The Federal Energy Regulatory Commission ("FERC") issued a Notice of Proposed Rulemaking ("NOPR") on January 18, 2008, proposing to require public utilities to submit more details in their FERC financial reports (annual reports (Forms 1 and 1-F) and quarterly reports (Form 3-Q)) and to increase certain threshold reporting requirements therein. Pursuant to the NOPR's publication in the Federal Register on January 29th, comments are due by March 14, 2008.

The changes are proposed (i) to ensure sufficient data transparency such that FERC, public utility customers, state commissions, interested parties and the public may have access to a public utility's financial information to assess the justness and reasonableness of its rates, (ii) to balance the informational needs of FERC and other customers with the burden imposed by reporting requirements on regulated entities and (iii) to enhance the forms' usefulness by updating them to better reflect current electric industry markets.

Some of the more significant changes include the following proposals:

  • Affiliate Transactions: FERC proposes to add a new "Transactions with Associated (Affiliated) Companies" section (Form 1 page 429) that would require filers to report certain affiliate transaction information such that a party may analyze the nature and extent of the affiliate transactions and monitor cross-subsidization issues.
  • SO2 and NOx Allowances: FERC proposes to provide separate pages for reporting SO2 and NOx allowances allowed and not allowed by the Environmental Protection Agency.
  • Filing Thresholds for Annual Report Forms 1 and 1-F: Although FERC does not propose specific changes to the threshold metrics that trigger filing requirements for Forms 1 and 1-F, it requests parties to submit suggestions for how this might be done and why a particular proposed threshold would be appropriate. Under the current regulations, a "major" utility (which files Form 1) is defined as a utility that in each of the last three consecutive years had sales or transmission services exceeding (a) one million MWh of total sales, (b) 100 MWh of sales for resale, (c) 500 MWh of power exchanges delivered, or (d) 500 MWh of wheeling power for others. A "nonmajor" utility (which files Form 1-F) is a utility which is not classified as a "major" utility and had total sales in each of the last three consecutive years of 10,000 MWh or more. FERC also proposes that if a utility subject to the filing requirements subsequently fails to meet the criteria for either a "nonmajor" or "major" utility for three consecutive years, such that it no longer has a filing requirement, it must provide notice of its non-filer status to FERC.
  • Formula Rates: While FERC believes caution should be exercised in making changes to the data contained in Form 1 that may be utilized in a utility's formula rates, it proposes to require that if the inputs to a formula rate deviate from what is currently shown in Form 1, the filer must provide an explanation for the change in a footnote to the corresponding page, line and column where the specified data is reported. However, this requirement would apply only to utilities with formula rates that do not make informational filings with FERC.
  • Non-Calendar Fiscal Year: To eliminate the current burden on non-calendar fiscal year Form 1 filers of preparing two sets of audited financial statements (one on a calendar year basis filed with the April FERC annual report and a second on a fiscal year basis), FERC proposes that these utilities continue to file annual reports each April but be permitted to file a second set of financial statements with the required Certified Public Accountant certification following the end of their fiscal year.
  • Other Threshold Revisions: FERC also proposes to raise certain minimum dollar thresholds that trigger reporting requirements for the following items: Construction Work in Progress (Form 1 page 216); Other Regulatory Assets, Miscellaneous Deferred Debts & Other Regulatory Liabilities (Form 1 pages 232, 233 and 278); Other Deferred Credits (Form 1 page 269); and Research & Development (Form 1 pages 352 and 353).
  • Other Revenues: FERC proposes to require a detailed breakdown of the sources of "Other Revenues" identified in the "Electric Operating Revenues" section of Form 1, which currently is a cumulative total for the reporting year. This change would require the inclusion of a footnote on page 300 of Form 1 to identify the source of any revenues not otherwise specified in the "Transmission of Electricity for Others (including transactions referred to as 'wheeling')" section of Form 1 (Form 1 pages 328-330).

FERC found that in lieu of wholesale changes to Form 1, only targeted changes are necessary at this time. As such, FERC explicitly rejected the suggestions that Form 1 filers provide the following information: (i) cost and revenue study information typically needed in a rate case; (ii) detailed information on pension and other employment benefits; (iii) demand response data; and (iv) future transmission investment information. FERC also rejected the suggested elimination of quarterly reports (Form 3-Q).

For More Information

Click here for the complete NOPR (PDF)