[Federal Register Volume 68, Number 211 (Friday, October 31, 2003)]
[Rules and Regulations]
[Pages 61993-62005]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-27410]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

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

[Docket Nos. RM02-14-000 and RM02-14-001; Order No. 634-A]


Regulation of Cash Management Practices

October 23, 2003.
AGENCY: Federal Energy Regulatory Commission, Department of Energy.

ACTION: Final rule.

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SUMMARY: The Federal Energy Regulatory Commission is amending its 
regulations to implement reporting requirements for FERC-regulated 
entities that participant in cash

[[Page 61994]]

management programs. The Commission is also modifying certain aspects 
of the documentation requirements that became effective August 7, 2003.

EFFECTIVE DATE: This rule is effective December 1, 2003.

FOR FURTHER INFORMATION CONTACT:
Rosemary Womack (Technical Information), Office of the Executive 
Director, Division of Regulatory Accounting Policy, Federal Energy 
Regulatory Commission, 888 First Street NE., Washington, DC 20426, 
(202) 502-8989.
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. Statutory Basis for the Rule
    B. Applicability of the Rule to Registered Holding Companies
    C. Applicability of the Rule to Utilities Regulated by State 
PUCs
    D. Submission of Cash Management Agreements
    E. Notification Requirements
    F. Public Disclosure of Information
    G. Clarification of Documentation Requirements
IV. Regulatory Flexibility Act Statement
V. Environmental Analysis
VI. Information Collection Statement
VII. Document Availability
VIII. Effective Date and Congressional Notification
Regulatory Text
Appendix--List of Commenters on the Interim Rule

I. Introduction

    1. On June 26, 2003, the Federal Energy Regulatory Commission 
(Commission or FERC) issued an Interim Rule, which amended its 
regulations under 18 CFR parts 101, 201, and 352 of the Commission's 
Uniform Systems of Accounts by implementing documentation requirements 
for FERC-regulated entities that participate in cash management 
programs. Cash management or ``money pool'' programs typically 
concentrate affiliates' cash assets in joint accounts for the purpose 
of providing financial flexibility and lowering the cost of borrowing.
    2. The regulations require that FERC-regulated entities subject to 
these rules place their cash management agreements in writing, 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.
    3. In the Interim Rule, the Commission also sought comments on new 
reporting requirements that would require FERC-regulated entities to 
file their cash management agreements with the Commission and 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. The reporting requirements were reflected in 
changes to 18 CFR parts 141, 260, and 357 of the Commission's 
regulations for public utilities and licensees, natural gas companies, 
and oil pipeline companies.
    4. This Final Rule amends the Commission's regulations under 18 CFR 
parts 141, 260, and 357 of the Uniform System of Accounts for public 
utilities and licensees, natural gas companies, and oil pipeline 
companies by implementing the reporting requirements proposed in the 
Interim Rule, with some modifications. The modifications require FERC-
regulated entities to compute their proprietary capital ratios 
quarterly (as compared to a proposed monthly computation) and to notify 
the Commission within 45 days after the end of each calendar quarter if 
their proprietary capital ratios drop below or subsequently exceed 30 
percent (as compared to a proposed 15 day period for computation and 5 
day notification deadline).
    5. The Final Rule also modifies certain aspects of the 
documentation requirements that were implemented in the Interim Rule 
and became effective August 7, 2003. Specifically, the Commission is 
revising parts 101 and 201, Account 146 C, and part 352, Account 13(c), 
to require that FERC-regulated entities maintain documentation related 
only to the administrator and the FERC-regulated entity (rather than 
documentation related to all cash management participants). Account 146 
B(1), (2) and (4) and Account 13(b)(1), (2) and (4) are also revised to 
require that FERC-regulated entities document the interest rates on 
deposits or borrowings in the cash management agreements, but not on 
the daily records for each deposit, withdrawal or borrowing. 
Additionally, the regulations are revised to require records showing 
the monthly balances of cash management programs, rather than daily 
balances.
    6. The documentation and reporting requirements the Commission is 
adopting in this Final Rule directly address the deficiencies in cash 
management programs found by the Chief Accountant in audits conducted 
in 2002. At that time, FERC-regulated entities had $16 billion in cash 
management accounts. More recently, analysis indicates that FERC-
regulated entities have $25.2 billion in cash management accounts. The 
documentation and reporting requirements the Commission is adopting are 
needed to ensure that rates paid by the customers of FERC-regulated 
entities are just and reasonable. The additional financial transparency 
required by these rules will also aid the Commission in meeting its 
oversight and market monitoring obligations and will benefit the 
investing public.
    7. In sum, the Final Rule applies to all FERC-regulated entities 
that have not been granted waivers of the Commission's accounting 
regulations and the FERC Annual Report Forms 1, 1-F, 2, 2-A or 6 filing 
requirements.\1\ Due to the nature of electric cooperatives, the 
Commission is exempting them from the requirement 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.\2\ Electric cooperatives must comply with the Final 
Rule except for the notification requirements stated above.
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    \1\ Reporting requirements for the Annual Report Forms can be 
found at Section 141.1 for Form 1, Section 141.2 for Form 1-F, 
Section 260.1 for Form 2, Section 260.2 for Form 2-A and Section 
357.2 for Form 6.
    \2\ Electric cooperatives that have paid off their debt to the 
Rural Utilities Services are subject to the Commission's 
regulations.
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II. Background

    8. An investigation by the Chief Accountant in March 2002 revealed 
that FERC-regulated entities had approximately $16 billion of assets in 
cash management accounts. The preliminary results of the investigation 
also revealed severe recordkeeping deficiencies:
    [sbull] Cash management agreements generally were not formalized in 
writing.
    [sbull] The terms of the programs and the interest associated with 
loans were not documented in writing.
    [sbull] It was unclear whether interest had been paid to subsidiary 
companies by the parent companies.
    9. The Commission issued a Notice of Proposed Rulemaking (NOPR) on 
August 1, 2002, 67 FR 51150 (Aug. 7, 2002), IV FERC Stats. & Regs. ] 
32,561 (August 1, 2002), to amend its Uniform Systems of Accounts for 
public utilities

[[Page 61995]]

and licensees,\3\ natural gas companies,\4\ and oil pipeline 
companies.\5\ The NOPR proposed to require that, as a prerequisite to a 
FERC-regulated entity participating in a cash management program, 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. Also, the NOPR 
proposed new documentation requirements for cash management programs.
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    \3\ 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).
    \4\ 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).
    \5\ 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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    10. The Commission issued an interim rule on June 26, 2003, 68 FR 
40500 (July 8, 2003), FERC Stats. & Regs. ] 31,145 (June 26, 2003), 
which amended its regulations under 18 CFR parts 101, 201, and 352 of 
the Commission's Uniform Systems of Accounts for public utilities and 
licensees, natural gas companies, and oil pipeline companies by 
implementing the documentation requirements proposed in the NOPR. The 
interim regulations required that FERC-regulated entities maintain 
their cash management agreements 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. The 
regulations became effective August 7, 2003 for all FERC-regulated 
entities that have not been granted waivers of the Commission's 
accounting regulations and the FERC Annual Report Forms 1, 1-F, 2, 2-A 
or 6 filing requirements.
    11. The Commission decided not to adopt the financial prerequisites 
proposed in the NOPR. Instead, the Commission sought comments on new 
reporting requirements that require FERC-regulated entities 
participating in cash management programs to file agreements related to 
such programs with the Commission and to notify the Commission when 
their proprietary capital ratios drop below 30 percent, and when they 
subsequently return to or exceed 30 percent. These new reporting 
requirements were reflected in revisions to parts 141, 260, and 357 of 
the Commission's regulations. The Commission also concluded that the 
information collected through the new reporting requirements would be 
considered non-confidential in nature and be made available to the 
general public via FERC's eLibrary (formerly FERRIS) accessed from 
FERC's Home Page.\6\ The Commission did not implement the new reporting 
requirements in the Interim Rule, but sought comments on these 
requirements.
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    \6\ http://www.ferc.gov/.
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    12. Requests for stay of the Interim Rule were denied in an order 
dated August 21, 2003.\7\
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    \7\ 104 FERC ] 61,217 (2003).
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III. Discussion

    13. The Commission received twenty-five comments \8\ in response to 
the new reporting requirements or comments asking clarification of the 
documentation requirements that became effective August 7, 2003. While 
commenters generally support the Commission's decision not to impose 
prerequisites to cash management program participation, some commenters 
question whether the Commission has authority to require utilities to 
file agreements associated with cash management programs. Other 
commenters ask whether the Commission has a statutory basis for cash 
management oversight of public utility affiliates of registered holding 
companies and of utilities whose money pools are regulated by state 
commissions.
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    \8\ Commenters on the Interim Rule are listed in the appendix to 
this final rule.
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    14. Several commenters also suggested various changes to make 
compliance with the proposed regulations easier. The suggested changes 
principally involve the time period for performing the proprietary 
capital ratio calculation, the deadline for notifying the Commission 
when the proprietary capital ratio falls below, or subsequently returns 
to or exceeds 30 percent, and the requirement to file cash management 
agreements with the Commission.
    15. After careful consideration of the comments received, the 
Commission is implementing the new reporting requirements with some 
modifications, as discussed below, and is modifying certain aspects of 
the documentation requirements that became effective August 7, 2003.
    16. Consistent with the discussions below, the Commission also 
denies all requests for rehearing of the Interim Rule.

A. Statutory Basis for the Rule

    17. The Interim Rule did not propose to regulate participation in 
cash management programs, nor did it establish any prerequisites for 
participation in cash management programs as the Notice of Proposed 
Rulemaking had originally proposed. Rather, the Interim Rule merely 
established documentation requirements and proposed reporting 
requirements. The Final Rule requires FERC-regulated entities subject 
to the rule to file their cash management agreements with the 
Commission, as well as notify the Commission when their proprietary 
capital ratios drop below 30 percent. The provisions in the Federal 
Power Act (FPA), Natural Gas Act (NGA), and Interstate Commerce Act 
(ICA) that authorize the Commission to require reports and 
documentation to administer these statutes provide ample authority for 
issuance of the Final Rule.\9\
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    \9\ See 15 U.S.C. 717g (2000); 15 U.S.C. 717i (2000); 16 U.S.C. 
825 (2000); 16 U.S.C. 825c (2000); 49 App. U.S.C. 20(1) (1988); 49 
App. U.S.C. 20(5) (1988).
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    18. Most commenters do not challenge the Commission's legal 
authority to set the documentation and reporting requirements of the 
Interim Rule.\10\ A few commenters still raise such challenges, 
however, and we address their concerns here. EEI, for example, argues 
that the Commission lacks a legal or factual basis for the reporting 
requirements.\11\ Southern California Edison Company (Edison) supports 
EEI's comments on the Interim Rule. Duke Energy asserts that the 
Commission lacks the statutory authority to regulate the financial 
transactions of Duke Energy's FERC-regulated entities, including their 
participation in cash management programs.
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    \10\ For example, the Interstate Natural Gas Association of 
America (INGAA), which had initially argued that the Commission does 
not have authority to establish prerequisites for money pool 
participation, does not argue that the Commission lacks the legal 
authority to set the Final Rule's reporting requirements. Others 
such as the American Public Gas Association (APGA) strongly confirm 
the Commission's legal authority to impose the needed reporting 
requirements in the Final Rule, consistent with the Commission's 
mandate to protect customers from unjust and unreasonable rates.
    \11\ The legal basis for the 30 percent proprietary capital 
reporting obligation and other reporting obligations is discussed 
here, while the choice of a 30 percent proprietary capital level for 
initiating the report is discussed infra.
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    19. The short answer is that the Commission is not ``regulating'' 
cash management programs. Rather, the Final Rule implements reporting 
and documentation requirements, which are

[[Page 61996]]

amply justified by the enormous amount of assets of regulated entities 
in cash management programs. In 2002, the Commission found at least $16 
billion of regulated entities' assets in such accounts and that amount 
has increased in 2003 to approximately $25 billion. This is an 
enormous, mostly unregulated, pool of money in cash management programs 
that may detrimentally affect regulated rates. The Final Rule properly 
requires that FERC-regulated entities document and report information 
to aid the Commission in monitoring cash management programs, but is 
not in the nature of a regulation governing participation in cash 
management programs. The reporting requirements allow the Commission to 
protect ratepaying customers of regulated entities by providing greater 
transparency of cash management activities.
    20. AOPL and Chevron Pipeline Company, et al., in their comments on 
the Interim Rule question the Commission's statutory authority for the 
record-keeping requirements, insofar as the Final Rule may intend to 
require such records of non-FERC-regulated entities. Shell Pipeline 
Company LP shares these concerns. The Final Rule does not require 
recordkeeping or reports from non-jurisdictional entities. Accordingly, 
the recordkeeping and reporting requirements of the NGA, FPA, and ICA 
provide express statutory authority for the reporting requirements of 
the Final Rule, which are imposed solely on FERC-regulated entities.
    21. Specifically, NGA Section 8 provides that ``[e]very natural-gas 
company shall make, keep, and preserve for such periods, such accounts, 
records of cost-accounting procedures, correspondence, memoranda, 
papers, books, and other records as the Commission may by rules and 
regulations prescribe as necessary or appropriate for purposes of the 
administration of this Act * * *,'' \12\ and NGA Section 10 provides 
that ``[e]very natural-gas company shall file with the Commission such 
annual and other periodic or special reports as the Commission may by 
rules and regulations or order prescribe as necessary or appropriate to 
assist the Commission in the proper administration of this act.'' \13\ 
FPA Section 301 provides that ``[e]very licensee and public utility 
shall make, keep and preserve for such periods, such accounts, records 
of cost-accounting procedures, correspondence, memoranda, papers, 
books, and other records as the Commission may by rules and regulations 
prescribe as necessary or appropriate for purposes of the 
administration of this Act * * *,'' \14\ and FPA Section 304 provides 
that ``[e]very licensee and every public utility shall file with the 
Commission such annual and other periodic or special reports as the 
Commission may by rules and regulations or order prescribe as necessary 
or appropriate to assist the Commission in the proper administration of 
this Act.'' \15\ Section 20(1) of the ICA provides that ``[t]he 
Commission is authorized to require annual, periodical, or special 
reports from [oil pipeline] carriers * * * and full, true, and correct 
answers to all questions upon which the Commission may deem information 
to be necessary * * *,'' \16\ and Section 20(5) of the ICA authorizes 
the Commission ``in its discretion, [to] prescribe the forms of any and 
all accounts, records, and memoranda to be kept by carriers and their 
lessors, including the accounts, records, and memoranda of the movement 
of traffic, as well as of the receipts and expenditures of moneys. * * 
*.'' \17\
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    \12\ 15 U.S.C. 717g (2000).
    \13\ 15 U.S.C. 717i (2000).
    \14\ 16 U.S.C. 825 (2000).
    \15\ 16 U.S.C. 825c (2000).
    \16\ 49 App. U.S.C. 20(1) (1988).
    \17\ 49 App. U.S.C. 20(5) (1988).
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    22. In sum, the Commission is entrusted with the responsibility to 
ensure that rates are just and reasonable and that FERC-regulated 
entities provide the services to which they have committed.\18\ The 
transparency-enhancing reporting requirements adopted in the Final Rule 
for cash management programs--in which over $25 billion of regulated 
entities' funds are deposited (and accessible to others in their 
corporate family)--will help ensure that both goals are achieved.
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    \18\ See FPA Sections 205 and 206, NGA Sections 4 and 5, and ICA 
Title 49 App. Sections 1(5) and 15(1).
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    23. Requiring that FERC-regulated entities that participate in 
money pools file reports and maintain documents does not impermissibly 
extend the Commission's jurisdiction to unregulated parent companies 
(or other unregulated affiliates). The Commission is requiring 
jurisdictional entities to document cash management transactions and 
file cash management agreements to which the jurisdictional entities 
are parties. This is squarely within the ambit of the Commission's 
statutory authority.

B. Applicability of the Rule to Registered Holding Companies

    24. The Interim Rule applied the documentation requirements to all 
FERC-regulated entities that have not been granted waivers of the 
Commission's accounting regulations and the FERC Annual Report Forms 1, 
1-F, 2, 2-A or 6 filing requirements. This includes subsidiaries of 
registered holding companies that are regulated by the SEC pursuant to 
Public Utility Holding Company Act (PUHCA).\19\
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    \19\ 15 U.S.C. 79a et seq. (2000).
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    25. In the Interim Rule, the Commission found that to protect 
ratepayers, the Commission needed to better understand the financial 
condition of the companies it regulates, including their cash 
management practices. And while the Commission agreed with many 
commenters that the SEC regulates some aspects of a registered holding 
company's cash management programs, the SEC's case-by-case analysis of 
these programs did not provide assurance that documentation adequate 
for this Commission's regulatory oversight would be maintained.
    26. Therefore, the Interim Rule required that FERC-regulated 
entities that are also subject to PUHCA follow the documentation 
requirements adopted in the Commission's Uniform Systems of Accounts 
and proposed that FERC-regulated holding company subsidiaries follow 
the same reporting requirements as all other FERC-regulated entities 
subject to this rule.
    Comments Received:
    27. EEI requested rehearing and clarification of the applicability 
of the rule to subsidiaries of registered holding companies, asserting 
that regulation by the Commission is unnecessary and barred by Section 
318 of the FPA.\20\ While acknowledging that ``the documentation 
requirements the FERC is imposing differ somewhat from the SEC's 
requirements,'' EEI goes on to assert that any regulated holding 
company's cash management program ``already satisfies documentation 
requirements comparable to those that would be imposed in the interim 
rule.''

[[Page 61997]]

Thus, EEI asserts, there is ``no reason to create redundant 
requirements for registered holding company systems.'' EEI makes the 
same policy and legal arguments against the reporting requirements 
proposed in the Interim Rule.
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    \20\ Section 318 of the Federal Power Act provides as follows:
    If, with respect to the issue, sale, or guaranty of a security, 
or assumption of obligation or liability in respect of a security, 
the method of keeping accounts, the filing of reports, or the 
acquisition or disposition of any security, capital assets, 
facilities, or any other subject matter, such person is subject both 
to a requirement of [PUHCA] or of a rule, regulation or order 
thereunder and to a requirement of [the FPA], or of any rule, 
regulation, or order thereunder, the requirement of [PUHCA] shall 
apply to such person, and such person shall not be subject to the 
requirement of [the FPA] or of any rule, regulation, or order 
thereunder, with respect to the same subject matter, unless the 
Securities and Exchange Commission has exempted such person from 
such requirement of [PUHCA], in which case the requirements of [the 
Federal Power Act] shall apply to such person.
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    28. FirstEnergy, while not requesting rehearing, reiterates many of 
EEI's comments. FirstEnergy also points out that the documentation the 
Interim Rule requires companies to maintain is different from the 
documentation that the SEC requires companies to maintain under PUHCA. 
Additionally, FirstEnergy echoes EEI's argument that the SEC has the 
sole and exclusive jurisdiction over the regulation of cash management 
programs. Finally, in regard to the proposed notification and filing 
requirements, FirstEnergy argues that ``in our view, there is no 
critical need for utilities to file this information with the 
Commission'' and that ``such information could then be made available 
to the Commission in connection with an audit or other Commission 
proceeding.''
    Commission Response:
    29. The Commission finds that to better ensure that rates for 
jurisdictional services are just and reasonable, it must examine the 
financial structure of the entities it regulates. As the Commission 
stated in the Interim Rule, regulated entities routinely place large 
quantities of funds (over $25 billion, at last count) into cash 
management accounts. As recent market events have shown, financial 
troubles may afflict both PUHCA and non-PUHCA companies. 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. As a result, it is vital to the Commission's statutory mission 
that it has on hand the necessary information to understand how 
regulated entities are accounting for their assets.
    30. Section 318 of the FPA governs conflicts between the 
Commission's and the SEC's regulations.\21\
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    \21\ In the Arcadia case, Arcadia, Ohio v. Ohio Power Co., 498 
U.S. 73 (1990) (Arcadia), cited by both FirstEnergy and EEI, the 
Supreme Court declined to address the issue of whether Section 318 
prohibits all Commission regulation of a subject matter regulated by 
the SEC or ``only such regulation as actually imposes a conflicting 
requirement.'' Arcadia, 498 U.S. at 77. Instead, the Court held that 
the Commission's actions at issue did not relate to one of the four 
subject matters laid out in Section 318 and concluded, therefore, 
that there was no conflict between the actions of the Commission and 
the actions of the SEC. The complete chronology of the Arcadia case 
is as follows: Ohio Power Co., 39 FERC 61,098 (1987), reh'g denied, 
43 FERC 61,046 (1988), vacated sub nom. Ohio Power v. FERC, 880 F.2d 
1400 (D.C. Cir. 1989), reh'g denied, 897 F.2d 540 (D.C. Cir. 1989), 
order on cert. Arcadia v. Ohio Power Co., 498 U.S. 73 (1990), order 
on remand sub nom. Ohio Power Co. v. FERC, 954 F.2d 779 (D.C. Cir. 
1992), cert. denied sub nom. Arcadia v. Ohio Power Co., 506 U.S. 981 
(1992).
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    31. FirstEnergy and EEI mistakenly seem to believe that the 
Commission's requirements are in conflict with the requirements of the 
SEC, and are therefore barred by FPA Section 318. The Final Rule does 
not dictate the content of or terms for participating in a cash 
management program. And nothing in the regulations the Commission is 
adopting is incompatible with existing SEC requirements.
    32. While the SEC sometimes requires the filing of cash management 
agreements and notification of changes in a holding company's capital 
equity, there is nothing that prevents a registered holding company 
from making one filing with the SEC and its subsidiary making another 
filing with FERC. Therefore, there is no conflict, and Section 318 does 
not bar the proposed regulations.

C. Applicability of the Rule to Utilities Regulated by State PUCs

    33. The Interim Rule did not specifically address application of 
the rule to companies whose cash management programs are regulated by 
State Public Utility Commissions (PUCs).
    Comments Received:
    34. EEI and Duke Energy suggest that the Interim Rule should not 
apply to a public utility or licensee whose participation in cash 
management arrangements or whose securities and debts are regulated by 
the utility commission of the State in which the public utility or 
licensee is organized and operating. The commenters argue that those 
companies are subject to oversight similar to the oversight the 
Commission is imposing here. Second, EEI suggests that Section 204(f) 
of the FPA excludes such State-regulated public utility activities from 
further Commission regulation.\22\ If a State utility commission 
already regulates a utility's participation in a cash management 
arrangement, or regulates the utility's securities and debt, EEI 
asserts that the Commission should defer to the state commission's 
regulation of those activities and not also apply the documentation and 
reporting requirements of the Final Rule to the utility.
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    \22\ 16 U.S.C. 824c(f). Section 204 of the FPA reads as follows:
    ``The provisions of this Section [204 dealing with Commission 
regulation of public utility securities and liabilities] shall not 
apply to a public utility organized and operating in a State under 
the laws of which its security issues are regulated by a State 
commission.''
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    35. National Grid, PacifiCorp, Edison, and others urge the 
Commission to avoid imposing cash management program requirements that 
either conflict with or inappropriately duplicate requirements of state 
commissions that may have existing regulatory oversight. PacifiCorp, 
for instance, states that it already receives regulatory permission for 
its cash management operations from six states and is loath to modify 
those agreements since any modification would require it to seek 
regulatory approval from each of those states, as well as the SEC. Both 
PacifiCorp and National Grid companies seek clarification that the new 
cash management rules pertain only to proper documentation, reporting, 
and notification, and not modification of their cash management 
programs. Edison believes that the proposed reporting requirements are 
unduly burdensome, considering that Edison is already regulated by both 
the California Public Utilities Commission (CPUC) and the SEC with 
respect to affiliate transactions. According to Edison, CPUC's rules 
and regulations already require it to comply with voluminous 
documentation and other requirements concerning its relationship with 
its affiliates.
    Commission Response:
    36. The Commission's Final Rule does not conflict with any 
requirement of any State PUC. The Final Rule does not require entities 
to alter their cash management agreements, nor will the Commission 
alter them after they are filed. Further, as mentioned earlier, the FPA 
gives the Commission broad authority to collect the information it 
needs to administer the FPA, NGA and ICA. The documentation and 
reporting requirements all fall within this broad grant of power.
    37. EEI and Duke Energy's concern over Section 204(f)'s limitation 
on the Commission's authority over the issuance of securities regulated 
by a state commission is misplaced. Section 204 does not apply because 
the Commission is not regulating the issuance of any security by means 
of this Final Rule. Therefore, in response to EEI's concerns, none of 
the Final Rule's requirements regulates a public utility's ability to 
``issue any security, or assume any obligation or liability.''
    38. In response to other complaints about duplication of effort, 
the

[[Page 61998]]

Commission reiterates the need for this information in carrying out its 
statutory obligations to customers. The burden imposed on regulated 
entities by the Final Rule is extremely low while the benefits to the 
Commission and the public of documenting over $25 billion worth of 
regulated assets is high. The Commission would be remiss in its 
obligation to ensure just and reasonable rates if it were to ignore the 
effects on its jurisdictional entities of having these large sums in 
cash management programs.

D. Submission of Cash Management Agreements

    39. The interim rule proposed requiring FERC-regulated entities 
subject to the rule to file their cash management agreements with the 
Commission, and to file any subsequent changes within 10 days from the 
date of change. The Commission is adopting this requirement in the 
Final Rule.
    Comments Received:
    40. Several commenters \23\ argue that FERC-regulated entities 
should not be required to file cash management agreements with the 
Commission. A few commenters argue that doing so is unnecessary. For 
example, INGAA, Duke Energy and FirstEnergy assert that because the 
Interim Rule requires FERC-regulated entities to maintain documentation 
supporting their cash management agreements which are subject to audit, 
there is no compelling reason to have the agreements filed with the 
Commission. Duke Energy adds that the Commission's own annual reporting 
requirements require FERC-regulated entities to provide the Commission 
with a description of material terms of their agreements in footnotes 
to their annual reports.
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    \23\ E.g., INGAA, Duke Energy, and FirstEnergy.
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    41. Other commenters \24\ suggest that the Commission should merely 
require companies to maintain documentation, subject to Commission 
review, without requiring companies to submit the information. EEI 
expresses the concern that filing cash management agreements would 
invite proceedings unintended by the Commission, and requests that the 
Commission clarify that the documents are for informational purposes 
only, and not subject to complaints or protests. Commenters \25\ also 
argue that the new reporting requirement is excessively burdensome.
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    \24\ E.g., EEI, PSEG Companies, and Edison.
    \25\ E.g., Graham County Electric Cooperative and PSEG 
Companies.
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    42. Additionally, Cinergy asks that the Commission clarify that the 
initial submission of the agreements for programs established prior to 
the effective date of the rule shall be within 10 days of the effective 
date of this rule.
    Commission Response:
    43. The underlying premise of this reporting requirement is that 
additional transparency of cash management activities between FERC-
regulated entities and their affiliates will allow the Commission and 
other users of financial information to make decisions based on 
relevant and accurate information. The only way to achieve this 
transparency is to require FERC-regulated entities to file their cash 
management documents with the Commission, which will consequently make 
them available to the public. In addition, the requirement that any 
subsequent changes to an existing agreement be filed within 10 days of 
the date of the change is necessary to provide users of financial 
information with knowledge of when such decisions are being made. Since 
cash management agreements are altered infrequently and only after 
considerable planning, the 10 day notification deadline is reasonable.
    44. Any cash management agreements established prior to the 
effective date of the rule must be filed within 10 days of the 
effective date of the rule.
    45. With regard to the concern that the filing of cash management 
agreements will generate protests and complaints, these filings are for 
informational purposes and the Commission will not entertain public 
comments on them.

E. Notification Requirements

    46. The Interim Rule proposed that FERC-regulated entities 
participating in cash management programs notify the Commission when 
their proprietary capital ratios fall below 30 percent and when they 
subsequently return to or exceed 30 percent. The Interim Rule also 
required that FERC-regulated entities compute their proprietary capital 
ratios within 15 days after the end of each month and notify the 
commission within 5 days after making the calculation. In the Final 
Rule, the Commission is adopting the notification requirement, but is 
allowing FERC-regulated entities to compute their proprietary capital 
ratios quarterly and to notify the Commission within 45 days after the 
end of each calendar quarter if their proprietary capital ratios fall 
below 30 percent and when they subsequently return to or exceed 30 
percent.
    Comments Received:
    47. Virtually all commenters expressed concerns about the Interim 
Rule's proposal that FERC-regulated entities notify the Commission when 
their proprietary capital ratios fall below 30 percent. Several 
commenters \26\ argue that the choice of 30 percent seemed arbitrary, 
and that the 30 percent threshold was not necessarily an accurate 
indication of a company's health. Rather, the commenters argue, the 30 
percent threshold has been overemphasized in the Interim Rule, since it 
is only one of many possible gauges of the financial health of a FERC-
regulated entity. Gulf South adds that establishing a minimum equity 
threshold is inconsistent with the NGA since pipelines are not required 
to maintain any minimum capitalization level.
---------------------------------------------------------------------------

    \26\ E.g., Duke Energy, Exelon, AOPL.
---------------------------------------------------------------------------

    48. Cinergy, Duke Energy, Gulfterra and PacifiCorp expressed 
concerns about the requirement that the ratio be computed within 15 
days after the end of the monitoring period. For example, Duke Energy 
argues that 15 days is insufficient to compute the proprietary capital 
ratio. Cinergy suggests that the Commission revise the date by which 
the ratio must be determined to the 15th business day rather than the 
15th calendar day. Also, Gulfterra and PacifiCorp suggest extending the 
time period to 45 days.
    49. Numerous commenters \27\ object to the monthly monitoring 
requirement, stating that complying with the requirement would be 
unworkable or burdensome, and that calculations completed in such a 
short timeframe may be unreliable. PSEG Companies and FirstEnergy note 
that their capitalization reviews are not prepared on a monthly basis. 
FirstEnergy explains that while books are maintained on a monthly 
basis, utilities do not and are not required to close their books at 
the end of the month in a manner that would enable them to calculate 
their proprietary capital ratios.
---------------------------------------------------------------------------

    \27\ E.g., Alliance, Duke Energy, EEI, Gulf South, WPC.
---------------------------------------------------------------------------

    50. EEI and Exelon ask that the Commission allow utilities to 
calculate the 30 percent equity ratio with transition bonds and other 
non-recourse debt eliminated from the calculation. They argue that 
these bonds were issued pursuant to state enabling legislation that 
allows the bonds to be repaid through a specifically authorized retail 
rate and, as such, the bonds are not the obligation of the utility or 
parent company but instead are non-recourse.
    51. Also, EEI, Sierra Southwest Cooperative Services, Inc. and the 
PSEG Companies ask that the Commission clarify that 18 CFR part 141.500 
B, C and D applies only to public utilities and licensees that are 
subject to the

[[Page 61999]]

Commission's Uniform System of Accounts.
    52. NRECA asserts that the local and continuous control and 
oversight of member-owners provides far more effective control over 
potential abuse of an electric cooperative's cash management programs 
and practices than the Commission could accomplish. It asks that the 
Commission give careful consideration to any request for waiver from 
the final rule.\28\
---------------------------------------------------------------------------

    \28\ Graham County Electric Cooperative requested a waiver from 
the rule on August 7, 2003. Its request will be addressed in a 
separate order.
---------------------------------------------------------------------------

    Commission Response:
    53. Although a 30 percent proprietary capital threshold was not 
adopted as a prerequisite for participation in a cash management 
arrangement, the threshold remains a reasonable and important indicator 
of a company's financial health and the extent to which a FERC-
regulated entity has taken on debt to finance its assets or operations. 
We considered the application of various proprietary capital 
percentages. Our analyses indicate that over 90 percent of FERC-
regulated entities have at least 30 percent proprietary capital. In 
addition, the SEC utilizes a 30 percent proprietary capital percentage 
for its evaluations, albeit for broader purposes than monitoring a 
specific company's financial health.
    54. The Commission agrees that a quarterly reporting requirement of 
proprietary capital ratios, rather than a monthly one as proposed in 
the Interim Rule, would be more appropriate since many companies do not 
currently prepare monthly financial analyses. Adopting a quarterly 
requirement would also ease the administrative burden of complying with 
the reporting requirement. Additionally, this will make the reporting 
requirement more consistent with the quarterly financial reports 
required by the SEC.
    55. The Commission also agrees that it would be more consistent to 
require notification within 45 days after the end of each calendar 
quarter that a company's proprietary capital ratio has dropped below or 
subsequently exceeded 30 percent, rather than allowing only 15 days to 
make the computation and 5 days to make the filing as proposed in the 
Interim Rule. Changing the notification requirement to 45 days is more 
consistent with the SEC's requirement that financial information be 
disclosed 45 days after the end of each fiscal quarter, as well as with 
the change in the Final Rule from a monthly to a quarterly monitoring 
requirement. Lengthening the notification period will also ease the 
administrative burden on affected companies.
    56. Additionally, the Commission will continue to require 
transition bonds and other non-recourse debt to be included in the 
proprietary capital ratio computation. If the proprietary capital ratio 
drops below 30 percent because of this inclusion, the documentation 
notifying the Commission may include a description of this fact.
    57. The Commission is also revising parts 141.500 B, C and D, 
260.400 B, C and D, and 357.5(b), (c) and (d) to apply only to public 
utilities and licensees, natural gas or oil pipeline companies that are 
subject to the Commission's Uniform Systems of Accounts. The language 
is revised to read, ``Public utilities and licensees or natural gas or 
oil pipeline companies subject to the provisions of the Commission's 
Uniform System of Accounts in part 101 and Sec.  141.1 or Sec.  141.2 
or part 201 and Sec.  260.1 or Sec.  260.2, or part 352 and Sec.  357.2 
of this title that participate in cash management programs and are not 
electric cooperatives must determine, on a quarterly basis, the 
percentage of their capital structures that constitute proprietary 
capital.''
    58. Parts 141.500 C, 260.400 C and 357.5(c) are revised to read, 
``In the event that the proprietary capital ratio is less than 30 
percent, public utilities and licensees, natural gas or oil pipeline 
companies subject to the provisions of the Commission's Uniform System 
of Accounts in part 101 and Sec.  141.1 or Sec.  141.2, or part 201 and 
Sec.  260.1 or Sec.  260.2 or part 352 and Sec.  357.2 of this title 
that participate in cash management programs and are not electric 
cooperatives must notify the Commission within 45 days after the end of 
each calendar quarter.''
    59. Parts 141.500 D, 260.400 D and 357.5(d) are revised to read, 
``In the event that the proprietary capital ratio subsequently meets or 
exceeds 30 percent, public utilities and licensees, natural gas or oil 
pipeline companies subject to the provisions of the Commission's 
Uniform System of Accounts in part 101 and Sec.  141.1 or Sec.  141.2 
or part 201 and Sec.  260.1 or Sec.  260.2 or part 352 and Sec.  357.2 
of this title that participate in cash management programs and are not 
electric cooperatives must notify the Commission within 45 days after 
the end of each calendar quarter.''
    60. The Commission recognizes that electric cooperatives 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. It also recognizes that electric cooperatives generally do 
not accumulate profits for shareholders as in the case of investor 
owned utilities. After careful consideration of the comments and the 
structure of electric cooperatives, the Final Rule is revised to exempt 
electric cooperatives from the requirement 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. However, the Commission is aware that electric cooperatives 
have themselves established subsidiaries that are engaged in 
diversified non-electric business activities. Placing cash management 
agreements in writing contributes to a stable environment in which 
rates are just and reasonable, and filing those agreements provides 
needed transparency for the Commission to understand the financial 
arrangements of the cooperatives it regulates.
    61. The final rule applies to all FERC-regulated entities that have 
not been granted waivers of the Commission's accounting regulations and 
the FERC Annual Report Forms 1, 1-F, 2, 2-A or 6 filing requirements. 
Electric cooperatives must comply with the Final Rule except for the 
notification requirements related to the 30 percent proprietary capital 
ratio.

F. Public Disclosure of Information

    62. The interim rule explained that all of the information 
contained in the required filings will be made public to provide for 
greater transparency of the cash management program activities of FERC-
regulated entities.
    Comments Received:
    63. Several commenters \29\ object to public disclosure of their 
cash management agreements. They claim that such agreements may contain 
competitively sensitive or proprietary information and urge the 
Commission to protect from disclosure agreements or supporting 
documents that contain competitively sensitive information. Gulf South 
argues that making cash management agreements public is anticompetitive 
because pipelines would be required to disclose their internal costs of 
capital, and that disclosure of sensitive proprietary information would 
create an uneven competitive playing field among regulated and 
unregulated market participants. AOPL, Duke Energy, and Edison suggest 
that the Commission should grant the agreements confidential treatment 
under the

[[Page 62000]]

Freedom of Information Act's confidential business information 
exemption.
---------------------------------------------------------------------------

    \29\ E.g., INGAA, AOPL, Edison, Gulfterra and Duke Energy.
---------------------------------------------------------------------------

    64. The commenters also object to public notification when their 
proprietary capital ratios fall below 30 percent. Gulfterra and INGAA 
argue that such notifications should also be kept confidential to avoid 
stock volatility.
    Commission Response:
    65. As noted in the Interim Rule, the Commission considers the 
information to be collected to be non-confidential in nature and 
therefore it will be made available to the public. The Commission has 
determined that release of the information is ``necessary to carry out 
its jurisdictional responsibilities.'' See 18 CFR 388.112(c)(2003). The 
information will provide the Commission with relevant and accurate 
information on which to make decisions.
    66. Allowing only the Commission and not the public to review the 
cash management agreements would not meet the goal of providing greater 
transparency for the protection of ratepaying customers. This 
transparency, in turn, will lessen the chance of an acute financial 
reversal that would harm utility ratepaying customers and energy 
markets. Entities that believe the information they submit should be 
withheld from public view on account of unique circumstances may still 
request confidential treatment pursuant to Sec.  388.112 of our 
regulations, stating the rationale for their requests. However, 
general, unsubstantiated assertions that future harm will occur if 
information contained in cash management agreements is released will be 
insufficient for a specific company to acquire confidential status.

G. Clarification of Documentation Requirements

    67. In the interim rule, the Commission implemented documentation 
requirements for cash management programs that became effective August 
7, 2003. The regulations 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. The regulations also require FERC-regulated entities to 
maintain documentation of all deposits into and borrowings from cash 
management programs, including the amount of the deposit or borrowing, 
the maturity date, if any, of the deposit or borrowing, and the 
interest earning rate on the deposit or borrowing, and the daily 
balance of the cash management program.
    Comments Received:
    68. Generally, commenters support the requirement to put all cash 
management agreements in writing. Exelon asserts that it continues to 
support the Commission's desires to protect customers of FERC-
jurisdictional utilities from misuse of cash management accounts. INGAA 
agrees that cash management agreements should be documented and that 
FERC-regulated entities should maintain documentation as specified by 
the regulatory text of Account 146.
    69. On the other hand, many commenters, including AOPL, EEI, INGAA 
and PacifiCorp seek clarification of the documentation requirements. 
Specifically, AOPL, INGAA, El Paso and PacifiCorp seek clarification of 
the requirements to document the duties and responsibilities of the 
administrator and the non-FERC-regulated participants in the program.
    70. AOPL and El Paso argue that the regulated entity cannot be 
called upon to maintain documentation on third party participants. AOPL 
asserts that the terms of the cash management agreement between the 
administrator and individual participants can vary and are kept 
confidential. Cash management programs in which AOPL's member companies 
participate can have more than a thousand participants and that 
maintaining this information would prohibit some regulated entities 
from participating in a cash management program. INGAA also asserts 
that the regulated entity will not necessarily know the restrictions on 
deposits or borrowings by each of the other participants in the cash 
management agreement. PacifiCorp is unclear whether the Commission is 
also creating a requirement for regulated utilities to amend their 
existing cash management agreements.
    71. Gulf South asks that the Commission clarify that the 
documentation requirement only applies to monies contributed into the 
cash management program by the pipeline and not by other participants. 
It argues that to require pipelines to maintain records on the 
activities of all cash management participants is not only burdensome, 
but requires pipelines to be more involved in its affiliates' daily 
businesses than traditionally has either been required or desired by 
the Commission.
    72. AOPL and EEI urge the Commission to reconsider the requirement 
to document the interest rates on each deposit into or withdrawal from 
a cash management program. Both commenters assert that interest 
earnings on deposits or charges on borrowings typically cannot be 
determined for an individual deposit or borrowing; rather, interest 
rates fluctuate based on the average balance for the month or other 
relevant time period. AOPL also argues that the interest earned on a 
deposit or charged on a borrowing is both documented in the cash 
management agreement and reported on a monthly basis in the current 
statements.
    73. Gulf South asks for clarification of what documentation would 
be required when a program is based solely upon bilateral loan 
agreements. It asserts that this arrangement is not a traditional money 
pooling or cash management arrangement and does not have an 
administrator, but appears to be subject to the requirements of the 
Final Rule.
    Commission Response:
    74. The Commission agrees that documentation related to the other 
participants might be unduly burdensome for FERC-regulated entities to 
maintain. Therefore, the Commission is requiring that FERC-regulated 
entities only maintain documentation related to the administrator and 
the FERC-regulated entity. To reflect this change, the Commission is 
revising the language in 18 CFR parts 101 and 201, Account 146 C and 
part 352, Account 13(c) to read, ``the public utilities or licensee, 
natural gas or oil pipeline company must maintain documents authorizing 
the establishment of cash management programs including the duties and 
responsibilities of the administrator and the public utility or 
licensee, natural gas or oil pipeline company in the cash management 
program.''
    75. The Commission agrees that it may be difficult for some FERC-
regulated entities to maintain documentation that includes the interest 
rate on each deposit, withdrawal and borrowing from the cash management 
program and to maintain records showing the daily balance of the cash 
management program. Therefore, the Commission is requiring that the 
documentation authorizing the cash management program include the 
interest rate but that the documentation supporting deposits, 
withdrawals and borrowings from the cash management program need not 
show the interest rate for each transaction. The Commission is 
modifying the daily balance documentation requirement of the Interim 
Rule. Rather than require daily balance documentation, the Final Rule 
is requiring FERC-regulated entities subject to the rule to maintain 
monthly

[[Page 62001]]

balances of their cash management program.
    76. To reflect these changes, parts 101 and 201, Account 146 B(1), 
(2) and (4), and part 352, Account 13(b)(1), (2) and (4) are revised to 
read, ``the written documentation must include (1) For deposits with 
and withdrawals from the cash management program: the date of the 
deposit or withdrawal, the amount of the deposit or withdrawal, and the 
maturity date, if any, of the deposit; (2) For borrowings from a cash 
management program: the date of the borrowing, the amount of the 
borrowing, and the maturity date, if any, of the borrowing; * * * and 
(4) The monthly balance of the cash management program.''
    77. Parts 101 and 201, Account 146 C(3), and part 352, Account 
13(c)(3) are also revised to read, ``The interest rate, including the 
method used to determine the interest earning rates and interest 
borrowing rates for deposits into and borrowings from the program.''
    78. For cash management programs that are based upon bilateral loan 
agreements, documentation supporting the programs should include the 
documentation requirements adopted here. To the extent that certain 
information is not applicable to the arrangement, the FERC-regulated 
entity should so state in the information maintained by the entity and 
filed with the Commission.

IV. Regulatory Flexibility Act Statement

    79. The Regulatory Flexibility Act (RFA) \30\ 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. The Commission is not required to make such 
analyses if a rule would not have such an effect.
---------------------------------------------------------------------------

    \30\ 5 U.S.C. 601-612 (2000).
---------------------------------------------------------------------------

    80. The Commission concludes that this Final Rule would not have 
such an impact on small entities. Most 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.

V. Environmental Analysis

    81. 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.\31\ The 
Commission excludes certain actions not having a significant effect on 
the human environment from the requirement to prepare an environmental 
impact statement.\32\ 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.\33\ This 
Final 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.
---------------------------------------------------------------------------

    \31\ 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).
    \32\ 18 CFR 380.4 (2003).
    \33\ 18 CFR 380.4(a)(2)(ii) (2003).
---------------------------------------------------------------------------

VI. Information Collection Statement

    82. 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 Final 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.
    83. In accordance with Section 3507(d) of the Paperwork Reduction 
Act of 1995,\34\ the information collection requirements in the subject 
rulemaking were submitted to OMB for review.
---------------------------------------------------------------------------

    \34\ 44 U.S.C. 3507(d) (2000).
---------------------------------------------------------------------------

    84. Public Reporting Burden: FERC-regulated entities must 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. 
In the Interim Rule the Commission estimated that 602 FERC-regulated 
entities will be submitting documents describing their cash management 
agreements and 34 will be submitting notifications. For each entity, 
the Interim Rule estimated it would require an average of 1.5 hours to 
file its cash management agreement and .75 hours to submit the 
notification for a total of burden estimate of 903 hours and 51 hours, 
respectively. The burden estimates below reflect the reporting 
requirements.
    85. The Commission received over twenty-five comments on the 
Interim Rule. Several commenters \35\ have indicated that the Interim 
Rule's proposed requirements would place a significant burden upon 
them. In particular, Edison asserts that the implementation of any rule 
takes much longer than the time it takes to file the document and/or 
notify FERC of any changes under the rule.
---------------------------------------------------------------------------

    \35\ Alliance Pipeline, Gulf South, NRECA, Gulfterra, First 
Energy, Graham County, NRECA, Chevron, Williams, Exelon, PSEG, EEI, 
AOPL, INGAA, Southern California Edison (Edison) and Duke.
---------------------------------------------------------------------------

    86. Companies were already familiar with the documentation and 
reporting requirements proposed by the Commission in the Interim Rule. 
The Commission is responding to comments and modifying what the Interim 
Rule proposed to ameliorate any additional burden. Sound business 
practices already require companies to keep adequate internal controls 
over cash management practices. Such internal controls include 
documenting and maintaining information to support cash management 
programs.
    87. To reduce the burden on companies, the Commission has changed 
the reporting requirement in the Final Rule to quarterly and has 
extended the notification period. The Commission finds the burden 
associated with complying with this Final Rule is minimal and that its 
previous estimate was a reasonable one.
    88. Reporting Requirements:

[[Page 62002]]



----------------------------------------------------------------------------------------------------------------
                                                                     Number of
                 Data collection                     Number of     responses per     Hours per     Total annual
                                                    respondents     respondent       response          hours
----------------------------------------------------------------------------------------------------------------
FERC-555:
    (cash management agreement).................           * 602               1             1.5             903
    (Notification)..............................              34               2             .75              51
                                                 -----------------
        Totals..................................  ..............  ..............  ..............            954
----------------------------------------------------------------------------------------------------------------
* (The number of respondents as identified in the Interim Rule that will be subject to submitting documents
  describing their cash management agreements.)
 The total annual hours for reporting requirements for this rule are 954.

    89. Information Collection Costs: The Commission estimates the 
costs associated with submitting cash management program documents and 
notifying the Commission when the proprietary capital ratio of a FERC-
regulated entity subject to the rule falls below 30 percent and when 
its proprietary capital ratio subsequently returns to or exceeds 30 
percent to be $53,681.\36\
---------------------------------------------------------------------------

    \36\ (954 hours for collection / 2,080 hours) x $117,041 = 
$53,681.
---------------------------------------------------------------------------

    90. 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'';
    Action: Proposed information collection requirements.
    OMB Control No.: 1902-0098.
    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 final rule amends the 
Commission's regulations to revise parts 101, 141, 201, 260, 352 and 
357 to provide information collection requirements for cash management 
activities.
    91. 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.
    92. 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. Document Availability

    93. 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.
    94. From FERC's Home Page on the Internet, this information is 
available in the eLibrary (formerly FERRIS). The full text of this 
document is available on eLibrary in PDF and MSWord format for viewing, 
printing, and/or downloading. To access this document in eLibrary, type 
the docket number excluding the last three digits of this document in 
the docket number field.
    95. User assistance is available for eLibrary 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].

VIII. Effective Date and Congressional Notification

    96. These regulations are effective December 1, 2003. The 
Commission has determined, with the concurrence of the Administrator of 
the Office of Information and Regulatory Affairs of OMB, that this 
final rule is not a ``major rule'' as defined in Section 351 of the 
Small Business Regulatory Enforcement Fairness Act of 1996.\37\ The 
Commission will submit the final rule to both houses of Congress and 
the General Accounting Office.\38\
---------------------------------------------------------------------------

    \37\ 5 U.S.C. 804(2) (2002).
    \38\ 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.

List of Subjects

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
Accordingly, the Interim Rule amending parts 101, 141, 201, 260, 352, 
and 357 in Title 18 of the Code of Federal Regulations, which was 
published at 68 FR 40500 on July 8, 2003 is adopted as a final rule 
with the following changes:

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, account 146, paragraphs B(1), 
B(2) and B(4) and C(1) through C(4) are revised to read as follows:

[[Page 62003]]

Balance Sheet Accounts

* * * * *
    146 Accounts receivable from associated companies.
* * * * *
    B. * * *
    (1) For deposits with and withdrawals from the cash management 
program: the date of the deposit or withdrawal, the amount of the 
deposit or withdrawal, and the maturity date, if any, of the deposit;
    (2) For borrowings from a cash management program: the date of the 
borrowing, the amount of the borrowing, and the maturity date, if any, 
of the borrowing;
* * * * *
    (4) The monthly balance of the cash management program.
    C. * * *
    (1) The duties and responsibilities of the administrator and the 
public utilities or licensees in the cash management program;
    (2) The restrictions on deposits or borrowings by public utilities 
or licensees in the cash management program;
    (3) The interest rate, including 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 
public utilities or licensees 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 revised 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 and 
Sec.  141.1 or Sec.  141.2 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 the effective date of the 
rule or 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 subject to the provisions of the 
Commission's Uniform System of Accounts prescribed in part 101 and 
Sec.  141.1 or Sec.  141.2 of this title that participate in cash 
management programs and are not electric cooperatives must determine, 
on a quarterly basis, 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 utilities or licensees subject to the provisions of 
the Commission's Uniform System of Accounts prescribed in part 101 and 
Sec.  141.1 or Sec.  141.2 of this title that participate in cash 
management programs and are not electric cooperatives must notify the 
Commission within 45 days after the end of each calendar quarter, and 
must describe the significant events or transactions causing their 
proprietary capital ratios to be less than 30 percent. The extent to 
which the public utilities or licensees have amounts loaned or money 
advanced to their parent, subsidiary, or affiliated companies through 
their cash management program(s) should also be reported, 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, public utilities or licensees subject to 
the provisions of the Commission's Uniform System of Accounts 
prescribed in part 101 and Sec.  141.1 or Sec.  141.2 of this title 
that participate in cash management programs and are not electric 
cooperatives must notify the Commission within 45 days after the end of 
each calendar quarter.

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, account 146, paragraphs B(1), 
B(2) and B(4) and C(1) through C(4) are revised to read as follows:

Balance Sheet Accounts

* * * * *
    146 Accounts receivable from associated companies.
* * * * *
    B. * * *
    (1) For deposits with and withdrawals from the cash management 
program: the date of the deposit or withdrawal, the amount of the 
deposit or withdrawal, and the maturity date, if any, of the deposit;
    (2) For borrowings from a cash management program: the date of the 
borrowing, the amount of the borrowing, and the maturity date, if any, 
of the borrowing;
* * * * *
    (4) The monthly balance of the cash management program.
    C. * * *
    (1) The duties and responsibilities of the administrator and the 
natural gas companies in the cash management program;
    (2) The restrictions on deposits or borrowings by natural gas 
companies in the cash management program;
    (3) The interest rate, including 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 
natural gas companies 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 revised 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

[[Page 62004]]

Uniform System of Accounts prescribed in part 201 and Sec.  260.1 or 
Sec.  260.2 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 the effective date of the rule or 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 subject to the provisions of the 
Commission's Uniform System of Accounts prescribed in part 201 and 
Sec.  260.1 or Sec.  260.2 of this title that participate in cash 
management programs must determine, on a quarterly basis, 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, natural gas companies subject to the provisions of the 
Commission's Uniform System of Accounts prescribed in part 201 and 
Sec.  260.1 or Sec.  260.2 of this title that participate in cash 
management programs must notify the Commission within 45 days after the 
end of each calendar quarter, and must describe the significant events 
or transactions causing their proprietary capital ratios to be less 
than 30 percent. The extent to which the natural gas companies have 
amounts loaned or money advanced to their parent, subsidiary, or 
affiliated companies through their cash management program(s) should 
also be reported, 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, natural gas companies subject to the 
provisions of the Commission's Uniform System of Accounts prescribed in 
part 201 and Sec.  260.1 or Sec.  260.2 of this title that participate 
in cash management programs must notify the Commission within 45 days 
after the end of each calendar quarter.

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, account 13, paragraphs (b) 
introductory text, (b)(1), (b)(2) and (b)(4) and (c)(1) through (c)(4) 
are revised to read as follows:

Balance Sheet Accounts

* * * * *
    13 Receivables from affiliated companies.
* * * * *
    (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 oil pipeline company along with the 
excess funds of the oil pipeline 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 deposits with and withdrawals from the cash management 
program: The date of the deposit or withdrawal, the amount of the 
deposit or withdrawal, and the maturity date, if any, of the deposit;
    (2) For borrowings from a cash management program: The date of the 
borrowing, the amount of the borrowing, and the maturity date, if any, 
of the borrowing;
* * * * *
    (4) The monthly balance of the cash management program.
    (c) * * *
    (1) The duties and responsibilities of the administrator and the 
oil pipeline company in the cash management program;
    (2) The restrictions on deposits or borrowings by oil pipeline 
companies in the cash management program;
    (3) The interest rate, including 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 
oil pipeline companies 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 revised 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 prescribed in part 352 and 
Sec.  357.2 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 the effective date of the rule or 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 subject to the provisions of the 
Commission's Uniform System of Accounts prescribed in part 352 and 
Sec.  357.2 of this title that participate in cash management programs 
must determine, on a quarterly basis, 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 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, oil pipeline companies subject to the provisions of the 
Commission's Uniform System of Accounts prescribed in part 352 and 
Sec.  357.2 of this title that participate in cash management programs 
must notify the Commission within 45 days after the end of each 
calendar quarter and must describe the significant events or 
transactions

[[Page 62005]]

causing their proprietary capital ratios to be less than 30 percent. 
The extent to which the oil pipeline company has amounts loaned or 
money advanced to its parent, subsidiary, or affiliated companies 
through its cash management program(s) should also be reported, 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, oil pipeline companies subject to the 
provisions of the Commission's Uniform System of Accounts prescribed in 
part 352 and Sec.  357.2 of this title that participate in cash 
management programs must notify the Commission within 45 days after the 
end of each calendar quarter.


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

Appendix

                 List of Commenters on the Interim Rule
------------------------------------------------------------------------
             Respondent                          Abbreviation
------------------------------------------------------------------------
Alliance Pipeline, LP...............  Alliance.
American Public Gas Association.....  APGA.
Association of Oil Pipe Lines.......  AOPL.
Chevron Pipe Line Company...........  CPL.
Cinergy Corporation.................  Cinergy.
Duke Energy Corporation.............  Duke Energy.
Edison Electric Institute...........  EEI.
El Paso Corporation's Pipeline Group  El Paso.
Exelon Corporation..................  Exelon.
First Energy Corporation............  FirstEnergy.
Graham County Electric Cooperative,   GCEC.
 Inc.
Gulf South Pipeline Company, LP.....  Gulf South.
Gulfterra Energy Partners, LP.......  Gulfterra.
Interstate Natural Gas Association    INGAA.
 of America.
National Rural Electric Cooperative   NRECA.
 Association.
National Grid USA...................  National Grid.
National Association of Regulatory    NARUC (late comment).
 Utility Commissioners.
NiSource Inc........................  NiSource.
OKTex Pipe Line Co..................  OKTex.
PacifiCorp..........................  PacifiCorp.
The PSEG Companies.
Shell Pipeline Company LP...........  Shell.
Sierra Southwest Cooperative          SSW.
 Services, Inc.
Southern California Edison Company..  Edison.
Tucson Electric Power Company.......  Tucson.
Williams Pipe Line Company, LLP.....  WPL.
------------------------------------------------------------------------

[FR Doc. 03-27410 Filed 10-30-03; 8:45 am]
BILLING CODE 6717-01-P