[Federal Register Volume 68, Number 130 (Tuesday, July 8, 2003)]
[Rules and Regulations]
[Pages 40500-40510]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-16819]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 101, 141, 201, 260, 352, and 357

[Docket No. RM02-14-000; Order No. 634]


Documentation Requirements for Cash Management Programs Issued 
June 26, 2003

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Interim rule.

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SUMMARY: In order to protect the customers of jurisdictional companies, 
the Federal Energy Regulatory Commission is amending its regulations to 
implement documentation requirements for cash management programs. The 
Commission is also seeking comments on new reporting requirements that 
require FERC-regulated entities to file their cash management 
agreements with the Commission, and to notify the Commission when their 
proprietary capital ratios fall below 30 percent, and when their 
proprietary capital ratios subsequently return to or exceed 30 percent.
    This initiative responds to recent investigations by FERC and 
others that revealed large amounts of funds in cash management programs 
(at least $16 billion) that, in many instances, were not formalized in 
writing. The interim rule is intended to protect the ratepaying 
customers of FERC-regulated entities by providing greater transparency 
concerning cash management programs. Additionally, it will ensure that 
the investing community has more and better information to evaluate the 
condition of these FERC-regulated entities and their financial 
exposure.

DATES: Effective Date: This rule is effective August 7, 2003.
    Compliance Date: The Commission will not implement the reporting 
requirements in Sec. Sec.  141.500, 260.400, and 357.5 until it has 
considered the comments filed on these requirements.
    Comment Date: Comments on the new reporting requirements in 
Sec. Sec.  141.500, 260.400, and 357.5 are due August 7, 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:

Wayne McDanal (Technical Information), Office of the Executive 
Director, Division of Regulatory Accounting Policy, Federal Energy 
Regulatory Commission, 888 First Street, NE., Washington, DC 20426, 
(202) 502-6010.
Peter Roidakis (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street, NE., 
Washington, DC 20426, (202) 502-8206.

SUPPLEMENTARY INFORMATION:

Table of Contents

I. Introduction
II. Background
III. Discussion
    A. Prerequisites for Participating in Cash Management Programs
    B. Documentation Requirements
    C. Prohibition on Netting
    D. Applicability of Rule
    E. Legal Authority to Prescribe Prerequisites
    F. Requests for Policy Statement
    G. New Reporting Requirements
    1. Submission of Cash Management Agreements
    2. Notification Requirements
IV. Regulatory Flexibility Act Statement
V. Environmental Analysis
VI. Information Collection Statement
VII. Comment Procedures
VIII. Document Availability
IX. Effective Date and Congressional Notification

Regulatory Text

Appendix A--Commenters in RM02-14-000

I. Introduction

    1. The Federal Energy Regulatory Commission (Commission or FERC) is 
amending its regulations by implementing documentation requirements for 
FERC-regulated entities that participate in cash management programs. 
The documentation requirements are reflected in changes to 18 CFR parts 
101, 201, and 352 of the Commission's Uniform Systems of Accounts for 
public utilities and licensees, natural gas and oil pipeline companies. 
The Commission, however, is not adopting the two financial 
prerequisites as proposed in the NOPR that would have limited 
participation in a cash management program when either of the two 
prerequisites was not met.
    2. Additionally, the Commission is seeking comments on new 
reporting requirements that require FERC-regulated entities to file the 
agreements related to their cash management programs with the 
Commission, and require FERC-regulated entities to notify the 
Commission when their proprietary capital ratios drop below 30 percent, 
and when their proprietary capital ratios subsequently return to or 
exceed 30 percent. By making this information available to the public, 
the investing community will have needed and better information on 
which to evaluate the financial conditions of FERC-regulated entities. 
These reporting requirements are reflected in changes to 18 CFR 
Sec. Sec.  141.500, 260.400, and 357.5 of the Commission's regulations. 
The Commission will not implement the reporting requirements in these 
Sections until it has considered the comments filed on these 
requirements.
    3. Cash management programs are of several different types. Some 
concentrate and transfer funds from multiple accounts into a single 
bank account in the parent company's name. Another type is known as 
``cash pooling'' or ``money pooling.'' This system uses a single 
summary account with interest earned or charged on the net cash balance 
position. There is no movement of funds between accounts of the 
entities participating in the pool. All accounts must be in the same 
bank, but not at the same branch. A third type, known as a ``zero 
balance account,'' empties or fills the balances in an affiliated 
company's account at a bank into or out of a parent's account each day. 
This list is not exhaustive and merely describes generic features of 
cash management programs.

[[Page 40501]]

    4. Cash management programs control a large amount of assets. FERC 
Staff investigators found that in 2001, balances in cash management 
programs affecting FERC-regulated entities totaled approximately $16 
billion. In addition, other investigations have revealed large 
transfers of funds (amounting to more than $1 billion) between 
regulated pipeline affiliates and non-regulated parents whose financial 
conditions were precarious. See In Re Investigation of Certain 
Financial Data, ``Order to Respond,'' Docket No. IN02-6-000, 100 FERC ] 
61,143 (2002). These and other fund transfers and the enormous, mostly 
unregulated, pools of money in cash management programs may 
detrimentally affect regulated rates.
    5. To date, the scrutiny of cash management programs has been 
minimal and has been made difficult because many cash management 
programs have not been formalized in writing, and the impact of these 
programs on the energy markets and ratepayers is thus obscured. Other 
means of transferring assets from FERC-regulated entities to 
unregulated entities, such as loans and dividends, have a degree of 
transparency not found in cash management programs.
    6. To protect the ratepaying customers of FERC-regulated entities 
by providing greater transparency of cash management programs, the 
Commission is implementing documentation standards for these activities 
that will assure appropriate data are maintained. The availability of 
such information will also allow FERC audit staff ready access to 
consistent data.
    7. The Commission is amending its Uniform Systems of Accounts (18 
CFR parts 101, 201, and 352) to provide documentation requirements for 
cash management programs, to require that cash management agreements be 
in writing, that the agreements specify the duties and responsibilities 
of cash management program participants and administrators, specify the 
methods for calculating interest and for allocating interest income and 
expenses, and specify any restrictions on deposits or borrowings by 
participants.
    8. Additionally, to provide greater transparency of FERC-regulated 
entities' cash management programs, the Commission is seeking comments 
on a new reporting requirement that requires FERC-regulated entities to 
file these agreements with the Commission. Any subsequent changes to 
these agreements must be filed within 10 days from the date of the 
change.
    9. The Commission is also seeking comments on a new reporting 
requirement that requires a FERC-regulated entity to notify the 
Commission within 5 days when its proprietary capital ratio falls below 
30 percent. The filing must include the entity's proprietary capital 
ratio, the significant event(s) or transaction(s) that contributed to 
the proprietary capital ratio falling below 30 percent, the extent to 
which the entity has amounts loaned or advanced to others within its 
corporate group through its cash management program, and plans, if any, 
to raise its proprietary capital ratio. Finally, the Commission is 
seeking comments on a new reporting requirement that would require a 
FERC-regulated entity to notify the Commission within 5 days when its 
proprietary capital ratio subsequently returns to or exceeds 30 
percent.
    10. The provisions of this interim rule will apply to all FERC-
regulated entities that have not been granted waivers of the 
Commission's accounting and the FERC Annual Report Forms 1, 1-F, 2, 2-A 
or 6 filing requirements. The information collected through the new 
reporting requirements is considered non-confidential in nature and 
will be made available to the general public via the Federal Energy 
Regulatory Records Information System (FERRIS) accessed from the FERC's 
Home Page.
    11. The new documentation standards, the filing of the cash 
management agreements, and the notification requirements, will achieve 
additional transparency with respect to the financial conditions and 
financial dealings of FERC-regulated entities and their corporate 
financial transactions. The public availability of the information will 
allow all users of financial information to make informed decisions 
based on relevant and accurate information.

II. Background

    12. In a Notice of Proposed Rulemaking (NOPR) issued on August 1, 
2002, 67 FR 51150 (Aug. 7, 2002), IV FERC Stats. & Regs. ] 32,561 (Aug. 
1, 2002), the Commission proposed to amend its Uniform Systems of 
Accounts for public utilities and licensees,\1\ natural gas 
companies,\2\ and oil pipeline companies,\3\ to require that, as a 
prerequisite to a FERC-regulated entity participating in cash 
management programs, the FERC-regulated entity shall maintain a minimum 
proprietary capital ratio of at least 30 percent and the FERC-regulated 
entity and its parent shall maintain investment grade credit ratings. 
The Commission further proposed that if either of the conditions was 
not met, the FERC-regulated entity could not participate in the cash 
management program. Also, the NOPR proposed documentation requirements 
for cash management programs.
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    \1\ 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).
    \2\ 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).
    \3\ Part 352 Uniform Systems 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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    13. The NOPR was published in the Federal Register on August 7, 
2002, and comments were initially due 15 days thereafter, or August 22, 
2002. By notice issued August 16, 2002, the Commission extended the 
comment deadline to August 28, 2002. A Staff Technical Conference was 
held on September 25, 2002, to explore the issues raised by the 
NOPR.\4\
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    \4\ Notice of the Staff Technical Conference was issued 
September 6, 2002. See 67 FR 57994 (Sept. 13, 2002).
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III. Discussion

    14. The Commission received nearly fifty comments concerning 
various aspects of the proposed rule. Virtually all commenters were 
generally supportive of the Commission's effort to establish more 
precise accounting rules with respect to cash management programs 
between regulated and unregulated entities.
    15. On the other hand, most of the commenters objected to the 
proposed prerequisites to FERC-regulated entities' participation in 
cash management programs and claimed that there is no statutory basis 
for these requirements. Other commenters argued that they should be 
exempt from the requirements of the proposed rule. The Edison Electric 
Institute (EEI), the Interstate Natural Gas Association of America 
(INGAA), and the Association of Oil Pipe Lines (AOPL) filed a joint 
supplement to their initial comments, urging that the Commission adopt 
guidelines rather than a rule. A complete list of commenters may be 
found at Appendix A.

A. Prerequisites for Participating in Cash Management Programs

    16. The NOPR proposed two financial prerequisites that must be met 
for FERC-regulated entities to participate in cash management programs. 
As discussed below, most commenters objected to the use of these 
criteria for participation in the programs, and after reviewing the 
comments, the Commission will not impose the two financial 
prerequisites as conditions that FERC-regulated

[[Page 40502]]

entities must meet to participate in cash management programs.

Comments Received

    17. Commenters \5\ argue that the NOPR fails to explain the basis 
for choosing a 30 percent proprietary capital requirement as well as 
how meeting this requirement achieves the stated objectives of the 
NOPR. They also assert that the proposed requirement would not 
effectively prevent any ``upstream'' loans from a regulated entity to 
its unregulated parent.
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    \5\ E.g., NiSource Inc. (Nisource), Chevron Pipeline Company, et 
al. (Chevron), El Paso Energy Partners, L.P. (El Paso).
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    18. EEI, INGAA, AOPL and others object that to obtain credit 
ratings for previously unrated subsidiaries would be costly, and in 
some cases subsidiaries might not be able to obtain investment grade 
credit ratings without parental guarantees. Other commenters (e.g., 
PEPCO Holdings, Inc.) maintain that requiring a regulated entity to 
maintain a credit rating is unreasonable because not every subsidiary 
has publicly held debt, as the parent entity most likely does. Public 
Service Electric and Gas Company, et al. (PSEG) is concerned that many 
of its subsidiaries would be unable to obtain investment grade credit 
ratings based on its current business structure, which is designed to 
qualify subsidiaries for exempt wholesale generator status. KeySpan 
Corporation (KeySpan) expresses doubt that a credit rating for FERC-
regulated entities would do much to protect ratepayers.
    19. The National Rural Electric Cooperative Association (NRECA) 
points out that many of its electric cooperative members operate as 
not-for-profit organizations collecting only enough revenues in excess 
of operating expenses to meet mortgage requirements and would, 
therefore, not be able to meet the 30 percent proprietary capital 
requirement. These electric cooperatives argue that so long as they 
meet their loan agreements, they should be permitted to participate in 
cash management programs.
    20. Commenters \6\ also argue that the investment grade credit 
rating prerequisite could in fact increase costs to ratepayers where 
neither the FERC-regulated entity nor its unregulated parent currently 
holds a credit rating of any kind. The cost burden of obtaining and 
maintaining investment grade credit ratings, commenters state, would 
invariably be passed on to ratepayers. They further argue that any 
costs associated with a FERC-regulated entity not being able to 
participate in a cash management program, such as higher costs of 
borrowing, would also be borne by ratepayers in the form of higher 
rates.
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    \6\ Among them are AOPL, Chevron, INGAA, National Grid USA 
(National Grid), Duke Energy Corporation (Duke Energy), SCANA 
Corporation (SCANA) and Ameren Corporation (Ameren) (also arguing 
that cutting off access to capital could be detrimental to customers 
because utilities might then avoid maintenance and improvements to 
their systems).
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    21. Duke Energy and NiSource fear the rule would effectively become 
a financial rating trigger and would place added stress on a company's 
investment grade credit rating. They point out that rating agencies 
advise companies to avoid such rating triggers in financing agreements 
because rating agencies view these triggers as creating additional 
risk. Accordingly, these commenters would eliminate either the 
investment grade credit rating or the 30 percent proprietary capital 
requirement, or both.
    22. Conversely, Missouri Public Service Commission (MoPSC) suggests 
that the Commission require all entities that participate in the same 
cash management program as a regulated entity maintain investment grade 
credit ratings or maintain the ratings if they participate in different 
pools with members in common with the regulated entity's pool.

Commission Response

    23. The Commission recognizes the myriad concerns raised by parties 
commenting on the NOPR, both in comments on the NOPR and in comments 
received at the related Staff Technical Conference, particularly with 
respect to the 30 percent proprietary capital and investment grade 
credit rating prerequisites. Based upon the additional information 
obtained from commenters, conditioning participation in a cash 
management program using an investment grade credit rating and a 
proprietary capital ratio of 30 percent may be too rigid and 
inflexible.
    24. Although over 90 percent of FERC-regulated entities have at 
least 30 percent proprietary capital, many do not have credit ratings 
and would thus fail the investment grade prerequisite. The 
prerequisites, particularly the requirement for an investment grade 
credit rating, would create uncertainty as to the ability of FERC-
regulated entities to participate in new or existing cash management 
programs. The Commission therefore is not adopting the proposed 
prerequisites.\7\
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    \7\ The Commission will not adopt the NOPR's proposed revision 
to paragraph B of Accounts 146, Accounts receivable from associated 
companies and paragraph (b) of Account 13, Receivables from 
affiliated companies, which prescribed the prerequisites for 
participation in cash management programs.
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B. Documentation Requirements

    25. The NOPR proposed that FERC-regulated entities would be 
required to maintain documentation of all deposits into and borrowings 
from cash management programs, as well as documentation of security, if 
any, provided for repayment of deposits or in support of borrowings, 
and daily balances for each individual deposit or borrowing as well as 
documentation on the organization and operation of the cash management 
program.

Comments Received

    26. Virtually all commenters supported the NOPR's proposed 
requirement to put all agreements in writing, specifying the duties of 
the participants as well as the duties of the administrators. EEI 
asserts that, as a general matter, the proposed documentation 
requirements as to the structure and operation of the cash management 
programs appear reasonable and would formalize documentation practices 
that should already be in place for such programs. AOPL argues that 
while companies could document the establishment of cash management 
programs and all transactions, individual agreements are rarely, if 
ever, put into writing. While agreeing that putting agreements into 
written documents would be helpful, Duke Energy urges the Commission 
not to dictate the terms of the agreements.
    27. While commenters support the documentation requirements, many, 
including EEI, Allegheny Energy, Inc. (Allegheny), AOPL, Cinergy Corp. 
(Cinergy), Gulf South Pipeline Company LP (Gulf South), KeySpan and 
NiSource, request clarification on whether they must securitize cash 
management transactions. They also request clarification that 
securitization is not required for participation in a cash management 
program, but that the Commission intends that any security provided be 
documented. AOPL, Gulf South, and National Fuel Gas Supply Corporation 
(National Fuel) also request clarification of the level of detail 
required for the documentation, whether the documentation may be 
maintained electronically, and whether companies must submit the 
documentation on any regular basis or whether maintaining the 
documentation is sufficient. AOPL suggests that the documentation 
requirements should be simplified to more closely mirror Generally 
Accepted Accounting Principles (GAAP), arguing that tracking every 
transaction is unreasonable and unwarranted.

[[Page 40503]]

Commission Response

    28. While we recognize that some commenters argue that their 
particular cash management programs have not been reduced to writing, 
sound business practices dictate, as noted by EEI, that such agreements 
be in writing. We are not, however, establishing the terms of such 
agreements. In this interim rule, we require FERC-regulated entities to 
maintain documentation in support of their cash management programs 
including the duties and responsibilities of the program administrators 
and participants, restrictions on borrowings from the cash management 
programs, interest earnings and expense rates and cost sharing 
provisions, all as stated in the text of revised Account 146, Accounts 
receivable from associated companies, for public utilities and 
licensees, and natural gas companies, and Account 13, Receivables from 
affiliated companies, for oil pipeline companies.
    29. With respect to the form of documentation required in support 
of cash management programs, the Commission's regulations at parts 125, 
225 and 356 prescribe the form of the media to be utilized for 
maintaining the records including paper, electronic, optical or other 
new and evolving media, as well as the retention period for such 
records.\8\
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    \8\ 18 CFR parts 125, 225 and 356 (2003).
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    30. The Commission did not propose the filing of any of the 
documentation that it proposed to be maintained. After review of 
comments and in recognition of the need for transparency of information 
on cash management programs, the Commission is now seeking comment on 
proposed filing requirements for cash management agreements and for 
notification of changes in the FERC-regulated entity's proprietary 
capital ratio.
    31. Duke Energy's and other commenters' concerns about the 
Commission's requirements for security for cash management program 
deposits and borrowings are misplaced. The interim rule does not 
require security for these arrangements. To clarify, FERC-regulated 
entities must maintain documentation of security for deposits into and 
borrowings from these arrangements only when the cash management 
programs themselves require such security.\9\
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    \9\ EEI made this point in its comments at the September 25, 
2002 technical conference.
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    32. Duke Energy also argues that the text of Account 146 should be 
revised to provide that items ``not expected to be paid'' within 12 
months or non-current items should be transferred either to Account 
123, Investment in associated companies, or Account 123.1, Investment 
in subsidiary companies, rather than requiring the transfer of all non-
current items to Account 123 as Account 146 now provides.\10\ Duke 
Energy argues that this clarification will ensure proper classification 
of items and will ``eliminate the need for burdensome daily monitoring 
for the twelve-month time limit on entries in this account * * *.''\11\
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    \10\ Duke Energy comments at 26-27.
    \11\ Id. at 27.
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    33. While Duke Energy's concern is not entirely clear, it may be 
related to a misperception of the proposed requirements for documenting 
security of cash management program transactions. The NOPR proposed no 
change in how current and non-current transactions are accounted for, 
and Duke Energy's suggested revision is beyond the scope of this 
interim rule. As explained above, the interim rule does not mandate 
that cash management transactions be securitized, but only imposes a 
documentation requirement for any security that exists. Duke Energy 
implies it is hard to monitor ``undated'' paper for purposes of the 
rule's documentation requirements. However, the possibility of 
``undated'' paper existed prior to the interim rule, and for purposes 
of proper classification in Account 146, 123, or 123.1, a reasonable 
date must be imputed. Duke Energy has not clearly articulated any need 
for changing Account 146 as a consequence of the interim rule. 
Accordingly, the Commission will not modify Account 146, as requested 
by Duke Energy.
    34. AOPL's proposal that documentation ``mirror'' GAAP is imprecise 
and does not identify the specific documentation to be maintained for 
cash management transactions. The Commission is specifying the 
documentation that FERC-regulated entities must maintain to meet 
Commission's oversight needs and to satisfy its regulatory mandate.
    35. Finally, FirstEnergy Corp. (FirstEnergy) suggests creating a 
new account under the Uniform System of Accounts under which all cash 
management program loans would be recorded. It further requests that 
the Commission clarify the specific transactions to which the NOPR 
applies, as Account 146 encompasses all transactions between associated 
companies.
    36. We do not find it necessary at this time to revise the Uniform 
Systems of Accounts by adding a new account as requested by 
FirstEnergy. The instructions to Account 146 are sufficient and can 
accommodate cash management programs used by FERC-regulated entities.

C. Prohibition on Netting

    37. The NOPR proposed that ``cash deposits and borrowings may not 
be netted'' in order to provide better transparency of inter-company 
payables or receivables resulting from cash management agreements.

Comments Received

    38. Commenters uniformly object to this proposal or request 
clarification as to the meaning of this requirement, pointing out that 
netting is the essence of, and one of the key benefits of, cash 
management programs.\12\ Commenters argued that cash management 
programs operate, essentially, as ordinary checking accounts and that 
transactions within an account are netted against each other.\13\
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    \12\ See, e.g., AOPL, INGAA, and EEI.
    \13\ Id.
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Commission Response

    39. Prior to the issuance of the NOPR, the Commission examined a 
number of FERC-regulated entities' cash management accounts. That 
examination revealed numerous instances in which amounts reported in 
FERC Accounts 146 and 13 had negative balances. The Commission views 
the reporting of negative balances in these receivables accounts rather 
than in payable accounts as inappropriate and potentially misleading. 
The Commission included in the NOPR a ban on netting in an effort to 
rectify that situation.
    40. The Commission agrees with the commenters that cash management 
programs operate essentially as ordinary checking accounts and that 
transactions within an account are netted against each other. The 
Commission is therefore deleting the prohibition on netting from this 
interim rule. We will require, however, that the balances in the FERC 
accounts that record cash management activities be properly classified: 
debit balances must be reported in the appropriate accounts receivable 
account and credit balances must be reported in the appropriate 
accounts payable account at the end of each accounting period.

D. Applicability of Rule

    41. The NOPR proposed that the requirements of this rule apply to 
all FERC-regulated entities including registered holding companies that 
are regulated by the United States Securities and Exchange Commission 
(SEC).

[[Page 40504]]

Comments Received

    42. Registered holding company commenters uniformly argue that 
registered holding companies, regulated by the SEC under the Public 
Utility Holding Company Act of 1935 (PUHCA), should be exempted from 
the proposed rule.\14\ They argue that their cash management activities 
are already regulated by the SEC, that efforts by FERC to regulate the 
same would be burdensome and duplicative, that the PUHCA itself 
protects against cash management abuse, and that Section 318 of the 
Federal Power Act (FPA) deprives FERC of the authority to regulate 
their cash management practices.\15\ Ameren suggests that the 
Commission deem registered holding companies in compliance with the 
proposed rule so long as the companies comply with all applicable PUHCA 
rules and SEC orders. Furthermore, several commenters, including 
Cinergy, point out that the regulation of cash management programs 
falls squarely within the technical expertise of the SEC.
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    \14\ Registered holding company commenters included: American 
Electric Power Company, Inc. (AEP), Allegheny, Ameren, Cinergy, 
FirstEnergy, KeySpan, National Fuel, National Grid, NiSource, 
Northeast Utilities (NU), SCANA, and WGL Holdings, Inc. (WGL 
Holdings).
    \15\ 16 U.S.C. 792.
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    43. Similarly, USG Pipelines,\16\ Cinergy and others argue that the 
rule should not apply to small regulated entities and urge the 
Commission expressly to exempt these entities. The NRECA asks that the 
rule not be applied to cash management programs maintained by FERC-
regulated electric cooperatives.
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    \16\ USG Pipeline Co., B-R Pipeline Co. and United States Gypsum 
Co. (collectively USG Pipelines).
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    44. Energy marketers and traders argue that ratepayers would not be 
adversely affected by mismanagement of their cash management programs, 
and, therefore, they should be exempted from the proposed rule.\17\ 
PSEG suggests expanding the exemption from the Uniform System of 
Accounts to include generators and suggests that energy marketers, 
traders and generators be allowed to apply for waivers by demonstrating 
that they are not subject to the Commission's cost-based rate 
regulation, similar to the Commission's waiver of its part 35 cost of 
service filing requirements.
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    \17\ Ontario Energy Trading International, Electric Power Supply 
Association, Edison Mission Energy, and Edison Mission Marketing and 
Trading, Inc. The concern is that entities with market-based rate 
authority may lose their exemption from the requirements of the 
Uniform System of Accounts, at which time they would become subject 
to the Commission's cash management requirements.
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Commission Response

    45. The Commission agrees with comments submitted by registered 
holding companies and their affiliates asserting that the SEC regulates 
their cash management activities. The Commission is not, in this 
interim rule, prescribing any limitations on the entry into and 
participation in cash management programs. The Commission is, however, 
prescribing documentation requirements that will apply to FERC-
regulated entities that are subject to the SEC's oversight. In carrying 
out its oversight, the SEC has not promulgated regulations governing 
the documentation to be maintained for cash management activities. The 
SEC's case-by-case documentation requirements do not provide assurance 
that documentation adequate for this Commission's regulatory oversight 
will be maintained. Therefore, we shall require that FERC-regulated 
entities that are also subject to the PUHCA follow the documentation 
requirements that we are adopting in our Uniform Systems of Accounts. 
Section 318 of the FPA does not prohibit the imposition of these 
requirements because there is no conflict between the documentation 
requirements the Commission is adopting here and those used by the SEC.
    46. The eligibility concerns of NRECA and others representing 
``small regulated entities'' are moot since the Commission is not 
adopting the proposed prerequisites for participation in cash 
management programs. Small regulated entities and NRECA members are 
subject to our Uniform Systems of Accounts and thus will be subject to 
the documentation requirements that we are adopting in this interim 
rule.
    47. Energy marketers, traders, generators and other FERC-regulated 
entities that have been granted waivers of our accounting and the FERC 
Annual Report Forms 1, 1-F, 2, 2-A or 6 reporting requirements will not 
be subject to the documentation requirements included in this interim 
rule.

E. Legal Authority to Prescribe Prerequisites

    48. Several commenters \18\ argue that FERC lacks the authority 
under the Natural Gas Act (NGA),\19\ the FPA, as well as the Interstate 
Commerce Act (ICA) \20\ to impose any prerequisites for the use of cash 
management accounts. Other commenters argue that the regulation of cash 
management participation is beyond the jurisdiction of the Commission. 
Others state that the proper way to protect customers and redress cash 
management issues is through rate cases.\21\ Duke Energy in particular 
argues that the Commission's authority under its ratemaking powers and 
its related investigatory powers offers ample protection to ratepayers 
without the need for the more restrictive measures proposed in the 
NOPR.
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    \18\ Among the commenters are Duke Energy, INGAA (comments 
supported by El Paso, National Fuel, and Williston Basin Interstate 
Pipeline Co.), EEI (comments supported by AEP), AOPL (comments 
supported by Chevron), and the Kinder Morgan Pipelines (Kinder 
Morgan)).
    \19\ 15 U.S.C. 717.
    \20\ 49 App. U.S.C. 1-85 (1988).
    \21\ E.g., Kinder Morgan, NiSource. These commenters argue that 
the Commission can prevent harm to consumers by disallowing the 
passthrough of costs related to improper cash management practices 
to customers, when the regulated entity files a rate case to recover 
such costs. However, the Commission observes that rate cases are 
infrequent for many FERC-regulated entities, and the harm done by 
improper cash management practices may occur long before a rate case 
is filed.
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    49. These commenters' arguments about our authority to prescribe 
prerequisites to cash management programs are made moot by the 
Commission's decision in this interim rule to forego such 
prerequisites. The interim rule revises the Uniform Systems of Accounts 
for public utilities and licensees, natural gas companies, and oil 
pipeline companies pursuant to the authority granted the Commission 
under the FPA, the NGA, and the ICA to prescribe uniform accounting 
requirements for entities subject to the Commission's jurisdiction.\22\
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    \22\ 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 FERC-
regulated companies and, after notice and opportunity for hearing, 
may determine the accounts in which particular outlays and receipts 
will be entered, charged or credited.
---------------------------------------------------------------------------

F. Requests for Policy Statement

    50. EEI, INGAA, AOPL and other commenters \23\ suggest that the 
Commission issue a policy statement concerning cash management programs 
rather than a rule.
---------------------------------------------------------------------------

    \23\ See e.g. Gulf South, Duke Energy, and Kinder Morgan.
---------------------------------------------------------------------------

    51. Because a policy statement does not have the force of law, a 
policy statement in lieu of a rule would not provide the assurance or 
transparency of a rule on documentation requirements and, therefore, 
would not adequately protect ratepayers. The Commission

[[Page 40505]]

finds that the public interest will be better satisfied by implementing 
a rule rather than by issuing advisory guidelines.

G. New Reporting Requirements

    52. As part of this interim rule, the Commission is seeking 
comments on new reporting requirements that were not explicitly 
included in the NOPR that would require FERC-regulated entities to file 
their cash management agreements with the Commission, and to notify the 
Commission when their proprietary capital ratios fall below 30 percent 
and when they subsequently return to or exceed 30 percent.
    53. As previously mentioned, large amounts of funds are controlled 
through cash management programs and in many instances such programs 
were not formalized in writing or were not adequately documented. In 
order to monitor these types of programs, the Commission is exercising 
its authority 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 to require the filing of cash management 
agreements, and the filing of a notification when a FERC-regulated 
entity's proprietary capital ratio falls below 30 percent and when it 
subsequently returns to or exceeds 30 percent.\24\ Additionally, all of 
the information collected in these filings will be considered non-
confidential in nature and therefore will be made available to the 
general public for greater transparency. The Commission will not 
implement any reporting requirements, however, until it has received 
and analyzed the comments.
1. Submission of Cash Management Agreements
    54. The Commission is seeking comments on a new reporting 
requirement that would require FERC-regulated entities participating in 
cash management programs to file their cash management agreements, and 
any subsequent changes within 10 days from the date of the change. The 
filing of these agreements with the Commission will provide timely 
information that will lend additional transparency to the cash 
management program activities between FERC-regulated entities and their 
affiliates. The public availability of the information will allow the 
Commission, as well as all users of financial information to make 
informed decisions based on relevant and accurate information.
2. Notification Requirements
    55. The Commission is seeking comments on a new reporting 
requirement that would require FERC-regulated entities participating in 
cash management programs to notify the Commission when their 
proprietary capital ratios fall below 30 percent and when they 
subsequently return to or exceed 30 percent. In addition, the 
Commission is seeking comments on what would be an appropriate 
notification standard to use as a comparable indicator of a change in 
financial condition for electric cooperatives that file FERC Annual 
Report Forms 1 or 1-F with the Commission.
    56. Although the two financial prerequisites (i.e., the investment 
grade credit rating and the 30 percent proprietary capital) included in 
the NOPR were not adopted as part of this interim rule, they are 
important indicators of a company's financial health and indicate the 
extent to which a FERC-regulated entity has taken on debt to finance 
its assets or operations. A highly leveraged company, with the 
accompanying fixed interest expense and future obligation to repay the 
principal, may be in a weakened financial position if there is an 
unfavorable change in the business climate. This event may result in an 
inadequate flow of cash which may have an adverse impact on the FERC-
regulated entity's ability to remain solvent.
    57. Therefore, when a FERC-regulated entity's proprietary capital 
ratio falls below 30 percent (or conversely, its long-term debt ratio 
rises above 70 percent), the FERC-regulated entity must file a 
notification with the Commission, detailing its proprietary capital 
ratio, the significant event(s) or transaction(s) that contributed to 
the proprietary capital ratio falling below 30 percent, the extent to 
which the FERC-regulated entity has amounts loaned or money advanced to 
others within its corporate group through its cash management 
program(s), and plans, if any, to raise its proprietary capital ratio.
---------------------------------------------------------------------------

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

    58. NRECA asserts that many of its electric cooperative members 
operate as not-for-profit organizations collecting only enough revenues 
in excess of operating expenses to meet mortgage requirements and 
would, therefore, not be able to meet the 30 percent proprietary 
capital requirement. However, NRECA also states that many electric 
cooperatives have themselves established subsidiaries that are engaged 
in diversified non-electric business activities.\25\ The Commission 
recognizes that electric cooperatives generally do not accumulate 
profits for shareholders as is the case of investor owned utilities. 
Consequently, the proprietary capital ratio may not be an appropriate 
indicator of a weakened financial condition for a cooperative. The 
Commission therefore invites comment on what would be an appropriate 
metric of financial condition to use as a notification trigger for 
cooperatives that participate in cash management programs with their 
affiliates.
---------------------------------------------------------------------------

    \25\ NRECA comments at 4.
---------------------------------------------------------------------------

    59. Under the Uniform System of Accounts, FERC-regulated entities 
are required to keep their books and records on a monthly basis.\26\ 
Therefore, within 15 days after the end of the month, FERC-regulated 
entities subject to this interim rule must compute their proprietary 
capital ratios. The proprietary capital ratio must be computed as 
follows. The numerator will be the sum of the balances in the 
proprietary capital accounts. Public utilities and licensees and 
natural gas companies will use Account 201, Common stock issued, 
through Account 219, Accumulated other comprehensive income, and oil 
pipeline companies will use Account 70, Capital stock, through Account 
77, Accumulated other comprehensive income. The denominator will be the 
sum of the balances in the proprietary capital accounts plus the sum of 
the balances in the long-term debt accounts. Public utilities and 
licensees, and natural gas companies will use Account 221, Bonds, 
through Account 226, Unamortized discount on long-term debt-Debit, and 
oil pipeline companies will use Account 60, Long term debt-payable 
after one year, through Account 62, Unamortized discount and interest 
on long term debt. In the event the proprietary capital ratio falls 
below 30 percent, the FERC-regulated entity must make its notification 
filing within 5 days after making the above calculation. Additionally, 
the FERC-regulated entity will be required to notify the Commission 
within 5 days after the determination has been made that its 
proprietary capital ratio has met or exceeded 30 percent.
---------------------------------------------------------------------------

    \26\ General Instruction 4 in 18 CFR parts 101 and 201, General 
Instruction 1-3 in 18 CFR part 352.
---------------------------------------------------------------------------

IV. Regulatory Flexibility Act Statement

    60. The Regulatory Flexibility Act (RFA) \27\ requires agencies to 
prepare certain statements, descriptions, and analyses of proposed 
rules that will have a significant economic impact on

[[Page 40506]]

substantial number of small entities. The Commission is not required to 
make such analyses if a rule would not have such an effect.
---------------------------------------------------------------------------

    \27\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    61. The Commission concludes that this interim rule would not have 
such an impact on small entities. Most filing companies regulated by 
the Commission do not fall within the RFA's definition of a small 
entity, and the data required by this rule are already being captured 
by their accounting systems. However, if the recordkeeping requirements 
represent an undue burden on small businesses, the entity affected may 
seek a waiver of the requirements from the Commission.
    62. AOPL argues that the NOPR's estimate of the impact of this rule 
for the purposes of the Regulatory Flexibility Act of 1980 was too low. 
AOPL bases its estimate largely on the costs that previously unrated 
subsidiaries would incur to obtain credit ratings.\28\ The interim 
rule, however, eliminates the proposed prerequisites for participation 
in cash management programs thus making concerns over obtaining credit 
ratings moot.
---------------------------------------------------------------------------

    \28\ AOPL Comments at 12.
---------------------------------------------------------------------------

V. Environmental Analysis

    63. 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.\29\ The 
Commission excludes certain actions not having a significant effect on 
the human environment from the requirement to prepare an environmental 
impact statement.\30\ 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.\31\ This 
rule updates parts 101, 141, 201, 260, 352 and 357 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.
---------------------------------------------------------------------------

    \29\ 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).
    \30\ 18 CFR 380.4.
    \31\ 18 CFR 380.4(a)(2)(ii).
---------------------------------------------------------------------------

VI. Information Collection Statement

    64. The Office of Management and Budget's (OMB) regulations at 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 information 
collection requirements of this interim 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.
    65. In accordance with section 3507(d) of the Paperwork Reduction 
Act of 1995,\32\ the information collection requirements in the subject 
rulemaking were submitted to OMB for review.
---------------------------------------------------------------------------

    \32\ 44 U.S.C. 3507(d).
---------------------------------------------------------------------------

    66. Public Reporting Burden: In the NOPR the Commission provided 
burden estimates based on an estimate of the number of FERC-regulated 
entities currently filing FERC Forms 1, 2 and 6, who are members of 
consolidated groups and participate in their consolidated groups' cash 
management programs. The NOPR estimated that 448 FERC-regulated 
entities would need to convert verbal cash management agreements into 
writing to comply with this interim rule. For each entity, the NOPR 
estimated it would require an average of two hours to make the 
conversion for a total of burden estimate of 896 hours.\33\ In 
addition, FERC-regulated entities must maintain documentation on their 
cash management programs. Also, the Commission is seeking comments on 
new reporting requirements that would require FERC-regulated entities 
to file their cash management agreements and notify the Commission when 
their proprietary capital ratios fall below 30 percent and when their 
proprietary capital ratios subsequently return to or exceed 30 percent. 
These requirements will be part of a new reporting requirement, FERC-
604. The burden estimates below reflect both the documentation and the 
reporting requirements.
    67. The Commission received 48 comments on the proposed cash 
management prerequisites and documentation requirements. Of the 48 
commenters, EEI and AOPL challenged the Commission's estimates for 
reporting burden as too low. EEI asserts a company of any size with 
multiple cash management agreements is likely to spend more than two 
hours per year maintaining written cash management agreements and the 
non-netted transactional records. EEI further asserts that the rule's 
FERC Form 1 reporting requirements would likely take 10 or more hours 
by themselves. EEI suggests that a more realistic estimate of burden 
imposed by the rule would be at least 30 hours or more per company per 
year. AOPL states that while the FERC Form 6 reporting is unlikely to 
increase significantly, other requirements within the proposed rule 
would have a significant impact on the cost and burden of this rule. 
AOPL estimates the cost of complying with the investment grade rating 
requirement could range from $100,000 to $300,000 for each previously 
unrated subsidiary. Six other commenters argued that the proposed 
prerequisite would impose significant costs and burdens upon them.
---------------------------------------------------------------------------

    \33\ In the NOPR, the burden estimate was improperly identified 
as applying to the FERC Form 1, FERC Form 2 and FERC Form 6 data 
collections. Since the interim rule imposes a recordkeeping 
requirement and requires all cash management agreements to be in 
writing, the associated burden is correctly assigned to FERC-555 
``Records Retention Requirements.'' The reporting requirements that 
are also the subject of this interim rule will be identified by a 
new information collection requirement.
---------------------------------------------------------------------------

    68. In this interim rule, the Commission has eliminated the 
prerequisites for participation in cash management programs and the no-
netting requirement for cash management transactions. Therefore, issues 
raised by EEI, AOPL and others about costs and burdens of complying 
with these aspects of the proposed rule are moot. The Commission 
concludes that EEI's comment that the rule imposes ten or more hours of 
additional burden on FERC Form 1 reporting requirements is unsupported 
and misplaced. Similarly, the Commission concludes that EEI has not 
provided any support regarding its assertion that burden imposed by 
this rule is 30 or more hours. The Commission finds the burden 
associated with converting documents to comply with this interim rule 
is minimal and that its previous estimate was a reasonable one. While 
FERC-regulated entities will now be required to reduce their cash 
management agreements to writing, the Commission finds that this is 
simply sound business practice and, as the Commission is not dictating 
the terms of these agreements, the burden should be small.
    69. Recordkeeping (Documentation) Requirements

[[Page 40507]]



----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                 Data Collection                     Number of     Responses Per     Hours Per     Total Annual
                                                    Respondents     Respondent      Respondent         Hours
----------------------------------------------------------------------------------------------------------------
FERC-555........................................             448               1               2             896
                                                 -----------------
    Totals......................................  ..............  ..............  ..............            896
----------------------------------------------------------------------------------------------------------------
 The total annual hours for documentation requirements = 896 hours.

    70. Reporting Requirements:

----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                 Data Collection                     Number of     Responses Per     Hours Per     Total Annual
                                                    Respondents     Respondent       Response          Hours
----------------------------------------------------------------------------------------------------------------
FERC-604 (new) (cash management agreement)......            602*               1             1.5             903
(Notification)..................................              34               2             .75              51
                                                 -----------------
    Totals......................................  ..............  ..............  ..............            954
----------------------------------------------------------------------------------------------------------------
 *(The number of respondents as identified in the NOPR that will be subject to submitting documents describing
  their cash management agreements.)
 The total annual hours for reporting requirements is 954.

    71. Information Collection Costs: The Commission estimates the 
costs associated with converting verbal cash management agreements into 
writing to comply with the requirements of this interim rule to be 
$50,418.\34\ The Commission estimates the costs associated with 
submitting cash management program documents and notifying the 
Commission when a FERC-regulated entity's proprietary capital ratio 
falls below 30 percent and when its proprietary capital ratio 
subsequently returns to or exceeds 30 percent to be $53,681.\35\
---------------------------------------------------------------------------

    \34\ (896 hours for collection/2,080 hours) x $117,041 = 
$50,418.
    \35\ (954 hours for collection/2,080 hours) x $117,041 = 
$53,681.
---------------------------------------------------------------------------

    72. The Commission has assured itself, by means of its internal 
review that there is specific, objective support for the burden 
estimates associated with the information requirements.
    Title: FERC-555 ``Records Retention Requirements''; FERC-604 ``Cash 
Management Programs and Financial Reporting Requirements''.
    Action: Proposed information collection requirements.
    OMB Control No.: 1902-0098 and to be determined.
    Respondents: Public utilities and licensees; natural gas companies; 
oil pipeline companies (Business or other for profit, including small 
businesses.)
    Frequency of the information: On occasion.
    Necessity of the information: The interim rule amends the 
Commission's regulations to revise parts 101, 141, 201, 260, and 352, 
the Commission's Uniform Systems of Accounts, to provide information 
collection requirements for cash management activities and to require 
that cash management agreements be in writing.
    73. The implementation of these requirements will help the 
Commission carry out its responsibilities under the FPA, the NGA and 
the ICA to protect ratepaying customers of FERC-regulated entities by 
providing greater transparency of cash management activities.
    74. 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 by phone at 
(202) 395-7856, or fax: (202) 395-7285.

VII. Comment Procedures

    75. The Commission invites all interested persons to submit 
comments on the new reporting requirements included in this interim 
rule, including any related matters or alternative proposals that 
commenters may wish to discuss. Comments are due August 7, 2003. 
Comments must refer to Docket No. RM02-14-000, and must include the 
commenter's name, the organization he or she represents, if applicable, 
and the commenter's 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 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 rule 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 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.
    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

[[Page 40508]]

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 
telephone at (866) 208-3676 (toll free) or for TTY, (202) 502-8659, or 
by e-mail at [email protected].

IX. Effective Date and Congressional Notification

    81. These regulations are effective August 7, 2003. The Commission, 
however, will not implement the new reporting requirements until it has 
had an opportunity to consider the comments filed on these 
requirements. The Commission has determined, with the concurrence of 
the Administrator of the Office of Information and Regulatory Affairs 
of OMB, that this interim rule is not a ``major rule'' as defined in 
section 351 of the Small Business Regulatory Enforcement Fairness Act 
of 1996.\36\ The Commission will submit the interim rule to both houses 
of Congress and the General Accounting Office.\37\
---------------------------------------------------------------------------

    \36\ 5 U.S.C. 804(2) (2002).
    \37\ 5 U.S.C. 801(a)(1)(A) (2002).
---------------------------------------------------------------------------

List of Subjects

18 CFR Part 101

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

18 CFR Part 141

    Electric power, Reporting and recordkeeping requirements.

18 CFR Part 201

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

18 CFR Part 260

    Natural gas, Reporting and recordkeeping requirements.

18 CFR Part 352

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

18 CFR Part 357

    Pipelines, Reporting and recordkeeping requirements.

    By the Commission.
Magalie R. Salas,
Secretary.

0
In consideration of the foregoing, the Commission is amending parts 
101, 141, 201, 260, 352, and 357 in Title 18 of the Code of Federal 
Regulations, as follows:

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

0
1. The authority citation for part 101 continues to read as follows:

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

0
2. In part 101, Balance Sheet Accounts, the existing paragraph in 
account 146 is designated as paragraph A, and paragraphs B and C are 
added to read as follows:

Balance Sheet Accounts

* * * * *
    146 Accounts receivable from associated companies.
    A. * * *
    B. A public utility or licensee participating in a cash management 
program must maintain supporting documentation for all deposits into, 
borrowings from, interest income from, and interest expense to such 
program. Cash management programs include all agreements in which funds 
in excess of the daily needs of the public utility or licensee along 
with the excess funds of the public utility's or licensee's parent, 
affiliated and subsidiary companies are concentrated, consolidated, or 
otherwise made available for use by other entities within the corporate 
group. The written documentation must include the following 
information:
    (1) For each deposit with and each withdrawal from the cash 
management program: the date of the deposit or withdrawal, the amount 
of the deposit or withdrawal, the maturity date, if any, of the 
deposit, and the interest earning rate on the deposit;
    (2) For each borrowing from a cash management program: the date of 
the borrowing, the amount of the borrowing, the maturity date, if any, 
of the borrowing, and the interest rate on the borrowing;
    (3) The security, if any, provided by the cash management program 
for repayment of deposits into the cash management program and the 
security required, if any, by the cash management program in support of 
borrowings from the program; and
    (4) The daily balance of the cash management program.
    C. The public utility or licensee must maintain current and up-to-
date copies of the documents authorizing the establishment of the cash 
management program including the following:
    (1) The duties and responsibilities of the administrator and the 
other participants in the cash management program;
    (2) The restrictions on deposits or borrowings by participants in 
the cash management program;
    (3) The method used to determine the interest earning rates and 
interest borrowing rates for deposits into and borrowings from the 
program; and
    (4) The method used to allocate interest income and expenses among 
participants in the program.
* * * * *

PART 141--STATEMENTS AND REPORTS (SCHEDULES)

0
3. The authority citation for part 141 continues to read:

    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.

0
4. Section 141.500 is added to read as follows:


Sec.  141.500  Cash management programs and financial condition 
reports.

    (a) Public utilities and licensees subject to the provisions of the 
Commission's Uniform System of Accounts Prescribed in part 101 of this 
title that participate in cash management programs must file these 
agreements with the Commission. The documentation establishing the cash 
management program and entry into the program must be filed within 10 
days of entry into the program. Subsequent changes to the cash 
management agreement must be filed with the Commission within 10 days 
of the change.
    (b) Public utilities and licensees must determine, on a monthly 
basis within 15 days after the end of each month, the percentage of 
their capital structure that constitutes proprietary capital. The 
proprietary capital ratio must be computed using a formula in which the 
total of the balances in the Proprietary Capital Accounts; Account 201, 
Common stock issued, through Account 219, Accumulated other 
comprehensive income, in part 101 of this title is the numerator and 
the total proprietary capital plus the total of the Long-Term Debt 
Accounts; Account 221, Bonds, through Account 226, Unamortized discount 
on long-term debt--Debit, in part 101 of this title, is the 
denominator.
    (c) In the event that the proprietary capital ratio is less than 30 
percent, the public utility or licensee must notify the Commission 
within 5 days of the determination of that fact and must describe the 
significant event(s) or transaction(s) causing its proprietary capital 
ratio to be less than 30 percent including the extent to which the 
public

[[Page 40509]]

utility or licensee has amounts loaned or money advanced to its parent, 
subsidiary, or affiliate companies through its cash management 
program(s), along with plans, if any, to regain at least a 30 percent 
proprietary capital ratio.
    (d) In the event that the proprietary capital ratio subsequently 
meets or exceeds 30 percent, the public utility or licensee must notify 
the Commission within 5 days of the determination of that fact.

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

0
5. 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
6. In part 201, Balance Sheet Accounts, the existing paragraph in 
account 146 is designated as paragraph A, and paragraphs B and C are 
added to read as follows:

Balance Sheet Accounts

* * * * *
    146 Accounts receivable from associated companies.
    A. * * *
    B. A natural gas company participating in a cash management program 
must maintain supporting documentation for all deposits into, 
borrowings from, interest income from, and interest expense to such 
program. Cash management programs include all agreements in which funds 
in excess of the daily needs of the natural gas company along with the 
excess funds of the natural gas company's parent, affiliated and 
subsidiary companies are concentrated, consolidated, or otherwise made 
available for use by other entities within the corporate group. The 
written documentation must include the following information:
    (1) For each deposit with and each withdrawal from the cash 
management program: The date of the deposit or withdrawal, the amount 
of the deposit or withdrawal, the maturity date, if any, of the 
deposit, and the interest earning rate on the deposit;
    (2) For each borrowing from a cash management program: The date of 
the borrowing, the amount of the borrowing, the maturity date, if any, 
of the borrowing, and the interest rate on the borrowing;
    (3) The security, if any, provided by the cash management program 
for repayment of deposits into the cash management program and the 
security required, if any, by the cash management program in support of 
borrowings from the program; and
    (4) The daily balance of the cash management program.
    C. The natural gas company must maintain current and up-to-date 
copies of the documents authorizing the establishment of the cash 
management program including the following:
    (1) The duties and responsibilities of the administrator and the 
other participants in the cash management program;
    (2) The restrictions on deposits or borrowings by participants in 
the cash management program;
    (3) The method used to determine the interest earning rates and 
interest borrowing rates for deposits into and borrowings from the 
program; and
    (4) The method used to allocate interest income and expenses among 
participants in the program.
* * * * *

PART 260--STATEMENTS AND REPORTS (SCHEDULES)

0
7. The authority citation for part 260 continues to read:

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

0
8. Section 260.400 is added to read as follows:


Sec.  260.400  Cash management programs and financial condition 
reports.

    (a) Natural gas companies subject to the provisions of the 
Commission's Uniform System of Accounts in part 201 of this title that 
participate in cash management programs must file these agreements with 
the Commission. The documentation establishing the cash management 
program and entry into the program must be filed within 10 days of 
entry into the program. Subsequent changes to the cash management 
agreement must be filed with the Commission within 10 days of the 
change.
    (b) Natural gas companies must determine, on a monthly basis within 
15 days after the end of each month, the percentage of their capital 
structure that constitutes proprietary capital. The proprietary capital 
ratio must be computed using a formula in which the total of the 
balances in the Proprietary Capital Accounts; Account 201, Common stock 
issued, through Account 219, Accumulated other comprehensive income, in 
part 201 of this title is the numerator and the total proprietary 
capital plus the total of the Long-Term Debt Accounts; Account 221, 
Bonds, through Account 226, Unamortized discount on long-term debt--
Debit, in part 201 of this title, is the denominator.
    (c) In the event that the proprietary capital ratio is less than 30 
percent, the natural gas company must notify the Commission within 5 
days of the determination of that fact and must describe the event(s) 
or transaction(s) causing its proprietary capital ratio to be less than 
30 percent including the extent to which the natural gas company has 
amounts loaned or money advanced to its parent, subsidiary, or 
affiliate companies through its cash management program(s), along with 
plans, if any, to regain at least a 30 percent proprietary capital 
ratio.
    (d) In the event that the proprietary capital ratio subsequently 
meets or exceeds 30 percent, the company must notify the Commission 
within 5 days of the determination of that fact.

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

0
9. 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
10. In Part 352, Balance Sheet Accounts, the existing paragraph of 
account 13 is designated as paragraph (a) and paragraphs (b) and (c) 
are added to read as follows:

Balance Sheet Accounts

* * * * *
    13 Receivables from affiliated companies.
    (a) * * *
    (b) An oil pipeline company participating in a cash management 
program must maintain supporting documentation for all deposits into, 
borrowings from, interest income from, and interest expense to such 
program. Cash management programs include all agreements in which funds 
in excess of the daily needs of the carrier along with the excess funds 
of the carrier's parent, affiliated and subsidiary companies are 
concentrated, consolidated, or otherwise made available for use by 
other entities within the corporate group. The written documentation 
must include the following information:
    (1) For each deposit with and each withdrawal from the cash 
management program: the date of the deposit or withdrawal, the amount 
of the deposit or withdrawal, the maturity date, if any, of the 
deposit, and the interest earning rate on the deposit;
    (2) For each borrowing from a cash management program: the date of 
the

[[Page 40510]]

borrowing, the amount of the borrowing, the maturity date, if any, of 
the borrowing, and the interest rate on the borrowing;
    (3) The security, if any, provided by the cash management program 
for repayment of deposits into the cash management program and the 
security required, if any, by the cash management program in support of 
borrowings from the program; and
    (4) The daily balance of the cash management program.
    (c) The oil pipeline company must maintain current and up-to-date 
copies of the documents authorizing the establishment of the cash 
management program including the following:
    (1) The duties and responsibilities of the administrator and the 
other participants in the cash management program;
    (2) The restrictions on deposits or borrowings by participants in 
the cash management program;
    (3) The method used to determine the interest earning rates and 
interest borrowing rates for deposits into and borrowings from the 
program; and
    (4) The method used to allocate interest income and expenses among 
the participants in the program.
* * * * *

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

0
11. The authority citation for part 357 continues to read:

    Authority: 42 U.S.C. 7101-7352; 49 U.S.C. 60502; 49 App. U.S.C. 
1-85 (1998).


0
12. Section 357.5 is added to read as follows:


Sec.  357.5  Cash management programs and financial condition reports.

    (a) Oil pipeline companies subject to the provisions of the 
Commission's Uniform System of Accounts in part 352 of this title that 
participate in cash management programs must file these agreements with 
the Commission. The documentation establishing the cash management 
program and entry into the program must be filed within 10 days of 
entry into the program. Subsequent changes to the cash management 
agreement must be filed with the Commission within 10 days of the 
change.
    (b) Oil pipeline companies must determine, on a monthly basis 
within 15 days after the end of each month, the percentage of their 
capital structures that constitute proprietary capital. The proprietary 
capital ratio must be computed using a formula in which the total of 
the balances in the Proprietary Capital Accounts; Account 70, Capital 
stock, through Account 77, Accumulated other comprehensive income, in 
part 352 of this title, is the numerator and the total proprietary 
capital plus the total of the Long-Term Debt Accounts; Account 60, 
Long-term debt payable after one year, through Account 62, Unamortized 
discount and interest on long-term debt, in part 352 of this title, is 
the denominator.
    (c) In the event that the proprietary capital ratio is less than 30 
percent, the oil pipeline company must notify the Commission within 5 
working days of the determination of that fact and must describe the 
significant event(s) or transaction(s) causing its proprietary capital 
ratio to be less than 30 percent including the extent to which the oil 
pipeline company has amounts loaned or money advanced to its parent, 
subsidiary, or affiliate companies through its cash management 
program(s), along with plans, if any, to regain at least a 30 percent 
proprietary capital ratio.
    (d) In the event that the proprietary capital ratio subsequently 
meets or exceeds 30 percent, the carrier must notify the Commission 
within 5 days of the determination of that fact.

    Note: This Appendix will not be published in the Code of Federal 
Regulations.

Appendix A--Commenters in RM02-14-000

Air Conditioning Contractors of America, et al. (late-filed).
Allegheny Energy, Inc., et al.
Ameren Corporation.
American Electric Power Company, Inc., et al.
American Public Gas Association.
Association of Oil Pipelines.
Avista Corporation.
California Public Utilities Commission (late-filed).
Chevron Pipeline Company, et al.
Cinergy Corp.
Dominion Resources, Inc.
Duke Energy Corporation.
Edison Electric Institute.
Edison Mission Energy and Edison Mission Marketing and Trading, Inc.
Electric Power Supply Association.
El Paso Energy Partners, L.P.
Entergy Services, Inc.
Exelon Corporation.
Fairfax Financial Holdings, Ltd. (late-filed).
FirstEnergy Corp.
Gulf South Pipeline Company, LP.
Interstate Natural Gas Association of America.
Kansas State Corporation Commission.
KeySpan Corporation.
The KM Pipelines.
Marathon Ashland Pipeline LLC.
Midwestern Gas Transmission Company.
Missouri Public Service Commission (late-filed).
National Fuel Gas Supply Corporation.
National Grid USA.
National Rural Electric Cooperative Association.
NiSource Inc.
Northeast Utilities.
Northern Natural Gas Company.
Ontario Energy Trading International.
PEPCO Holdings, Inc.
PG&E Corporation.
Philadelphia Gas Works.
Pinnacle West Companies.
Plains All American Pipeline, L.P.
Public Service Electric and Gas Company, et al.
SCANA Corporation.
TECO Power Services Corporation.
USG Pipeline Co, B-R Pipeline Co., and United States Gypsum Co.
Washington Utilities and Transportation Commission (late-filed).
WGL Holdings, Inc., Hampshire Gas Co., and Washington Gas Light Co.
Williston Basin Interstate Pipeline Company.
WPS Resources Corporation.
[FR Doc. 03-16819 Filed 7-7-03; 8:45 am]
BILLING CODE 6717-01-P