[Federal Register Volume 84, Number 229 (Wednesday, November 27, 2019)]
[Rules and Regulations]
[Pages 65281-65298]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-25724]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM19-5-000; Order No. 864]


Public Utility Transmission Rate Changes To Address Accumulated 
Deferred Income Taxes

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: In this final rule, the Federal Energy Regulatory Commission 
(Commission) is requiring public utility transmission providers with 
transmission formula rates under an Open Access Transmission Tariff, a 
transmission owner tariff, or a rate schedule to revise those 
transmission formula rates to account for changes caused by the Tax 
Cuts and Jobs Act of 2017. The Commission is requiring public utilities 
with transmission formula rates to include a mechanism in those 
transmission formula rates to deduct any excess accumulated deferred 
income taxes (ADIT) from or add any deficient ADIT to their rate bases. 
Public utilities with transmission formula rates are also required to 
incorporate a mechanism to decrease or increase their income tax 
allowances by any amortized excess or deficient ADIT, respectively. 
Finally, the Commission is requiring public utilities with transmission 
formula rates to incorporate a new permanent worksheet into their 
transmission formula rates that will annually track information related 
to excess or deficient ADIT. The Commission does not adopt the 
proposals in the notice of proposed rulemaking that were applicable to 
public utilities with transmission stated rates.

DATES: This rule is effective January 27, 2020.

FOR FURTHER INFORMATION CONTACT: 
Noah Lichtenstein (Technical Information), Office of Energy Market 
Regulation, Federal Energy Regulatory Commission, 888 First Street NE, 
Washington, DC 20426, (202) 502-8696, [email protected]
Joshua Walters (Legal Information), Office of the General Counsel, 
Federal Energy Regulatory Commission, 888 First Street NE, Washington, 
DC 20426, (202) 502-6098, [email protected].

SUPPLEMENTARY INFORMATION:

Table of Contents

 
                                                         Paragraph Nos.
 
I. Introduction......................................                  1
II. Background.......................................                  7
    A. Overview of Public Utility Transmission Rates.                  9
    B. Order No. 144 and 18 CFR 35.24................                 12
    C. Notice of Inquiry.............................                 14
    D. Notice of Proposed Rulemaking.................                 15
III. Discussion......................................                 20
    A. Formula Rates.................................                 20
        1. Ensuring Rate Base Neutrality.............                 20
        2. Return or Recovery of Excess or Deficient                  32
         ADIT........................................

[[Page 65282]]

 
        3. Support for Excess and Deficient ADIT                      52
         Calculation and Amortization................
    B. Stated Rates..................................                 75
        1. NOPR......................................                 75
        2. Comments..................................                 76
        3. Commission Determination..................                 86
    C. Compliance Filings............................                 96
        1. NOPR......................................                 96
        2. Comments..................................                 98
        3. Commission Determination..................                100
    D. Other Comments Relating to Issues Not                         105
     Addressed in the NOPR...........................
        1. Comments..................................                105
        2. Commission Determination..................                112
IV. Information Collection Statement.................                116
V. Environmental Analysis............................                122
VI. Regulatory Flexibility Act.......................                123
VII. Document Availability...........................                127
VIII. Effective Date and Congressional Notification..                130
 

I. Introduction

    1. In this final rule, we require, pursuant to section 206 of the 
Federal Power Act \1\ (FPA), all public utility transmission providers 
with transmission formula rates under an Open Access Transmission 
Tariff (OATT), a transmission owner tariff, or a rate schedule to 
revise those transmission formula rates to account for changes caused 
by the Tax Cuts and Jobs Act of 2017.\2\ The requirements set forth in 
this final rule are designed to address the effects of the Tax Cuts and 
Jobs Act on the accumulated deferred income taxes (ADIT) reflected in 
transmission formula rates under an OATT, a transmission owner tariff, 
or a rate schedule of public utilities.
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    \1\ See 16 U.S.C. 824e (2018).
    \2\ An Act to provide for reconciliation pursuant to titles II 
and V of the concurrent resolution on the budget for fiscal year 
2018, Public Law 115-97, 131 Stat. 2054 (2017) (Tax Cuts and Jobs 
Act).
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    2. The requirements adopted in this final rule for public utilities 
with transmission formula rates track the proposals set forth in the 
notice of proposed rulemaking (NOPR) issued in this proceeding on 
November 15, 2018,\3\ with certain modifications. However, as discussed 
below, we decline to adopt the requirements proposed in the NOPR that 
were applicable to public utilities with transmission stated rates. For 
transmission stated rates, we instead find that a public utility's next 
rate proceeding is the most appropriate place to address excess or 
deficient ADIT resulting from the Tax Cuts and Jobs Act.
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    \3\ Public Utility Transmission Rate Changes to Address 
Accumulated Deferred Income Taxes, 83 FR 59331 (Nov. 23, 2018), 165 
FERC ] 61,117 (2018).
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    3. We are adopting the requirements in the NOPR for all public 
utilities with transmission formula rates to include a mechanism in 
their formula rates to deduct any excess ADIT from or add any deficient 
ADIT to their rate bases (Rate Base Adjustment Mechanism). This 
requirement will ensure that a public utility's rate base continues to 
be treated in a manner similar to that prior to the Tax Cuts and Jobs 
Act (i.e., that rate base neutrality is preserved).
    4. We also adopt the NOPR proposal to require all public utilities 
with transmission formula rates to include a mechanism in their formula 
rates that decreases or increases their income tax allowances by any 
amortized excess or deficient ADIT, respectively (Income Tax Allowance 
Adjustment Mechanism). This requirement will ensure that public 
utilities with transmission formula rates return excess ADIT to or 
recover deficient ADIT from ratepayers.
    5. Finally, we adopt the NOPR proposal to require all public 
utilities with transmission formula rates to incorporate a new 
permanent worksheet into their transmission formula rates that will 
annually track information related to excess or deficient ADIT (ADIT 
Worksheet). This requirement will increase the transparency surrounding 
the adjustment of rate bases and income tax allowances to account for 
excess or deficient ADIT by public utilities with transmission formula 
rates. However, we modify the NOPR proposal that public utilities with 
transmission formula rates submit an unpopulated worksheet in their 
compliance filings and instead require the worksheet to be populated. 
The populated worksheet will assist the Commission in analyzing the 
worksheet's function and help the Commission to assess whether the 
worksheet provides adequate transparency.
    6. We require each public utility with transmission formula rates 
to submit a filing to demonstrate compliance with the final rule, 
including revisions to its transmission formula rates, as necessary, 
within the later of (1) 30 days of the effective date of this final 
rule or (2) the public utility's next annual informational filing 
following the issuance of this final rule.

II. Background

    7. On December 22, 2017, the President signed into law the Tax Cuts 
and Jobs Act. The Tax Cuts and Jobs Act, among other things, reduced 
the federal corporate income tax rate from 35 percent to 21 percent, 
effective January 1, 2018. This means that, beginning January 1, 2018, 
companies subject to the Commission's jurisdiction compute income taxes 
owed to the IRS based on a 21 percent tax rate. The tax rate reduction 
will result in less federal corporate income tax expense going 
forward.\4\
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    \4\ See Tax Cuts and Jobs Act, Sec. 13001, 131 Stat. at 2096.
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    8. Importantly, the tax rate reduction will also result in a 
reduction in ADIT liabilities and ADIT assets on the books of public 
utilities. ADIT balances are accumulated on the regulated books and 
records of public utilities based on the requirements of the Uniform 
System of Accounts (USofA). ADIT arises from timing differences between 
the method of computing taxable income for reporting to the IRS and the 
method of computing income for regulatory accounting and ratemaking 
purposes.\5\ As a result of the Tax Cuts and Jobs Act reducing the 
federal corporate income tax rate from 35 percent to 21 percent, a 
portion of an ADIT liability that was

[[Page 65283]]

collected from customers will no longer be due from public utilities to 
the IRS and is considered excess ADIT, which must be returned to 
customers in a cost of service ratemaking context.\6\ Public utilities 
are required to adjust their ADIT assets and ADIT liabilities to 
reflect the effect of the change in tax rates in the period that the 
change is enacted.\7\
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    \5\ See 18 CFR 35.24(d)(2) (2019) (``Timing differences means 
differences between the amounts of expenses or revenues recognized 
for income tax purposes and amounts of expenses or revenues 
recognized for ratemaking purposes, which differences arise in one 
time period and reverse in one or more other time periods so that 
the total amounts of expenses or revenues recognized for income tax 
purposes and for ratemaking purposes are equal.'').
    \6\ The converse is true for public utilities that have ADIT 
assets.
    \7\ See 18 CFR 35.24 and 18 CFR 154.305 (2019); see also 
Regulations Implementing Tax Normalization for Certain Items 
Reflecting Timing Differences in the Recognition of Expenses or 
Revenues for Ratemaking and Income Tax Purposes, Order No. 144, FERC 
Stats. & Regs. ] 30,254 (1981) (cross-referenced at 18 FERC ] 
61,163), order on reh'g, Order No. 144-A, FERC Stats. & Regs. ] 
30,340 (1982)) (cross-referenced at 15 FERC ] 61,142).
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A. Overview of Public Utility Transmission Rates

    9. The Commission is responsible for ensuring that the rates, 
terms, and conditions of service for wholesale sales and transmission 
of electric energy in interstate commerce are just, reasonable, and not 
unduly discriminatory or preferential. With respect to the transmission 
of electric energy in interstate commerce, most jurisdictional entities 
are subject to cost of service regulation. Cost of service regulation 
seeks to allow public utilities the opportunity to (1) recover 
operating costs, including income taxes, (2) recover the cost of 
capital investments, and (3) earn a just and reasonable return on 
investments.\8\ Public utilities calculate their cost of service-based 
transmission rates predominately by using formula rates or stated 
rates. These transmission rates are contained in numerous agreements, 
including a public utility's OATT, a regional transmission operator's 
or independent system operator's OATT, coordination agreements, and 
wholesale distribution agreements.
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    \8\ See Pub. Sys. v. FERC, 709 F.2d 73, 75 (D.C. Cir. 1983).
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    10. When a public utility seeks to change its transmission stated 
rate, it files a rate case at the Commission to establish the cost of 
service revenue requirement, allocate costs to various customer groups, 
and set its rates. As an alternative, the Commission permits a public 
utility to establish its rates through a formula, in which the 
Commission accepts the public utility's cost of service calculation 
methodologies and input sources and allows the public utility to update 
those inputs every year.
    11. Public utilities must seek changes to their transmission stated 
rates or formula rates through filings with the Commission under 
section 205 of the FPA,\9\ while the Commission and third parties can 
challenge a rate in a proceeding initiated under section 206 of the 
FPA.
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    \9\ See 16 U.S.C. 824d.
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B. Order No. 144 and 18 CFR 35.24

    12. The purpose of tax normalization is to match the tax effects of 
costs and revenues with the recovery in rates of those same costs and 
revenues.\10\ As noted above, timing differences may exist between the 
method of computing taxable income for reporting to the IRS and the 
method of computing income for regulatory accounting and ratemaking 
purposes. The tax effects of these differences are placed in a deferred 
tax account to be used in later periods when the differences 
reverse.\11\
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    \10\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,522, 
31,530.
    \11\ Id. at 31,554.
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    13. The Commission established its policy of tax normalization in 
Order No. 144, where it required use of ``the provision for deferred 
taxes [(i.e., ADIT)] as a mechanism for setting the tax allowance at 
the level of current tax cost.'' \12\ In keeping with this 
normalization policy, and as relevant to the Tax Cuts and Jobs Act's 
reduction of the federal corporate income tax rate, the Commission in 
Order No. 144 also required adjustments in the ADIT of public 
utilities' cost of service when excessive or deficient ADIT has been 
created as a result of changes in tax rates.\13\ Furthermore, the 
Commission required ``a rate applicant to compute the income tax 
component in its cost of service by making provision for any excess or 
deficiency in its deferred tax reserves resulting . . . from tax rate 
changes.'' \14\ The Commission required that such mechanism be 
consistent with a Commission-approved ratemaking method made 
specifically applicable to the rate applicant.\15\ Where no ratemaking 
method has been made specifically applicable, the Commission required 
the rate applicant to advance some method in its next rate case.\16\ 
The Commission stated that it would determine the appropriateness of 
any proposed method on a case-by-case basis, but as the Commission 
resolved the issue in a number of cases, a method with wide 
applicability may be adopted.\17\ The Commission codified the 
requirements of Order No. 144 in its regulations in 18 CFR 35.24.\18\
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    \12\ Id. at 31,530.
    \13\ Id. at 31,519.
    \14\ Id. at 31,560. See also 18 CFR 35.24(c)(1)(ii); 18 CFR 
35.24(c)(2).
    \15\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560. See 
also 18 CFR 35.24(c)(3).
    \16\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560.
    \17\ Id. See also 18 CFR 35.24(c)(3).
    \18\ Originally promulgated as part of Order No. 144, the 
regulatory text was redesignated as 18 CFR 35.25 in Order No. 144-A. 
See Order No. 144-A, FERC Stats. & Regs. ] 30,340 at 30,140. In 
Order No. 545, the Commission again redesignated the regulatory text 
to its present designation as 18 CFR 35.24. See Streamlining 
Electric Power Regulation, Order No. 545, FERC Stats. & Regs. ] 
30,955, at 30,713 (1992) (cross-referenced at 61 FERC ] 61,207).
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C. Notice of Inquiry

    14. Following the enactment of the Tax Cuts and Jobs Act, the 
Commission issued a Notice of Inquiry seeking comments on, among other 
things, whether, and if so, how, the Commission should address the 
effects of the Tax Cuts and Jobs Act on ADIT. The Commission noted that 
the Tax Cuts and Jobs Act's reduction of the federal corporate income 
tax rate would potentially create excess or deficient ADIT on the books 
of public utilities and sought comment on the appropriate treatment of 
excess and deficient ADIT in the transmission rates of public 
utilities.\19\
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    \19\ Inquiry Regarding the Effect of the Tax Cuts and Jobs Act 
on Commission-Jurisdictional Rates, 162 FERC ] 61,223 (2018) (NOI).
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D. Notice of Proposed Rulemaking

    15. In response to the Tax Cuts and Jobs Act, on November 15, 2018, 
the Commission issued the NOPR to address the fact that many, if not 
most, transmission formula rates of public utilities do not fully 
reflect any excess or deficient ADIT following a change in tax rates, 
as required by Order No. 144 and the Commission's regulations in 18 CFR 
35.24. The Commission explained that, because the vast majority of 
public utilities have transitioned from stated rates to formula rates, 
a rate case no longer remains the appropriate vehicle for formula rates 
to reflect excess or deficient ADIT in a public utility's cost of 
transmission service, as contemplated by Order No. 144. The Commission 
further explained that a public utility's transmission formula rate 
should include mechanisms that accurately reflect excess or deficient 
ADIT in a public utility's cost of transmission service during the 
annual updates of the rest of the revenue requirement.\20\
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    \20\ NOPR, 165 FERC ] 61,117 at PP 15-16.
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    16. As a result, the Commission proposed two requirements for 
public utilities with transmission formula rates to maintain an 
accurate cost of service following a change in income tax rates, such 
as that caused by the Tax Cuts and Jobs Act: (1) The Rate Base 
Adjustment

[[Page 65284]]

Mechanism, which preserves rate base neutrality through the removal of 
excess ADIT from or addition of deficient ADIT to rate base; and (2) 
the Income Tax Allowance Adjustment Mechanism, which returns excess 
ADIT to or recovery of deficient ADIT from ratepayers. Additionally, to 
provide greater transparency, the Commission proposed to require all 
public utilities with transmission formula rates to incorporate into 
their transmission formula rates the ADIT Worksheet, which is a new 
permanent worksheet that will annually track information related to 
excess or deficient ADIT. The Commission also proposed that the changes 
to transmission formula rates made in response to these requirements 
must be applicable to any future changes to tax rates that give rise to 
excess or deficient ADIT.\21\
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    \21\ Id. PP 17, 26.
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    17. Regarding public utilities with transmission stated rates, the 
Commission proposed maintaining Order No. 144's requirement that such 
public utilities reflect any adjustments made to their ADIT balances as 
a result of the Tax Cuts and Jobs Act (and any future tax changes) in 
their next rate case. However, to increase the likelihood that those 
customers who contributed to the related ADIT accounts receive the 
benefit of the Tax Cuts and Jobs Act, the Commission proposed to 
require public utilities with transmission stated rates to (1) 
determine any excess or deficient ADIT caused by the Tax Cuts and Jobs 
Act and (2) return or recover this amount to or from customers.\22\
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    \22\ Id. P 18.
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    18. Finally, the Commission proposed that, similar to the 
Commission's actions following the Tax Cuts and Jobs Act,\23\ 
compliance filings made in response to this final rule's requirements 
may be considered on a single-issue basis given the limited scope of 
the proposed requirements.\24\
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    \23\ See AEP Appalachian Transmission Co., Inc., 162 FERC ] 
61,225 (2018); Alcoa Power Generating Inc.--Long Sault Division, 162 
FERC ] 61,224 (2018) (Tax Rate Related Orders to Show Cause).
    \24\ See generally Indicated RTO Transmission Owners, 161 FERC ] 
61,018, at PP 13-14 (2017); see also Rates Changes Relating to the 
Federal Corporate Income Tax Rate for Public Utilities, Order No. 
475, FERC Stats. & Regs. ] 30,752 (cross-referenced at 39 FERC ] 
61,357), order on reh'g, 41 FERC ] 61,029 (1987) (cross-referenced 
at 41 FERC ] 61,029) (allowing public utilities to use a voluntary, 
abbreviated rate filing procedure to reduce their rates to reflect a 
reduction in the federal corporate income tax rate on a single-issue 
basis).
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    19. The Commission received comments from 14 entities in response 
to the NOPR.\25\ In general, commenters supported the proposals in the 
NOPR relating to public utilities with transmission formula rates. 
However, commenters generally disagreed with the NOPR proposals 
relating to public utilities with transmission stated rates.
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    \25\ A list of commenters to the NOPR and the abbreviated names 
used in this final rule appears in Appendix A.
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III. Discussion

A. Formula Rates

1. Ensuring Rate Base Neutrality
a. NOPR
    20. In the NOPR, the Commission proposed to require all public 
utilities with transmission formula rates to include the Rate Base 
Adjustment Mechanism, which is a mechanism in their formula rates that 
deducts any excess ADIT from or adds any deficient ADIT to their rate 
bases, in order to preserve rate base neutrality. The Commission did 
not propose to prescribe a specific adjustment mechanism that would 
apply to all public utilities with transmission formula rates; rather, 
the Commission proposed to adopt a case-by-case approach that would 
allow public utilities to propose any necessary changes to their 
formula rates on an individual basis. The proposed case-by-case 
approach also included the ability for a public utility with 
transmission formula rates to demonstrate that its formula rate already 
meets the Rate Base Adjustment Mechanism requirements described in the 
NOPR.\26\
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    \26\ NOPR, 165 FERC ] 61,117 at PP 15-16.
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    21. Additionally, the Commission did not propose new accounts for 
recording excess or deficient ADIT. Instead, the Commission noted that 
it had previously issued guidance on this accounting topic, finding 
that public utilities are required to record a regulatory asset 
(Account 182.3) associated with deficient ADIT or a regulatory 
liability (Account 254) associated with excess ADIT.\27\
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    \27\ See Accounting For Income Taxes, Docket No. AI93-5-000 
(April 23, 1993), http://www.ferc.gov/enforcement/acct-matts/docs/AI93-5-000.asp (Accounting for Income Taxes Guidance).
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b. Comments
    22. Commenters generally supported the NOPR requirement to include 
mechanisms in the transmission formula rates of public utilities that 
adjust ADIT balances for any excess or deficient ADIT amounts in order 
to preserve rate base neutrality.\28\ Similarly, commenters generally 
support the NOPR requirement that the Commission review the adjustments 
on a case-by-case basis and allow public utilities to demonstrate that 
their existing formula rates maintain rate base neutrality.\29\ 
Industrial Customers assert that the underlying principle of tax 
normalization continues to be fully applicable and, given the 
insufficient mechanisms to reflect excess ADIT, provides ample support 
for the NOPR.\30\ NRECA notes that its support is not intended to imply 
that additional Commission actions will not be needed for some public 
utilities in compliance filings and subsequent rate proceedings because 
the final rule may not address all details required to ensure just and 
reasonable rates.\31\
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    \28\ See Eversource Comments at 7; AMP Comments at 2-3; EEI 
Comments at 4; Industrial Customers Comments at 4-5; NRECA Comments 
at 3-4.
    \29\ AMP Comments at 2-3; EEI Comments at 4; Eversource Comments 
at 9; MISO Transmission Owners Comments at 6-7.
    \30\ Industrial Customers Comments at 5.
    \31\ NRECA Comments at 3-4.
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    23. AMP states that the Commission should provide further guidance 
in, or use caution in reviewing compliance filings to, the final rule 
regarding transparency in excess and deficient ADIT adjustment 
mechanisms. AMP argues that the Commission-accepted method proposed by 
ITC Companies and Ameren Services Company erodes transparency because 
it requires manipulation of excess and deficient ADIT inputs prior to 
their inclusion in the formula rate.\32\ AMP argues this also creates 
risk of error. AMP asserts that accounting for excess and deficient 
ADIT within the same ADIT accounts where the ADIT would have been 
recorded but for the change in tax rate, as described in its comments 
to the NOI, provides greater transparency.\33\
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    \32\ AMP Comments at 3 (citing Midcontinent Indep. Sys. 
Operator, Inc., 153 FERC ] 61,374 (2015); Midcontinent Indep. Sys. 
Operator, Inc., 163 FERC ] 61,163 (2018)).
    \33\ AMP Comments at 2-4.
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    24. In contrast, MISO Transmission Owners contend that the 
Commission should rely on existing formula rate mechanisms to preserve 
rate base neutrality, such as the ones found in the formula rates of 
the MISO Transmission Owners that exclude excess ADIT from inputs to 
the formula rates and require that rate base be adjusted as excess and 
deficient ADIT are amortized.\34\
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    \34\ MISO Transmission Owners Comments at 6-7.
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    25. Eversource asserts that, where possible, any adjustments to 
preserve rate base neutrality should be done through existing 
mechanisms so long as they allow for the inclusion of Financial 
Accounting Standards Board Accounting Standards Codification (ASC) No. 
740 (ASC 740) income tax

[[Page 65285]]

regulatory deferral in rate base. To this end, Eversource agrees with 
the Commission that public utilities should record excess ADIT in 
Account 254 (Other Regulatory Liabilities) and deficient ADIT in 
Account 182.3 (Other Regulatory Assets) and notes that this requirement 
is consistent with USofA instructions.\35\
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    \35\ Eversource Comments at 8-9.
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    26. DEMEC requests that the Commission clarify that this final rule 
is intended to be consistent with the USofA, which only permits booking 
of regulatory assets and liabilities to Accounts 182.3 and 254 when 
those amounts cannot be booked to other accounts. DEMEC asserts that 
this will ensure that public utilities do not recover assets booked to 
Account 182.3 that are unrelated to excess or deficient ADIT that have 
been authorized for recovery by the Commission. DEMEC asserts that 
sufficient transparency could also be achieved by booking excess and 
deficient ADIT to new accounts, subaccounts of 182.3 and 254, or as 
subaccounts of Accounts 190, 281, and 283.\36\
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    \36\ DEMEC Comments at 7-10.
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    27. DEMEC asserts that the final rule should incorporate the proper 
method for calculating any excess or deficient amounts of ADIT, which 
is to multiply ADIT balances as of December 31, 2017 by the ratio of 
the new tax rate, 21 percent, to the tax rate used to calculate the 
ADIT balance.\37\
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    \37\ Id. at 10.
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c. Commission Determination
    28. We adopt the proposal to require all public utilities with 
transmission formula rates to include the Rate Base Adjustment 
Mechanism in their transmission formula rates. The Rate Base Adjustment 
Mechanism is a mechanism by which public utilities deduct any excess 
ADIT from or add any deficient ADIT to their rate bases. Without such a 
mechanism, public utilities with transmission formula rates would 
violate the Commission's normalization requirements by overstating or 
understating their rate bases by the amount of any excess or deficient 
ADIT, respectively, generated as a result of a change to tax rates. 
Adopting this requirement will ensure that all public utilities with 
transmission formula rates offset their rate bases by any unamortized 
excess and deficient ADIT, thus maintaining rate base neutrality.
    29. We affirm our statement in the NOPR that any Rate Base 
Adjustment Mechanism proposed in compliance with this rule must apply 
to any future changes to tax rates that give rise to excess or 
deficient ADIT.\38\ We also find that any such mechanism should apply 
to state and local tax rate changes that give rise to excess and 
deficient ADIT. This general applicability will reduce the burden on 
public utilities with transmission formula rates in the long-term by 
avoiding the need for such public utilities to propose a new mechanism 
after every income tax rate change.
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    \38\ NOPR, 165 FERC ] 61,117 at P 26.
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    30. As proposed in the NOPR, we do not require that public 
utilities with transmission formula rates adopt a specific mechanism. 
Rather, we will allow public utilities to propose changes to their 
formula rates on a case-by-case basis. Similarly, public utilities may 
also demonstrate that their formula rates already meet the Rate Base 
Adjustment Mechanism requirements described in this final rule. Thus, 
because compliance filings will be evaluated on a case-by-case basis, 
we will not pre-approve or reject any specific adjustment method at 
this time as certain commenters suggest. However, in response to AMP's 
concern regarding transparency, we clarify that public utilities must 
clearly demonstrate in their compliance filings how their proposed 
mechanisms adjust rate base for excess and deficient ADIT through their 
transmission formula rates.\39\
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    \39\ We note that the ADIT Worksheet required in this final rule 
will also address transparency concerns regarding how public 
utilities with transmission formula rates adjust their rate bases 
for excess and deficient ADIT.
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    31. We also find that, as noted in the NOPR, the Commission's 
previous accounting guidance interpreting the USofA regarding 
accounting for excess and deficient ADIT remains applicable.\40\ In 
that guidance, the Commission stated that public utilities are required 
to record a regulatory asset (Account 182.3) associated with deficient 
ADIT or regulatory liability (Account 254) associated with excess 
ADIT.\41\ As a result, we do not propose any changes to that accounting 
guidance.
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    \40\ NOPR, 165 FERC ] 61,117 at P 28.
    \41\ Accounting for Income Taxes Guidance at 3, 8.
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2. Return or Recovery of Excess or Deficient ADIT
a. NOPR
    32. The Commission proposed to require all public utilities with 
transmission formula rates to include the Income Tax Allowance 
Adjustment Mechanism in their formula rates. The Income Tax Allowance 
Adjustment Mechanism is a mechanism by which public utilities decrease 
or increase the income tax components of their formula rates by any 
amortized excess or deficient ADIT, respectively. Consistent with other 
aspects of the NOPR, the Commission proposed to review any such 
mechanisms on a case-by-case basis rather than proposing a single 
method for public utilities with transmission formula rates to adjust 
their income tax allowances for any amortized excess or deficient 
ADIT.\42\
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    \42\ NOPR, 165 FERC ] 61,117 at PP 36-37.
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    33. Regarding the period over which the amortization of excess or 
deficient ADIT must occur, the Commission stated that public utilities 
should follow the guidance provided in the Tax Cuts and Jobs Act, where 
available. For certain excess and deficient ADIT, the Commission noted 
that the Tax Cuts and Jobs Act provides a method of general 
applicability and requires public utilities to return this excess ADIT 
no more rapidly than over the life of the underlying asset using the 
Average Rate Assumption Method, or, where a public utility's books and 
underlying records do not contain the vintage account data necessary, 
it must use an alternative method.\43\ This excess and deficient ADIT 
is considered ``protected.'' In contrast, the Tax Cuts and Jobs Act 
does not specify what method public utilities must use for excess or 
deficient ADIT without such normalization requirements (i.e., 
``unprotected''), and therefore, the Commission proposed that it 
evaluate amortization periods for unprotected excess or deficient ADIT 
on a case-by-case basis.\44\
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    \43\ Tax Cuts and Jobs Act, Sec. 13001(b)(6)(A), 131 Stat. at 
2099. If a public utility must use an alternative method, Commission 
precedent provides that the public utility should use the Reverse 
South Georgia Method for excess ADIT or the South Georgia Method for 
deficient ADIT. See Memphis Light, Gas & Water Div. v. FERC, 707 
F.2d 565, 569 (D.C. Cir. 1983).
    \44\ NOPR, 165 FERC ] 61,117 at P 38.
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    34. The Commission did not propose any specific requirements for 
transmission formula rates to ensure that customers receive the entire 
balance of excess ADIT caused by the Tax Cuts and Jobs Act (including 
the excess ADIT for the period beginning January 1, 2018 until the date 
a tariff revision to include the excess ADIT in the transmission 
formula rate becomes effective). Rather, the Commission explained that 
public utilities should not amortize an excess ADIT regulatory 
liability for accounting purposes until the Commission approves the 
ADIT regulatory liability for the public utility's transmission formula 
rate.\45\ Accordingly, the Commission stated that excess ADIT scheduled 
to be

[[Page 65286]]

returned to customers prior to the effective date of any tariff 
revisions made in compliance with the final rule should still be 
returned to customers. In other words, the full regulatory liability 
for excess ADIT should be captured in rates, beginning on the effective 
date of any proposed tariff provision.\46\
---------------------------------------------------------------------------

    \45\ Id. P 39.
    \46\ Id.
---------------------------------------------------------------------------

b. Comments
    35. Most commenters agree with the Commission's proposal to require 
a mechanism in transmission formula rates that increases or decreases 
income tax allowances for any excess or deficient ADIT, respectively, 
and that such a mechanism should be evaluated on a case-by-case 
basis.\47\ While agreeing with the basis for such a mechanism, AMP 
argues that the Commission should narrow the parameters of acceptable 
approaches by requiring the amortization of excess or deficient ADIT to 
occur within existing income tax expense and tax gross up calculations. 
Provided that such mechanisms are incorporated in existing income tax 
calculations, AMP also asserts that these mechanisms could be used for 
excess and deficient ADIT caused by state and local tax rate changes 
and that this will avoid redundant revisions that will be necessary if 
the Commission accepts mechanisms narrowly tailored to federal tax rate 
changes.\48\
---------------------------------------------------------------------------

    \47\ AMP Comments at 2-3; Eversource Comments at 10-11; NRECA 
Comments at 4; APPA Comments at 2; Industrial Customers Comments at 
4-5.
    \48\ AMP Comments at 4-8.
---------------------------------------------------------------------------

    36. Regarding the amortization of any excess or deficient ADIT, 
commenters also generally agree with the Commission that public 
utilities should rely on the guidance in the Tax Cuts and Jobs Act for 
protected excess ADIT.\49\ Concerning unprotected excess ADIT, most 
commenters agree with the Commission that any amortization periods 
should be evaluated on a case-by-case basis.\50\ DEMEC agrees with the 
Commission ``that those customers who contributed to the related ADIT 
accounts [should] receive the benefit of the Tax Cuts and Jobs Act.'' 
\51\ As such, DEMEC argues that the Commission must reject any attempt 
to unduly delay return of unprotected excess ADIT to avoid any cross-
generational cost allocation issues.\52\
---------------------------------------------------------------------------

    \49\ EEI Comments at 4-5; Eversource Comments at 12; MISO 
Transmission Owners Comments at 10-12.
    \50\ EEI Comments at 5-6; Eversource Comments at 12-13; MISO 
Transmission Owners Comments at 12-13; APPA Comments at 8; TAPS 
Comments at 6; Xcel Comments at 11-13.
    \51\ DEMEC Comments at 10.
    \52\ Id. at 10-11.
---------------------------------------------------------------------------

    37. However, certain commenters disagree with the Commission's 
statement that ``in applying a tax normalization method (e.g., the 
Average Rate Assumption Method), public utilities are required to 
develop a schedule removing ADIT from rate base and returning it to 
customers, effective January 1, 2018, using the fastest allowable 
method to return the excess ADIT under the IRS' normalization 
requirements,'' to the extent the Commission is limiting its proposed 
case-by-case approach and shortening the range of acceptable 
amortization periods for unprotected excess and deficient ADIT to the 
``fastest allowable method.'' \53\ Accordingly, EEI and MISO 
Transmission Owners seek clarification that the final rule will not 
require public utilities to use a shortened amortization period for 
unprotected excess or deficient ADIT and that the Commission will 
evaluate amortization periods on a case-by-case basis.\54\ EEI asserts 
that the diversity of assets giving rise to unprotected ADIT supports a 
case-by-case approach, as well as many other factors, including the 
desire to avoid different return or recovery periods at the state 
level.\55\ MISO Transmission Owners also argue that a shortened 
amortization period could cause cash flow issues.\56\ Xcel argues that 
excess and deficient ADIT should be amortized consistently across a 
public utility's various rate jurisdictions if possible.\57\
---------------------------------------------------------------------------

    \53\ EEI Comments at 4-6; MISO Transmission Owners Comments at 
15-16; Xcel Comments at 12-13.
    \54\ EEI Comments at 4-6; MISO Transmission Owners Comments at 
15-16.
    \55\ EEI Comments at 5.
    \56\ MISO Transmission Owners Comments at 14.
    \57\ Xcel Comments at 12.
---------------------------------------------------------------------------

    38. Furthermore, EEI and MISO Transmission Owners request that the 
Commission find that an amortization period matching the life of the 
asset that gave rise to the unprotected excess or deficient ADIT is per 
se just and reasonable.\58\ MISO Transmission Owners assert that such a 
finding would not prevent public utilities from using shorter 
amortization periods, would increase administrative efficiency by 
minimizing future disputes, and is consistent with Commission precedent 
and the amortization approach established in Order Nos. 144 and 144-
A.\59\ Similarly, Eversource and Xcel argue that the amortization 
period for unprotected excess and deficient ADIT should be based on the 
approximate average life of the assets that gave rise to that excess or 
deficiency. Eversource argues that this is appropriate because the 
average remaining lives of assets are unique and distinct to each 
utility.\60\ Xcel notes that the Commission accepted its operating 
company's, Southwestern Public Service Company (SPS), proposed five-
year amortization period for unprotected excess and deficient ADIT and 
asserts that SPS's proposal takes into account the varying lives of its 
assets and intergenerational equity issues.\61\
---------------------------------------------------------------------------

    \58\ EEI Comments at 5-6.
    \59\ MISO Transmission Owners Comments at 13-14.
    \60\ Eversource Comments at 12.
    \61\ Xcel Comments at 12.
---------------------------------------------------------------------------

    39. Several commenters argue that the Commission should clarify 
that any such mechanism for transmission formula rates does not relieve 
a public utility of its obligation to submit an FPA section 205 filing 
to obtain Commission approval prior to reflecting regulatory assets or 
liabilities in rates. These commenters assert that Commission precedent 
supports a requirement for pre-approval.\62\ DEMEC adds that such a 
requirement would be consistent with limits the Commission has placed 
on recovery of excess or deficient ADIT incurred prior to the Tax Cuts 
and Jobs Act.\63\
---------------------------------------------------------------------------

    \62\ AMP Comments at 8; APPA Comments at 8-9; DEMEC Comments at 
5-6; TAPS Comments at 4-5.
    \63\ DEMEC Comments at 6.
---------------------------------------------------------------------------

    40. TAPS contends that, without a requirement for pre-approval, the 
NOPR could be read as providing public utilities unrestricted 
discretion to amortize a regulatory asset or liability over a period of 
their discretion.\64\ Furthermore, TAPS argues, pre-approval of assets 
or liabilities holding excess or deficient ADIT will ensure rates are 
just and reasonable to accommodate the case-specific considerations of 
excess and deficient ADIT. TAPS additionally argues that a pre-approval 
requirement is similar to requirements for changes in depreciation 
rates.\65\ TAPS contends that unlike other formula rate inputs that are 
verifiable and updated annually, the appropriate amortization period 
for excess and deficient ADIT is subjective. TAPS contends that the 
absence of a pre-approval requirement would violate the FPA by moving 
the burden to show the amortization of excess or deficient ADIT is just 
and reasonable from the public utility to the Commission or a customer 
to show that the proposed amortization is unjust and unreasonable.\66\ 
APPA asserts that the Commission should require a footnote or other 
provision in transmission formula rates stating this obligation 
consistent with prior Commission

[[Page 65287]]

precedent.\67\ APPA also recommends that the Commission clarify that 
the final rule does not allow recovery of past period deficient ADIT 
and does not modify or supersede the guidance the Commission provided 
in Commonwealth Edison regarding Order No. 144.\68\
---------------------------------------------------------------------------

    \64\ TAPS Comments at 4.
    \65\ Id. at 7.
    \66\ Id.
    \67\ APPA Comments at 8-9 (citing So. Cal. Edison Co., 166 FERC 
] 61,006, at P 24 (2019); PJM Interconnection, L.L.C., 165 FERC ] 
61,275, at P 28 (2018) (PJM)).
    \68\ APPA Comments at 7 (citing Commonwealth Edison Co., et al., 
164 FERC ] 61,172 (2018) (Commonwealth Edison)). In Commonwealth 
Edison, the Commission announced a limited, one-year compliance 
period in which public utilities could file to recover past ADIT if 
the public utility did not file a rate case subsequent to the 
Commission's issuance of Order No. 144 or if the public utility 
properly preserved its right to recover past ADIT through settlement 
terms. Commonwealth Edison, 164 FERC ] 61,172 at P 132.
---------------------------------------------------------------------------

    41. In contrast, Eversource urges the Commission to allow public 
utilities to propose a return or recovery mechanism that adjusts the 
income tax allowance for any excess or deficient ADIT stemming from not 
only the Tax Cuts and Jobs Act but also future changes in federal and 
state income taxes without the need for future FPA section 205 
filings.\69\
---------------------------------------------------------------------------

    \69\ Eversource Comments at 8, 11.
---------------------------------------------------------------------------

c. Commission Determination
    42. We adopt the NOPR proposal to require all public utilities with 
transmission formula rates to include the Income Tax Allowance 
Adjustment Mechanism in their formula rates. Under this mechanism, 
public utilities decrease or increase the income tax components of 
their formula rates by any amortized excess or deficient ADIT, 
respectively. This mechanism will enable a public utility with 
transmission formula rates to ``compute the income tax component in its 
cost of service by making provision for any excess or deficiency in 
deferred taxes'' following changes in income tax rates, in compliance 
with Commission regulations and Order No. 144.\70\
---------------------------------------------------------------------------

    \70\ 18 CFR 35.24(c)(2); Order No. 144, FERC Stats. & Regs. ] 
30,254 at 31,560.
---------------------------------------------------------------------------

    43. While the Commission has accepted revisions to certain public 
utilities' transmission formula rates that adjust their income tax 
allowances as proposed by AMP (i.e., within the existing income tax 
allowance calculation), we decline to narrow the range of possible 
approaches here. Consistent with other requirements in this final rule, 
we adopt the NOPR proposal to evaluate all such mechanisms on a case-
by-case basis. Public utilities may also demonstrate that their formula 
rates already meet the Income Tax Allowance Adjustment Mechanism 
requirements described in this final rule. Additionally, any proposed 
mechanism must remain applicable to any future changes to tax rates 
that give rise to excess or deficient ADIT, including changes to state 
and local tax rates. We agree with AMP that the general applicability 
of a mechanism will avoid redundant revisions to transmission formula 
rates that might otherwise follow every tax rate change.
    44. Regarding the period over which excess and deficient ADIT are 
amortized, we affirm our statement in the NOPR that public utilities 
should follow the guidance provided in the Tax Cuts and Jobs Act for 
protected excess ADIT. The Tax Cuts and Jobs Act provides a method of 
general applicability and requires public utilities to return protected 
excess ADIT \71\ no more rapidly than over the life of the underlying 
asset using the Average Rate Assumption Method, or, where a public 
utility's books and underlying records do not contain the vintage 
account data necessary, it must use an alternative method.\72\ We also 
adopt our proposal in the NOPR to evaluate any amortization periods for 
unprotected excess and deficient ADIT on a case-by-case basis. As noted 
in the NOPR, the Tax Cuts and Jobs Act does not specify a method to 
calculate amortization schedules for unprotected excess and deficient 
ADIT. Furthermore, a case-by-case evaluation will allow public 
utilities to propose amortization periods that better suit their and 
their customers' specific circumstances.
---------------------------------------------------------------------------

    \71\ While the Tax Cuts and Jobs Act does not mention protected 
deficient ADIT specifically, we expect that public utilities will 
recover such protected deficient ADIT in the same manner prescribed 
for protected excess ADIT.
    \72\ See supra n.43.
---------------------------------------------------------------------------

    45. For both excess protected and unprotected ADIT, we affirm our 
statement in the NOPR that the full regulatory liability for excess 
ADIT should be captured in transmission formula rates, beginning on the 
effective date of any proposed tariff provision. In other words, the 
full amount of excess ADIT resulting from the Tax Cuts and Jobs Act 
must be returned to transmission formula rate customers.
    46. We clarify that our statement that ``public utilities are 
required to develop a schedule removing ADIT from rate base and 
returning it to customers, effective January 1, 2018, using the fastest 
allowable method to return the excess ADIT under the IRS' normalization 
requirements'' was only in reference to the Tax Cuts and Jobs Act's 
requirement that protected excess ADIT may not be returned more rapidly 
than the life of the underlying asset. The Tax Cuts and Jobs Act places 
no restrictions on unprotected excess and deficient ADIT amortization 
schedules, and public utilities may propose amortization schedules that 
appropriately balance the respective circumstances of those public 
utilities and their customers, provided the full amount of excess ADIT 
resulting from the Tax Cuts and Jobs Act is returned to customers.
    47. Additionally, we deny EEI's and MISO Transmission Owners' 
requests to find that an amortization period matching the life of the 
underlying asset for unprotected excess and deficient ADIT is per se 
just and reasonable. While certain public utilities have demonstrated 
that amortization periods matching the lives of their assets are just 
and reasonable, we find that a generally applicable determination that 
such amortization periods are per se just and reasonable runs counter 
to the case-by-case approach that the Commission will use to evaluate 
proposed amortization periods for excess and deficient ADIT. Moreover, 
the diverse sources of unprotected excess and deficient ADIT do not 
lend themselves to a general finding on an appropriate amortization 
period. We also note that, contrary to MISO Transmission Owners' 
assertion, Order No. 144 did not establish a generally applicable 
amortization method for excess and deficient ADIT.\73\ Similarly, we 
will evaluate requests by public utilities to amortize excess and 
deficient ADIT using an amortization period approved in a state 
proceeding on a case-by-case basis.
---------------------------------------------------------------------------

    \73\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560 
(``Since the appropriateness of any method to accomplish the 
objective of full normalization at current tax rates has not been 
analyzed by the Commission on a generic basis, the Commission is, at 
this time, requiring resolution of this problem on a case-by-case 
basis.'').
---------------------------------------------------------------------------

    48. Because of the requirements adopted in this final rule, we will 
not require that public utilities make a filing pursuant to FPA section 
205 to obtain Commission approval prior to including excess and 
deficient ADIT in their transmission formula rates following future 
changes to tax rates, as some commenters have requested. While those 
commenters are correct that the Commission has previously required that 
public utilities obtain such Commission approval, we find that with the 
ADIT Worksheet adopted as part of this final rule and discussed below, 
it is no longer necessary to require an FPA section 205 filing prior to 
including excess and deficient ADIT in transmission formula rates. 
Specifically, the ADIT Worksheet will provide

[[Page 65288]]

transparency and allow for Commission and customer review of the public 
utility's calculation of excess and deficient ADIT, as well as the 
associated amortization schedule for returning or recovering excess and 
deficient ADIT, respectively.
    49. We disagree with TAPS' assertion that not requiring public 
utilities with transmission formula rates to seek Commission approval 
prior to including excess and deficient ADIT in their transmission 
formula rates following future changes to tax rates will shift the 
burden of proof from the public utility to the Commission or customer. 
To be considered just and reasonable, the Commission-approved 
implementation protocols of public utilities with transmission formula 
rates must require that public utilities provide underlying data and 
calculations supporting all inputs that are not supported in the FERC 
Form No. 1 or in other tariff schedules in formula rate annual updates 
and, where applicable, true-ups.\74\ As such, as with any other 
transmission formula rate input, customers can request information 
about and challenge the amortization period for excess or deficient 
ADIT.\75\ Further, when a customer challenges the data that is flowed 
into the formula rate from worksheets like the ADIT Worksheet, the 
public utility continues to bear the burden to show ``the justness and 
reasonableness of the rate resulting from its application of the 
formula.'' \76\
---------------------------------------------------------------------------

    \74\ See Midwest Indep. Transmission Sys. Operator, Inc., 143 
FERC ] 61,149, at P 86 (2013) (MISO). See also The Empire Dist. 
Elec. Co., 148 FERC ] 61,030 (2014); Black Hills Power, Inc., 148 
FERC ] 61,035 (2014); Kan. City Power & Light Co. and KCP&L Greater 
Mo. Operations Co., 148 FERC ] 61,034 (2014); UNS Elec., Inc., 148 
FERC ] 61,032 (2014); PJM Interconnection, LLC, 152 FERC ] 61,180 
(2015).
    \75\ Id. PP 91, 118-120.
    \76\ Id. P 120 (quoting Va. Elec. & Power Co., 123 FERC ] 
61,098, at P 47 (2008)).
---------------------------------------------------------------------------

    50. We also disagree with TAPS' assertion that public utilities 
could have unrestricted discretion to amortize a regulatory asset or 
liability over a period of their choice. First, a public utility must 
support its chosen amortization period for excess or deficient ADIT in 
its annual update following a change in tax rates as just and 
reasonable, as discussed above. Second, our determination here applies 
only to excess or deficient ADIT, which are types of regulatory 
liabilities and assets, respectively; it does not relieve public 
utilities of their obligation to obtain Commission approval prior to 
including other regulatory assets and liabilities in their transmission 
formula rates.
    51. Regarding APPA's comment, we clarify that the requirements 
adopted here apply only to excess and deficient ADIT caused by the Tax 
Cuts and Jobs Act and any future tax rate changes, not past period 
deficient ADIT, and, therefore, do not conflict with the Commission's 
determination in Commonwealth Edison.
3. Support for Excess and Deficient ADIT Calculation and Amortization
a. NOPR
    52. The Commission proposed to require all public utilities with 
transmission formula rates to incorporate the ADIT Worksheet, which is 
a new permanent worksheet that will annually track information related 
to excess or deficient ADIT, into their transmission formula rates. The 
Commission did not propose to require this worksheet to be populated 
when submitted to the Commission on compliance with the final rule. 
Further, the Commission did not propose a pro forma worksheet and 
instead proposed broad categories of information that each worksheet 
should contain at a minimum, including: (1) How any ADIT accounts were 
re-measured and the excess or deficient ADIT contained therein; (2) the 
accounting for any excess or deficient amounts in Accounts 182.3 (Other 
Regulatory Assets) and 254 (Other Regulatory Liabilities); (3) whether 
the excess or deficient ADIT is protected or unprotected; (4) the 
accounts to which the excess or deficient ADIT are amortized; and (5) 
the amortization period of the excess or deficient ADIT being returned 
or recovered through the rates. The Commission specifically requested 
comments on whether it should consider additional guiding 
principles.\77\
---------------------------------------------------------------------------

    \77\ NOPR, 165 FERC ] 61,117 at PP 46-47.
---------------------------------------------------------------------------

b. Comments
    53. In general, comments from transmission customers supported the 
proposal for the ADIT Worksheet,\78\ while comments from transmission 
owners and groups representing transmission owners did not.\79\
---------------------------------------------------------------------------

    \78\ AMP Comments at 9-11; NRECA Comments at 4-5; APPA Comments 
at 10; DEMEC Comments at 11; Industrial Customers Comments at 5.
    \79\ EEI Comments at 6-7; Eversource Comments at 14-15; MISO 
Transmission Owners Comments at 21-22; PSEG Comments at 2.
---------------------------------------------------------------------------

    54. Certain transmission customers supporting the Commission's 
proposal believe that additional requirements are necessary to ensure 
just and reasonable rates. AMP and Six Cities argue that the Commission 
should also require a standard template or pro forma worksheet. AMP 
asserts that, while a one-size-fits-all approach may not be appropriate 
for the other requirements proposed in the NOPR, a standard template 
could be provided akin to a FERC Form No. 1. AMP further asserts that 
such standardization will promote development of technical expertise 
and ratemaking efficiency, while benefiting customers by providing a 
better opportunity for meaningful review. AMP states that if the 
Commission does not adopt a standard template, it should, at a minimum, 
require public utilities to file an annual worksheet containing the 
minimum reporting requirements discussed by AMP.\80\ Six Cities argue 
that a pro forma worksheet will reduce the need for information 
exchange and allow interested parties to better assess what was and was 
not included.\81\
---------------------------------------------------------------------------

    \80\ APPA Comments at 10-11.
    \81\ Six Cities Comments at 7-8.
---------------------------------------------------------------------------

    55. AMP and Six Cities argue that the Commission should require 
public utilities to provide specific information in the proposed 
worksheet. AMP asserts that the Commission should require public 
utilities to provide item-by-item accounting to verify public 
utilities' classification of excess or deficient ADIT as protected or 
unprotected because the rate impact associated with this classification 
is generally significant and material. Six Cities argue that the 
worksheet should contain a breakdown of ADIT detailed enough to discern 
whether a public utility is seeking to recover ADIT items in 
contravention of USofA. AMP argues that public utilities should also 
provide line-by-line accounting for any excess or deficient ADIT or 
ADIT associated with other comprehensive income or that has been moved 
outside of regulated rate base or cost of service entirely. AMP argues 
that line-by-line accounting will enable customers to verify that they 
are made whole for all ADIT charged previously.\82\
---------------------------------------------------------------------------

    \82\ AMP Comments at 6-11; Six Cities Comments at 7-10.
---------------------------------------------------------------------------

    56. AMP argues that the proposed worksheet should also include a 
public utility's proposed amortization period for protected and 
unprotected excess and deficient ADIT and all supporting 
documentation.\83\ Six Cities contend that the proposed worksheet 
should also itemize protected and unprotected excess and deficient ADIT 
into more granular categories. In addition, Six Cities assert that 
public utilities should be required to specify items that are either 
below the line or inapplicable to customers to ensure deficient ADIT 
related to these items is not collected.\84\ AMP and Six Cities argue 
that their

[[Page 65289]]

proposed additions to the worksheet should be included regardless of 
whether the Commission adopts its suggestion to require a pro forma 
worksheet.\85\
---------------------------------------------------------------------------

    \83\ AMP Comments at 8-10.
    \84\ Six Cities Comments at 8-10.
    \85\ AMP Comments at 11; Six Cities Comments at 10.
---------------------------------------------------------------------------

    57. APPA argues that the Commission should require public utilities 
with transmission formula rates to submit a populated version of the 
proposed worksheet, including actual ADIT cost or accounting 
information relating to the ADIT effects of the Tax Cuts and Jobs Act. 
APPA states that, without this information, interested parties would 
not have an opportunity to review a public utility's ADIT accounting 
information until the first annual update following when the revised 
formula rate provisions become effective. APPA argues that this 
information will assist the Commission in evaluating whether the 
proposed mechanism and amortization periods are just and reasonable and 
consistent with Commission precedent.\86\ APPA recommends that a public 
utility's transmission formula rate protocols must allow interested 
parties to request information concerning the information in the annual 
worksheet and the ADIT effects of the Tax Cuts and Jobs Act. To the 
extent that a given transmission formula rate protocol does not allow 
for this, APPA argues that public utilities should be required to make 
the necessary tariff revisions in their compliance filings.\87\
---------------------------------------------------------------------------

    \86\ APPA Comments at 9-10.
    \87\ Id. at 10.
---------------------------------------------------------------------------

    58. Conversely, many transmission owners or affiliated groups argue 
that the Commission's proposed worksheet is burdensome and not 
necessary. Certain commenters assert that the information provided 
annually in the FERC Form No. 1 and documentation under the existing 
requirements of transmission formula rate protocols provide sufficient 
transparency.\88\ EEI and PSEG note that, under the Commission's 2014 
Staff Guidance, inputs to formula rates must be fully supported, and, 
to the extent an input is not a specific line item in the FERC Form No. 
1, public utilities must provide detailed workpapers showing the origin 
of the input in relation to the FERC Form No. 1 data.\89\ PSEG argues 
that requiring additional information regarding ADIT calculations when 
the current requirements provide sufficient transparency is unnecessary 
and burdensome.\90\ MISO Transmission Owners note that they committed 
in comments to the NOI to providing a workpaper in each annual update 
with excess and deficient ADIT information. MISO Transmission Owners 
argue that this workpaper, in combination with the required information 
exchange procedures that are part of the annual update filing, provides 
a just and reasonable process.\91\ MISO Transmission Owners state that, 
to the extent any information required by the proposed worksheet is not 
provided in their FERC Forms No. 1, they could provide the additional 
information in footnotes.\92\
---------------------------------------------------------------------------

    \88\ EEI Comments at 6-7; MISO Transmission Owner Comments at 
20-22; PSEG Comments at 2-3.
    \89\ EEI Comments at 6-7; PSEG Comments at 2-3.
    \90\ PSEG Comments at 3.
    \91\ MISO Transmission Owners Comments at 19-20.
    \92\ Id. at 22.
---------------------------------------------------------------------------

    59. Certain transmission owners and associated groups also argue 
that the proposed worksheet is redundant because it seeks essentially 
identical information as the Commission's disclosure requirements in 
the Commission's ADIT Treatment Following Asset Sales and Retirements 
Policy Statement on the Accounting and Ratemaking Treatment of 
Accumulated Deferred Income Taxes and Treatment Following the Sale or 
Retirement of an Asset (ADIT Treatment Following Asset Sales and 
Retirements Policy Statement).\93\ Eversource argues that the language 
in the ADIT Treatment Following Asset Sales and Retirements Policy 
Statement suggests that the disclosure requirements are intended to 
apply generally beyond the sale or retirement of an asset and, thus, it 
would be duplicative and confusing to also require public utilities to 
submit this information in their formula rates.\94\ While not taking a 
position on whether the ADIT Worksheet would be duplicative, MISO 
Transmission Owners argue that no consensus or Commission guidance 
exists as to how public utilities should amortize excess and deficient 
ADIT following the ADIT Treatment Following Asset Sales and Retirements 
Policy Statement's guidance that public utilities should continue to 
amortize excess ADIT in rates even after the sale or retirement of an 
asset. MISO Transmission Owners contend that it is therefore unclear 
how public utilities would address this issue in the proposed 
worksheet.\95\
---------------------------------------------------------------------------

    \93\ Accounting and Ratemaking Treatment of Accumulated Deferred 
Income Taxes and Treatment Following the Sale or Retirement of an 
Asset, 83 FR 59,295 (Nov. 23, 2018), 165 FERC ] 61,115 (2018). See 
Eversource Comments at 13-15; EEI Comments at 6; PSEG Comments at 2.
    \94\ Eversource Comments at 13-15.
    \95\ MISO Transmission Owners Comments at 19.
---------------------------------------------------------------------------

    60. MISO Transmission Owners agree with the Commission that 
adequate transparency is necessary but contend that the calculations of 
excess and deficient ADIT balances will only occur once (i.e., as of 
December 31, 2017) and the vast majority of information in the proposed 
worksheet will remain unchanged going forward. MISO Transmission Owners 
argue that creating an appropriate worksheet will be a time-consuming 
and tedious process because of the Commission's assertion that the 
proposed worksheet should be tailored to each public utility's unique 
circumstances. MISO Transmission Owners contend that requiring a 
worksheet may also be burdensome for the Midcontinent Independent 
System Operator, Inc. (MISO) to implement because MISO is responsible 
for administering its tariff and MISO's staff would need to familiarize 
themselves with many versions of the worksheets that are housed within 
MISO's tariff.\96\ MISO Transmission Owners assert that public 
utilities could also provide ADIT workpapers to customers outside of a 
tariff-based procedure, such as an Open Access Same-Time Information 
System (OASIS) or website posting. MISO Transmission Owners argue that 
the Commission did not address in the NOPR why these alternatives are 
not just and reasonable.\97\
---------------------------------------------------------------------------

    \96\ Id. at 18-19.
    \97\ Id. at 22.
---------------------------------------------------------------------------

    61. Xcel requests that, to the extent the final rule imposes 
administrative requirements such as a worksheet, the Commission should 
not require public utilities to revise settlements related to the 
specific contents for documenting the flow-back of excess and deficient 
ADIT.\98\
---------------------------------------------------------------------------

    \98\ Xcel Comments at 11.
---------------------------------------------------------------------------

c. Commission Determination
    62. We adopt the NOPR proposal to require all public utilities with 
transmission formula rates to include the ADIT Worksheet, which is a 
new permanent worksheet that will annually track information related to 
excess and deficient ADIT, in their transmission formula rates. We find 
that such a worksheet is necessary to provide interested parties and 
the Commission adequate transparency regarding how public utilities 
with transmission formula rates adjust their rate bases and income tax 
allowances to account for excess or deficient ADIT. We also find that 
making the worksheet a permanent part of transmission formula rates, as 
opposed to a one-time filing after the Tax Cuts and Jobs Act, will 
ensure that

[[Page 65290]]

excess or deficient ADIT can be tracked as it is included in the annual 
revenue requirement. Additionally, the ADIT Worksheet will provide 
sufficient transparency for excess and deficient ADIT included in rates 
following future local, state, and federal tax rate changes. Finally, 
we find that the NOPR proposal to require five categories of 
information in the worksheet strikes an appropriate balance between 
transparency for interested parties and burden to the industry.
    63. We agree with APPA's comments to require public utilities with 
transmission formula rates to submit worksheets populated with excess 
and deficient ADIT resulting from the Tax Cuts and Jobs Act. This 
represents a departure from the NOPR proposal that required the 
function of the worksheet to be clear when filed on compliance, but did 
not require the worksheet to be populated. We find that a populated 
worksheet will facilitate the review of the proposed worksheet's 
function by interested parties and the Commission prior to the first 
annual update. In addition, we believe that a populated worksheet will 
assist the Commission in determining whether the worksheet adequately 
addresses the transparency concerns that led the Commission in the NOPR 
to propose requiring the worksheet.
    64. We also affirm the NOPR proposal to not require a pro forma or 
standard template worksheet despite comments requesting the adoption of 
such. We do not believe that the worksheet lends itself to a pro forma 
or standard template.\99\ We find that any benefits flowing from 
adopting such a template are outweighed by the difficulty in developing 
such a template because excess and deficient ADIT depends on the 
circumstances of each public utility. This is especially true because 
of the diverse sources of unprotected excess and deficient ADIT.
---------------------------------------------------------------------------

    \99\ See, e.g., Ariz. Pub. Serv. Co., Docket No. ER18-975-001 
(May 22, 2018) (delegated order); Pub. Serv. Co. of Colo., Docket 
Nos. ER19-2077-000 & ER19-2077-001 (Sep. 11, 2019) (delegated 
order).
---------------------------------------------------------------------------

    65. We agree in part with AMP's and Six Cities' requests for public 
utilities to provide specific information in the proposed worksheet. We 
specifically find that the Commission's requirement for public 
utilities to include five categories of information in the proposed 
worksheet overlaps with AMP's and Six Cities' requests. For example, 
AMP's request for the worksheet to include the proposed amortization 
period for excess and deficient ADIT is covered by category five--the 
amortization period of the excess or deficient ADIT being returned or 
recovered through rates. Similarly, AMP's and Six Cities' request for 
an item-by-item accounting or itemization of excess or deficient ADIT 
in the worksheet is covered by category two--the accounting for any 
excess or deficient amounts in Accounts 182.3 and 254. We expect public 
utilities to identify each specific source of the excess or deficient 
ADIT, classify the excess or deficient ADIT as protected or 
unprotected, and list the proposed amortization period associated with 
each classification or source in their proposed worksheets, which will 
provide sufficient detail to verify excess and deficient ADIT resulting 
from the Tax Cuts and Jobs Act and future tax rate changes. Because we 
will also review the compliance filings to determine whether the 
proposed amortization periods for any excess and deficient ADIT 
resulting from the Tax Cuts and Jobs Act are just and reasonable,\100\ 
we also expect public utilities to provide supporting documentation 
necessary to justify those proposed amortization periods. In addition, 
for future tax rate changes where excess and deficient ADIT will 
automatically be included in a public utility's formula rate without 
the need for an FPA section 205 filing, we expect public utilities to 
provide supporting documentation for the excess and deficient ADIT 
inputs to the ADIT Worksheet to customers as part of their annual 
update process. Further, public utilities should include the supporting 
documentation in their annual informational filings to the Commission 
following a tax rate change.
---------------------------------------------------------------------------

    \100\ See infra P 104.
---------------------------------------------------------------------------

    66. We acknowledge that, given the diverse sources of excess or 
deficient ADIT, a public utility or its transmission formula rate may 
have some unique attribute that requires additional categories of 
information to provide interested parties and the Commission with a 
complete understanding of that public utility's treatment of excess and 
deficient ADIT. As described elsewhere in this final rule, the 
Commission will consider public utilities' proposals to implement the 
ADIT Worksheet on a case-by-case basis.\101\ We note that the five 
categories of information required to be included in the ADIT Worksheet 
represent the minimum information that the worksheet should contain.
---------------------------------------------------------------------------

    \101\ We note that the public utility would need to demonstrate 
that its proposal is consistent with or superior to the requirements 
of the final rule. See Promoting Wholesale Competition Through Open 
Access Non-Discriminatory Transmission Services by Public Utilities; 
Recovery of Stranded Costs by Public Utilities and Transmitting 
Utilities, Order No. 888, 61 FR 21540, at 21619 (May 10, 1996), FERC 
Stats. & Regs. ] 31,036 (1996) (cross-referenced at 75 FERC ] 
61,080), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 14, 
1997), FERC Stats. & Regs. ] 31,048 (cross-referenced at 78 FERC ] 
61,220), order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997), 
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in 
relevant part sub nom. Transmission Access Policy Study Grp. v. 
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. N.Y. v. FERC, 
535 U.S. 1 (2002). An interested party could also protest a public 
utility's proposed worksheet and argue that additional categories of 
information are necessary given that public utility's unique 
attributes.
---------------------------------------------------------------------------

    67. We find that Commission precedent already requires a public 
utility's transmission formula rate protocols to allow interested 
parties to request the type of information contained in the ADIT 
Worksheet.\102\ We therefore disagree with APPA's request and will not 
require revisions to a public utility's transmission formula rate 
protocols for purposes of this rulemaking proceeding.
---------------------------------------------------------------------------

    \102\ See MISO, 143 FERC ] 61,149 at P 86 (finding that public 
utilities must provide ``sufficient detail and with sufficient 
explanation to demonstrate that each input to the formula rate is 
consistent with the requirements of the formula rate, without 
forcing interested parties to make extensive information requests to 
understand the transmission owner's implementation of the formula 
rate and to verify its correctness'').
---------------------------------------------------------------------------

    68. We disagree with arguments that the worksheet is unnecessary or 
overly burdensome to administer, or will otherwise be overly time 
consuming to create. First, arguments that information in the ADIT 
Worksheet may overlap with information provided in FERC Form No. 1 are 
misplaced. The ADIT Worksheet will provide more detailed information 
than what is included in a public utility's FERC Form No. 1. Moreover, 
the level of detail and manner in which regulatory liabilities are 
disclosed in the FERC Form No. 1 vary across public utilities and may 
not uniformly support amounts used as inputs to the formula rate. 
Second, we affirm our position in the NOPR that public utilities 
already gathered the information required for the worksheet when they 
re-measured their ADIT balances as a result of the Tax Cuts and Jobs 
Act.
    69. Third, while MISO Transmission Owners are correct that the 
calculation of excess and deficient ADIT will be performed once for the 
Tax Cuts and Jobs Act, the ADIT Worksheet will also reflect any excess 
or deficient ADIT resulting from future tax rate changes, including 
state and local tax changes. Furthermore, the worksheet will enable 
interested parties and the Commission to track the amortization of 
excess or deficient ADIT over time. Fourth, as discussed above, with 
the information provided in the ADIT Worksheet, we

[[Page 65291]]

will no longer require public utilities to make an FPA section 205 
filing to include excess and deficient ADIT in rates after tax rate 
changes that result in excess and deficient ADIT. Instead, we will rely 
on the worksheet to provide the requisite transparency for excess and 
deficient ADIT. We find that relying on the worksheet instead of 
requiring a public utility to make an FPA section 205 filing after 
every tax change will result in an overall reduction in the burden of a 
public utility with a transmission formula rate over the long run.
    70. Additionally, some commenters argue against the worksheet 
because their transmission formula rate protocols already require them 
to provide information on excess and deficient ADIT. To the extent that 
a public utility already provides information on excess and deficient 
ADIT due to existing requirements in its transmission formula rate 
protocols, we find that the ADIT Worksheet should not create an undue 
ongoing burden for the public utility. The Commission has also required 
public utilities to revise their transmission formula rates to include 
greater detail where the Commission deemed that certain inputs to the 
transmission formula rate are complex enough to warrant prior 
understanding of their effect.\103\
---------------------------------------------------------------------------

    \103\ See NOPR, 165 FERC ] 61,117 at P 49 (citing Midcontinent 
Indep. Sys. Operator, Inc., 153 FERC ] 61,374 at P 14 (directing 
certain transmission companies to revise their transmission formula 
rates to include worksheets to ensure appropriate transparency)); 
Xcel Energy Sw. Transmission Co., LLC, 149 FERC ] 61,182 (2014); 
Xcel Energy Transmission Dev. Co., LLC, 149 FERC ] 61,181 (2014); 
Transource Wisconsin, LLC, 149 FERC ] 61,180 (2014); Transource 
Kansas, LLC, 151 FERC ] 61,010 (2015) (requiring revisions to new 
formula rates to provide greater transparency)).
---------------------------------------------------------------------------

    71. Similarly, we also disagree with comments that the worksheet is 
redundant because it seeks the same information that public utilities 
must disclose following the Commission's issuance of the ADIT Treatment 
Following Asset Sales and Retirements Policy Statement. The FERC Form 
No. 1 disclosures required under the ADIT Treatment Following Asset 
Sales and Retirements Policy Statement are not specific enough to 
identify the effect of excess and deficient ADIT for a particular 
transmission formula rate on file with the Commission. Therefore, we 
find that the worksheet will provide additional transparency to the 
Commission and interested parties on excess and deficient ADIT.
    72. We disagree with MISO Transmission Owners' comments that it is 
unclear how public utilities should address the amortization of excess 
and deficient ADIT following the sale or retirement of an asset. The 
ADIT Treatment Following Asset Sales and Retirements Policy Statement 
states that, in cases for which the excess and deficient ADIT do not 
transfer to the purchaser of the plant asset, public utilities' 
balances of excess and deficient ADIT recorded in Account 254 and 
Account 182.3 continue to exist as regulatory liabilities and assets 
after an asset sale or an extraordinary retirement.\104\ The ADIT 
Treatment Following Asset Sales and Retirements Policy Statement 
further states that public utilities should therefore continue to 
amortize excess or deficient ADIT balances upon such sales and 
retirements.\105\ Because the Commission's guidance provides that 
public utilities should continue to record and amortize such 
liabilities and assets as any other excess ADIT liability or deficient 
ADIT asset, we reiterate that public utilities should treat these 
liabilities and assets as any other excess or deficient ADIT in their 
worksheets.
---------------------------------------------------------------------------

    \104\ ADIT Treatment Following Asset Sales and Retirements 
Policy Statement, 165 FERC ] 61,115 at P 37, n.79.
    \105\ Id. P 36; see also id. PP 40-43.
---------------------------------------------------------------------------

    73. We decline to adopt MISO Transmission Owners' suggestion that 
public utilities could provide ADIT workpapers to customers through 
their OASIS or the Transmission Owner Rate Data section of the MISO 
website instead of including the worksheet as part of their 
transmission formula rates. We find that it is appropriate to require 
public utilities to include the worksheet as part of their transmission 
formula rates because these rates already provide a Commission-approved 
process that allows interested parties to request information about 
excess and deficient ADIT and provides a well understood framework to 
challenge information or data contained in the worksheet. Rather than 
creating an entirely new process, which could create additional burdens 
on industry, we believe that utilizing existing processes will help to 
ensure a fair and efficient process whenever tax rates change in the 
future.
    74. We do not agree with Xcel that the Commission should exempt 
public utilities from revising settlement agreements to account for 
certain ``administrative requirements,'' such as the worksheet that 
documents the amortization of excess and deficient ADIT. Instead, in 
keeping with the Commission's decision to evaluate any revisions made 
in compliance with this final rule on a case-by-case basis, a public 
utility may show that its existing ADIT-related mechanisms, including 
those established by a Commission-approved settlement, meet the 
requirements of this final rule.

B. Stated Rates

1. NOPR
    75. The Commission proposed to require all public utilities with 
transmission stated rates to (1) determine the excess and deficient 
ADIT created as a result of the Tax Cuts and Jobs Act and (2) return 
this amount to or recover this amount from customers under 18 CFR 
35.24. The Commission further proposed to require these public 
utilities to calculate their excess or deficient ADIT using the ADIT 
approved in their last rate cases.\106\ The Commission did not propose 
a specific mechanism for public utilities with transmission stated 
rates to return or recover the excess or deficient ADIT to or from 
ratepayers. In keeping with the proposal for public utilities with 
transmission formula rates, the Commission proposed to require public 
utilities with transmission stated rates to follow guidance in the Tax 
Cuts and Jobs Act for the appropriate amortization period for protected 
excess or deficient ADIT, while allowing amortization periods for 
unprotected excess or deficient ADIT to be determined on a case-by-case 
basis.\107\
---------------------------------------------------------------------------

    \106\ NOPR, 165 FERC ] 61,117 at P 40.
    \107\ Id. P 42.
---------------------------------------------------------------------------

2. Comments
    76. EEI and Avista argue that any issues related to ADIT should be 
addressed in the rate cases of public utilities with transmission 
stated rates.\108\ EEI and Avista assert that such a finding would be 
consistent with the Commission's decision in Order No. 144, issued at a 
time when all public utilities' transmission rates were stated.\109\ 
EEI argues that the proposal in the NOPR would effectively order 
through the return of excess ADIT a reduction in existing transmission 
stated rates without claiming to act under FPA section 206 authority or 
first meeting the Commission's burden to demonstrate that those 
transmission stated rates are unjust and unreasonable. EEI contends 
that this stands in contrast to the Commission's actions in the Tax 
Rate-Related Orders to Show Cause. EEI agrees with the Commission's 
statement in the NOPR that, while ADIT balances may have changed as a 
result of the Tax Cuts and Jobs Act, many aspects other than ADIT 
balances that underlie a transmission stated rate may have

[[Page 65292]]

changed.\110\ EEI and Avista argue that addressing the ADIT-related 
effects of the Tax Cuts and Jobs Act in the next rate case is more 
reasonable, efficient, and accurate than the Commission's 
proposal.\111\ Similarly, FirstEnergy supports the assertions and 
conclusions in EEI's comments.\112\
---------------------------------------------------------------------------

    \108\ EEI Comments at 8-11.
    \109\ Id.; Avista Comments at 2-3.
    \110\ EEI Comments at 8-11 (citing NOPR, 165 FERC ] 61,117 at P 
29).
    \111\ Id.; Avista Comments at 2-3.
    \112\ FirstEnergy Comments at 2.
---------------------------------------------------------------------------

    77. Furthermore, EEI contends, it may be infeasible for public 
utilities with transmission stated rates resulting from a black box 
settlement to identify ADIT balances because they were not individually 
negotiated. EEI requests that, if the Commission adopts the proposed 
requirements for public utilities with transmission stated rates, the 
Commission should clarify how such public utilities with black box 
settlements should perform the necessary calculations or allow them to 
address ADIT in their next rate cases.\113\
---------------------------------------------------------------------------

    \113\ EEI Comments at 8-11.
---------------------------------------------------------------------------

    78. EEI argues, and Avista agrees, that the Commission should 
clarify that, where it has found that a public utility with a 
transmission stated rate does not need to revise such rate to reflect 
the reduced federal income tax rate following the Tax Rate-Related 
Orders to Show Cause, those public utilities are not required to make a 
filing in compliance with the final rule.\114\
---------------------------------------------------------------------------

    \114\ Id. at 11-12; Avista Comments at 3-4.
---------------------------------------------------------------------------

    79. EEI argues that, if the Commission does require public 
utilities with transmission stated rates to make compliance filings, it 
should establish a threshold such that the final rule only applies to 
agreements with annual revenues/charges per agreement above $100,000 to 
$500,000 per year. EEI asserts that, below that threshold, the cost of 
preparing a compliance filing would exceed the amount returned to 
customers.\115\
---------------------------------------------------------------------------

    \115\ EEI Comments at 13.
---------------------------------------------------------------------------

    80. EEI asserts that, its arguments regarding compliance filings 
and public utilities with transmission stated rates notwithstanding, 
addressing compliance with the final rule on a single-issue basis is 
appropriate and efficient. Industrial Customers agree that such a 
single-issue ratemaking approach is warranted.\116\ EEI notes that the 
Commission has historically demonstrated a willingness to allow single-
issue filings to address tax-related changes to rates.\117\
---------------------------------------------------------------------------

    \116\ Industrial Customers Comments at 6.
    \117\ EEI Comments at 14-15.
---------------------------------------------------------------------------

    81. Separately, EEI argues that the five categories of information 
the NOPR proposes as necessary to support the compliance filings of 
public utilities with transmission stated rates are duplicative of the 
additional disclosures required in their FERC Form No. 1 filings 
following issuance of the ADIT Treatment Following Asset Sales and 
Retirements Policy Statement. EEI asserts that the Commission should 
clarify that the ADIT Treatment Following Asset Sales and Retirements 
Policy Statement's required disclosures obviate the need for this 
information to be presented in compliance filings to the final rule. 
Alternatively, EEI requests that the Commission should confirm that a 
compliance filing is not necessary for public utilities with 
transmission stated rates that included the ADIT Treatment Following 
Asset Sales and Retirements Policy Statement's required information in 
their FERC Form No. 1s.\118\
---------------------------------------------------------------------------

    \118\ Id. at 12-13.
---------------------------------------------------------------------------

    82. On the other hand, AMP argues that the Commission should 
require public utilities with transmission stated rates to file the 
same worksheet proposed for public utilities with transmission formula 
rates. AMP states that such a worksheet, which would be filed annually, 
would be used to track and defer, for future return or recovery, 
changes in the annual amortization of excess and deficient ADIT. AMP 
states that, alternatively, transmission stated rates could be adjusted 
each year to reflect required changes to annual excess and deficient 
ADIT amortization.\119\
---------------------------------------------------------------------------

    \119\ AMP Comments at 13.
---------------------------------------------------------------------------

    83. APPA requests that the Commission clarify that the full amount 
of any excess or deficient ADIT be returned to or collected from 
customers based on the actual level of excess or deficient ADIT on that 
public utility's books.\120\ APPA asserts, and Six Cities agree, that 
the mechanism to return excess ADIT to or recover deficient ADIT from 
customers proposed in the NOPR should not prevent customers from 
receiving the full benefit of the Tax Cuts and Jobs Act and that the 
Commission should specify that any difference between the actual 
amounts on a public utility's books and the amount determined by ADIT 
values used in the last rate case must be reconciled in the next rate 
case.\121\
---------------------------------------------------------------------------

    \120\ APPA Comments at 5-6.
    \121\ Id. at 6; Six Cities Comments at 2.
---------------------------------------------------------------------------

    84. APPA contends, and Six Cities agree, that to the extent the 
Commission intends for a public utility to provide information on 
excess or deficient ADIT relative to the ADIT balance in its last rate 
case rather than its current ADIT balance, the final rule should 
require public utilities with transmission stated rates to provide the 
latter.\122\
---------------------------------------------------------------------------

    \122\ APPA Comments at 6; Six Cities Comments at 2.
---------------------------------------------------------------------------

    85. Six Cities request that the Commission direct public utilities 
with transmission stated rates subject to a moratorium to delay 
amortization of excess or deficient ADIT until their next rate cases 
(i.e., the end of the moratorium period). Six Cities contend that 
customers may otherwise lose the benefits of the Tax Cuts and Jobs Act 
because the required amortization schedule might begin or occur during 
the moratorium period.\123\ Six Cities argue that this delay would be 
consistent with the Commission's statement that ``public utilities 
should not amortize an excess ADIT regulatory liability for accounting 
purposes until it is included in ratemaking.'' \124\ Six Cities contend 
that this requirement would not upset any moratorium as public 
utilities would only be placing excess ADIT in a deferred account. Six 
Cities request that, in conjunction with this deferral requirement, the 
Commission require that any affected public utilities submit a single-
issue compliance filing coinciding with the end of the moratorium 
period.\125\
---------------------------------------------------------------------------

    \123\ Six Cities Comments at 3-5.
    \124\ Id. at 5 (citing NOPR, 165 FERC ] 61,117 at P 39).
    \125\ Id. at 5-6.
---------------------------------------------------------------------------

3. Commission Determination
    86. We do not adopt the NOPR proposal to require public utilities 
with transmission stated rates to (1) determine the excess and 
deficient income tax caused by the Tax Cuts and Jobs Act's reduction to 
the federal corporate income tax rate and (2) return this amount to or 
recover this amount from customers. Instead, we maintain the status quo 
under Order No. 144, Order No. 475 and 18 CFR 35.24, under which public 
utilities with transmission stated rates should address any excess or 
deficient ADIT caused by the Tax Cuts and Jobs Act in their next rate 
case.\126\ We also do not adopt any of the other proposals in the NOPR 
related to public utilities with transmission stated rates.\127\
---------------------------------------------------------------------------

    \126\ See Order No. 144, FERC Stats. & Regs. ] 30,254, at 
31,519, 31,560.
    \127\ NOPR, 165 FERC ] 61,117 at P 40.
---------------------------------------------------------------------------

    87. In Order No. 144, the Commission stated that the cost of 
service adjustments for excess and deficient ADIT are required to be 
made in a public utility's next rate case.\128\ Thus, Order No. 144 
stands for the proposition that it is appropriate for a public utility

[[Page 65293]]

with transmission stated rates to address excess and deficient ADIT in 
its next rate case, as opposed to on a generic basis. Order No. 475, 
which the Commission issued following the last reduction in the federal 
corporate income tax rate, also supports our decision to not adopt the 
requirements in the NOPR for public utilities with transmission stated 
rates. In Order No. 475, the Commission declined to act on excess and 
deficient ADIT for public utilities with transmission stated rates on a 
generic basis and instead stated that determination would be made in a 
public utility's next rate case. The Commission reasoned that the 
potentially complex questions involving the return of excess ADIT were 
best dealt with in individual FPA section 205 or 206 proceedings where 
all interested parties could weigh in.\129\ We find that this rationale 
still applies. The question of how to properly handle excess and 
deficient ADIT for public utilities with transmission stated rates 
following a tax rate change continues to raise complex questions that 
are more properly addressed in a rate case.
---------------------------------------------------------------------------

    \128\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,519.
    \129\ Order No. 475, FERC Stats. & Regs. ] 30,752 at 30,736.
---------------------------------------------------------------------------

    88. We agree with EEI's comments that addressing excess and 
deficient ADIT in the next rate case for a public utility with 
transmission stated rates is more reasonable, efficient, and accurate 
than the proposal in the NOPR. Although APPA supported requiring public 
utilities with transmission stated rates to address excess or deficient 
ADIT on a single-issue basis at a general level, it noted that the 
approach proposed in the NOPR to accomplish this goal would still 
require a reconciliation in a public utility's next rate 
proceeding.\130\ APPA's comments highlight the inefficiency and 
inaccuracy of addressing excess and deficient ADIT on a single-issue 
basis because such an approach would offer only a temporary, imperfect 
solution that would need to be revisited in the public utility's next 
rate proceeding.
---------------------------------------------------------------------------

    \130\ APPA Comments at 6.
---------------------------------------------------------------------------

    89. We therefore find that it is inappropriate to address excess 
and deficient ADIT resulting from the Tax Cuts and Jobs Act on a 
single-issue basis for public utilities with transmission stated rates. 
Like the Commission's finding in Order No. 475 following the tax rate 
changes in 1986, we determine that for the Tax Cuts and Jobs Act, a 
public utility's next rate proceeding is the appropriate time to 
address excess and deficient ADIT in the context of transmission stated 
rates.
    90. We decline to adopt Six Cities' proposal for the Commission to 
direct public utilities with transmission stated rates subject to a 
moratorium to delay amortization of excess or deficient ADIT until the 
next rate case. As explained above, excess or deficient ADIT resulting 
from the Tax Cuts and Jobs Act for a public utility with transmission 
stated rates will be addressed in that public utility's next rate case. 
This outcome is consistent with Order No. 144, 18 CFR 35.24, and the 
approach adopted by the Commission in Order No. 475.\131\
---------------------------------------------------------------------------

    \131\ Order No. 475, FERC Stats. & Regs. ] 30,752, at 30,736.
---------------------------------------------------------------------------

    91. Although we plan to address excess and deficient ADIT issues 
for public utilities with transmission stated rates to their future 
rate cases, we clarify our intentions. First, we emphasize that to the 
extent public utilities with transmission stated rates have a 
Commission-approved ratemaking method made specifically applicable to 
them for returning excess ADIT, they should have begun reducing excess 
ADIT pursuant to that previously approved method.\132\
---------------------------------------------------------------------------

    \132\ 18 CFR 35.24(c)(3). The same regulations apply to 
interstate natural gas pipelines under 18 CFR 154.305.
---------------------------------------------------------------------------

    92. In the absence of a prior Commission-approved methodology, the 
Commission's regulations require that public utilities ``use some 
ratemaking method'' for making a provision for returning excess ADIT. 
The regulations further state that ``the appropriateness of such method 
will be subject to a case-by-case determination'' by the 
Commission.\133\
---------------------------------------------------------------------------

    \133\ Id.
---------------------------------------------------------------------------

    93. In applying this ``case-by-case'' analysis, we recognize there 
are differences between formula rates (as discussed elsewhere in this 
order) and stated rates. For stated rates, we will generally apply a 
policy that public utilities begin reducing excess ADIT immediately 
upon a tax rate change and not at a later date, such as at the time of 
a future rate case.\134\ This guidance addresses when the amortization 
of excess ADIT should begin, rather than other issues related to the 
reasonableness of a public utility's amortization methodology (e.g., 
ARAM or South Georgia). Moreover, this discussion regarding when 
amortization of excess ADIT begins for public utilities with stated 
transmission rates is merely intended to provide guidance regarding the 
general course of action the Commission intends to follow in future 
adjudications. The Commission will address issues related to a 
utility's method for amortizing excess ADIT in stated rates (including 
timing) based on the specific facts and circumstances in each 
proceeding. For example, nothing here precludes a public utility with 
transmission stated rates from proposing to delay amortization of 
excess ADIT to its next rate case.
---------------------------------------------------------------------------

    \134\ See, e.g., Interstate and Intrastate Natural Gas 
Pipelines; Rate Changes Relating to Federal Income Tax Rate, Order 
No. 849, 164 FERC ] 61,031, at PP 136-150 (2018) (providing guidance 
that natural gas pipelines should begin amortizing excess ADIT 
resulting from the Tax Cuts and Jobs Act immediately for purposes of 
the FERC Form No. 501-G informational filing, consistent with 
section 154.305 of the Commission's regulations).
---------------------------------------------------------------------------

    94. We believe it is reasonable to treat transmission formula rates 
differently than transmission stated rates given the unique 
circumstances surrounding formula rates at the time the Tax Cuts and 
Jobs Act became law. First as discussed above and in the NOPR, most 
electric transmission formula rates lack a mechanism to make provision 
for excess ADIT in computing the income tax component of the cost of 
service.\135\ It is inappropriate to treat excess ADIT as reducing 
immediately as of the Tax Cuts and Jobs Act when the formula itself 
lacks a mechanism to accomplish this task. We further emphasize that, 
upon enactment of the Tax Cuts and Jobs Act, the rates of public 
utilities with transmission formula rates (unlike those with stated 
rates) actually increased because the formula rates lacked an input for 
excess ADIT. Thus, the excess ADIT no longer served as a reduction from 
rate base as it did prior to the tax rate change when it was part of 
ADIT.\136\ Because the transmission formula rate excluded excess ADIT 
from the calculation of the rate, it is appropriate to treat excess 
ADIT as being wholly preserved in Account 254 until it can be addressed 
and reinserted into the transmission formula rate as required by this 
final rule.\137\
---------------------------------------------------------------------------

    \135\ ADIT NOPR, 165 FERC ] 61,117 at P 16.
    \136\ Previously, the excess ADIT had been included in regular 
ADIT (Accounts 190, 281, 282 and 283) and served as a reduction to 
rate base. While the excess ADIT in Account 254 should have also 
served as a reduction to rate base, the formula rates did not 
include the appropriate mechanism for this to occur.
    \137\ Further distinguishing transmission formula rates from 
stated rates, even where a public utility's formula rate included 
provisions for excess ADIT, the Commission's policy prior to this 
final rule required the public utility to seek Commission approval 
prior to returning excess ADIT. See PJM, 165 FERC ] 61,275 at P 28. 
Accordingly, public utilities with formula rates could not return 
excess ADIT under this prior policy. This provides another way to 
distinguish transmission formula rates from stated rates.
---------------------------------------------------------------------------

    95. For these reasons, we believe the policy discussed above 
regarding transmission stated rates and their treatment of excess ADIT 
is reasonable. Therefore, we reject Six Cities' proposal for public 
utilities with transmission

[[Page 65294]]

stated rates to delay amortization of excess or deficient ADIT until 
the next rate case.

C. Compliance Filings

1. NOPR
    96. The Commission proposed to require each public utility with 
transmission stated or formula rates to submit a compliance filing 
within 90 days of the effective date of this final rule to revise its 
transmission stated or formula rates, as necessary, to demonstrate that 
it meets the requirements set forth in this final rule.\138\
---------------------------------------------------------------------------

    \138\ NOPR, 165 FERC ] 61,117 at P 51.
---------------------------------------------------------------------------

    97. The Commission noted that some public utilities with 
transmission formula rates already had mechanisms in place in their 
rates that address the requirements discussed in this final rule. Where 
existing mechanisms would be modified by this final rule, the 
Commission proposed that the public utility must either comply with the 
requirements of this final rule or demonstrate that these previously 
approved mechanisms continue to be consistent with or superior to the 
requirements of this final rule.\139\
---------------------------------------------------------------------------

    \139\ Id. P 52.
---------------------------------------------------------------------------

2. Comments
    98. Some commenters support the Commission's 90-day compliance 
filing proposal.\140\ EEI requests that the Commission modify the 
compliance timeline for public utilities with transmission formula 
rates so that those utilities must submit compliance filings within the 
later of (1) 90 days of issuance of a final rule or (2) the public 
utility's next informational or true-up filing. EEI contends that the 
complexity and time-consuming nature of the annual update and true-up 
processes support such flexibility.\141\ Conversely, Industrial 
Customers argue that the compliance period should be shortened for the 
final rule.\142\
---------------------------------------------------------------------------

    \140\ See Eversource Comments at 15; AMP Comments at 13-14.
    \141\ EEI Comments at 7-8.
    \142\ Industrial Customers Comments at 5-6.
---------------------------------------------------------------------------

    99. EEI also requests that the Commission provide guidance in the 
final rule as to the timing of compliance filings for public utilities 
transitioning from transmission stated to transmission formula rates. 
EEI argues that these public utilities should be allowed to address 
compliance with the final rule in the proceeding addressing this 
transition. EEI asserts this would reduce burden and increase 
efficiency for the Commission and all interested parties. EEI contends 
that, so long as these public utilities are not amortizing ADIT 
balances prior to the proceeding addressing this transition, customers 
will see the benefits in reduction of the federal income tax rate.\143\
---------------------------------------------------------------------------

    \143\ EEI Comments at 15-16.
---------------------------------------------------------------------------

3. Commission Determination
    100. We adopt a modified version of EEI's proposal in its comments 
to the NOPR and require each public utility with transmission formula 
rates to submit a filing to demonstrate compliance with the final rule 
including revisions to its transmission formula rates, as necessary, 
within the later of (1) 30 days of the effective date of this final 
rule \144\ or (2) the public utility's next annual informational filing 
following the issuance of this final rule. We find that this schedule 
for compliance filings will reduce the burden on public utilities by 
allowing them flexibility to align the compliance requirement with 
their annual informational filing deadlines. However, we note that this 
compliance filing schedule represents the deadline to submit a 
compliance filing and that public utilities may choose to make their 
compliance filings earlier. Additionally, on compliance, we expect 
public utilities with transmission formula rates to make their proposed 
tariff sheets effective on the effective date of this final rule.
---------------------------------------------------------------------------

    \144\ The final rule becomes effective 60 days after publication 
in the Federal Register. With the first set of compliance filings 
due 30 days after the effective date of the final rule, public 
utilities will have a minimum of 90 days from the date of 
publication in the Federal Register to make compliance filings.
---------------------------------------------------------------------------

    101. We adopt the proposal that, if a public utility believes that 
its existing transmission formula rate already meets the requirements 
of this final rule, the public utility must demonstrate that these 
previously approved mechanisms are consistent with or superior to the 
requirements of this final rule; otherwise, such a public utility must 
modify their transmission formula rate to comply with the requirements 
of this final rule.
    102. Regarding Industrial Customers' request for a shortened 
compliance period, we find that the compliance period adopted by this 
final rule appropriately balances the time necessary for public 
utilities to develop and implement the changes required by this final 
rule, including the ADIT Worksheet, while still ensuring that 
compliance occurs in a timely manner.
    103. As for a public utility transitioning from transmission stated 
rates to transmission formula rates, because we decline to adopt the 
NOPR requirements for public utilities with transmission stated rates, 
a public utility transitioning from stated rates to formula rates will 
not need to make a compliance filing. Accordingly, when the public 
utility makes a filing under section 205 to adopt transmission formula 
rates, the Commission at that time will consider whether the utility's 
proposal appropriately reflects the excess or deficient ADIT resulting 
from the Tax Cuts and Jobs Act.
    104. As discussed above, this final rule requires that each public 
utility with a transmission formula rate populate the ADIT Worksheet 
submitted in compliance with the requirements of this final rule with 
excess and deficient ADIT resulting from the Tax Cuts and Jobs Act and 
any interested party will have an opportunity to comment on this 
information. Consistent with past practice, we will also determine 
whether the proposed amortization periods for any excess and deficient 
ADIT are just and reasonable.\145\ To aid in our review and provide 
greater clarity to customers, we also require that public utilities 
clearly indicate the date such inputs were populated with excess and 
deficient ADIT data.
---------------------------------------------------------------------------

    \145\ See, e.g., Emera Me., 165 FERC ] 61,086, at PP 44-45 
(2018); So. Cal. Edison Co., 166 FERC ] 61,006 at PP 23-24.
---------------------------------------------------------------------------

D. Other Comments Relating to Issues Not Addressed in the NOPR

1. Comments
    105. EEI argues that the Commission should affirm in the final rule 
that the proposed requirements apply only to jurisdictional 
transmission rates and that ADIT-related issues in all other rates, 
particularly negotiated rates, will be addressed on a case-by-case 
basis.\146\ EEI proposes that the Commission clarify that a 
``transmission rate'' is a rate for transmission delivery service, and 
therefore does not include ancillary services that are provided under 
OATTs or other tariffs. MISO Transmission Owners request a similar 
clarification and state that they do not support the proposal to the 
extent it would apply to non-transmission rates in the Commission-
jurisdictional OATTs of public utilities with transmission formula 
rates.\147\ EEI requests that the Commission reiterate that customers 
who choose to challenge rates other than transmission rates continue to 
bear the burden of demonstrating that the Tax Cuts and Jobs Act has 
rendered

[[Page 65295]]

such rates unjust, unreasonable, unduly discriminatory, or 
preferential.\148\
---------------------------------------------------------------------------

    \146\ EEI Comments at 16-17.
    \147\ MISO Transmission Owners Comments at 16-17.
    \148\ EEI Comments at 17.
---------------------------------------------------------------------------

    106. APPA argues that the Commission should reconsider its position 
and act affirmatively to ensure non-transmission, cost-based rates are 
adjusted to reflect the effects of the Tax Cuts and Jobs Act. APPA 
points to its previous comments submitted in response to the NOI, 
noting over-collection in revenues from the non-transmission rates. 
APPA argues that the ability to file a complaint under FPA section 206 
does not provide adequate protections as customers are unlikely to have 
sufficient information to judge whether the Tax Cuts and Jobs Act has 
rendered an existing non-transmission rate unjust and unreasonable. 
APPA contends that the Commission should direct jurisdictional public 
utilities to file adjustments to their non-transmission cost-based 
rates to reflect Tax Cuts and Jobs Act-related changes or show cause 
why they should not be required to do so. APPA asserts that, at 
minimum, any public utilities with non-transmission cost-based rates 
not addressed in the NOPR or the Tax Rate-Related Orders to Show Cause 
should be required to file an informational filing describing the 
effect of the Tax Cuts and Jobs Act on their income tax costs and 
ADIT.\149\
---------------------------------------------------------------------------

    \149\ APPA Comments at 11-13.
---------------------------------------------------------------------------

    107. NRECA supports the Commission's proposal to not address the 
rates of non-public utilities.\150\
---------------------------------------------------------------------------

    \150\ NRECA Comments at 5.
---------------------------------------------------------------------------

    108. DEMEC and Industrial Customers argue that refunds of excess 
ADIT resulting from the Tax Cuts and Jobs Act should include 
interest.\151\ Industrial Customers argue that interest would 
compensate ratepayers for the loss of benefit of the partial rate base 
reduction for the period until the adjustment is implemented.\152\
---------------------------------------------------------------------------

    \151\ DEMEC Comments at 11; Industrial Customers Comments at 5.
    \152\ Industrial Customers Comments at 6.
---------------------------------------------------------------------------

    109. EEI states that the Commission should consider accepting 
comments about the ADIT Treatment Following Asset Sales and Retirements 
Policy Statement in the context of this NOPR to allow for 
clarification. EEI contends that the Commission should clarify whether 
the ADIT Treatment Following Asset Sales and Retirements Policy 
Statement applies in the case of all ordinary retirements or excludes 
all ordinary retirements. EEI also argues that the Commission should 
clarify that the ADIT Treatment Following Asset Sales and Retirements 
Policy Statement does not apply to retirements and sales that are 
closed after November 23, 2018, the ADIT Treatment Following Asset 
Sales and Retirements Policy Statement's effective date, where 
transmission stated rate cases have addressed accounting and ratemaking 
treatment prior to the effective date as evidenced by a final state 
commission order.\153\
---------------------------------------------------------------------------

    \153\ EEI Comments at 17-18.
---------------------------------------------------------------------------

    110. DEMEC notes that the ADIT Treatment Following Asset Sales and 
Retirements Policy Statement did not address transmission facilities 
transferred to other functions (e.g., from transmission to 
distribution). DEMEC argues that the Commission should ensure the 
refund of excess ADIT associated with retired, sold, and transferred 
facilities to customers.\154\
---------------------------------------------------------------------------

    \154\ DEMEC Comments at 16.
---------------------------------------------------------------------------

    111. AMP argues that the Commission should take immediate action to 
stop further charges based on pre-Tax Cuts and Jobs Act federal income 
tax rates by initiating ``show cause'' proceedings for each public 
utility that has transmission stated rates not yet reflecting post-Tax 
Cuts and Jobs Act income tax rates.\155\ Similarly, AMP and Industrial 
Customers request that the Commission act immediately to issue the 
final rule to prevent those public utilities that still have 
transmission rates based on a 35 percent federal income tax rate from 
collecting excessive federal income tax revenue allowances until their 
next rate cases.\156\ AMP further argues that the final rule should be 
expanded to require the return of any incremental charges collected 
after December 31, 2017 that relate to utilizing the pre-Tax Cuts and 
Jobs Act tax rate in jurisdictional ratemaking. AMP contends that these 
incremental charges will not necessarily be returned as a component of 
excess ADIT under the NOPR because the re-measurement of excess and 
deficient ADIT took place on December 31, 2017 and accounts only for 
incremental tax charges occurring until the date of re-measurement. AMP 
asserts that, absent Commission action, public utilities will have no 
obligation to return these charges collected after re-measurement.\157\ 
AMP argues that the Commission should issue a directive requiring 
refunds for rates charged after December 31, 2017, to the extent those 
rates were based on the 35 percent federal income tax rate.\158\
---------------------------------------------------------------------------

    \155\ AMP Comments at 13.
    \156\ Id. at 13-14; Industrial Comments at 5-6.
    \157\ AMP Comments at 13.
    \158\ Id. at 14.
---------------------------------------------------------------------------

2. Commission Determination
    112. We affirm that this final rule applies only to public 
utilities with transmission formula rates that are contained in an 
OATT, a transmission owner tariff, or a rate schedule. This final rule 
does not address ancillary services or non-transmission rates for 
services provided under an OATT or other tariff. We find the arguments 
requesting that the Commission address non-transmission rates to be 
beyond the scope of this proceeding.
    113. Additionally, we find that AMP's requests for the Commission 
to initiate ``show cause'' orders for public utilities not yet 
reflecting the Tax Cuts and Jobs Act's change in tax rates \159\ and to 
issue a directive requiring refunds for rates charged after December 
31, 2017, to the extent those rates were based on the 35 percent 
federal income tax rate, are beyond the scope of this proceeding. In 
this final rule, we focus only on ensuring that transmission formula 
rates properly address excess and deficient ADIT resulting from the Tax 
Cuts and Jobs Act and any future tax rate changes in a transparent 
manner and consistent with Order No. 144 and 18 CFR 35.24.
---------------------------------------------------------------------------

    \159\ See supra n.23.
---------------------------------------------------------------------------

    114. We are unpersuaded by DEMEC's and Industrial Customers' 
request for public utilities to include interest when returning excess 
ADIT. The Commission has chosen not to require interest in prior 
proceedings involving the return of excess ADIT, including proceedings 
addressing the return of excess ADIT following the Tax Cuts and Jobs 
Act.\160\ Furthermore, the requirements in this final rule will ensure 
that the full regulatory liability for excess ADIT is returned to 
transmission formula rate customers and that rate base neutrality is 
preserved going forward. Accordingly, we find that transmission formula 
rate customers will receive the full benefit of the Tax Cuts and Jobs 
Act, and therefore, we do not find it appropriate to require public 
utilities to include interest when returning excess ADIT as a result of 
the Tax Cuts and Jobs Act to customers.
---------------------------------------------------------------------------

    \160\ See, e.g., Order No. 475, FERC Stats. & Regs. ] 30,752, at 
30,737; Emera Me., 165 FERC ] 61,086; So. Cal. Edison Co., 166 FERC 
] 61,006.
---------------------------------------------------------------------------

    115. We find requests to clarify the ADIT Treatment Following Asset 
Sales and Retirements Policy Statement to be beyond the scope of this 
proceeding.

[[Page 65296]]

IV. Information Collection Statement

    116. The Paperwork Reduction Act (PRA) \161\ requires each federal 
agency to seek and obtain the Office of Management and Budget's (OMB) 
approval before undertaking a collection of information (including 
reporting, record keeping, and public disclosure requirements) directed 
to ten or more persons or contained in a rule of general applicability. 
OMB regulations require approval of certain information collection 
requirements imposed by rules (including deletion, revision, or 
implementation of new requirements).\162\ Upon approval of a collection 
of information, OMB will assign an OMB control number and an expiration 
date. Respondents subject to the filing requirements of a rule will not 
be penalized for failing to respond to the collection of information 
unless the collection of information displays a valid OMB control 
number.
---------------------------------------------------------------------------

    \161\ 44 U.S.C. 3501-21.
    \162\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    117. The Commission is submitting these reporting and recordkeeping 
requirements to OMB for its review and approval under section 3507(d) 
of the PRA. Comments are solicited on the Commission's need for this 
information, whether the information will have practical utility, the 
accuracy of the provided burden estimate, ways to enhance the quality, 
utility, and clarity of the information to be collected, and any 
suggested methods for minimizing the respondent's burden, including the 
use of automated information techniques.
    118. Public Reporting Burden: The Commission initially identified 
106 public utilities with transmission formula rates that will each be 
required to revise its rate so that any excess or deficient ADIT is 
properly reflected in its revenue requirement following a change in tax 
rates, such as those established by the Tax Cuts and Jobs Act. 
Additionally, each public utility with a transmission formula rate will 
be required to incorporate the ADIT Worksheet into its transmission 
formula rate to increase transparency. Public utilities will be 
required to populate this worksheet in their compliance filings. We 
also note the Commission's reliance on the ADIT Worksheet in lieu of an 
FPA section 205 filing each time a local, state, or federal tax rate 
changes will result in an overall reduction in burden in the long run 
to public utilities with transmission formula rates.
    119. The Commission also initially identified 31 public utilities 
with transmission stated rates that it proposed to require to calculate 
the excess and deficient ADIT caused by the Tax Cuts and Jobs Act and 
to return to or recover from customers those amounts. However, the 
Commission decided not to adopt the proposed requirements for public 
utilities with transmission stated rates in this proceeding, and 
therefore public utilities with transmission stated rates will have no 
future burden or cost associated with this final rule.
    120. Based on these assumptions, we estimate the burden and cost 
\163\ for the information collection requirements as follows.
---------------------------------------------------------------------------

    \163\ The loaded hourly wage figure (including benefits) is 
based on the average of the occupational categories for 2018 found 
on the Bureau of Labor Statistics website (http://www.bls.gov/oes/current/naics2_22.htm and http://www.bls.gov/news.release/ecec.nr0.htm):
    --Accountant and Auditor (Occupation Code: 13-2011): $56.09.
    --Management (Occupation Code: 11-0000): $95.24.
    --Legal (Occupation Code: 23-0000): $142.86.
    --Office and Administrative Support (Occupation Code: 43-0000): 
$42.11.
    These various occupational categories' wage (and benefits) 
figures are averaged and weighted equally, giving an average of 
$84.08/hour. The resulting wage figure is rounded to $84.00/hour for 
use in calculating wage figures in the final rule in Docket No. 
RM19-5-000.
---------------------------------------------------------------------------

     
---------------------------------------------------------------------------

    \164\ One-time burdens apply in Year 1 only. The ongoing annual 
burden starting in Year 2 covers the annual requirement to update 
the worksheet, mentioned below.
    \165\ Total for Public Utilities with Transmission Stated Rates.
    \166\ Total for Public Utilities with Transmission Formula 
Rates.

                                                 Changes Due to the Final Rule in Docket No. RM19-5-000
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                  Annual number                                                                                Cost per
                                    Number of     of responses    Total number    Average burden hours & cost   Total annual burden hours &   respondent
                                   respondents   per respondent   of responses         ($) per response            total annual cost ($)         ($)
                                            (1)             (2)     (1) * (2) =  (4).........................  (3) * (4) = (5).............    (5) / (1)
                                                                            (3)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Revising transmission formula               106               1             106  8 hours; $672...............  848 hours; $71,232..........         $672
 rates so that excess ADIT is
 deducted and/or deficient ADIT
 is added to rate base (one-
 time) \164\.
Revising transmission formula               106               1             106  8 hours; $672...............  848 hours; $71,232..........          672
 rates so that any excess and/
 or deficient ADIT is amortized
 (one-time).
Revising transmission stated                  0               0               0  0; $0.......................  0 hours; $0.................            0
 rates to return or recover
 excess or deficient ADIT (one-
 time).
Requiring public utilities with             106               1             106  44 hours; $3,696............  4,664 hours; $391,776.......        3,696
 transmission formula rates to
 incorporate a new permanent
 worksheet that will annually
 track ADIT information (one-
 time).
Requiring public utilities with             106               1             106  4 hours; $336...............  424 hours; $35,616..........          336
 transmission formula rates to
 update their ADIT worksheet
 (annual, starting in Year 2).
                                ------------------------------------------------------------------------------------------------------------------------
    Total (Stated Rates) \165\.  ..............  ..............               0  ............................  0 hours; $0.................  ...........
                                ------------------------------------------------------------------------------------------------------------------------
    Total (Formula Rates), one-  ..............  ..............             318  ............................  6,360 hours; $534,240.......  ...........
     time in Year 1 \166\.
                                ------------------------------------------------------------------------------------------------------------------------
    Total (Formula Rates         ..............  ..............             106  ............................  424 hours; $35,616..........  ...........
     (annual, starting in Year
     2)).
--------------------------------------------------------------------------------------------------------------------------------------------------------


[[Page 65297]]

    Cost to Comply: We have projected the total cost of compliance as 
follows: \167\
     Year 1: $534,240 ($5,040/utility) for public utilities 
with transmission formula rates.
---------------------------------------------------------------------------

    \167\ For a public utility with a transmission formula rate, the 
costs for Year 1 would consist of filing proposed changes to its 
transmission formula rate, including the addition of the ADIT 
Worksheet, with the Commission based on the compliance schedule laid 
out in this final rule plus the initial implementation. The annual 
ongoing cost starting in Year 2 relates to updating the worksheet.
---------------------------------------------------------------------------

     Year 2 and continuing annually: $35,616 ($336/utility) for 
public utilities with transmission formula rates.
    Title: FERC-516, Electric Rate Schedules and Tariff Filings.
    Action: Proposed revisions to an information collection.
    OMB Control No.: 1902-0096.
    Respondents for this Proposal: Businesses or other for profit and/
or not-for-profit institutions.
    Frequency of Information: One-time implementation burden during 
Year 1, and ongoing annual burden starting in Year 2.
    Necessity of Information: The Commission requires information in 
order to ensure for public utilities with transmission formula rates 
that (1) rate base neutrality is preserved following enactment of the 
Tax Cuts and Jobs Act; (2) the reduction in ADIT on the books of public 
utilities with transmission formula rates that was collected from 
customers but is no longer payable to the IRS due to the Tax Cuts and 
Jobs Act is returned to or recovered from customers consistent with 
general ratemaking principles; and (3) there is increased transparency 
for the process of excess and deficient ADIT calculation and 
amortization.
    Internal Review: We have reviewed the proposed changes and have 
determined that such changes are necessary. These requirements conform 
to the Commission's need for efficient information collection, 
communication, and management within the electric industry. We have 
specific, objective support for the burden estimates associated with 
the information collection requirements.
    121. 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: Ellen 
Brown, Office of the Executive Director], email: 
[email protected], phone: (202) 502-8663, fax: (202) 273-0873. 
Comments concerning the collection of information and the associated 
burden estimate(s), may also be sent to the Office of Information and 
Regulatory Affairs, Office of Management and Budget, 725 17th Street 
NW, Washington, DC 20503 [Attention: Desk Officer for the Federal 
Energy Regulatory Commission]. Due to security concerns, comments 
should be sent electronically to the following email address: 
[email protected]. Comments submitted to OMB should include 
FERC-516 and OMB Control No. 1902-0096.

V. Environmental Analysis

    122. 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.\168\ The 
actions taken here fall within categorical exclusions in the 
Commission's regulations for approval of actions under sections 205 and 
206 of the FPA relating to the filing of schedules containing all rates 
and charges for the transmission or sale of electric energy subject to 
the Commission's jurisdiction, plus the classification, practices, 
contracts and regulations that affect rates, charges, classification, 
and services.\169\ Therefore, an environmental review is unnecessary 
and has not been prepared in this rulemaking.
---------------------------------------------------------------------------

    \168\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, FERC Stats. & Regs. ] 30,783 (1987) (cross-
referenced at 41 FERC ] 61,284).
    \169\ 18 CFR 380.4(a)(15).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act

    123. The Regulatory Flexibility Act of 1980 (RFA) \170\ generally 
requires a description and analysis of final rules that will have 
significant economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \170\ 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    124. The Small Business Administration (SBA) revised its size 
standards (effective January 22, 2014) for electric utilities from a 
standard based on megawatt hours to a standard based on the number of 
employees, including affiliates. Under SBA's standards, some 
transmission owners will fall under the following category and 
associated size threshold: electric bulk power transmission and 
control, at 500 employees.\171\
---------------------------------------------------------------------------

    \171\ 13 CFR 121.201, Sector 22 (Utilities), NAICS code 221121 
(Electric Bulk Power Transmission and Control).
---------------------------------------------------------------------------

    125. As noted in the above Information Collection Statement, we 
estimate that 106 public utilities with transmission formula rates, 
both large and small, are subject to the requirements adopted by this 
rule. Of these, we estimate that approximately 43 percent are small 
entities (approximately 46 entities). We estimate the average total 
cost to each of these entities will be $5,040 in Year 1 and $336 in 
subsequent years.
    126. According to SBA guidance, the determination of significance 
of impact ``should be seen as relative to the size of the business, the 
size of the competitor's business, and the impact the regulation has on 
larger competitors.'' \172\ We do not consider the estimated burden to 
be a significant economic impact. As a result, we certify that the 
revisions proposed in this final rule will not have a significant 
economic impact on a substantial number of small entities.
---------------------------------------------------------------------------

    \172\ U.S. Small Business Administration, A Guide for Government 
Agencies How to Comply with the Regulatory Flexibility Act, at 18 
(May 2012), https://www.sba.gov/sites/default/files/advocacy/rfaguide_0512_0.pdf.
---------------------------------------------------------------------------

VII. Document Availability

    127. 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 5:00 
p.m. Eastern time) at 888 First Street NE, Room 2A, Washington, DC 
20426.
    128. From FERC's Home Page on the internet, this information is 
available on eLibrary. The full text of this document is available on 
eLibrary in PDF and Microsoft Word 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.
    129. User assistance is available for eLibrary and the FERC's 
website during normal business hours from FERC Online Support at 202-
502-6652 (toll free at 1-866-208-3676) or email at 
[email protected], or the Public Reference Room at (202) 502-
8371, TTY (202) 502-8659. Email the Public Reference Room at 
[email protected].

[[Page 65298]]

VIII. Effective Date and Congressional Notification

    130. These regulations are effective January 27, 2020. The 
Commission has determined, with the concurrence of the Administrator of 
the Office of Information and Regulatory Affairs of OMB, that this rule 
is not a ``major rule'' as defined in section 351 of the Small Business 
Regulatory Enforcement Fairness Act of 1996.

    By the Commission.

    Issued: November 21, 2019.
Nathaniel J. Davis, Sr.,
Deputy Secretary.

    Note: Appendix A will not be published in the Federal Register.

Appendix A--List of Commenters

------------------------------------------------------------------------
            Short name                            Commenter
------------------------------------------------------------------------
APPA..............................  American Public Power Association.
AMP...............................  American Municipal Power, Inc.
Avista............................  Avista Corporation.
DEMEC.............................  Delaware Municipal Electric
                                     Corporation, Inc.
EEI...............................  Edison Electric Institute.
Eversource........................  Eversource Energy Service Company.
FirstEnergy.......................  FirstEnergy Service Company filing
                                     on behalf of its affiliates
                                     American Transmission Systems,
                                     Incorporated, Jersey Central Power
                                     & Light Company, Mid-Atlantic
                                     Interstate Transmission LLC, West
                                     Penn Power Company, the Potomac
                                     Edison Company, Monongahela Power
                                     Company, and Trans-Allegheny
                                     Interstate Line Company.
Industrial Customers..............  Electricity Consumers Resource
                                     Council, the American Forest &
                                     Paper Association, and the American
                                     Chemistry Council.
MISO Transmission Owners..........  Ameren Services Company, as agent
                                     for Union Electric Company and
                                     Ameren Illinois Company; American
                                     Transmission Company LLC; Central
                                     Minnesota Municipal Power Agency;
                                     City Water, Light & Power
                                     (Springfield, IL); Cleco Power LLC;
                                     Cooperative Energy; Dairyland Power
                                     Cooperative; Duke Energy Business
                                     Services, LLC for Duke Energy
                                     Indiana, LLC; East Texas Electric
                                     Cooperative; Entergy Arkansas,
                                     Inc.; Entergy Louisiana, LLC;
                                     Entergy Mississippi, Inc.; Entergy
                                     New Orleans, LLC; Entergy Texas,
                                     Inc.; Great River Energy; Indiana
                                     Municipal Power Agency;
                                     Indianapolis Power & Light Company;
                                     International Transmission Company;
                                     ITC Midwest LLC; Lafayette
                                     Utilities System; Michigan Electric
                                     Transmission Company, LLC;
                                     MidAmerican Energy Company;
                                     Minnesota Power (and its subsidiary
                                     Superior Water, L&P); Missouri
                                     River Energy Services; Montana-
                                     Dakota Utilities Co.; Northern
                                     Indiana Public Service Company LLC;
                                     Northern States Power Company, a
                                     Minnesota corporation, and Northern
                                     States Power Company, a Wisconsin
                                     corporation, subsidiaries of Xcel
                                     Energy Inc.; Northwestern Wisconsin
                                     Electric Company; Otter Tail Power
                                     Company; Prairie Power Inc.;
                                     Southern Indiana Gas & Electric
                                     Company; Southern Minnesota
                                     Municipal Power Agency; Wabash
                                     Valley Power Association, Inc.; and
                                     Wolverine Power Supply Cooperative,
                                     Inc.
NRECA.............................  National Rural Electric Cooperative
                                     Association.
PSEG..............................  Public Service Electric and Gas
                                     Company.
Six Cities........................  The Cities of Anaheim, Azusa,
                                     Banning, Colton, Pasadena, and
                                     Riverside, CA.
TAPS..............................  Transmission Access Policy Study
                                     Group.
Xcel..............................  Xcel Energy Services Inc., on behalf
                                     of the Xcel Energy Operating
                                     Companies including Northern States
                                     Power Company; Northern States
                                     Power Company; Public Service
                                     Company of Colorado; and
                                     Southwestern Public Service
                                     Company.
------------------------------------------------------------------------

[FR Doc. 2019-25724 Filed 11-26-19; 8:45 am]
BILLING CODE 6717-01-P