Service       [bcheck]         (\1\)         (\1\)
 Not by Function..............
 9 Accumulated Provision for       [bcheck]      [bcheck]      [bcheck]
 Depreciation.................
10 Public Utility and Licensee     [bcheck]         (\1\)         (\1\)
 Revenues.....................
11 Natural Gas Company                (\1\)      [bcheck]         (\1\)
 Revenues.....................
12 Oil Pipeline Company               (\1\)         (\1\)      [bcheck]
 Revenues.....................
13 Electric Prod., Other Power     [bcheck]         (\1\)         (\1\)
 Supply Exp., and Transmission
 and Distribution Exp.........
14 Gas Production and Other           (\1\)      [bcheck]         (\1\)
 Gas Supply Exp...............
15 Natural Gas Storage,               (\1\)      [bcheck]         (\1\)
 Terminaling, Processing,
 Transmission and Distribution
 Expenses.....................
16 Oil Carrier Expenses.......        (\1\)         (\1\)      [bcheck]
17 Customer Accounts, Service,     [bcheck]      [bcheck]         (\1\)
 Sales, Administrative and
 General Expenses.............
18 Other Regulatory Assets....     [bcheck]      [bcheck]         (\1\)
19 Other Regulatory                [bcheck]      [bcheck]         (\1\)
 Liabilities..................
20 Transmission of Electricity     [bcheck]         (\1\)         (\1\)
 for Others...................
21 Transmission of Electricity     [bcheck]         (\1\)         (\1\)
 by Others....................

[[Page 40345]]

 
22 Oil Barrels Delivered......        (\1\)         (\1\)     [bcheck]
------------------------------------------------------------------------
\1\ Not applicable.

2. Management Discussion and Analysis
    39. The Commission is proposing to include a new schedule to the 
quarterly report entitled Management's Discussion and Analysis of 
Financial Condition and Results of Operation (commonly referred to as 
the ``MD&A''). The MD&A schedule is intended to be a forward looking 
presentation of management's opinion regarding the probable impact of 
current and future events on the operations of the company. The 
reporting objectives of this new MD&A schedule are to disclose 
information necessary for the users of the financial statements to 
obtain an understanding of the company's financial condition and 
results of operation. The proposed MD&A schedule should satisfy three 
related objectives:
    1. Provide a narrative explanation of the jurisdictional entity's 
financial statements that enable the Commission and other users to view 
the company from management's perspective;
    2. Provide overall financial disclosure and provide the context 
within which financial statements of the jurisdictional entity should 
be analyzed; and
    3. Provide information about the quality of, and potential 
variability of, a jurisdictional entity's earnings and cash flow, so 
the Commission, as well as other users, can ascertain the likelihood 
that past performance is an indicator of future performance.
    40. The MD&A is an important aspect in obtaining transparency in 
financial reporting because it gives the users of financial information 
an opportunity to monitor the company through the perspective of 
management on both a short-term and long-term basis. The Commission 
acknowledges that companies currently file an MD&A with the SEC on a 
basis of consolidated operations. However, the Commission is proposing 
to require an MD&A schedule on an individual jurisdictional entity 
basis for both the quarterly and annual reports as further discussed 
below.
    41. The MD&A schedule will contain a description of events where 
there is a known trend or uncertainty that is reasonably likely to have 
a material effect on a jurisdictional company's operations. Management 
will identify and evaluate current trends to determine the potential 
impact on the company's operating results and financial position. The 
Commission will benefit from the most relevant, useful and 
understandable information regarding jurisdictional companies.
    42. The MD&A schedule will include disclosures as they apply to the 
reporting entity regarding the probable future impacts of regulatory 
accounting policies; revenue recognition; asset impairment, including 
goodwill and other intangible assets; environmental contingencies; 
litigation contingencies; defined benefit pension plans and other post-
retirement benefit plans; cost capitalization policies; depreciation 
expense; decommissioning; asset retirement obligations; self insurance; 
unique ownership arrangements; guarantees and other assurances; leasing 
arrangements; related party transactions; and energy trading and other 
risk management.
    43. This list is not intended to be an all inclusive or exhaustive 
inventory of significant events. Other events that could potentially 
positively or negatively impact its company, management must be 
reported under the heading of other significant events.
3. Electric Transmission Peak Loads
    44. The Commission is also proposing to obtain in the quarterly and 
annual reports electric peak load information of the transmission 
system including the respondent's own use of its transmission system. 
This information will aid the Commission in evaluating the adequacy of 
existing traditional cost-based rates.
4. Corporate Officers Certification
    45. In reaction to the Sarbanes-Oxley Act of 2002, the Commission 
is updating its corporate officer certification requirements.\18\ The 
Corporate Officer's Certification Statement is a current requirement of 
the FERC Annual Reports. The Commission is including the Corporate 
Officer's Certification Statement as a requirement for the quarterly 
reports.
---------------------------------------------------------------------------

    \18\ Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, section 
302, 116 Stat. 777 (2002). (codified at 15 U.S.C. 7241 (2000)).
---------------------------------------------------------------------------

    46. The updated certification will require that principal executive 
officer or officers and the principal financial officer or officers, 
and persons performing similar functions, to certify that each officer 
has reviewed the quarterly report form and the quarterly report does 
not contain any untrue statement of material fact, is not misleading, 
and fairly represents the financial condition of the company. In 
addition, each officer will certify that they are responsible for 
establishing and maintaining disclosure controls and procedures, and 
have designed disclosure controls and procedures to ensure that 
material information is made known to them. The officers will certify 
that they have evaluated the effectiveness of the controls and 
procedures within 90 days prior to the filing date. Each officer will 
also certify that all significant deficiencies in the design or 
operation of internal controls, any changes to internal controls, and 
any fraud were disclosed to the company's auditors and the audit 
committee. The proposed officer certification for public utilities and 
licensees, natural gas companies and oil pipeline companies reads as 
follows:
    47. The undersigned officer(s) certifies that:
    (1) I have reviewed this FERC Quarterly Financial Report.
    (2) Based on my knowledge this report does not contain any untrue 
statement of material fact or omit to state a material fact necessary 
to make the statements made, in light of the circumstances under which 
such statements were made, not misleading with respect to the period 
covered by this quarterly report.
    (3) Based on my knowledge, the financial statements, and other 
financial information included in this quarterly report, fairly 
represent in all material respects the financial condition, results of 
operations and cash flows of the respondent as of, and for the periods 
presented in this quarterly report.
    (4) I am responsible for establishing and maintaining internal 
controls, and have designed such internal controls to ensure that 
material information relating to the respondent and its subsidiaries is 
made known to such officers by others within those entities, particular 
during the period in which the periodic reports are being presented. I 
have evaluated the effectiveness of the respondent's internal controls 
as of a date within 90 days prior to the report, and have presented in 
the report their conclusions about the effectiveness of

[[Page 40346]]

their internal controls based on their evaluation as of that date.
    (5) I have disclosed to the respondent's auditors and the audit 
committee of the board of directors and the audit committee of the 
board of directors (or persons fulfilling the equivalent function) that 
all significant deficiencies in the design or operation of internal 
controls which could adversely affect the respondent's ability to 
record, process, summarize and report financial data and have 
identified for the respondent's auditors any material weaknesses in 
internal controls; and any fraud, whether or not material, that 
involves management or other employees who have a significant role in 
the respondent's internal controls.
    (6) I have indicated in this quarterly report whether or not there 
were significant changes in internal controls or in other factors that 
could significantly affect internal controls subsequent to the date of 
our most recent evaluation, including any corrective actions with 
regard to significant deficiencies and material weaknesses.
5. CPA Review Letter
    48. At this time the Commission is not requiring that companies 
have the proposed quarterly report reviewed by a CPA. However, if a 
company chooses to have the quarterly report reviewed by a CPA, the 
company must submit the CPA review letter along with the quarterly 
report to the Commission.
    49. Presently there are significant differences between a CPA 
``review'' report for interim financial statements and a CPA ``audit'' 
report for annual financial statements. A CPA review is substantially 
less in scope than an audit, and the CPA does not express an opinion as 
to whether the quarterly financial statements present fairly the 
financial position of the company, or were prepared in accordance with 
generally accepted accounting principles (GAAP). In contrast, an audit 
includes selective examination of the evidence supporting the amounts 
and disclosures in the financial statements, and includes assessing the 
accounting principles used and significant estimates made by 
management, as well as evaluating the overall financial statement 
presentation.
    50. While it is impractical to obtain an audit for interim 
financial statements, companies may choose to have a review performed. 
The Commission is of the view that the CPA review will aid in the 
reliability of the financial and other information contained in the 
quarterly report. However, since the CPA is not expressing an opinion 
on the financial statements presented in the quarterly report, the 
Commission at this time is not proposing to require companies to have a 
CPA perform a review of the financial statements contained in the 
quarterly reports. However, if the Quarterly Report Forms 3-Q and 6-Q 
are reviewed by a CPA, the company must submit an original CPA review 
letter to the Commission in accordance with the instructions contained 
in the quarterly report forms.
6. Who Must File and When
    51. The Commission proposes that jurisdictional entities that file 
FERC Annual Report Forms 1, 1-F, 2, 2-A, or 6 will now be required to 
submit the FERC Quarterly Forms 3-Q or 6-Q. The Commission proposes the 
quarterly reports be filed using a phase-in approach.\19\
---------------------------------------------------------------------------

    \19\ Sarbanes-Oxley Act of 2002, Pub. L. No. 107-204, Sec.  409, 
116 Stat. 791 (2002) requires that companies disclose material 
changes in financial condition and operations on a rapid and current 
basis. In response, the SEC has established a phase-in approach for 
accelerating the filing of SEC forms. The Commission proposes an 
identical phase-in approach for the filing of FERC Quarterly Forms 
and accelerating the filing of the FERC Annual Report Forms.
---------------------------------------------------------------------------

    52. Quarterly reports will be filed 45 days after the end of the 
quarter for quarters ending before December 15, 2004. Quarterly reports 
will be filed 40 days after the end of the quarter for quarters ending 
after December 15, 2004 and before December 15, 2005. Quarterly reports 
will be filed 35 days after the end of the quarter for quarters ending 
after December 15, 2005, as shown in the table below:

------------------------------------------------------------------------
                                  FERC quarterly report filing due on or
    Quarterly period covered                      before
------------------------------------------------------------------------
1 Covered 1/1/2004 through 3/31/  May 15, 2004
 2004
2 4/1/2004 through 6/30/2004      August 14, 2004
3 7/1/2004 through 9/30/2004      November 14, 2004
4 1/1/2005 through 3/31/2005      May 10, 2005
5 4/1/2005 through 6/30/2005      August 9, 2005
6 7/1/2005 through 9/30/2005      November 9, 2005
7 Subsequent Quarters             35 days after the end of the quarter
------------------------------------------------------------------------

7. Update Delegations
    53. Finally, the Commission proposes to update the delegations of 
authority for the Chief Accountant. Under the proposed new delegations, 
the Chief Accountant will accept delegated authority for accepting the 
filing of the quarterly report forms when the filing is in compliance 
with the Commission orders or decisions, or issue a deficiency letter 
when the filing fails to comply with applicable statutory requirements. 
Additionally, the proposed delegation will allow the Chief Accountant 
to deny or grant requests for waiver of the accounting or reporting 
requirements.

C. Proposed Changes to the FERC Annual Report Forms

    54. In addition to adding quarterly reporting requirements, the 
Commission proposes to update its annual reporting and disclosure 
requirements by making conforming changes to certain schedules in the 
FERC Annual Reports so that the information is better aligned with the 
information collected in the quarterly reports.
    55. The Commission also proposes to add a new schedule to the FERC 
Form 1 and 1-F to collect financial information on the amount of 
ancillary services purchased and sold during the year, update the 
corporate officer's certification, accelerate the submission dates of 
the FERC Annual Reports, allow the CPA certification to be filed 
electronically, update the statistical classifications used by public 
utilities and licensees to report transmission transactions, and other 
minor reporting changes.
1. Fourth Quarter Financial Information
    56. The Commission is proposing to make certain revisions to the 
FERC Annual Reports to report fourth quarter financial data. The 
Commission proposes to break out fourth quarter data in the income 
statements contained in the FERC Annual Report Forms 1, 1-F, 2, 2-A, 
and 6. This data will include the addition of two columns to the 
Statement of Income for the Year. One column will include fourth 
quarter data for the current year, and the second column will include 
fourth quarter data from the prior year. This information will be 
useful to the Commission for comparative purposes.
    57. Currently, the Statement of Cash Flows is presented on a 
comparative basis only in the FERC Annual Report Forms 2, 2-A and 6. 
The Commission is proposing to revise the FERC Annual Report Forms 1 
and 1-F to include a comparative Statement of Cash Flows to report 
current year and prior year activity.
    58. In addition, the Commission is proposing to report derivative 
assets and liabilities as current or long-term asset and liabilities on 
the Comparative Balance Sheet.

[[Page 40347]]

2. New Ancillary Service Schedule
    59. The Commission proposes to add a new schedule to the FERC 
Annual Report Forms 1 and 1-F to collect information on the amount of 
ancillary services purchased and sold during the year. Under Order No. 
888, ancillary services are now offered as part of open access 
transmission tariffs. These services and related amounts have been 
reported in an inconsistent manner in the annual reports. Therefore the 
proposed change would add a new schedule to report the services by the 
six types of ancillary services described in Order No. 888.\20\ 
Appendix B contains a sample of the proposed new schedule to collect 
financial data related to ancillary services and the related 
instructions.
---------------------------------------------------------------------------

    \20\ See FERC Stats. & Regs., Regulations Preambles January 
1991-1996, ] 31,036 (1996). See also Proforma OATT in Order No. 888, 
Schedules 1-8 and Attachment F.
---------------------------------------------------------------------------

3. Update Corporate Officer Certification
    60. In response to the Sarbanes-Oxley Act of 2002, the Commission 
is updating its corporate officer certification requirements.\21\ The 
Corporate Officer Certification Statement is not a new requirement. The 
Commission is simply updating the current statement to reflect the 
current economic environment. The corporate officer certification will 
contain the same representations as the one previously discussed for 
the proposed quarterly reports.
---------------------------------------------------------------------------

    \21\ Supra note 6.
---------------------------------------------------------------------------

4. Acceleration of Annual Report Form Submission
    61. The Commission proposes to accelerate the filing date for FERC 
Annual Report Forms 1, 1-F, 2, 2-A, and 6.\22\ Using a phase-in 
approach, the Commission proposes that all FERC Annual Report Forms be 
filed within 75 days for the year ending on December 31, 2003. 
Additionally, the Commission proposes that all FERC Annual Report Forms 
be filed within 60 days for the year ending December 31, 2004, and each 
subsequent year as shown in the table below:
---------------------------------------------------------------------------

    \22\ Supra note 6.

------------------------------------------------------------------------
                                    FERC annual report filing due on or
      Calendar year ending                        before
------------------------------------------------------------------------
1 December 31, 2003               March 17, 2004
2 December 31, 2004               March 1, 2005
3 Each Year Thereafter            March 1
------------------------------------------------------------------------

5. Changes to the CPA Certification Requirements
    62. The Commission proposes to accelerate filing dates of the 
current annual CPA Certification Statement and permit it to be filed 
electronically. Under the existing Commission requirements, 
jurisdictional public utilities, licensees and natural gas companies 
may file their CPA certification letter 30 days after submission of the 
FERC Annual Report. As part of the acceleration of the FERC Annual 
Report Forms the Commission is also proposing to accelerate the filing 
date of the annual CPA Certification Statement. The Commission proposes 
that the CPA certification be filed electronically on the same date as 
the FERC Annual Report. The CPA Certification Statement provides the 
users of the annual financial statements with additional support 
increasing the reliability of the financial and other information 
contained in the form. Electronic filing of the CPA certification will 
reduce the cost of submitting and maintaining the paper document, and 
improve the accessibility of the document. Finally, for those companies 
that continue to file a paper CPA Certification Statement, the 
Commission proposes to accelerate the filing date of the paper CPA 
Certification Statement from 30 days to 7 days after the FERC Annual 
Reports are filed.
6. Miscellaneous
    63. Finally, as part of the revisions to the FERC Annual Report 
Forms 1 and 1-F, the Commission proposes to update the statistical 
classifications billings resulting from the use of the transmission 
system by others, and the use of the system for others to reflect open 
access established by Order No. 888. The revised statistical 
classifications are as follows:
    FNS-for Firm Network Transmission Service for Self. ``Firm'' means 
service that cannot be interrupted for economic reasons and is intended 
to remain reliable even under adverse conditions. ``Network 
Transmission Service'' is transmission service as described in Order 
No. 888 and the Open Access Transmission Tariff.``Self'' means the 
respondent. FNO-Firm Network Service for Others. ``Firm'' means that 
service cannot be interrupted for economic reasons and is intended to 
remain reliable even under adverse conditions. ``Network Service'' is 
Network Transmission Service as described in Order No. 888 and the Open 
Access Transmission Tariff.
    LFP-for Long-Term Firm Point-to-Point Transmission Reservations. 
``Long-term'' means 1 year or longer. ``Firm'' means that service 
cannot be interrupted for economic reasons and is intended to remain 
reliable even under adverse conditions, and ``Point-to-point 
Transmission Reservations'' are described in Order No. 888 and the Open 
Access Transmission Tariff. For all transactions identified as LFP, 
provide in a footnote the termination date of the contract defined as 
the earliest date either buyer or seller can unilaterally cancel the 
contract.
    OLF-for Other Long-Term Firm Transmission Service. ``Long-term'' 
means 1 year or longer. This is service provided under contracts which 
do not conform to the terms of the Open Access Transmission Tariff. 
``Firm'' means that service cannot be interrupted for economic reasons 
and is intended to remain reliable even under adverse conditions. For 
all transactions identified as OLF, provide in a footnote the 
termination date of the contract defined as the earliest date either 
buyer or seller can unilaterally get out of the contracts.
    SFP-for Short-Term Firm Point-to-Point Transmission Reservations. 
This proposed classification is used for all firm point-to-point 
transmission reservations, where the duration of each period of 
reservation is less than 1 year.
    NF-for Non-Firm Transmission Service, where ``Non-firm'' means 
service that cannot be interrupted for economic reasons or reliability 
reasons.
    OS-for Other Transmission Service, where ``Firm'' means service 
that cannot be interrupted for economic reasons and is intended to 
remain reliable even under adverse conditions.
    AD-for Out-of-Period Adjustments. Use this code for any accounting 
adjustments or ``true-ups'' for service provided in prior reporting 
periods. Provide an explanation in a footnote for each adjustment.

IV. Regulatory Flexibility Act Statement

    64. The Regulatory Flexibility Act (RFA) requires agencies to 
prepare certain statements, descriptions, and analyses of proposed 
rules that will have a significant economic impact on a substantial 
number of small entities. \23\ The Commission is not required to make 
such analyses if a rule would not have such an effect.
---------------------------------------------------------------------------

    \23\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    65. The Commission concludes that this rule would not have such an 
impact on small entities. Most filing companies regulated by the 
Commission do not fall within the RFA's definition of a small

[[Page 40348]]

entity.\24\ As previously mentioned, the Commission concludes that this 
reporting would not be a significant burden to industry since the 
information is already being captured by their accounting systems and 
generally being reported to shareholders and others at a company, or at 
a consolidated business level. 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.
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

V. Environmental Analysis

    66. The Commission is required to prepare an Environmental 
Assessment or an Environmental Impact Statement for any action that may 
have a significant adverse effect on the human environment.\25\ No 
environmental consideration is raised by the promulgation of a rule 
that is procedural or does not substantially change the effect of 
legislation or regulations being amended.\26\ The proposed rule updates 
the Parts 141, 260, 357 and 375 of the Commission's regulations, and 
does not substantially change the effect of the underlying legislation 
or the regulations being revised or eliminated. Accordingly, no 
environmental consideration is necessary.
---------------------------------------------------------------------------

    \25\ Order No. 486, Regulations Implementing the National 
Environmental Policy Act, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & 
Regs. Preambles 1986-1990 ] 30,783 (1987).
    \26\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

VI. Information Collection Statement

    67. The following collections of information contained in this 
proposed rule have been submitted to the Office of Management and 
Budget (OMB) for review under Sec.  3507(d) of the Paperwork Reduction 
Act of 1995, 44 U.S.C. 3507(d). Comments are solicited on the 
Commission's need for this information, whether the information will 
have practical utility, the accuracy of provided burden estimates, ways 
to enhance the quality, utility, and clarity of the information to be 
collected, and any suggested methods for minimizing respondent's 
burden, including the use of automated information techniques.

Estimated Annual Burden

    68. The Commission estimates that on average it will take 
respondents 24 hours to comply with the proposed requirements. This 
will result in total hours for the following collections of 
information:

----------------------------------------------------------------------------------------------------------------
                                                    Number of                                      Total annual
            Data collection form (a)               respondents      Number of    Filing periods       hours
                                                       (b)          hours (c)          (d)       (e)=(b)x(c)x(d)
----------------------------------------------------------------------------------------------------------------
1 FERC Form 3-Q................................             331              24               3  23,832.0
2 FERC Form 6-Q................................             159              24               3  11,448.0
3 FERC Form 1..................................             216               1               1     216.0
4 FERC Form 17-F...............................              26               1               1      26.0
5 FERC Form 2..................................              57           \1/2\               1      28.5
6 FERC Form 2-A................................              53           \1/2\               1      26.5
7 FERC Form 6..................................             159           \1/2\               1      79.5
8 Totals.......................................  ..............  ..............  ..............  35,656.5
----------------------------------------------------------------------------------------------------------------

Total Annual Hours for Collection

(Reporting + Recordkeeping, (if appropriate)) = 35,656.5 hours.

    * This estimate is based on an average of 24 hours per respondent 
for recordkeeping purposes.
    69. OMB's regulations require it to approve certain information 
collection requirements imposed by agency rule. The Commission is 
submitting notification of this proposed rule to OMB.\27\
---------------------------------------------------------------------------

    \27\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    Title:

FERC Form No. 1, Annual Report of Major Electric Utilities, Licensees, 
and Others;
FERC Form No. 1-F, Annual Report for Non-Major Public Utilities and 
Licensees;
FERC Form No. 2, Annual Report for Major Natural Gas Companies;
FERC Form No. 2-A, Annual Report for Non-Major Natural Gas Companies;
FERC Form No. 3-Q, Quarterly Financial Report of Electric Utilities, 
Licensees, and Natural Gas Companies;
FERC Form No. 6, Annual Report for Oil Pipeline Companies;
FERC Form No. 6-Q, Quarterly Financial Report of Oil Pipeline 
Companies.

    Action: Proposed Collections.
    OMB Control No.: To be determined.
    Respondents: Business or other for profit.
    Frequency of Responses: Quarterly.
    Necessity of the Information: The proposed rule would revise the 
Commission's reporting requirements to improve financial transparency 
for jurisdictional companies. Transparent reporting of financial 
information and better financial disclosures proposed in this rule will 
help the Commission identify emerging trends and issues affecting 
energy companies, and thus provide more vigilant oversight of the 
regulated companies. The improved transparency brought about by more 
frequent financial reporting will help restore investor confidence in 
the energy industry.
    70. Quarterly reporting of financial information will provide the 
Commission with an important tool to timely identify issues affecting 
jurisdictional entities within the energy industry. It will aid the 
Commission in assessing the economic consequences of transactions and 
events on jurisdictional entities, measuring the effects of regulatory 
initiatives, evaluating the adequacy of existing traditional cost-based 
rates, and aid in the development of needed changes to existing 
regulatory initiatives.
    71. Although the Commission currently requires jurisdictional 
entities to file financial information on an annual basis, a general 
weakness in this reporting program has been the frequency with which 
these reports are required. In a rapidly changing business environment, 
annual reporting is simply insufficient. For financial information to 
be useful to the Commission it must be collected on a more timely 
basis.
    72. Internal Review: The Commission has reviewed the requirements 
pertaining to the Uniform Systems of Accounts and to the financial 
reports it prescribes and determined the proposed revisions are 
necessary to obtain more timely, relevant, reliable and understandable 
financial information from major participants in the energy market. 
More frequent reporting of financial information will provide the

[[Page 40349]]

Commission and the investing public with an important tool to help 
identify emerging trends, business conditions, and issues affecting 
jurisdictional entities within the energy industry. 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.
    73. 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, Phone: (202) 502-
8415, fax: (202) 208-2425, e-mail: [email protected])
    74. For submitting comments concerning the collections of 
information and the associated burden estimate(s), please send your 
comments to the contact listed above and to the Office of Management 
and Budget, Office of Information and Regulatory Affairs, 725 17th 
Street, NW., Washington, DC 20503 (Attention: Desk Officer for the 
Federal Energy Regulatory Commission, phone (202) 395-7318, fax: (202) 
395-7285).

VII. Comment Procedures

    75. The Commission invites all interested persons to submit 
comments on the matters and issues proposed in this notice to be 
adopted, including any related matters or alternative proposals that 
commenters may wish to discuss. Comments are due August 6, 2003. 
Comments must refer to Docket No. RM03-8-000, and must include the 
commenter's name, the organization they represent, if applicable, and 
their address in the comments. Comments may be filed either in 
electronic or paper format.
    76. Comments may be filed electronically via the eFiling link on 
the Commission's Web site at http://www.ferc.gov. The Commission 
accepts most standard word processing formats and commenters may attach 
additional files with supporting information in certain other file 
formats. Commenters filing electronically do not need to make a paper 
filing. Commenters that are not able to file comments electronically 
must send an original and 14 copies of their comments to: Federal 
Energy Regulatory Commission, Office of the Secretary, 888 First Street 
NE., Washington, DC 20426.
    77. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this proposal are 
not required to serve copies of their comments on other commenters.

VIII. Document Availability

    78. 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 on the Commission's Web site at 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.
    79. From FERC's Home page on the Internet, this information is 
available in the Federal Energy Regulatory Records Information System 
(FERRIS). The full text of this document is available on FERRIS in PDF 
and WordPerfect format for viewing, printing, and/or downloading. To 
access this document in FERRIS, type the docket number excluding the 
last three digits of this document in the docket number field.
    80. User assistance is available for FERRIS and the FERC's Web site 
during normal business hours by contacting FERC Online Support by e-
mail at [email protected] or by telephone at 866-208-3676 
(toll free), or for TTY, contact (202) 502-8659.

List of Subjects

18 CFR Part 141

    Electric power, Reporting and recordkeeping requirements.

18 CFR Part 260

    Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 357

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

18 CFR Part 375

    Authority delegations (Government agencies).

    By direction of the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
parts 141, 260, 357 and 375, Chapter I, Title 18, Code of Federal 
Regulations, as follows:

PART 141--STATEMENTS AND REPORTS (SCHEDULES)

    1. The authority citation for part 141 continues to read as 
follows:

    Authority: 15 U.S.C. 79; 16 U.S.C. 791a-828c, 2601-2645; 31 
U.S.C. 9701; 42 U.S.C. 7101-7352.

    2. In Sec.  141.1, paragraph (b)(2) is revised to read as follows:


Sec.  141.1  FERC Form No. 1, Annual report of Major electric 
utilities, licensees, and others.

* * * * *
    (b) Filing requirements. * * *
    (2) When to file and what to file: This report shall be filed as 
follows:
    (i) The annual report for the year ending December 31, 2003, will 
be filed on March 17, 2004.
    (ii) The annual report for the year ending December 31, 2004, will 
be filed on March 1, 2005.
    (iii) The annual report for each year thereafter will be filed on 
March 1 of the subsequent year.
    (iv) This report must be filed with the Federal Energy Regulatory 
Commission as prescribed in Sec.  385.2011 of this chapter and as 
indicated in the General Instructions set out in this form, and must be 
properly completed and verified. Filing on electronic media pursuant to 
Sec.  385.2011 of this chapter is required.
    3. In Sec.  141.2, paragraph (b)(2) is revised as follows:


Sec.  141.2  FERC Form No. 1-F, Annual report for Nonmajor public 
utilities and licensees.

* * * * *
    (b) Filing requirements. * * *
    (2) When to file: This report shall be filed as follows:
    (i) The annual report for the year ending December 31, 2003, will 
be filed on March 17, 2004.
    (ii) The annual report for the year ending December 31, 2004, will 
be filed on March 1, 2005.
    (iii) The annual report for each year thereafter will be filed on 
March 1 of the subsequent year.
    4. Section 141.400 is added to read as follows:


Sec.  141.400  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

    (a) Prescription. The Form of Quarterly Report of electric 
utilities, licensees, and natural gas companies, designated herein as 
FERC Form No. 3-Q, is prescribed for the reporting quarter ending March 
31, 2004, and each quarter thereafter.
    (b) Filing requirements. (1) Who must file--(i) Generally Each 
electric utility (as defined in Part 101 of Subchapter C of this 
chapter) and other entity, i.e., each corporation, person, or licensee 
as defined in section 3 of the Federal Power Act (16 U.S.C. 792 et 
seq.), including any agency or instrumentality

[[Page 40350]]

engaged in generation, transmission, distribution, or sale of electric 
energy, however produced, throughout the United States and its 
possessions, having sales or transmission service, whether or not the 
jurisdiction of the Commission is otherwise involved, shall prepare and 
file with the Commission FERC Form 3-Q pursuant to the General 
Instructions set out in that form.
    (ii) Exceptions. This report form is not prescribed for any agency, 
authority or instrumentality of the United States, nor is it prescribed 
for municipalities as defined in section 3 of the Federal Power Act; 
(i.e., a city, county, irrigation district, or other political 
subdivision or agency of a State competent under the laws thereof to 
carry on the business of developing, transmitting, utilizing, or 
distributing power).
    (2) When to file and what to file. This quarterly report form must 
be filed as follows:
    (i) The quarterly report for the period January 1 through March 31, 
2004, must be filed on or before May 15, 2004.
    (ii) The quarterly report for the period April 1 through June 30, 
2004, must be filed on or before August 14, 2004.
    (iii) The quarterly report for the period July 1 through September 
30, 2004, must be filed on or before November 14, 2004.
    (iv) The quarterly report for the period January 1 through March 
31, 2005, must be filed on or before May 10, 2005.
    (v) The quarterly report for the period April 1, 2005 through June 
30, 2005, must be filed on or before August 9, 2005.
    (vi) The quarterly report for the period July 1, 2005 through 
September 30, 2005, must be filed on or before November 9, 2005.
    (vii) The quarterly report for the period January 1 through March 
31, 2006, must be filled on or before May 5, 2006.
    (viii) Subsequent quarterly reports must be filed within 35 days 
from the end of the reporting quarter.
    (ix) This report must be filed as prescribed in Sec.  385.2011 of 
this chapter and as indicated in the general instructions set out in 
the quarterly report form, and must be properly completed and verified. 
Filing on electronic media pursuant to Sec.  385.2011 of this chapter 
will be required commencing with the reporting quarter ending March 31, 
2004, due on or before May 15, 2004.

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

    5. The authority citation for part 260 continues to read as 
follows:

    Authority: 15 U.S.C. 717-717w, 3301-3432; 42 U.S.C. 7101-7352.
    6. In Sec.  260.1, paragraph (b) is revised as follows:


Sec.  260.1  FERC Form No. 2, Annual report for Major natural gas 
companies.

* * * * *
    (b) Filing requirements. Each natural gas company, as defined by 
the Natural Gas Act (15 U.S.C. 717, et seq.) which is a major company 
(a natural gas company whose combined gas transported or stored for a 
fee exceed 50 million Dth in each of the three previous calender years) 
must prepare and file with the Commission, as follows:
    (1) The annual report for the year ending December 31, 2003 will be 
filed on March 17, 2004.
    (2) The annual report for the year ending December 31, 2004 will be 
filed on March 1, 2005.
    (3) The annual report for each year thereafter will be filed on 
March 1 of the subsequent year.
    (4) Newly established entities must use projected data to determine 
whether FERC Form No. 2 must be filed.
    (5) The form must be filed in electronic format only, as indicated 
in the general instructions set out in that form. The format for the 
electronic filing can be obtained at the Federal Energy Regulatory 
Commission, Division of Information Services, Public Reference and 
Files Maintenance Branch, Washington, DC 20426. One copy of the report 
must be retained by the respondent in its files.
    7. In Sec.  260.2, paragraph (b) is revised to read as follows:


Sec.  260.2  FERC Form No. 2-A, Annual reports for Nonmajor natural gas 
companies.

* * * * *
    (b) Filing requirements: Each natural gas company, as defined by 
the Natural Gas Act, not meeting the filing threshold for FERC Form No. 
2, but having total gas sales or volume transactions exceeding 200,000 
Dth in each of the three previous calendar years, must prepare and file 
with the Commission as follows:
    (1) The annual report for the year ending December 31, 2003, will 
be filed on March 17, 2004.
    (2) The annual report for the year ending December 31, 2004, will 
be filed on March 1, 2005.
    (3) The annual report for each year thereafter will be filed on 
March 1 of the subsequent year.
    (4) Newly established entities must use projected data to determine 
whether FERC Form No. 2-A must be filed.
    (5) This report must be filed as prescribed in Sec.  385.2011 of 
this chapter and as indicated in the general instructions set out in 
the quarterly report form, and must be properly completed and verified. 
Filing on electronic media pursuant to Sec.  385.2011 of this chapter 
will be required commencing with the reporting quarter ending March 31, 
2004, due on or before May 15, 2004. One copy of the report must be 
retained by the respondent in its files.
    8. Section 260.300 is added to read as follows:


Sec.  260.300  FERC Form No. 3-Q, Quarterly financial report of 
electric utilities, licensees, and natural gas companies.

    (a) Prescription. The Form of Quarterly Report of electric 
utilities, licensees, and natural gas companies, designated herein as 
FERC Form No. 3-Q, is prescribed for the reporting quarter ending March 
31, 2004, and each quarter thereafter.
    (b) Filing requirements. (1) Who must file. Each natural gas 
company, (as defined in the Natural Gas Act (15 U.S.C. 717, et seq.) 
must prepare and file with the Commission a FERC Form No. 3-Q.
    (2) When to file and what to file. This quarterly report form must 
be filed as follows:
    (i) The quarterly report for the period January 1 through March 31, 
2004, must be filed on or before May 15, 2004.
    (ii) The quarterly report for the period April 1 through June 30, 
2004, must be filed on or before August 14, 2004.
    (iii) The quarterly report for the period July 1 through September 
30, 2004, must be filed on or before November 14, 2004.
    (iv) The quarterly report for the period January 1 through March 
31, 2005, must be filed on or before May 10, 2005.
    (v) The quarterly report for the period April 1, 2005 through June 
30, 2005, must be filed on or before August 9, 2005.
    (vi) The quarterly report for the period July 1, 2005 through 
September 30, 2005, must be filed on or before November 9, 2005.
    (vii) The quarterly report for the period January 1 through March 
31, 2006, must be filed on or before May 5, 2006.
    (viii) Subsequent quarterly reports must be filed within 35 days 
from the end of the reporting quarter.
    (ix) This report must be filed as prescribed in Sec.  385.2011 of 
this chapter and as indicated in the general instructions set out in 
the quarterly report form, and must be properly completed and verified. 
Filing on

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electronic media pursuant to Sec.  385.2011 of this chapter will be 
required commencing with the reporting quarter ending March 31, 2004, 
due on or before May 15, 2004. One copy of the report must be retained 
by the respondent in its files.

PART 357--ANNUAL SPECIAL OR PERIODIC REPORTS: CARRIERS SUBJECT TO 
PART I OF THE INTERSTATE COMMERCE ACT

    9. The authority citation for part 357 continues to read as 
follows:

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85 (1988).

    10. In Sec.  357.2, paragraph (b) is revised as follows:


Sec.  357.2  FERC Form No. 6, Annual report of oil pipeline companies.

* * * * *
    (b) When to file: This report shall be filed as follows:
    (1) The annual report for the year ending December 31, 2003, will 
be filed on March 17, 2004.
    (2) The annual report for the year ending December 31, 2004, will 
be filed on March 1, 2005.
    (3) The annual report for each year thereafter will be filed on 
March 1 of the subsequent year.
* * * * *
    11. Section 357.4 is added to read as follows:


Sec.  357.4  FERC Form No. 6-Q, Quarterly Report of Oil Pipeline 
Companies.

    (a) Prescription. The Form of Quarterly Report of oil pipeline 
companies, designated herein as FERC Form No. 6-Q, is prescribed for 
the reporting quarter ending March 31, 2004, and each quarter 
thereafter.
    (b) Filing requirements. (1) Who must file. Each oil pipeline 
company, subject to the provisions of section 20 of the Interstate 
Commerce Act must prepare and file with the Commission a FERC Form No. 
6-Q.
    (2) When to file and what to file. This quarterly report form must 
be filed as follows:
    (i) The quarterly report for the period January 1 through March 31, 
2004, must be filed on or before May 15, 2004.
    (ii) The quarterly report for the period April 1 through June 30, 
2004, must be filed on or before August 14, 2004.
    (iii) The quarterly report for the period July 1 through September 
30, 2004, must be filed on or before November 14, 2004.
    (iv) The quarterly report for the period January 1 through March 
31, 2005, must be filed on or before May 10, 2005.
    (v) The quarterly report for the period April 1, 2005 through June 
30, 2005, must be filed on or before August 9, 2005.
    (vi) The quarterly report for the period July 1, 2005 through 
September 30, 2005, must be filed on or before November 9, 2005.
    (vii) The quarterly report for the period January 1 through March 
31, 2006, must be filed on or before May 5, 2006.
    (viii) Subsequent quarterly reports must be filed within 35 days 
from the end of the reporting quarter.
    (ix) This report must be filed as prescribed in Sec.  385.2011 of 
this chapter and as indicated in the general instructions set out in 
the quarterly report form, and must be properly completed and verified. 
Filing on electronic media pursuant to Sec.  385.2011 of this chapter 
will be required commencing with the reporting quarter ending March 31, 
2004, due on or before May 15, 2004.

PART 375--THE COMMISSION

    12. The authority citation for part 375 continues to read as 
follows:

    Authority: 5 U.S.C. 551-557; 15 U.S.C. 717-717w, 3301-3432; 16 
U.S.C. 791-825r, 2601-2645; 42 U.S.C. 7101-7352.

    13. In Sec.  375.303, paragraphs (d) and (e) are added to read as 
follows:


Sec.  375.303  Delegations to the Chief Accountant.

* * * * *
    (d) Accept for filing Quarterly Report Form Nos. 3-Q and 6-Q if 
such filings are in compliance with Commission orders or decisions, and 
when appropriate, notify the party of such acceptance. Issue and sign 
deficiency letters if the filing fails to comply with applicable 
statutory requirements, and with all applicable Commission rules, 
regulations, and orders for which a waiver has not been granted.
    (e) Deny or grant, in whole or in part, requests for waiver of the 
reporting requirements for the forms under Sec. Sec.  141.400, 260.300, 
and 357.400 of this chapter and the filing of these forms on electronic 
media under Sec.  385.2011 of this chapter.

    Note: The following appendices will not appear in the Code of 
Federal Regulations.


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[FR Doc. 03-16811 Filed 7-3-03; 8:45 am]
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