

[Federal Register: May 16, 2006 (Volume 71, Number 94)]
[Proposed Rules]               
[Page 28464-28512]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16my06-33]                         



[[Page 28464]]


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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Parts 366, 367, 368, 369 and 375

[Docket No. RM06-11-000]

 
Financial Accounting, Reporting and Records Retention 
Requirements Under the Public Utility Holding Company Act of 2005

Issued April 24, 2006.
AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Notice of proposed rulemaking.

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SUMMARY: In this Notice of Proposed Rulemaking, the Federal Energy 
Regulatory Commission (Commission) proposes to amend its regulations to 
further implement the Public Utility Holding Company Act of 2005 (PUHCA 
2005). Specifically, the Commission is proposing to add a Uniform 
System of Accounts for Centralized Service Companies, to add 
preservation of records requirements for holding companies and service 
companies, to revise Form No. 60, Annual Report for Centralized Service 
Companies, to provide for financial reporting consistent with the 
proposed Uniform System of Accounts and to provide for electronic 
filing of Form No. 60. These changes are proposed to be made effective 
January 1, 2007. In addition, the Commission directs staff to hold a 
technical conference to provide interested entities an opportunity to 
discuss the proposed regulations.

DATES: Comments must be filed on or before June 15, 2006.

ADDRESSES: You may submit comments, identified by Docket No. RM06-11-
000, by one of the following methods:
     Agency Web Site: http://ferc.gov. Follow the instructions 

for submitting comments via the eFiling link found in the Comment 
Procedures Section of the preamble.
     Mail: Commenters unable to file comments electronically 
must mail or hand deliver an original and 14 copies of their comments 
to: Federal Energy Regulatory Commission, Office of the Secretary, 888 
First Street, NE., Washington, DC 20426. Please refer to the Comment 
Procedures Section of the preamble for additional information on how to 
file paper comments.

FOR FURTHER INFORMATION CONTACT: 

Rosemary Womack (Technical Information), Division of Audits and 
Accounting, Office of Market Oversight and Investigation, Federal 
Energy Regulatory Commission, 888 First Street, NE., Washington, DC 
20426. Telephone: (202) 502-8989. E-mail: rosemary.womack@ferc.gov.
Julia A. Lake (Legal Information), Office of the General Counsel--
Energy Markets, Federal Energy Regulatory Commission, 888 First Street, 
NE., Washington, DC 20426. Telephone: (202) 502-8370. E-mail: 
julia.lake@ferc.gov.


SUPPLEMENTARY INFORMATION:

I. Introduction

    1. The Commission proposes to amend its regulations to further 
implement the Public Utility Holding Company Act of 2005 (PUHCA 2005). 
The Commission is proposing to add a new Uniform System of Accounts for 
Centralized Service Companies and new preservation of records 
requirements as new Parts 367 and 368, respectively, to the 
Commission's regulations; to add Form No. 60, Annual Report for 
Centralized Service Companies, as Part 369 to the Commission's 
regulations; to revise Form No. 60 to provide for financial reporting 
by centralized service companies, i.e., service companies that are not 
special purpose companies, consistent with the proposed Uniform System 
of Accounts; and to provide for electronic filing of Form No. 60. The 
Commission also is proposing conforming changes to its regulations in 
Part 366 and corresponding changes to the Chief Accountant's 
delegations of authority in Part 375 of the Commission's 
regulations.\1\ The Commission proposes to make the revised regulations 
effective January 1, 2007. In addition, the Commission directs staff to 
hold a technical conference to provide interested entities an 
opportunity to discuss the proposed regulations.
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    \1\ See 18 CFR Parts 366 and 375.
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II. Background

    2. On August 8, 2005, the Energy Policy Act of 2005 (EPAct 2005) 
\2\ was signed into law. In relevant part, it repealed the Public 
Utility Holding Company Act of 1935 (PUHCA 1935) \3\ and enacted the 
Public Utility Holding Company Act of 2005 (PUHCA 2005),\4\ which, with 
one exception not relevant here, became effective on February 8, 2006 
(six months from the date of enactment). On December 8, 2005, the 
Commission issued Order No. 667, adding a new Subchapter U and Part 366 
to Title 18 of the Code of Federal Regulations to implement PUHCA 
2005.\5\
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    \2\ Energy Policy Act of 2005, Pub. L. 109-58, 119 Stat. 594 
(2005).
    \3\ 15 U.S.C. 79a et seq. (2000).
    \4\ EPAct 2005 at 1261 et seq.
    \5\ Order No. 667, 70 FR 75592 (Dec. 20, 2005), FERC Stats. & 
Regs.; Regulations and Preambles 2001-2005 ] 31,197 (2005), order on 
reh'g, Order No. 667-A, published elsewhere in this issue of the 
Federal Register, FERC Stats. & Regs. ] 31,213 (2006).
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    3. Order No. 667 required that, unless otherwise exempted by 
Commission rule or order, holding companies \6\ and service companies 
\7\ must maintain and make available to the Commission their books and 
records.\8\ In addition, Order No. 667 allowed holding companies and 
service companies that did not currently follow the Commission's 
records retention requirements to transition to the Commission's 
requirements by January 1, 2007. Order No. 667 further provided that 
holding companies would not be required to comply with a Uniform System 
of Accounts, but that centralized service companies would be required 
to do so as of January 1, 2007.
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    \6\ As defined in 18 CFR 366.1, holding company means (i) any 
company that directly or indirectly owns, controls, or holds, with 
power to vote, 10 percent or more of the outstanding voting 
securities of a public-utility company or of a holding company of 
any public-utility company; and (ii) any person, determined by the 
Commission, after notice and opportunity for hearing, to exercise 
directly or indirectly (either alone or pursuant to an arrangement 
or understanding with one or more persons) such a controlling 
influence over the management or policies of any public-utility 
company or holding company as to make it necessary or appropriate 
for the rate protection of utility customers with respect to rates 
that such person be subject to the obligations, duties, and 
liabilities imposed by this subtitle upon holding companies.
    \7\ As defined in 18 CFR 366.1, service company means any 
associate company within a holding company system organized 
specifically for the purpose of providing non-power goods or 
services or the sale of goods or construction work to any public 
utility in the same holding company system.
    \8\ Order No. 667 also required traditional, centralized service 
companies to file the newly created Form No. 60, Annual Report for 
Centralized Service Companies.
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    4. The Commission indicated in Order No. 667 that it would initiate 
a separate rulemaking proceeding to address how the Commission's 
Uniform Systems of Accounts and records retention requirements in Parts 
101, 125, 201 and 225 of its regulations should be modified to adopt or 
otherwise integrate the relevant parts of the SEC's Uniform System of 
Accounts and records retention rules. The Commission indicated that it 
intended to issue a final rule on any appropriate accounting and 
records retention requirements modifications before January 1, 2007, so 
that service companies would be able to transition to the Commission's 
Uniform System of Accounts and records retention requirements and so 
that holding companies could transition to

[[Page 28465]]

the Commission's records retention requirements, by that date.
    5. As discussed below, this Notice of Proposed Rulemaking proposes 
to adopt a Uniform System of Accounts for centralized service 
companies, and records retention requirements for holding companies and 
service companies, under PUHCA 2005.

III. Discussion

    6. In Order No. 667, the Commission prescribed uniform accounting 
requirements for centralized service companies, i.e., service companies 
that are not special purpose companies, within holding company systems, 
and records retention requirements for both service companies and 
holding companies. In that order, the Commission announced its 
intention to modify the existing Uniform Systems of Accounts for public 
utilities and licensees and natural gas companies in Parts 101 and 201, 
respectively, of the Commission's regulations to accommodate 
centralized service companies' use of those systems. The Commission 
also announced its intention to similarly modify the existing records 
retention requirements contained in Parts 125 and 225 of the 
Commission's regulations.
    7. Since the issuance of Order No. 667, we have examined in greater 
depth some of the implementation issues associated with revising the 
Commission's existing Uniform Systems of Accounts and records retention 
requirements for public utilities and licensees and for natural gas 
companies to cover service companies and holding companies. After 
taking into consideration the overall framework of the Commission's 
regulations and the range of changes that would be required to the 
Uniform Systems of Accounts and records retention requirements, we have 
concluded that modifying the existing accounting and records retention 
requirements to accommodate service companies and holding companies 
would make understanding and applying the accounting and records 
retention requirements difficult for users of the systems. Instead, the 
Commission proposes to adopt a separate Uniform System of Accounts for 
centralized service companies, i.e., service companies that are not 
special purpose companies, and separate records retention requirements 
for service companies and holding companies. While these new 
regulations appear lengthy, we believe the detail will actually make it 
simpler and easier for service companies and holding companies to 
comply with our requirements.
    8. In developing the proposed regulations, we were guided by three 
overarching objectives: (1) The new accounting and records retention 
requirements should mirror the existing requirements contained in Parts 
101, 201, 125 and 225 of the Commission's regulations for public 
utilities and licensees and natural gas companies to the maximum extent 
practicable, but should exclude provisions that are not relevant; (2) 
the new accounting requirements should allow for the consolidation of 
service company financial information with the financial information of 
associate public utilities and licensees and natural gas companies as 
needed for stockholder and SEC reporting; and (3) the new Uniform 
System of Accounts for centralized service companies should include 
requirements that reflect aspects of business operations that are 
unique to such service companies.

A. Proposed Uniform System of Accounts

    9. The Commission proposes to add as Part 367 of the Commission's 
regulations a Uniform System of Accounts for Centralized Service 
Companies. The proposed Uniform System of Accounts for Centralized 
Service Companies conforms, to the maximum extent practicable, to the 
Commission's existing Uniform Systems of Accounts for public utilities 
and licensees and for natural gas companies as set forth in Parts 101 
and 201, respectively, of the Commission's regulations. As explained 
more fully below, however, there are a number of instances in which the 
existing requirements contained in Parts 101 and 201 of the 
Commission's regulations need to be revised or modified to reflect the 
unique business characteristics of centralized service companies. In 
some instances, the revisions simply change a word, e.g., substituting 
``service company'' property for ``utility'' property.\9\ In other 
instances, the changes were more significant. The sections that follow 
identify and explain the basis for the more significant revisions and 
modifications to the accounting requirements contained in Parts 101 and 
201 of the Commission's regulations that we believe are appropriate or 
necessary to reflect the unique business characteristics of centralized 
service companies in the proposed Uniform System of Accounts for 
Centralized Service Companies.
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    \9\ For purposes of discussion, when revisions to an instruction 
or account are limited to such word changes we consider it as 
adopting the affected instruction or account in total.
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1. Definitions and Instructions
    10. The Commission proposes to adopt most of the definitions 
contained in Parts 101 and 201 of the Commission's regulations. 
Additionally, the Commission proposes to adopt the definitions 
contained in the SEC's Uniform System of Accounts for direct cost, 
indirect cost, non-associate company, and work order system. The 
Commission also proposes to incorporate definitions for construction, 
electric utility company, gas utility company, goods, holding company 
system, natural gas company, public utility, public-utility company, 
service and service company from Sec.  366.1 of the Commission's 
regulations. The definitions adopted from the SEC's Uniform System of 
Accounts and Sec.  366.1 of the Commission's regulations are necessary 
to facilitate understanding other instructions not contained in Parts 
101 and 201 of the Commission's regulations as they should be applied 
to centralized service companies, i.e., service companies that are not 
special purpose companies.
    11. Consistent with the instructions in Parts 101 and 201 of the 
Commission's regulations, we propose to adopt instructions grouped into 
four categories: General Instructions, Service Company Property 
Instructions, Operating Expense Instructions and Special Instructions. 
These instructions include most of the instructions contained in Parts 
101 and 201 of the Commission's regulations and in the SEC's Uniform 
System of Accounts. We propose to adopt instructions in the SEC's 
Uniform System of Accounts because they provide instructions relevant 
to certain transactions and events of a centralized service company, 
that are not specifically addressed in the instructions for Parts 101 
and 201 of the Commission's regulations. The instructions we propose to 
adopt in the Special Instructions category include many of the 
instructions for groups of accounts, which are embedded in the text to 
the accounts in Parts 101 and 201 of the Commission's regulations. 
Instructions not adopted from Parts 101 and 201 of the Commission's 
regulations and the SEC's Uniform System of Accounts are considered 
irrelevant to centralized service company operations or duplicative of 
other instructions. Additionally, many of the instructions from Parts 
101 and 201 are modified for centralized service company operations. 
The more significant additions, deletions and modifications to the 
instructions contained in Parts 101 and 201 of the Commission's 
regulations are discussed below.

[[Page 28466]]

    12. The instructions found in both Parts 101 and 201 of the 
Commission's regulations contain provisions for implementing the 
ratemaking principle of original cost. Under this principle, companies 
are required to record utility property in the plant in service 
accounts at the cost to the person who first devoted the property to 
public service. Although public utilities and natural gas companies 
frequently enter into property transactions in which the original cost 
concept is at issue, centralized service companies are expected to have 
few, if any, transactions in which that is the case. Moreover, 
centralized service companies can now provide centralized services to 
both utility and non-utility entities. In this context, the original 
cost accounting rules that exist for public utilities and natural gas 
companies would be difficult to apply to centralized service companies. 
Therefore, the proposed instructions in the Uniform System of Accounts 
for Centralized Service Companies do not contain the requirements that 
would otherwise be needed to implement the original cost concept. In 
proposed Sec.  367.50,\10\ Service company property to be recorded at 
cost, and Sec.  367.53,\11\ Service company property purchased or sold, 
we propose to modify Electric and Gas Plant Instructions Nos. 2 and 5, 
respectively, to require centralized service company property to be 
recorded at the cost of acquisition rather than its original cost. The 
instructions to proposed Sec.  367.53 also require centralized service 
companies to file journal entries with the Commission when acquired 
property is at a purchase price of $10 million or more and has been 
previously devoted to public service.\12\ This filing requirement 
provides the Commission and others the opportunity to monitor 
transactions involving property previously devoted to public service.
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    \10\ Proposed 18 CFR 367.50 is adopted from Electric Plant 
Instructions No. 2, Electric plant to be recorded at cost, and Gas 
Plant Instructions No. 2, Gas plant to be recorded at cost.
    \11\ Proposed 18 CFR 367.53 is adopted from Electric Plant 
Instructions No. 5, Electric plant purchased or sold, and Gas Plant 
Instructions No. 5, Gas plant purchased or sold.
    \12\ The $10 million threshold is consistent with the threshold 
for certain transactions subject to section 203 of the Federal Power 
Act, as amended by section 1289 of the Energy Policy Act of 2005. 
See Order No. 669, 71 FR 1348 (Jan. 6, 2006), FERC Stats. & Regs. ] 
31,200 (2005).
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    13. We propose to adopt in Sec.  367.23 an instruction for 
transactions with non-associate companies from the SEC's Uniform System 
of Accounts (17 CFR Sec.  265.01-2). This instruction requires that 
profits and losses on transactions with non-associate companies be 
recorded in Account 458.4, Excess or deficiency on servicing non-
associate utility companies (Sec.  367.4584), and Account 459.4, Excess 
or deficiency on servicing non-associate non-utility companies (Sec.  
367.4594), as appropriate. The instruction also requires centralized 
service companies to determine the sum of the closing balances, at the 
end of each calendar year, in Account 458.4 (Sec.  367.4584) and 
Account 459.4 (Sec.  367.4594). If the sum of the closing balances of 
these accounts combine to a net credit, the amount of the net credit 
must be deducted from amounts reimbursable by associate companies as 
compensation for use of capital invested in the centralized service 
company. By following this instruction, service companies will be 
required to channel net profits from transactions with non-associate 
companies to the associate companies within the holding company system. 
The Commission believes this requirement is appropriate and reasonable 
because centralized service companies should be not-for-profit in 
nature and provide services to associate companies at cost.\13\ 
Therefore, profits received outside of the holding company system 
should be used to reduce the cost of providing service to associate 
companies within the holding company system.
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    \13\ Not-for-profit as used here does not preclude a reasonable 
return on equity capital. In addition, in Order No. 667, the 
Commission allowed centralized service companies to continue to sell 
non-power goods and services to affiliated utilities ``at-cost.'' 
Order No. 667, FERC Stats. & Regs. ] 31,197 at P 14.
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    14. We propose to adopt instructions from Parts 101 and 201 of the 
Commission's regulations on extraordinary items \14\ with certain 
modifications in proposed Sec.  367.8. Under the instructions contained 
in Parts 101 and 201, an item can be accounted for as extraordinary, 
without prior Commission approval if the item is more than five percent 
of income before extraordinary items. We do not view this stipulation 
as practical for centralized service companies because service 
companies typically have little or no income. Therefore, we propose to 
eliminate this threshold requirement to recognize an extraordinary 
item, but will require centralized service companies to seek Commission 
approval to record all extraordinary items.
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    \14\ See General Instructions No. 7, Extraordinary items, in 
Parts 101 and 201 of the Commission's regulations.
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    15. In proposed Sec.  367.16, we propose to adopt, in part, 
instructions for accounting for long-term debt from Parts 101 and 201 
of the Commission's regulations.\15\ We are not adopting instructions 
pertaining to the rate principle of amortizing gains and losses on the 
reacquisition of long-term debt because centralized service companies 
are not rate regulated and such gains and losses should be recognized 
immediately in income.
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    \15\ See General Instructions No. 17, Long-term debt: Premium, 
discount and expense and gain or loss on reacquisition, in Parts 101 
and 201 of the Commission's regulations.
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    16. In proposed Sec.  367.58, we propose to adopt instructions for 
maintaining a work order system for all construction and retirements of 
service company property from Parts 101 and 201 of the Commission's 
regulations.\16\ Additionally, in proposed Sec.  367.31, the Commission 
proposes to adopt instructions from the SEC's Uniform System of 
Accounts for maintaining work order systems for accumulating 
reimbursable costs and charges to customers.\17\ The Commission 
believes it is necessary to adopt this additional instruction from the 
SEC's Uniform System of Accounts because this specific instruction is 
appropriate for this proposed Uniform System of Accounts and is not 
provided for in the instructions contained in Parts 101 and 201 of the 
Commission's regulations.
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    \16\ See Electric (Gas) Plant Instructions No. 11, Work order 
and property record system required in Parts 101 and 201 of the 
Commission's regulations.
    \17\ See 17 CFR 256.00-1(f), 256.03(c).
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    17. We note that there appears to be a regulatory gap vis-[aacute]-
vis Commission jurisdiction as it relates to service companies with 
electric utility company affiliates and natural gas company affiliates 
in PUHCA 2005. As a result of the definitions for holding company, 
holding company system, natural gas company, public-utility company, 
electric utility company and gas utility company in PUHCA 2005 section 
1262, it appears that the Commission can regulate holding companies 
with electric utility company affiliates as to their books, accounts, 
memoranda, and other records. On the other hand, it appears that PUHCA 
2005 would not grant the Commission authority to require service 
companies that have only natural gas company affiliates to comply with 
the Commission's financial accounting and reporting and records 
retention requirements; this is in contrast to holding companies with 
gas utility company affiliates, i.e., holding companies with natural 
gas local distribution company affiliates.\18\

[[Page 28467]]

Companies with only natural gas company affiliates would not be a 
holding company under PUHCA 2005. The Commission is seeking comments on 
how we should deal with this apparent regulatory gap under PUHCA 2005, 
e.g., what, if any, action the Commission might take under the Natural 
Gas Act. Commenters are invited to address (1) whether there is, in 
fact, a regulatory gap, (2) if there is a regulatory gap, whether there 
is a need to address the gap, and, (3) if so, how the Commission should 
address this gap under the Natural Gas Act.
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    \18\ In PUHCA 2005 section 1262, a holding company is any 
company that directly or indirectly owns, controls, or holds, with 
power to vote, 10 percent or more of the outstanding voting 
securities of a public-utility company or of a holding company of 
any public utility company. A public-utility company is an electric 
utility company or a gas utility company. An electric utility 
company is any company that owns or operates facilities used for the 
generation, transmission, or distribution of electric energy for 
sale. A gas utility company is any company that owns or operates 
facilities used for distribution at retail of natural or 
manufactured gas, i.e., a natural gas local distribution company.
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2. Balance Sheet Accounts
    18. The Commission proposes to adopt in the new Uniform Systems of 
Accounts for Centralized Service Companies most of the balance sheet 
accounts contained in Parts 101 and 201 of the Commission's 
regulations, and primary property Accounts 301 (Sec.  367.3010), 303 
(Sec.  367.3030) and 389 to 399.1 (Sec. Sec.  367.3890 to 367.3991). 
Accounts not adopted are considered not applicable to centralized 
service companies. In most instances, the non-applicability of those 
accounts to centralized service companies is apparent from the account 
instructions and further discussion as to the reason for not adopting 
them is not necessary. However, a few warrant comment.
    19. The Commission does not propose to adopt Accounts 102, Electric 
and Gas plant purchased or sold, 114, Electric and Gas plant 
acquisition adjustments, and 116, Other electric and gas plant 
acquisition adjustments, because, as discussed above, property acquired 
will be included in Account 101, Service company property (Sec.  
367.1010), at acquisition cost as opposed to original cost. As a 
result, these accounts are not necessary for centralized service 
companies.
    20. In addition, we are not adopting Accounts 118, Other utility 
plant, and 121, Non-utility property. These accounts are used by public 
utilities and natural gas companies to record the cost of property used 
exclusively in providing other utility services, e.g., water, railway, 
etc., or non-utility services. In the Commission's view, the corollary 
use of these accounts by centralized service companies would be to 
record in these accounts the cost of property used exclusively in 
providing services to non-utility customers or a non-service business 
activity. While we believe it is important that such investments be 
identified and disclosed, we feel that it can be done more 
appropriately by the use of a schedule as opposed to adopting a 
separate account. Therefore, we propose to include Schedule III-A, 
Summary of Service Company Property and Accumulated Provision for 
Depreciation and Amortization, in revised Form No. 60.
3. Income Statement Accounts
    21. The Commission proposes to incorporate income statement 
accounts contained in Parts 101 and 201 of the Commission's 
regulations. We modified the accounts related to expenses for non-
utility companies\19\ and revenue accounts. The additions, deletions 
and modifications to the income statement accounts contained in Parts 
101 and 201 that are proposed for inclusion in the Uniform System of 
Accounts for Centralized Service Companies are discussed further below.
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    \19\ A non-utility company is defined in proposed 18 CFR Sec.  
367.1 as ``a company that is not a utility company.''
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    22. The Commission is proposing to include in the Uniform System of 
Accounts for Centralized Service Companies the same instructions 
covering income tax accounting presently contained in Parts 101 and 201 
of the Commission's regulations. We are aware that those instructions 
need to be revised to reflect the liability method of accounting for 
income taxes that all other Commission jurisdictional companies now 
follow.\20\ However, the changes needed to integrate the liability 
method of accounting for income taxes into the Uniform Systems of 
Accounts and other Commission regulations are expected to be complex 
and should be taken up in a separate proceeding.\21\ Until that 
proceeding can be undertaken, centralized service companies and all 
other Commission jurisdictional companies should account for income 
taxes using the same rules as modified by an Accounting Guidance Letter 
dated April 23, 1993. This will, in our view, facilitate the 
preparation of consolidated financial statements.
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    \20\ See Accounting Guidance Letter AI93-50-000, Accounting for 
Income Taxes, (April 23, 1993).
    \21\ 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).
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    23. We do not propose to include the following accounts, as 
contained in Parts 101 and 201 of the Commission's regulations, because 
we do not anticipate centralized service companies having transactions 
that give rise to the use of these accounts:
     Account 404.1, Amortization and depletion of producing 
natural gas land and land rights.
     Account 404.2, Amortization of underground storage land 
and land rights.
     Account 406, Amortization of electric plant acquisition 
adjustments.
     Account 407, Amortization of property losses, unrecovered 
plant and regulatory study costs.
     Account 407.2, Amortization of conversion expense.
     Account 407.3, Regulatory debits.
     Account 407.4, Regulatory credits.
     Account 411.6, Gains from disposition of utility plant.
     Account 411.7, Losses from disposition of utility plant.
     Account 411.8, Gains from disposition of allowances.
     Account 411.9, Losses from disposition of allowances.
     Account 412, Revenues from electric plant leased to 
others.
     Account 413, Expenses of electric plant leased to others.
     Account 414, Other utility operating income.
     Account 417, Revenues from non-utility operations.
     Account 418, Non-operating rental income.
     Account 420, Investment tax credits.
     Account 428.1, Amortization of loss on reacquired debt.
     Account 429.1, Amortization of gain on reacquired debt--
Credit.
    24. We propose to add Account 417.1, Expenses of non-utility 
company related operations (Sec.  367.4171). This account will include 
expenses incurred in providing services to non-utility companies where 
the revenues from which are included in Account 459, Services rendered 
to non-utility companies (Sec.  367.4590). Expenses related to 
providing customer, sales or administrative and general services to 
non-utility companies will initially be recorded in the 900 series of 
accounts and transferred to Account 417.1 (Sec.  367.4171), through 
credits to Account 922, Administrative expenses transferred--Credit 
(Sec.  367.9220). The cost of other services provided to non-utility 
companies will be charged directly to Account 417.1 (Sec.  367.4171).
    25. We propose to add the following retained earnings accounts:
     Account 433, Balance transferred from income (Sec.  
367.4330).
     Account 436, Appropriations of retained earnings (Sec.  
367.4360).

[[Page 28468]]

     Account 437, Dividends declared-preferred stock (Sec.  
367.4370).
     Account 438, Dividends declared--common stock (Sec.  
367.4380).
     Account 439, Adjustments to retained earnings (Sec.  
367.4390).
    26. We propose to adopt retained earnings Accounts 215, 
Appropriated retained earnings (Sec.  367.2150), and 216, 
Unappropriated retained earnings (Sec.  367.2160), as balance sheet 
accounts to track changes in the retained earnings accounts. We also 
propose to revise Form No. 60 to reflect the use of these accounts.
    27. We do not propose adopting the following operating revenue 
accounts, contained in Parts 101 and 201 of the Commission's 
regulations:
     Account 440, Residential sales.
     Account 442, Commercial and industrial sales.
     Account 444, Public street and highway lighting.
     Account 445, Other sales to public authorities (Major 
only).
     Account 446, Sales to railroads and railways (Major only).
     Account 447, Sales for resale.
     Account 448, Interdepartmental sales.
     Account 449, Other sales (Non-major only).
     Account 449.1, Provision for rate refunds.
     Account 450, Forfeited discounts.
     Account 451, Miscellaneous service revenues.
     Account 453, Sales of water and water power.
     Account 454, Rent from electric property.
     Account 455, Interdepartmental rents.
     Account 456, Other electric revenues.
     Account 480, Residential sales.
     Account 481, Commercial and industrial sales.
     Account 482, Other sales to public authorities.
     Account 483, Sales for resale.
     Account 484, Interdepartmental sales.
     Account 485, Intracompany transfers.
    These accounts are for recording revenues from the sale of 
electricity or gas and transmission or transportation service. 
Transactions of this nature would not be entered into by centralized 
service companies. However, we propose to adopt new revenue control 
Accounts 457, Services rendered to associate utility companies (Sec.  
367.4570), 458, Services rendered to non-associate utility companies 
(Sec.  367.4580) and 459, Services rendered to non-utility companies 
(Sec.  367.4590).\22\ Each of these revenue control accounts will have 
a corresponding subaccount or direct labor account (Accounts 457.1, 
458.1 and 459.1 in Sec. Sec.  367.4571, 367.4581 and 367.4591), 
indirect labor account (Accounts 457.2, 458.2 and 459.2 in Sec. Sec.  
367.4572, 367.4582 and 367.4592) and an account for compensation for 
use of capital (Accounts 457.3, 458.3 and 459.3 in Sec. Sec.  367.4573, 
367.3593 and 367.4593). This differs slightly from the SEC's Uniform 
System of Accounts, which provided control accounts for aggregating 
revenues between associate and non-associate companies only. However, 
the SEC's requirements were developed under PUHCA 1935, which 
restricted registered holding companies and their associated companies 
to utility operations or directly related business interests. With the 
repeal of the PUHCA 1935 and the elimination of the distinction between 
registered and exempt holding companies,\23\ these restrictions no 
longer apply. As a consequence, we expect that centralized service 
companies may provide an increasing amount of services to non-utility 
companies. As an aid to monitoring the potential for cross 
subsidization, we believe that it is important to have accounts that 
aggregate financial information in a way that separately identifies and 
measures this activity. We propose including revenue Accounts 458.4, 
Excess or deficiency on servicing non-associate utility companies 
(Sec.  367.4584, and 459.4, Excess or deficiency on servicing non-
associate non-utility companies (Sec.  367.4594). These accounts are 
necessary to monitor and ensure that centralized service companies 
comply with the requirements that profits from services provided to 
non-associate companies are used to reduce the billings of associate 
companies and to ensure that losses are not automatically passed on to 
associate companies.
---------------------------------------------------------------------------

    \22\ A control account includes the total of the related 
subaccounts.
    \23\ Order No. 667 states, ``[a]lthough, as also discussed 
below, we will provide certain exemptions from PUHCA 2005, we will 
not re-create the PUHCA 1935 distinction between ``exempt'' and 
``registered'' holding companies.'' Order No. 667, FERC Stats. & 
Regs. ] 31,197 at P 10.
---------------------------------------------------------------------------

    28. We propose to include in the Uniform System of Accounts for 
Centralized Service Companies all of the 500 series of electric 
operation and maintenance expense accounts presently contained in Part 
101 of the Commission's regulations and all of the 800 series of gas 
operation and maintenance accounts contained in Part 201 of the 
Commission's regulations. Service companies use these accounts when 
providing utility-related services to utility companies. However, to 
avoid unnecessary duplication and to ensure that symmetry is maintained 
between the Uniform Systems of Accounts, we propose to direct service 
companies to use the 500 and 800 series of accounts contained in Parts 
101 and 201 of the Commission's regulations instead of including all of 
the 500 and 800 series of accounts in the Uniform System of Accounts 
for Centralized Service Companies.
    29. We propose to include in the Uniform System of Accounts for 
CentralizedService Companies all of the 900 series of expense accounts 
presently contained in Parts 101 and 201 of the Commission's 
regulations, except the following accounts:
     Account 906, Customer service and informational expenses 
(Non-major only).
     Account 917, Sales expenses (Non-major only).
     Account 927, Franchise requirements.
     Account 929, Duplicate charges--Credit.
     Account 933, Transportation expenses (Non-major)
    Accounts 906, 917 and 933 are non-major. Accounts 927 and 929 
relate to utility sales of electricity. We could not cross reference 
the 900 series accounts as we did for the 500 or 800 series of accounts 
because the individual account instructions in Part 101 differ from the 
counterpart instructions in Part 201. In order to eliminate confusion 
that might be caused by the differences, we modified the text of these 
accounts and propose to adopt them, as modified, as part of the Uniform 
System of Accounts for Centralized Service Companies.

B. Proposed Records Retention Requirements

    30. The Commission proposes to establish, as Part 368 of the 
Commission's regulations, records retention requirements for holding 
companies and service companies. We stress that, consistent with Order 
No. 667, while the proposed Uniform System of Accounts applies only to 
centralized service companies, i.e., service companies that are not 
special purpose companies, the proposed records retention requirements 
apply to all holding companies and service companies. The records 
retention requirements proposed generally are based on the requirements 
contained in Sec. Sec.  125.3 and 225.3 of the Commission's 
regulations, with certain modifications considered appropriate for 
holding companies and service companies.

[[Page 28469]]

These modifications implement reduced retention periods for certain 
holding company and service company records where the retention periods 
were longer under the SEC's requirements than the retention periods 
applicable to similar records in Sec. Sec.  125.3 and 225.3 of the 
Commission's regulations. In addition, the modifications incorporate 
certain records retention requirements that were not part of the 
Commission's regulations in Sec. Sec.  125.3 and 225.3 of the 
Commission's regulations.
    31. To the extent that the Commission's retention periods differ 
from other regulatory agency requirements, holding companies and 
service companies should retain records for the longer of the required 
retention periods.

C. Proposed Statements of Reports (Schedules)

    32. The Commission proposes to add as Part 369 of the Commission's 
regulations instructions for filing the Form No. 60. The instructions 
propose to require centralized service companies to prepare and file 
electronically with the Commission an annual report by April 18 for the 
previous calendar year. Also, the instructions require service 
companies that do not file Form No. 60 to file annually a narrative 
description of their functions.

D. Proposed Revised FERC Form No. 60

    33. The proposed changes, if adopted, will require revising the 
existing schedules in the Form No. 60 filed with the Commission. 
Revised Form No. 60 is included in Appendix A to this Notice of 
Proposed Rulemaking. We plan to develop submission software to provide 
for electronic filing of revised Form No. 60 similar to the software 
used for electronic filing of the Commission's other annual reporting 
forms, i.e., Form No. 1 and Form No. 2.
    34. The proposed revisions to revised Form No. 60 include:
    (1) The title of the form is changed to ``Annual Report of 
Centralized Service Companies''.
    (2) The format of the schedules is revised consistent with Annual 
Report Form Nos. 1 and 2 (Form Nos. 1 and 2). Instructions have been 
added to schedules, where necessary, because they are non-existent in 
the current Form No. 60. A new cover page is added similar to the cover 
page for Form Nos. 1 and 2.
    (3) Two instructional pages are added to replace existing 
instructions. This is consistent with Form Nos. 1 and 2. General 
Information Item No. III is added to indicate how Form No. 60 is to be 
submitted. General Instruction No. II is added to indicate that amounts 
should be reported in whole dollars. The current Form No. 60 
instruction allows reporting in whole dollars, thousands of dollars and 
millions of dollars. This revision is necessary for consistency. 
General Instruction No. IV is added consistent with the adoption of 
submission software. General Instruction No. VII is added to indicate 
the process of how resubmissions are to be filed.
    (4) Page 1 is revised consistent with Form Nos. 1 and 2 and a 
telephone number and an e-mail address for contact person designated to 
respond to questions about Form No. 60 has been added. There currently 
is no contact information except for a correspondence address. A 
Corporate Officer Certification has been added the same as for Forms 1 
and 2 and the Signature Clause page has been deleted.
    (5) The filing date for Form No. 60 is changed to April 18 from May 
1. April 18 filing date is consistent with the due date for most of the 
Commission's annual report forms that contain financial information.
    (6) Schedule I, Comparative Balance Sheet, is revised to include 
the balance sheet accounts proposed to be adopted herein.
    (7) Schedule II, Service Company Property, is revised to include 
the property accounts proposed to be adopted in this NOPR.
    (8) Schedule III-A, Summary of Service Company Property and 
Accumulated Provision for Depreciation and Amortization, is added to 
distinguish service company property devoted exclusively to utility-
related operations and property devoted exclusively to non-utility 
operations.
    (9) Schedule XI, Proprietary Capital, is revised to include a 
statement of retained earnings.
    (10) Schedule XV, Comparative Income Statement, is revised to 
include the income statement accounts proposed to be adopted herein.
    (11) Schedule XV-A, Schedule of Utility Company Operating Expenses 
is added to disclose operating expenses which were only summarized in 
Schedule XV, Comparative Income Statement.
    (12) Schedule, Analysis of Billing Associate Companies--Account 
457, is revised to only include associate utility companies. This is 
consistent with proposed Account 457.
    (13) Schedule, Analysis of Billing Non-associate Companies--Account 
458, is revised to only include non-associate utility companies. This 
is consistent with proposed Account 458.
    (14) A new schedule, Analysis of Billing Non-Utility Companies--
Account 459, is added to Form No. 60. This is consistent with proposed 
Account 459.
    (15) Schedule XVI--Analysis of Charges for Service--Associate and 
Non-associate Companies, is revised to reflect the breakdown of utility 
companies and non-utility companies proposed for Accounts 457, 458 and 
459.
    (16) Schedule XVII, Expense Distribution by Department or Service 
Function, is revised by adding all income statement accounts.

D. Proposed Conforming Revisions to Parts 366 and 375

    35. The Commission proposes to revise Sec. Sec.  366.21(b), 
366.22(a)(1) and (b)(1) and 366.23(a) of the Commission's regulations 
to conform to the new accounting, and records retention and reporting 
requirements proposed in this notice of proposed rulemaking.
    36. The Commission also proposes to revise Sec.  375.303(c), (d), 
(e), (f), (g) and (h) of the Commission's regulations to update the 
delegations to give to the Chief Accountant or the Chief Accountant's 
designee certain authorities related to service company financial 
accounting and reporting matters. These authorities are similar to 
those that the Chief Accountant has for public utilities and licensees, 
natural gas companies and oil pipeline companies.

E. Technical Conference

    37. In addition to providing an opportunity to comment on the 
regulations proposed in this Notice of Proposed Rulemaking, the 
Commission directs staff to hold a technical conference regarding the 
proposed Uniform System of Accounts, the records retention requirements 
and revised Form No. 60 to provide interested entities an opportunity 
to discuss the proposed regulations following the close of the comment 
period for this Notice of Proposed Rulemaking. Entities are invited to 
include a separate list of subjects they would like discussed at this 
technical conference in their comments.\24\
---------------------------------------------------------------------------

    \24\ This technical conference is distinct from the technical 
conference announced in Order No. 667. This technical conference 
will address the specific details associated with the proposed 
Uniform System of Accounts, records retention requirements and 
revised Form No. 60. The conference announced in Order No. 667, on 
the other hand, will address other issues identified in the PUHCA 
2005 and FPA section 203 final rules and rehearing orders on those 
rules.

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

[[Page 28470]]

IV. Information Collection Statement

    38. The following collections of information contained in this 
proposed rule have been submitted to the Office of Management and 
Budget (OMB) for review under section 3507(d) of the Paperwork 
Reduction Act of 1995.\25\ The Commission solicits comments on the 
Commission's need for this information, whether the information will 
have practical utility, the accuracy of the provided burden estimates, 
ways to enhance the quality, utility and clarity of the information to 
be collected or retained, and any suggested methods for minimizing 
respondents' burden, including the use of automated information 
techniques.
---------------------------------------------------------------------------

    \25\ 44 U.S.C. 3507(d).

                                             Estimated Annual Burden
----------------------------------------------------------------------------------------------------------------
                                                                                     Number of
                 Data collection                     Number of       Number of       hours per     Total annual
                                                    respondents      responses       response          hours
----------------------------------------------------------------------------------------------------------------
FERC form No. 60................................              38              38              10             380
FERC-555A (new).................................             300  ..............           1,080         324,000
                                                 ---------------------------------------------------------------
    Totals......................................  ..............  ..............  ..............         324,380
----------------------------------------------------------------------------------------------------------------

    Total Annual Hours for Collection (Reporting and Recordkeeping) = 
324,380.
    Information Collection Costs: The Commission seeks comments on the 
costs to comply with the requirements. It has projected the average 
annualized costs for all respondents to be the following:
    FERC Form 60 = 380 hours at $120 an hour (an average of 3 staff at 
$40 an hour) = $45,600.
    FERC-555A = The Commission projects an annualized average cost of 
all respondents as 324,000 hours at $68 an hour ($17 an hour, an 
average of 4 staff) = $22,032,000 (staffing) + $6,696,000 (storage) = 
$28,728,000. These costs assume that the average office storage space 
cost is $7,440 for retaining records on-site. (Usually records after 
the initial years are transferred to off-site where the storage costs 
drop to $925 (on average). As these requirements are being approved for 
an initial three year period, the assumption was made that during that 
period the records would be retained on-site.) These costs used as an 
example 120 cubic feet (20 four drawer file cabinets) and include the 
cubic feet of storage plus the cost of floor space plus the costs for 
records storage cartons. Greater savings can be accomplished if 
documents are stored electronically, i.e., one file cabinet (four 
drawer) (10,000 pages on average) = 500 MegaBytes (MByte) = one CD ROM. 
The Commission seeks comments on the costs to comply with these 
requirements. Total costs (reporting and recordkeeping) = $9,908,880.
    OMB regulations \26\ require OMB to approve certain information 
collection requirements imposed by agency rule. The Commission is 
submitting notification of this proposed rule to OMB. These information 
collection requirements are mandatory requirements.
---------------------------------------------------------------------------

    \26\ 5 CFR 1320.11.
---------------------------------------------------------------------------

    Title: Annual Report for Centralized Service Companies (Form No. 
60) and Preservation of Records for Service Companies Subject to PUHCA 
2005 (555A).
    Action: Proposed Collections.
    OMB Control Nos.: 1902-0215 (Form No. 60) and new FERC-555A (To Be 
Determined).
    Respondents: Businesses or other for profit.
    Frequency of Responses: Annually (Form No. 60) and recordkeeping 
(555A).
    Necessity of the Information: This proposed rule implements certain 
provisions of Title XII of the Energy Policy Act of 2005, by adding 
financial accounting requirements and reporting by centralized service 
companies and the establishment of recordkeeping requirements for both 
holding companies and service companies. Section 1275(b) provides for 
Commission review and authorization of cost allocations for non-power 
goods or services provided by service companies. In Order No. 667, the 
Commission prescribed, for an initial transition period, uniform 
financial accounting and reporting requirements for centralized service 
companies' requirements within holding companies and record retention 
requirements for both service companies and holding companies and that 
the modification of the Commission's Uniform System of Accounts and 
records retention requirements would be implemented later. However, 
upon further review, the decision was made to implement a new Uniform 
System of Accounts and records retention requirements to ensure a 
smoother transition for service companies and holding companies. The 
Commission has developed standardized accounting rules. These rules, 
contained in the new Uniform System of Accounts for Centralized Service 
Companies, are generally consistent with the accounting standards that 
must be followed by commercial enterprises. Timely reporting of the 
information is critical to monitoring the industry to ensure that 
practices are not discriminatory and that appropriate rates are 
charged. The official records maintained by the regulated companies are 
in accordance with schedules already set by the Commission in its 
regulations and already used by companies as the basis for required 
filings and reports with the Commission. In addition, the records will 
be used by the Commission's audit staff during compliance reviews and 
special analyses as deemed necessary by the Commission. The additional 
financial transparency required by these requirements will aid the 
Commission in meeting its oversight and market monitoring obligations 
and will benefit the public both as ratepayers and investors.
    Internal Review: The Commission has reviewed the proposed 
accounting and records retention requirements and made a preliminary 
determination that these requirements are necessary to implement Title 
XII of the Energy Policy Act of 2005. By adapting relevant parts of the 
SEC's Uniform System of Accounts and records retention rules to the 
Commission's Uniform System of Accounts and records retention 
requirements, facilitates the Commission's need to conduct 
examinations, audits and verification of this information for the 
protection of utility customers with respect to jurisdictional rates. 
These requirements conform to the Commission's plan for efficient 
information collection, communication and management within

[[Page 28471]]

the energy industry. The Commission has assured itself, by means of 
internal review, that there is specific, objective support for the 
burden estimates associated with the information requirements.
    Interested persons may obtain information on the reporting 
requirements by contacting the following: Federal Energy Regulatory 
Commission, 888 First Street, NE., Washington, DC 20426 [Attention: 
Michael Miller, Office of the Executive Director, Phone (202) 502-8415, 
fax: (202) 273-0873, e-mail: michael.miller@ferc.gov].
    For submitting comments concerning the collection(s) of information 
and the associated burden estimate(s), please send your comments to the 
contact listed above and to the Office of Management and Budget, Office 
of Information and Regulatory Affairs, Washington, DC 20503 [Attention: 
Desk Officer for the Federal Energy Regulatory Commission, phone (202) 
395-4650, fax: (202) 295-7285, e-mail: oira_submission@omb.eop.gov].

V. Environmental Analysis

    39. 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.\27\ The 
Commission has categorically excluded certain actions from this 
requirement as not having a significant effect on the human 
environment. Included in the exclusion are rules that carry out 
legislation, involve information gathering, analyses and dissemination, 
and involve accounting.\28\ These proposed rules, if finalized, carry 
out EPAct 2005, involve information gathering and analysis, and involve 
accounting, and, therefore, fall under these exclusions. Consequently, 
no environmental consideration is necessary.
---------------------------------------------------------------------------

    \27\ Regulations Implementing the National Environmental Policy 
Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats. & Regs. 
1986-1990 ] 30,783 (1987).
    \28\ 18 CFR 380.4(a)(3), (a)(5), (a)(16).
---------------------------------------------------------------------------

VI. Regulatory Flexibility Act Certification

    40. The Regulatory Flexibility Act of 1980 (RFA) requires 
rulemakings to contain either a description and analysis of the effect 
that the rule will have on small entities or a certification that the 
rule will not have a significant economic impact on a substantial 
number of small entities.\29\ Most holding companies to which the rules 
proposed herein, if finalized, would not fall within the RFA's 
definition of small entity.\30\ Consequently, the rules proposed 
herein, if finalized, will not have a ``significant economic impact on 
a substantial number of small entities.''
---------------------------------------------------------------------------

    \29\ 5 U.S.C. 603 (2000).
    \30\ 5 U.S.C. 601(3)(2000), citing to section 3 of the Small 
Business Act, 15 U.S.C. 632 (2000). Section 3 of the Small Business 
Act defines a ``small business concern'' as a business that is 
independently owned and operated and that is not dominant in its 
field of operation. 15 U.S.C. 632 (2000). The Small Business Size 
Standards component of the North American Industry Classification 
System (NAICS) defines, for example, a small electric utility as one 
that, including its affiliates, is primarily engaged in the 
generation, transmission, and/or distribution of electric energy for 
sale and whose total electric output for the preceding fiscal year 
did not exceed four million MWh. NAICS defines a natural gas 
pipeline company as one that transports natural gas and whose annual 
receipts (total income plus cost of goods sold) did not exceed $6.5 
million dollars for the preceding year. 13 CFR 121.201.
---------------------------------------------------------------------------

VII. Comment Procedures

    41. The Commission invites interested persons to submit comments on 
the matters and issues proposed in this notice to be adopted, including 
any related matters or alternative proposals that commenters may wish 
to discuss. Comments are due on or before June 15, 2006. Comments must 
refer to Docket No. RM06-11-000, and must include the commenter's name, 
the organization he or she represents, if applicable, and his or her 
address.
    42. Comments may be filed electronically via the eFiling link on 
the Commission's website at http://www.ferc.gov. The Commission accepts 

most standard word processing formats, and commenters may attach 
additional files with supporting information in certain other file 
formats. Commenters filing electronically do not need to make a paper 
filing.
    43. Commenters who are not able to file comments electronically 
must send an original and 14 copies of their comments to: Federal 
Energy Regulatory Commission, Office of the Secretary, 888 First 
Street, NE., Washington, DC 20426.
    44. All comments will be placed in the Commission's public files 
and may be viewed, printed, or downloaded remotely as described in the 
Document Availability section below. Commenters on this notice of 
proposed rulemaking are not required to serve copies of their comments 
on other commenters.

VIII. Document Availability

    45. 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 the Commission's home page http://www.ferc.gov and in 

the Commission's Public Reference Room during normal business hours 
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A, 
Washington, DC 20426.
    46. From the Commission's home page on the Internet, this 
information is available in the Commission's document management 
system, 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.
    47. User assistance is available for eLibrary and the Commission's 
website during normal business hours. For assistance, please contact 
FERC Online Support at 1-866-208-3676 (toll free) or 202-502-6652 (e-
mail at FERCOn-lineSupport@ferc.gov), or the Public Reference Room at 
202-502-8371, TTY 202-502-8659 (e-mail at 
public.referenceroom@ferc.gov).


List of Subjects

18 CFR Part 366

    Electric power, Natural gas, Reporting and recordkeeping 
requirements.

18 CFR Part 367

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

18 CFR Part 368

    Electric power, Natural gas, Reporting and recordkeeping 
requirements.

18 CFR Part 369

    Electric power, Natural gas, Reporting and recordkeeping 
requirements.

18 CFR Part 375

    Authority delegations (Government agencies), Seals and insignia, 
Sunshine Act.

    By direction of the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, the Commission proposes to amend 
parts 366 and 375 and to add parts 367, 368 and 369, Chapter I, Title 
18 of the Code of Federal Regulations, as follows:

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

    1. The authority citation for part 366 continues to read as 
follows:

    Authority: Pub. L. 109-58, 1261 et seq., 119 Stat. 594, 972 et 
seq.

    2. In Sec.  366.21, paragraph (b) is revised to read as follows:

[[Page 28472]]

Sec.  366.21  Accounts and records for holding companies.

* * * * *
    (b) Unless otherwise exempted or granted a waiver by Commission 
rule or order pursuant to Sec. Sec.  366.3 and 366.4 of this chapter, 
beginning January 1, 2007, all holding companies must comply with the 
Commission's records retention requirements for holding companies and 
service companies as prescribed in part 368 of this chapter. Until 
December 31, 2006, holding companies registered under the Public 
Utility Holding Company Act of 1935 (15 U.S.C. 79a et seq.) may follow 
either the Commission's records retention rules for public utilities 
and licensees or for natural gas companies, as appropriate (parts 125 
and 225 of this chapter), or the Securities and Exchange Commission's 
record retention rules in 17 CFR part 257.
* * * * *
    3. In Sec.  366.22, paragraphs (a)(1) and (b)(1) are revised to 
read as follows:


Sec.  366.22  Accounts and records of service companies.

    (a) Records retention requirements--(1) General. Unless otherwise 
exempted or granted a waiver by Commission rule or order pursuant to 
Sec. Sec.  366.3 and 366.4 of this chapter, beginning January 1, 2007, 
every service company must maintain and make available to the 
Commission such books, accounts, memoranda, and other records in such 
manner and preserve them for such periods as the Commission prescribes 
in part 368 of this chapter, in sufficient detail to permit 
examination, audit, and verification, as necessary and appropriate for 
the protection of utility customers with respect to jurisdictional 
rates.
* * * * *
    (b) Accounting requirements--(1) General. Unless otherwise exempted 
or granted a waiver by Commission rule or order pursuant to Sec. Sec.  
366.3 and 366.4 of this chapter, beginning January 1, 2007, every 
centralized service company (See Sec.  367.2 of this chapter) must 
maintain and make available to the Commission such books, accounts, 
memoranda, and other records as the Commission prescribes in part 367 
of this chapter, in sufficient detail to permit examination, audit, and 
verification, as necessary and appropriate for the protection of 
utility customers with respect to jurisdictional rates. Every such 
service company must maintain and make available such books, accounts, 
memoranda, and other records in such manner as are prescribed in part 
367 of this chapter, and must keep no other records with respect to the 
same subject matter except:
    (i) Records other than accounts;
    (ii) Records required by federal or state law;
    (iii) Subaccounts or supporting accounts which are not inconsistent 
with the accounts required either by the Uniform System of Accounts for 
Centralized Service Companies in part 367 of this chapter; and
    (iv) Any other accounts that may be authorized by the Commission.
* * * * *
    4. In Sec.  366.23, the section heading and paragraph (a) are 
revised to read as follows:


Sec.  366.23  FERC Form No. 60, Annual report of service companies, and 
FERC-61, Narrative description of service company functions.

    (a) General. (1) FERC Form No. 60. Unless otherwise exempted or 
granted a waiver by Commission rule or order pursuant to Sec. Sec.  
366.3 and 366.4 of this chapter, every centralized service company (See 
Sec.  367.2 of this chapter) in a holding company system must file with 
the Commission by May 1, 2006 and May 1, 2007, and by April 18 each 
year thereafter, an annual report, FERC Form No. 60, for the prior 
calendar year. Every report must be submitted on the FERC Form No. 60 
then in effect and shall be prepared in accordance with the 
instructions incorporated in that form.
    (2) FERC-61. Unless otherwise exempted or granted a waiver by 
Commission rule or order pursuant to Sec. Sec.  366.3 and 366.4 of this 
chapter, every service company in a holding company system, including a 
special-purpose company (e.g., a fuel supply company or a construction 
company), that does not file a FERC Form No. 60 shall instead file with 
the Commission by April 18, 2007 and by April 18 each year thereafter, 
a narrative description, FERC-61, of the service company's functions 
during the prior calendar year. In complying with this section, a 
holding company may make a single filing on behalf of all such service 
company subsidiaries.
    (3) For good cause shown, the Commission may extend the time within 
which any such report or narrative description required to be filed 
pursuant to paragraphs (a)(1) or (2) of this chapter is to be filed or 
waive the requirements applicable to any such report or narrative 
description.
* * * * *
    5. Part 367 is added to read as follows:

PART 367--UNIFORM SYSTEM OF ACCOUNTS FOR CENTRALIZED SERVICE 
COMPANIES SUBJECT TO THE PROVISIONS OF PUCHA 2005

Subpart A--Definitions
Sec.
367.1 Definitions.
Subpart B--General Instructions
367.2 Companies for which this system of accounts is prescribed.
367.3 Records.
367.4 Numbering system.
367.5 Accounting period.
367.6 Submittal of questions.
367.7 Item list.
367.8 Extraordinary items.
367.9 Prior period items.
367.10 Unaudited items.
367.11 Distribution of pay and expenses of employees.
367.12 Payroll distribution.
367.13 Accounting to be on accrual basis.
367.14 Transactions with associate companies.
367.15 Contingent assets and liabilities.
367.16 Long-term debt: Premium, discount and expense, and gain or 
loss on reacquisition.
367.17 Comprehensive inter-period income tax allocation.
367.18 Criteria for classifying leases.
367.19 Accounting for leases.
367.20 Depreciation accounting.
367.22 Accounting for asset retirement obligations
367.23 Transactions with non-associate companies.
367.24 Construction and service contracts for other companies.
367.25 Determination of service cost.
367.26 Departmental classification.
367.27 Billing procedures.
367.28 Methods of allocation.
367.29 Compensation for use of capital.
367.30 Work order system for associate companies.
Subpart C--Service Company Property Instructions
367.50 Service company property to be recorded at cost.
367.51 Components of construction.
367.52 Overhead construction costs.
367.53 Service Company property purchased or sold.
367.54 Expenditures on leased property.
367.55 Land and land rights.
367.56 Structures and improvements.
367.57 Equipment.
367.58 Work order and property record system required for service 
company property.
367.59 Additions and retirements of property.
Subpart D--Operating Expense Instructions
367.80 Supervision and engineering.
367.81 Maintenance.
367.82 Rents.
367.83 Training costs.
Subpart E--Special Instructions
367.100 Accounts 131-174, Current and accrued assets.

[[Page 28473]]

367.101 Accounts 231-243, Current and accrued liabilities.
367.102 Accounts 408.1 and 408.2, Taxes other than income taxes.
367.103 Accounts 409.1, 409.2, and 409.3, Income taxes.
367.104 Accounts 410.1, 410.2, 411.1, and 411.2, Provision for 
deferred income taxes.
367.105 Accounts 411.4, and 411.5, Investment tax credit 
adjustments.
367.106 Accounts 426.1, 426.2, 426.3, 426.4, and 426.5, 
Miscellaneous expense accounts.
Subpart F--Balance Sheet Chart of Accounts

Service Company Property

367.1010 Account 101, Service company property.
367.1011 Account 101.1, Property under capital leases.
367.1070 Account 107, Construction work in progress.
367.1080 Account 108, Accumulated provision for depreciation of 
service company property.
367.1110 Account 111, Accumulated provision for amortization of 
service company property.
367.1230 Account 123, Investment in associate companies.
367.1240 Account 124, Other investments.
367.1280 Account 128, Other special funds.

Current and Accrued Assets

367.1310 Account 131, Cash.
367.1340 Account 134, Other special deposits.
367.1350 Account 135, Working funds.
367.1360 Account 136, Temporary cash investments.
367.1410 Account 141, Notes receivable.
367.1420 Account 142, Customer accounts receivable.
367.1430 Account 143, Other accounts receivable.
367.1440 Account 144, Accumulated provision for uncollectible 
accounts--Credit.
367.1450 Account 145, Notes receivable from associate companies.
367.1460 Account 146, Accounts receivable from associate companies.
367.1520 Account 152, Fuel stock expenses undistributed.
367.1540 Account 154, Materials and operating supplies.
367.1630 Account 163, Stores expense undistributed.
367.1650 Account 165, Prepayments.
367.1710 Account 171, Interest and dividends receivable.
367.1720 Account 172, Rents receivable.
367.1730 Account 173, Accrued revenues.
367.1740 Account 174, Miscellaneous current and accrued assets.

Deferred Debits

367.1810 Account 181, Unamortized debt expense.
367.1830 Account 183, Preliminary survey and investigation charges.
367.1840 Account 184, Clearing accounts.
367.1850 Account 185, Temporary facilities.
367.1860 Account 186, Miscellaneous deferred debits.
367.1880 Account 188, Research, development and demonstration 
expenditures.
367.1900 Account 190, Accumulated deferred income taxes.

Proprietary Capital

367.2010 Account 201, Common stock issued.
367.2040 Account 204, Preferred stock issued.
367.2110 Account 211, Miscellaneous paid-in-capital.
367.2150 Account 215, Appropriated retained earnings.
367.2160 Account 216, Unappropriated retained earnings.
367.2161 Account 216.1, Unappropriated undistributed subsidiary 
earnings.
367.2190 Account 219, Accumulated other comprehensive income.

Long-Term Debt

367.2230 Account 223, Advances from associate companies.
367.2240 Account 224, Other long-term debt.
367.2250 Account 225, Unamortized premium on long-term debt.
367.2260 Account 226, Unamortized discount on long-term debt--Debit.

Other Noncurrent Liabilities

367.2270 Account 227, Obligations under capital lease--Non-current.
367.2300 Account 230, Assets retirement obligations.

Current and Accrued Liabilities

367.2310 Account 231, Notes payable.
367.2320 Account 232, Accounts payable.
367.2330 Account 233, Notes payable to associate companies.
367.2340 Account 234, Accounts payable to associate companies.
367.2360 Account 236, Taxes accrued.
367.2370 Account 237, Interest accrued.
367.2380 Account 238, Dividends declared.
367.2410 Account 241, Tax collections payable.
367.2420 Account 242, Miscellaneous current and accrued liabilities.
367.2430 Account 243, Obligations under capital leases--Current.

Deferred Credits

367.2530 Account 253, Other deferred credits.
367.2550 Account 255, Accumulated deferred investment tax credits.
367.2820 Account 282, Accumulated deferred income taxes--Other 
property.
367.2830 Account 283, Accumulated deferred income taxes--Other
Subpart G--Service Company Property Chart of Accounts
367.3010 Account 301, Organization.
367.3030 Account 303, Miscellaneous intangible property.
367.3890 Account 389, Land and land rights.
367.3900 Account 390, Structures and improvements.
367.3910 Account 391, Office furniture and equipment.
367.3920 Account 392, Transportation equipment.
367.3930 Account 393, Stores equipment.
367.3940 Account 394, Tools, shop and garage equipment.
367.3950 Account 395, Laboratory equipment.
367.3960 Account 396, Power operated equipment.
367.3970 Account 397, Communication equipment.
367.3980 Account 398, Miscellaneous equipment.
367.3990 Account 399, Other tangible property.
367.3991 Account 399.1, Asset retirement costs for service company 
property.
Subpart H--Income Statement Chart of Accounts

Service Company Operating Income

367.4000 Account 400, Operating revenues.
367.4010 Account 401, Operation expense.
367.4020 Account 402, Maintenance expense.
367.4030 Account 403, Depreciation expense.
367.4031 Account 403.1, Depreciation expense for asset retirement 
costs.
367.4040 Account 404, Amortization of limited-term property.
367.4050 Account 405, Amortization of other property.
367.4081 Account 408.1, Taxes other than income taxes, operating 
income.
367.4082 Account 408.2, Taxes other than income taxes, other income 
and deductions.
367.4091 Account 409.1, Income taxes, operating income.
367.4092 Account 409.2, Income taxes, other income and deductions.
367.4093 Account 409.3, Income taxes, extraordinary items.
367.4101 Account 410.1, Provision for deferred income taxes, 
operating income.
367.4102 Account 410.2, Provision for deferred income taxes, other 
income and deductions.
367.4111 Account 411.1, Provision for deferred income taxes--Credit, 
operating income.
367.4112 Account 411.2, Provision for deferred income taxes--Credit, 
other income and deductions.
367.4114 Account 411.4, Investment tax credit adjustments, service 
company property.
367.4115 Account 411.5, Investment tax credit adjustments, other.
367.4116 Account 411.10, Accretion expense.
367.4150 Account 415, Revenues from merchandising, jobbing and 
contract work.
367.4160 Account 416, Costs and expenses of merchandising, jobbing 
and contract work.
367.4171 Account 417.1, Expenses of non-utility related operations.
367.4181 Account 418.1, Equity in earnings of subsidiary companies.
367.4190 Account 419, Interest and dividend income.
367.4191 Account 419.1, Allowance for other funds used during 
construction.

[[Page 28474]]

367.4210 Account 421, Miscellaneous income or loss.
367.4211 Account 421.1, Gain on disposition of property.
367.4212 Account 421.2, Loss on disposition of property.
367.4250 Account 425, Miscellaneous amortization.
367.4261 Account 426.1, Donations.
367.4262 Account 426.2, Life insurance.
367.4263 Account 426.3, Penalties.
367.4264 Account 426.4, Expenditures for certain civic, political 
and related activities.
367.4265 Account 426.5, Other deductions.
367.4270 Account 427, Interest on long-term debt.
367.4280 Account 428, Amortization of debt discount and expense.
367.4290 Account 429, Amortization of premium on debt--Credit.
367.4300 Account 430, Interest on debt to associate companies.
367.4310 Account 431, Other interest expense.
367.4320 Account 432, Allowance for borrowed funds used during 
construction--Credit.
Subpart I--Retained Earnings Accounts
367.4330 Account 433, Balance transferred from income.
367.4340 Account 434, Extraordinary income.
367.4350 Account 435, Extraordinary deductions.
367.4360 Account 436, Appropriations of retained earnings.
367.4370 Account 437, Dividends declared--preferred stock.
367.4380 Account 438, Dividends declared--common stock.
367.4390 Account 439, Adjustments to retained earnings.
Subpart J--Operating Revenue Chart of Accounts
367.4570 Account 457, Services rendered to associate utility 
companies.
367.4571 Account 457.1, Direct costs charged to associate utility 
companies.
367.4572 Account 457.2, Indirect costs charged to associate utility 
companies.
367.4573 Account 457.3, Compensation for use of capital--associate 
utility companies.
367.4580 Account 458, Services rendered to non-associate utility 
companies.
367.4581 Account 458.1, Direct costs charged to non-associate 
utility companies.
367.4582 Account 458.2, Indirect costs charged to non-associate 
utility companies.
367.4583 Account 458.3, Compensation for use of capital--Non-
associate utility companies.
367.4584 Account 458.4, Excess or deficiency on servicing non-
associate utility companies.
367.4590 Account 459, Services rendered to non-utility companies.
367.4591 Account 459.1, Direct costs charged to non-utility 
companies.
367.4592 Account 459.2, Indirect costs charged to non-utility 
companies.
367.4593 Account 459.3, Compensation for use of capital--non-utility 
companies.
367.4594 Account 459.4, Excess or deficiency on servicing non-
associate utility companies.
Subpart K--Operation and Maintenance Expense Chart of Accounts
367.5000 Accounts 500-598, Electric operation and maintenance 
accounts.
367.8000 Accounts 800-894, Gas operation and maintenance accounts.
367.9010 Account 901, Supervision.
367.9020 Account 902, Meter reading expenses.
367.9030 Account 903, Customer records and collection expenses.
367.9040 Account 904, Uncollectible accounts.
367.9050 Account 905, Miscellaneous customer accounts expenses.
367.9070 Account 907, Supervision.
367.9080 Account 908, Customer assistance expenses.
367.9090 Account 909, Informational and instructional advertising 
expenses.
367.9100 Account 910, Miscellaneous customer service and 
informational expenses.
367.9110 Account 911, Supervision.
367.9120 Account 912, Demonstrating and selling expenses.
367.9130 Account 913, Advertising expenses.
367.9160 Account 916, Miscellaneous sales expenses.
367.9200 Account 920, Administrative and general salaries.
367.9210 Account 921, Office supplies and expenses.
367.9220 Account 922, Administrative expenses transferred--Credit.
367.9230 Account 923, Outside services employed.
367.9240 Account 924, Property insurance.
367.9250 Account 925, Injuries and damages.
367.9260 Account 926, Employee pensions and benefits.
367.9280 Account 928, Regulatory commission expense.
367.9301 Account 930.1, General advertising expenses.
367.9302 Account 930.2, Miscellaneous general expenses.
367.9310 Account 931, Rents.
367.9350 Account 935, Maintenance of structures and equipment.

    Authority: 42 U.S.C. 16451-16463.

Subpart A--Definitions


Sec.  367.1  Definitions.

    (a) When used in this system of accounts:
    (1) Accounts means the accounts prescribed by this Uniform System 
of Accounts.
    (2) Actually issued, as applied to securities issued or assumed by 
the service companies, means those which have been sold to bona fide 
purchasers for a valuable consideration, those issued as dividends on 
stock, and those which have been issued in accordance with contractual 
requirements direct to trustees of sinking funds.
    (3) Actually outstanding, as applied to securities issued or 
assumed by the service company, means those which have been actually 
issued and are neither retired nor held by or for the service company; 
provided, however, that securities held by trustees must be considered 
as actually outstanding.
    (4) Amortization means the gradual extinguishment of an amount in 
an account by distributing such amount over a fixed period, over the 
life of the asset or liability to which it applies, or over the period 
during which it is anticipated the benefit will be realized.
    (5) Associate company means any company in the same holding company 
system with such company.
    (6) Book cost means the amount at which property is recorded in 
these accounts without deduction of related provisions for accrued 
depreciation, amortization, or for other purposes.
    (7) Commission means the Federal Energy Regulatory Commission.
    (8) Company, when not otherwise indicated in the context, means a 
service company.
    (9) Construction, when used in the context of a service provided to 
other companies, means any construction, extension, improvement, 
maintenance, or repair of the facilities or any part thereof of a 
company, which is performed for a charge.
    (10) Cost means the amount of money actually paid for property or 
services. When the consideration given is other than cash in a purchase 
and sale transaction, as distinguished from a transaction involving the 
issuance of common stock in a merger, the value of such consideration 
must be determined on a cash basis.
    (11) Cost of removal means the cost of demolishing, dismantling, 
tearing down or otherwise removing service property, including the cost 
of transportation and handling incidental thereto. It does not include 
the cost of removal activities associated with asset retirement 
obligations that are capitalized as part of the tangible long-lived 
assets that give rise to the obligation. (See General Instructions in 
Sec.  367.22).
    (12) Debt expense means all expenses in connection with the 
issuance and initial sale of evidences of debt, such as fees for 
drafting mortgages and trust deeds; fees and taxes for issuing or 
recording evidences of debt; cost of engraving and printing bonds and 
certificates of indebtedness; fees paid trustees; specific costs of 
obtaining governmental authority; fees for legal services; fees and 
commissions paid underwriters, brokers, and salesmen for

[[Page 28475]]

marketing such evidences of debt; fees and expenses of listing on 
exchanges; and other like costs.
    (13) Depreciation, as applied to depreciable service company 
property, means the loss in service value not restored by current 
maintenance. Among the causes to be used as consideration for causes of 
loss in service value are wear and tear, decay, action of the elements, 
inadequacy, obsolescence, changes in the art, changes in demand and 
requirements of public authorities.
    (14) Direct cost includes the labor costs and expenses which can be 
identified through a work order system as being applicable to services 
performed for a single or group of associate and non-associate 
companies. Cost incidental to or related to a directly charged item 
must be classified as direct costs.
    (15) Discount, as applied to the securities issued or assumed by 
the service company, means the excess of the par (stated value of no-
par stocks) or face value of the securities plus interest or dividends 
accrued at the date of the sale over the cash value of the 
consideration received from their sale.
    (16) Electric utility company means any company that owns or 
operates facilities used for the generation, transmission, or 
distribution of electric energy for sale. For the purposes of this 
subchapter, ``electric utility company'' shall not include entities 
that engage only in marketing of electric energy.
    (17) Gas utility company means any company that owns or operates 
facilities used for distribution at retail (other than the distribution 
only in enclosed portable containers or distribution to tenants or 
employees of the company operating such facilities for their own use 
and not for resale) of natural or manufactured gas for heat, light, or 
power. For the purposes of this subchapter, ``gas utility company'' 
shall not include entities that engage only in marketing of natural and 
manufactured gas.
    (18) Goods means any goods, equipment (including machinery), 
materials, supplies, appliances, or similar property (including coal, 
oil, or steam, but not including electric energy, natural or 
manufactured gas, or utility assets) which is sold, leased, or 
furnished, for a charge.
    (19) Holding company--(i) In general. The term ``holding company'' 
means--
    (A) Any company that directly or indirectly owns, controls, or 
holds, with power to vote, 10 percent or more of the outstanding voting 
securities of a public-utility company or of a holding company of any 
public-utility company; and
    (B) Any person, determined by the Commission, after notice and 
opportunity for hearing, to exercise directly or indirectly (either 
alone or pursuant to an arrangement or understanding with one or more 
persons) such a controlling influence over the management or policies 
of any public-utility company or holding company as to make it 
necessary or appropriate for the rate protection of utility customers 
with respect to rates that such person be subject to the obligations, 
duties, and liabilities imposed by this subchapter upon holding 
companies.
    (ii) Exclusions. The term ``holding company'' must not include--
    (A) A bank, savings association, or trust company, or their 
operating subsidiaries that own, control, or hold, with the power to 
vote, public utility or public utility holding company securities so 
long as the securities are--
    (1) Held as collateral for a loan;
    (2) Held in the ordinary course of business as a fiduciary; or
    (3) Acquired solely for purposes of liquidation and in connection 
with a loan previously contracted for and owned beneficially for a 
period of not more than two years; or
    (B) A broker or dealer that owns, controls, or holds with the power 
to vote public utility or public utility holding company securities so 
long as the securities are--
    (1) Not beneficially owned by the broker or dealer and are subject 
to any voting instructions which may be given by customers or their 
assigns; or
    (2) Acquired in the ordinary course of business as a broker, 
dealer, or underwriter with the bona fide intention of effecting 
distribution within 12 months of the specific securities so acquired.
    (20) Holding company system means a holding company, together with 
its subsidiary companies.
    (21) Indirect cost includes the costs of a general overhead nature 
such as general services, housekeeping costs, and other support cost 
which cannot be separately identified to a single or group of associate 
and non-associate companies and, therefore, must be allocated. Indirect 
costs must be accumulated on a departmental basis.
    (22) Investment advances means advances, represented by notes or by 
book accounts only, with respect to which it is mutually agreed or 
intended between the creditor and debtor that they must be settled by 
the issuance of securities or must not be subject to current 
settlement.
    (23) Lease, capital means a lease of property used by the service 
company, which meets one or more of the criteria stated in General 
Instructions in Sec.  367.18.
    (24) Lease, operating means a lease of property used by a service 
company, which does not meet any of the criteria stated in General 
Instructions in Sec.  367.18.
    (25) Minor items of property means the associated parts or items of 
which retirement units are composed.
    (26) Natural gas company means a person engaged in the 
transportation of natural gas in interstate commerce or the sale of 
such gas in interstate commerce for resale.
    (27) Net salvage value means the salvage value of property retired 
less the cost of removal.
    (28) Nominally issued, as applied to securities issued or assumed 
by the service company, means those which have been signed, certified, 
or otherwise executed, and placed with the proper officer for sale and 
delivery, or pledged, or otherwise placed in some special fund of the 
service company, but which have not been sold, or issued direct to 
trustees of sinking funds in accordance with contractual requirements.
    (29) Nominally outstanding, as applied to securities issued or 
assumed by the service company, means those which, after being actually 
issued, have been reacquired by or for the service company under 
circumstances which require them to be considered as held alive and not 
retired, provided, however, that securities held by trustees must be 
considered as actually outstanding.
    (30) Non-associate companies means a person, partnership, 
organization, government body or company which is not a member of the 
holding company system.
    (31) Non-utility company means a company that is not a utility 
company.
    (32) Person means an individual or company.
    (33) Premium, as applied to securities issued or assumed by the 
service company, means the excess of the cash value of the 
consideration received from their sale over the sum of their par 
(stated value of no-par stocks) or face value and interest or dividends 
accrued at the date of sale.
    (34) Public utility means any person who owns or operates 
facilities used for transmission of electric energy in interstate 
commerce or sales of electric energy at wholesale in interstate 
commerce.
    (35) Public-utility company means an electric utility company or 
gas utility company.

[[Page 28476]]

    (36) Replacing or replacement, when not otherwise indicated in the 
context, means the construction or installation of service property in 
place of property retired, together with the removal of the property 
retired.
    (37) Research, development, and demonstration (RD&D) means 
expenditures incurred by a service company, for the service company or 
on behalf of others, either directly or through another person or 
organization (such as research institute, industry association, 
foundation, university, engineering company or similar contractor) in 
pursuing research, development, and demonstration activities including 
experiment, design, installation, construction, or operation. This 
definition includes expenditures for the implementation or development 
of new and/or existing concepts until technically feasible and 
commercially feasible operations are verified. When conducted on behalf 
of an associate or non-associate utility company such research, 
development, and demonstration costs should be reasonably related to 
the existing or future business of such company. The term includes, but 
is not limited to: all the costs incidental to the design, development 
or implementation of an experimental facility, a plant process, a 
product, a formula, an invention, a system or similar items, and the 
improvement of already existing items of a like nature; amounts 
expended in connection with the proposed development and/or proposed 
delivery of alternate sources of electricity or substitute or synthetic 
gas supplies (alternate fuel sources, for example, an experimental coal 
gasification plant or an experimental plant synthetically producing gas 
from liquid hydrocarbons); and the costs of obtaining its own patent, 
such as attorney's fees expended in making and perfecting a patent 
application. The term includes preliminary investigations and detailed 
planning of specific projects for securing for customers' non-
conventional electric power or pipeline gas supplies that rely on 
technology that has not been verified previously to be feasible. The 
term does not include expenditures for efficiency surveys; studies of 
management, management techniques and organization; consumer surveys, 
advertising, promotions, or items of a like nature.
    (38) Retained earnings means the accumulated net income of the 
service company less distribution to stockholders and transfers to 
other capital accounts.
    (39) Retirement units means those items of property which, when 
retired, with or without replacement, are accounted for by crediting 
the book cost of the retirement units to the property account in which 
it is included.
    (40) Salvage value means the amount received for property retired, 
less any expenses incurred in connection with the sale or in preparing 
the property for sale; or, if retained, the amount at which the 
material recoverable is chargeable to materials and supplies, or other 
appropriate account.
    (41) Service means any managerial, financial, legal, engineering, 
purchasing, marketing, auditing, statistical, advertising, publicity, 
tax, research, or any other service (including supervision or 
negotiation of construction or of sales), information or data, which is 
sold or furnished for a charge.
    (42) Service company means any associate company within a holding 
company system organized specifically for the purpose of providing non-
power goods or services or the sale of goods or construction work to 
any public utility in the same holding company system.
    (43) Service cost means the total of direct and indirect costs 
incurred to provide a service to an associate or non-associate company 
which are properly charged to expense by the service company.
    (44) Service life means the time between the date property is 
placed in service, or property is leased to others, and the date of its 
retirement. If depreciation is accounted for on a production basis 
rather than on a time basis, then service life should be measured in 
terms of the appropriate unit of production.
    (45) Service value means the difference between the cost and net 
salvage value of service property.
    (46) State commission means any commission, board, agency, or 
officer, by whatever name designated, of a State, municipality, or 
other political subdivision of a State that, under the laws of such 
State, has jurisdiction to regulate public-utility companies.
    (47) Uniform System of Accounts means the Uniform System of 
Accounts for Centralized Service Companies prescribed in this part, as 
amended from time to time.
    (48) Utility company means a public-utility company or natural gas 
company whose rates are regulated by the Commission, state commission 
or other similar regulatory body.
    (49) Work order system means a system for the accumulation of 
service company cost on a job, project, or functional basis. It 
includes schedules and worksheets used to account for charges billed to 
single and groups of associate and non-associate companies.

Subpart B--General Instructions


Sec.  367.2  Companies for which this system of accounts is prescribed.

    (a) This Uniform System of Accounts applies to any centralized 
service company operating, or organized specifically to operate, within 
a holding company system for the purpose of providing non-power 
services to any public utility in the same holding company system. A 
centralized service company is not a special-purpose company (e.g., a 
fuel supply company or a construction company), but rather is a service 
company that provides services such as administrative, managerial, 
financial, accounting, recordkeeping, legal or engineering services, 
which are sold, furnished, or otherwise provided (typically for a 
charge) to other companies in the same holding company system. To the 
extent that the term service company is used in this Uniform System of 
Accounts, it applies only to centralized service companies.
    (b) This Uniform System of Accounts is not applicable to:
    (1) Service companies that are specifically organized as a special-
purpose company such as a fuel supply company or a construction 
company.
    (2) Electric or gas utility companies.
    (3) Companies primarily engaged:
    (i) In the production of goods, including exploration and 
development of fuel resources,
    (ii) In the provision of water, telephone, or similar services, the 
sale of which is normally subject to public rate regulation,
    (iii) In the provision of transportation, whether or not regulated, 
or
    (iv) In the ownership of property, including leased property and 
fuel reserves, for the use of associate companies.
    (4) A service company that provides services exclusively to a local 
gas distribution company.


Sec.  367.3  Records.

    (a) Each service company must keep its books of account, and all 
other books, records, and memoranda that support the entries in the 
books of account, so as to be able to furnish full information on any 
item included in any account. Each entry must be supported by 
sufficient detailed information that will permit ready identification, 
analysis, and verification of all facts relevant and related to the 
records.
    (b) The books and records referred to in this part include not only 
accounting

[[Page 28477]]

records in a limited technical sense, but all other records, such as 
minutes books, stock books, reports, correspondence, and memoranda, 
that may be useful in developing the history of or facts regarding any 
transaction.
    (c) No service company may destroy any books or records unless the 
destruction is permitted by the rules and regulations of the 
Commission.
    (d) In addition to prescribed accounts, clearing accounts, 
temporary or experimental accounts, and subaccounts of any accounts may 
be kept, provided the integrity of the prescribed accounts is not 
impaired.
    (e) The arrangement or sequence of the accounts prescribed in this 
part must not be controlling as to the arrangement or sequence in 
report forms that may be prescribed by the Commission.


Sec.  367.4  Numbering system.

    (a) The account numbering plan used in this part consists of a 
system of three-digit whole numbers as follows:
    (1) 100-199, Assets and other debits.
    (2) 200-299, Liabilities and other credits.
    (3) 300-399, Property accounts.
    (4) 400-432 and 434-435, Income accounts.
    (5) 433, 436 and 439, Retained earnings accounts.
    (6) 457-459, Revenue accounts.
    (7) 500-599, Electric operating expenses.
    (8) 800-894, Gas operating expenses.
    (9) 900-949, Customer accounts, customer service and informational, 
sales, and general and administrative expenses.
    (b) The numbers prefixed to account titles are to be considered as 
parts of the titles. Each service company, however, may adopt for its 
own purposes a different system of account numbers (See also General 
Instructions in Sec.  367.3(d)) provided that the numbers prescribed in 
this part must appear in the descriptive headings of the ledger 
accounts and in the various sources of original entry; however, if a 
service company uses a different system of account numbers and it is 
not practicable to show the prescribed account numbers in the various 
sources of original entry, the reference to the prescribed account 
numbers may be omitted from the various sources of original entry. Each 
service company using different account numbers for its own purposes 
must keep readily available a list of the account numbers that it uses 
and a reconciliation of those account numbers with the account numbers 
provided in this part. It is intended that the service company's 
records must be kept so as to permit ready analysis by prescribed 
accounts (by direct reference to sources of original entry to the 
extent practicable) and to permit preparation of financial and 
operating statements directly from the records at the end of each 
accounting period according to the prescribed accounts.


Sec.  367.5  Accounting period.

    Each service company must keep its books on a monthly basis so that 
for each month all transactions applicable to the account, as nearly as 
may be ascertained, must be entered in the books of the service 
company. Amounts applicable or assignable to a single or group of 
associate and non-associate companies must be segregated monthly. Each 
service company must close its books at the end of each calendar year 
unless otherwise authorized by the Commission.


Sec.  367.6  Submittal of questions.

    To maintain uniformity of accounting, service companies must submit 
questions of doubtful interpretation to the Commission for 
consideration and decision.


Sec.  367.7  Item list.

    Lists of items appearing in the texts of the accounts or elsewhere 
in this part are for the purpose of indicating clearly the application 
of the prescribed accounting. The lists are intended to be 
representative, but not exhaustive. The appearance of an item in a list 
warrants the inclusion of the item in the account mentioned only when 
the text of the account also indicates inclusion inasmuch as the same 
item frequently appears in more than one list. The proper entry in each 
instance must be determined by the texts of the accounts.


Sec.  367.8  Extraordinary items.

    Those items related to the effects of events and transactions that 
have occurred during the current period and that are of an unusual 
nature and infrequent occurrence must be considered extraordinary 
items. Accordingly, there will be events and transactions of 
significant effect that are abnormal and significantly different from 
the ordinary and typical activities of the service company, and that 
would not reasonably be expected to recur in the foreseeable future. In 
determining significance, items must be considered individually and not 
in the aggregate. However, the effects of a series of related 
transactions arising from a single specific and identifiable event or 
plan of action should be considered in the aggregate. For an item to be 
recognized as extraordinary, Commission approval must be obtained. (See 
Accounts 434 and 435 in Sec. Sec.  367.4340 and 367.4350.)


Sec.  367.9  Prior period items.

    (a) Items of profit and loss related to the following must be 
accounted for as prior period adjustments and excluded from the 
determination of net income for the current year:
    (1) Correction of an error in the financial statements of a prior 
year.
    (2) Adjustments that result from realization of income tax benefits 
of pre-acquisition operating loss carry forwards of purchased 
subsidiaries.
    (b) All other items of profit and loss recognized during the year 
must be included in the determination of net income for that year.


Sec.  367.10  Unaudited items.

    Whenever a financial statement is required by the Commission, if it 
is known that a transaction has occurred that affects the accounts but 
the amount involved in the transaction and its effect upon the accounts 
cannot be determined with absolute accuracy, the amount must be 
estimated and the estimated amount included in the proper accounts. The 
service company is not required to anticipate minor items that would 
not appreciably affect the accounts.


Sec.  367.11  Distribution of pay and expenses of employees.

    The charges to property, operating expense and other accounts for 
services and expenses of employees engaged in activities chargeable to 
various accounts, such as construction, maintenance, and operations, 
must be based upon the actual time engaged in the respective classes of 
work, or an appropriate allocation method.


Sec.  367.12  Payroll distribution.

    Underlying accounting data must be maintained so that the 
distribution of the cost of labor charged direct to the various 
accounts will be readily available. The underlying data must permit a 
reasonably accurate distribution to be made of the cost of labor 
charged initially to clearing accounts so that the total labor cost may 
be classified among construction, cost of removal, operating functions.


Sec.  367.13  Accounting to be on accrual basis.

    (a) The service company is required to keep its accounts on the 
accrual basis. This requires the inclusion in its accounts of all known 
transactions of appreciable amount that affect the accounts. If bills 
covering the transactions have not been received or

[[Page 28478]]

rendered, the amounts must be estimated and appropriate adjustments 
made when the bills are received. When the amount is ascertained, the 
necessary adjustments must be made through the accounts in which the 
estimate was recorded. If it is determined during the interval that a 
material adjustment will be required, the estimate must be adjusted 
through the current accounts. The service company is not required to 
anticipate minor items which would not appreciably affect these 
accounts.
    (b) When payments are made in advance for items such as insurance, 
rents, taxes or interest, the amount applicable to future periods must 
be charged to account 165, Prepayments (Sec.  367.1650), and spread 
over the periods to which they are applicable by credits to account 165 
(Sec.  367.1650), and charges to the accounts appropriate for the 
expenditure.


Sec.  367.14  Transactions with associate companies.

    Each service company must keep its accounts and records so as to be 
able to furnish accurately and expeditiously statements of all 
transactions with associate companies. The statements may be required 
to show the general nature of the transactions, the amounts involved in 
the transactions and the amounts included in each account prescribed in 
this part with respect to such transactions. Transactions with 
associate companies must be recorded in the appropriate accounts for 
transactions of the same nature. Nothing contained in this part, 
however, must be construed as restraining the service company from 
subdividing accounts for the purpose of recording separately 
transactions with associate companies.


Sec.  367.15  Contingent assets and liabilities.

    Contingent assets represent a possible source of value to the 
service company contingent upon the fulfillment of conditions regarded 
as uncertain. Contingent liabilities include items that, under certain 
conditions, may become obligations of the service company but that are 
neither direct nor assumed liabilities at the date of the balance 
sheet. The service company must be prepared to give a complete 
statement of significant contingent assets and liabilities (including 
cumulative dividends on preference stock) in its annual report and at 
such other times as may be requested by the Commission.


Sec.  367.16  Long-term debt: Premium, discount and expense, and gain 
or loss on reacquisition.

    (a) A separate premium, discount and expense account must be 
maintained for each class and series of long-term debt (including 
receivers' certificates) issued or assumed by the service company. The 
premium must be recorded in account 225, Unamortized premium on long-
term debt (Sec.  367.2250), the discount must be recorded in account 
226, Unamortized discount on long-term debt--Debit (Sec.  367.2260), 
and the expense of issuance must be recorded in account 181, 
Unamortized debt expense (Sec.  367.1810). The premium, discount and 
expense must be amortized over the life of the respective issues under 
a plan that will distribute the amounts equitably over the life of the 
securities. The amortization must be on a monthly basis, and the 
amounts relating to discounts and expenses must be charged to account 
428, Amortization of debt discount and expense (Sec.  367.4280). The 
amounts relating to premiums must be credited to account 429, 
Amortization of premium on debt--Credit (Sec.  367.4290).
    (b) When long-term debt is reacquired the difference between the 
amount paid upon reacquisition of any long-term debt and the face 
value, adjusted for unamortized discount, expenses or premium, as the 
case may be, applicable to the debt redeemed must be recognized 
currently in income and recorded in account 421, Miscellaneous income 
or loss (Sec.  367.4210), or account 426.5, Other deductions (Sec.  
367.4265).


Sec.  367.17  Comprehensive inter-period income tax allocation.

    (a) Where there are timing differences between the periods in which 
transactions affect taxable income and the periods in which they enter 
into the determination of pretax accounting income, the income tax 
effects of such transactions are to be recognized in the periods in 
which the differences between book accounting income and taxable income 
arise and in the periods in which the differences reverse using the 
deferred tax method. In general, comprehensive inter-period tax 
allocation should be followed whenever transactions enter into the 
determination of pretax accounting income for the period even though 
some transactions may affect the determination of taxes payable in a 
different period, as further qualified in this section.
    (b) Once comprehensive inter-period tax allocation has been 
initiated, either in whole or in part, it must be practiced on a 
consistent basis and must not be changed or discontinued without prior 
Commission approval.
    (c) Tax effects deferred currently will be recorded as deferred 
debits or deferred credits in accounts 190, Accumulated deferred income 
taxes (Sec.  367.1900), 282, Accumulated deferred income taxes--Other 
property (Sec.  367.2820), and 283, Accumulated deferred income taxes--
Other (Sec.  367.2830), as appropriate. The resulting amounts recorded 
in these accounts must be disposed of as prescribed in this system of 
accounts or as otherwise authorized by the Commission.


Sec.  367.18  Criteria for classifying leases.

    (a) If, at its inception, a lease meets one or more of the 
following criteria, the lease must be classified as a capital lease. 
Otherwise, it must be classified as an operating lease.
    (1) The lease transfers ownership of the property to the lessee by 
the end of the lease term.
    (2) The lease contains a bargain purchase option.
    (3) The lease term is equal to 75 percent or more of the estimated 
economic life of the leased property. However, if the beginning of the 
lease term falls within the last 25 percent of the total estimated 
economic life of the leased property, including earlier years of use, 
this criterion must not be used for purposes of classifying the lease.
    (4) The present value at the beginning of the lease term of the 
minimum lease payments, excluding that portion of the payments 
representing executory costs such as insurance, maintenance, and taxes 
to be paid by the lessor, including any related profit, equals or 
exceeds 90 percent of the excess of the fair value of the leased 
property to the lessor at the inception of the lease over any related 
investment tax credit retained by the lessor and expected to be 
realized by the lessor. However, if the beginning of the lease term 
falls within the last 25 percent of the total estimated economic life 
of the leased property, including earlier years of use, this criterion 
must not be used for purposes of classifying the lease. The lessee must 
compute the present value of the minimum lease payments using its 
incremental borrowing rate, unless:
    (i) It is practicable for the company to learn the implicit rate 
computed by the lessor, and
    (ii) The implicit rate computed by the lessor is less than the 
lessee's incremental borrowing rate.
    (iii) If both of those conditions are met, the lessee must use the 
implicit rate.
    (b) If, at any time, the lessee and lessor agree to change the 
provisions of the lease, other than by renewing the lease would have 
resulted in a different classification of the lease under the criteria 
in paragraph (a) of this section had the changed terms been in effect 
at the inception of the lease, the revised

[[Page 28479]]

agreement must be considered as a new agreement over its term, and the 
criteria in paragraph (a) of this section must be applied for purposes 
of classifying the new lease. Likewise, any action that extends the 
lease beyond the expiration of the existing lease term, such as the 
exercise of a lease renewal option other than those already included in 
the lease term, must be considered as a new agreement and must be 
classified according to the criteria in paragraph (a) of this section. 
Changes in estimates (for example, changes in estimates of the economic 
life or of the residual value of the leased property) or changes in 
circumstances (for example, default by the lessee) must not give rise 
to a new classification of a lease for accounting purposes.


Sec.  367.19  Accounting for leases.

    (a) All leases must be classified as either capital or operating 
leases.
    (b) The service company must record a capital lease as an asset in 
account 101.1, Property under capital leases (Sec.  367.1011) and an 
obligation in account 227, Obligations under capital leases--Non-
current (Sec.  367.2270), or account 243, Obligations under capital 
leases--Current (Sec.  367.2430), at an amount equal to the present 
value at the beginning of the lease term of minimum lease payments 
during the lease term, excluding that portion of the payments 
representing executory costs such as insurance, maintenance, and taxes 
to be paid by the lessor, together with any related profit. However, if 
the determined amount exceeds the fair value of the leased property at 
the inception of the lease, the amount recorded as the asset and 
obligation must be the fair value.
    (c) The service company, as a lessee, must recognize an asset 
retirement obligation (See General Instructions in Sec.  367.22) 
arising from the property under a capital lease unless the obligation 
is recorded as an asset and liability under a capital lease. The 
service company must record the asset retirement cost by debiting 
account 101.1, Property under capital leases (Sec.  367.1011), and 
crediting the liability for the asset retirement obligation in account 
230, Asset retirement obligations (Sec.  367.2300). Asset retirement 
costs recorded in account 101.1 (Sec.  367.1011) must be amortized by 
charging rent expense (See Operating Expense Instructions in Sec.  
367.82) or account 421, Miscellaneous income or loss (Sec.  367.4210), 
as appropriate, and crediting a separate subaccount of the account in 
which the asset retirement costs are recorded. Charges for the periodic 
accretion of the liability in account 230, Asset retirement obligations 
(Sec.  367.2300), must be recorded by a charge to account 411.10, 
Accretion expense, for service company property (Sec.  367.4111), and 
account 421, Miscellaneous income or loss, for non-service company 
property (Sec.  367.4210) and a credit to account 230, Asset retirement 
obligations (Sec.  367.2300).
    (d) Rental payments on all leases must be charged to rent expense, 
fuel expense, construction work in progress, or other appropriate 
accounts as they become payable.
    (e) For a capital lease, for each period during the lease term, the 
amounts recorded for the asset and obligation must be reduced by an 
amount equal to the portion of each lease payment that would have been 
allocated to the reduction of the obligation, if the payment had been 
treated as a payment on an installment obligation (liability) and 
allocated between interest expense and a reduction of the obligation so 
as to produce a constant periodic rate of interest on the remaining 
balance.


Sec.  367.20  Depreciation accounting.

    (a) Method. Service companies must use a method of depreciation 
that allocates in a systematic and rational manner the service value of 
depreciable property over the service life of the property.
    (b) Service lives. Estimated useful service lives of depreciable 
property must be supported by engineering, economic, or other 
depreciation studies.
    (c) Rate. Service companies must use percentage rates of 
depreciation that are based on a method of depreciation that allocates 
the service value of depreciable property over the service life of the 
property. Where composite depreciation rates are used, they must be 
based on the weighted average estimated useful service lives of the 
depreciable property comprising the composite group.


Sec.  367.22  Accounting for asset retirement obligations.

    (a) An asset retirement obligation represents a liability for the 
legal obligation associated with the retirement of a tangible, long-
lived asset that a service company is required to settle as a result of 
an existing or enacted law, statute, ordinance, or written or oral 
contract, or by legal construction of a contract under the doctrine of 
promissory estoppel. An asset retirement cost represents the amount 
capitalized when the liability is recognized for the long-lived asset 
that gives rise to the legal obligation. The amount recognized for the 
liability and an associated asset retirement cost must be stated at the 
fair value of the asset retirement obligation in the period in which 
the obligation is incurred.
    (b) The service company must initially record a liability for an 
asset retirement obligation in account 230, Asset retirement 
obligations (Sec.  367.2300), and charge the associated asset 
retirement costs to service company property (including account 101.1 
in Sec.  367.1011) related to the property that gives rise to the legal 
obligation. The asset retirement cost must be depreciated over the 
useful life of the related asset that gives rise to the obligations. 
For periods subsequent to the initial recording of the asset retirement 
obligation, a service company must recognize the period to period 
changes of the asset retirement obligation that result from the passage 
of time due to the accretion of the liability and any subsequent 
measurement changes to the initial liability for the legal obligation 
recorded in account 230, Asset retirement obligations (Sec.  367.2300), 
as follows:
    (1) The service company must record the accretion of the liability 
by debiting account 411.10, Accretion expense (Sec.  367.4116); and
    (2) The service company must recognize any subsequent measurement 
changes of the liability initially recorded in account 230, Asset 
retirement obligations (Sec.  367.2300), for each specific asset 
retirement obligation as an adjustment of that liability in account 230 
with the corresponding adjustment to service company property. The 
service company must on a timely basis monitor any measurement changes 
of the asset retirement obligations.
    (c) Gains or losses resulting from the settlement of asset 
retirement obligations associated with service company property 
resulting from the difference between the amount of the liability for 
the asset retirement obligation included in account 230, Asset 
retirement obligations(Sec.  367.2300), and the actual amount paid to 
settle the obligation shall be accounted for as follows:
    (1) Gains shall be credited to account 421, Miscellaneous income or 
loss (Sec.  367.4210), and;
    (2) Losses shall be charged to account 426.5, Other deductions 
(Sec.  367.4265).
    (d) Separate subsidiary records must be maintained for each asset 
retirement obligation showing the initial liability and associated 
asset retirement cost, any incremental amounts of the liability 
incurred in subsequent reporting periods for additional layers of the 
original liability and related asset retirement cost, the accretion of 
the

[[Page 28480]]

liability, the subsequent measurement changes to the asset retirement 
obligation, the depreciation and amortization of the asset retirement 
costs and related accumulated depreciation, and the settlement date and 
actual amount paid to settle the obligation. For purposes of analysis, 
a service company must maintain supporting documentation so as to be 
able to furnish accurately and expeditiously with respect to each asset 
retirement obligation the full details of the identity and nature of 
the legal obligation, the year incurred, the identity of the plant 
giving rise to the obligation, the full particulars relating to each 
component and supporting computations related to the measurement of the 
asset retirement obligation.


Sec.  367.23  Transactions with non-associate companies.

    When a service or construction is performed for non-associate 
companies at an amount other than cost, the amount of revenues in 
excess or deficiency of the cost on servicing the non-associate 
companies must be charged to account 458.4, Excess or deficiency on 
servicing non-associate utility companies (Sec.  367.4584), or account 
459.4, Excess or deficiency on servicing non-associate non-utility 
companies(Sec.  367.4594), as appropriate. A deficiency incurred in a 
project deemed beneficial to the associate companies may be charged to 
associate companies subject to disallowance by a State Commission or 
Federal Commission having jurisdiction over the rates or services of 
the associate companies. To the extent not charged, or if disallowed, 
the deficiency will be charged to account 458.4 (Sec.  367.4584) or 
account 459.4 (Sec.  367.4594), as appropriate. In computing charges to 
associate companies for any calendar year, the sum of the closing 
balances in these accounts, if a credit, must be deducted from amounts 
reimbursable by associate companies as compensation for use of capital 
invested in the service company.


Sec.  367.24  Construction and service contracts for other companies.

    (a) Specific accounts have not been provided to classify 
expenditures made in the performance of construction or service 
contracts, under which the service company undertakes projects to 
construct physical property for associate or non-associate companies. 
The service company must keep records pursuant to its work order system 
indicating the cost of each contract or project, the amount of service 
costs allocated to the contracts, and the additional classification of 
expenditures relating to projects that will meet the accounting 
requirements of the company for which the work is performed.
    (b) Service costs allocated to construction must include the proper 
proportion of salaries, expense of officers and employees, pay of 
employees on the service company's regular staff specifically assigned 
to construction work, and other expenses of maintaining the service 
company's organization and equipment. Cost of materials, construction 
payrolls, outside services, and other expenses directly attributable to 
construction work must be excluded from the accounting system of the 
service company and charged directly by the vendor or supplier to the 
construction project.
    (c) Service costs allocated to centralized procurement activities 
must include only the cost of the support services performed by the 
service company in connection with the procurement of goods for 
associate companies. Cost of goods procured must be excluded from the 
accounting system of the service company and charged directly by the 
vendor or supplier to the associate company concerned. The service 
company must keep records indicating the cost of goods, if any, that it 
procures for each associate company and the amount of service costs 
allocated thereto. These records must be maintained to meet the 
Commission's accounting requirements for electric and gas companies.


Sec.  367.25  Determination of service cost.

    A service must be deemed at cost and fair allocation of costs 
requires an accurate accounting for the elements that makes up the 
aggregate expense of conducting the business of the service company. In 
the accounts prescribed in this part, the total amounts included in the 
expense accounts during any period plus the amount that appropriately 
may be added as compensation for the use of capital, if paid, 
constitute cost during that period.


Sec.  367.26  Departmental classification.

    Salaries and wages and all other costs must be classified by 
departmental or other functional category in accordance with the 
departmental organization of the service company to provide a readily 
available basis for analysis.


Sec.  367.27  Billing procedures.

    All invoices for services rendered must be submitted monthly with 
sufficient information and in sufficient detail to permit such company, 
where applicable, to identify and classify the charge in terms of the 
system of accounts prescribed by the regulatory authorities to which it 
is subject. Each month a statement must be rendered to each associate 
and non-associate utility company to whom services were provided 
containing a summary of the accounts by work order and showing the 
charges, classified as direct cost, indirect cost, and compensation for 
use of capital.


Sec.  367.28  Methods of allocation.

    Indirect costs and compensation for use of capital must be 
allocated to work orders in accordance with the service company's 
applicable and currently effective methods of allocation. Both direct 
and allocated indirect costs of work orders must be assigned among 
those companies in the same manner. Each work order must identify the 
methods of allocation and the accounts to be charged. Companies must be 
notified in writing of any change in the methods of allocation.


Sec.  367.29  Compensation for use of capital.

    A servicing transaction is deemed to be performed at no more than 
cost if the price of the service does not exceed a fair and equitable 
allocation of expenses plus reasonable compensation for necessary 
capital procured through the issuance of capital stock. Interest on 
borrowed capital and compensation for the use of capital must only 
represent a reasonable return on the amount of capital reasonably 
necessary for the performance of services or construction work for, or 
the sale of goods to, associate companies. The compensation may be 
estimated and must be computed monthly. The amount of compensation must 
be stated separately in each billing to the associate companies. An 
annual statement to support the amount of compensation for use of 
capital billed for the previous 12 months and how it was calculated 
must be supplied to each associate company at the end of the calendar 
year.


Sec.  367.30  Work order system for associate companies.

    Service companies must maintain a detailed classification of 
service costs, that permits costs to be identified with the functional 
processes of the associate companies served. To permit the 
classification, each service company must maintain a work order system 
for accumulating reimbursable costs and charges to the associate 
companies served, and maintain time records for all service company 
employees in order to support the accounting allocation of all expenses 
assignable to the types of services performed and chargeable to

[[Page 28481]]

the associate companies served. Service company employee records must 
permit a ready identification of the hours worked, account numbers 
charged, department work order number and other code designations that 
facilitate proper classification.

Subpart C--Service Company Property Instructions


Sec.  367.50  Service company property to be recorded at cost.

    (a) All amounts included in the accounts for service company 
property must be stated at the cost incurred by the service company, 
except for property acquired by lease which qualifies as capital lease 
property under General Instructions in Sec.  367.18, Criteria for 
classifying leases, and is recorded in Account 101.1, Property under 
capital leases (Sec.  367.1011).
    (b) When the consideration given for property is other than cash, 
the value of the consideration must be determined on a cash basis (See, 
however, Definitions Sec.  367.1(a)(10)). In the entry recording the 
transaction, the actual consideration must be described with sufficient 
particularity to identify it. The service company must be prepared to 
furnish the Commission the particulars of its determination of the cash 
value of the consideration, if other than cash.
    (c) When property is purchased under a plan involving deferred 
payments, no charge must be made to the service company property 
accounts for interest, insurance, or other expenditures occasioned 
solely by such form of payment.
    (d) The service company property accounts must not include the cost 
or other value of service company property contributed to the company. 
Contributions in the form of money or its equivalent toward the 
construction of property must be credited to accounts charged with the 
cost of such construction. Property constructed from contributions of 
cash or its equivalent must be shown as a reduction to gross property 
constructed when assembling cost data in work orders for posting to 
property ledgers of accounts. The accumulated gross costs of property 
accumulated in the work order must be recorded as a debit in the plant 
ledger of accounts along with the related amount of contributions 
concurrently recorded as a credit.


Sec.  367.51  Components of construction.

    (a) For service companies, the cost of construction properly 
included in the service company property accounts must include, where 
applicable, the direct and overhead costs as listed and defined as 
follows:
    (1) Contract work includes amounts paid for work performed under 
contract by other companies, firms, or individuals, costs incident to 
the award of such contracts, and the inspection of the work.
    (2) Labor includes the pay and expenses of employees of the service 
company engaged on construction work, and related workmen's 
compensation insurance, payroll taxes and similar items of expense. It 
does not include the pay and expenses of employees that are distributed 
to construction through clearing accounts nor the pay and expenses 
included in other items in this section.
    (3)(i) Materials and supplies includes the purchase price at the 
point of free delivery plus customs duties, excise taxes, the cost of 
inspection, loading and transportation, the related stores expenses, 
and the cost of fabricated materials from the service company's shop. 
In determining the cost of materials and supplies used for 
construction, proper allowance must be made for unused materials and 
supplies, for materials recovered from temporary structures used in 
performing the work involved, and for discounts allowed and realized in 
the purchase of materials and supplies.
    (ii) The cost of individual items of equipment of small value (for 
example, $500 or less) or of short life, including small portable tools 
and implements, must not be charged to service company property 
accounts unless the correctness of the accounting is verified by 
current inventories. The cost must be charged to the appropriate 
operating expense or clearing accounts, according to the use of the 
items, or, if the items are consumed directly in construction work, the 
cost must be included as part of the cost of the construction.
    (4) Transportation includes the cost of transporting employees, 
materials and supplies, tools, purchased equipment, and other work 
equipment (when not under own power) to and from points of 
construction. It includes amounts paid to others as well as the cost of 
operating the service company's own transportation equipment. (See 
paragraph (a)(5) of this section.)
    (5) Special machine service includes the cost of labor (optional), 
materials and supplies, depreciation, and other expenses incurred in 
the maintenance, operation and use of special machines, such as steam 
shovels, pile drivers, derricks, ditchers, scrapers, material 
unloaders, and other labor saving machines; also expenditures for 
rental, maintenance and operation of machines of others. It does not 
include the cost of small tools and other individual items of small 
value or short life which are included in the cost of materials and 
supplies. (See paragraph (a)(3) of this section.) When a particular 
construction job requires the use for an extended period of time of 
special machines, transportation or other equipment, the associated net 
book cost, less the appraised or salvage value at time of release from 
the job, must be included in the cost of construction.
    (6) Shop service includes the proportion of the expense of the 
service company's shop department assignable to construction work 
except that the cost of fabricated materials from the service company's 
shop must be included in materials and supplies.
    (7) Protection includes the cost of protecting the service 
company's property from fire or other casualties and the cost of 
preventing damages to others, or to the property of others, including 
payments for discovery or extinguishment of fires, cost of apprehending 
and prosecuting incendiaries, related witness fees, amounts paid to 
municipalities and others for fire protection, and other analogous 
items of expenditures in connection with construction work.
    (8) Injuries and damages includes expenditures or losses in 
connection with construction work on account of injuries to persons and 
damages to the property of others; also the cost of investigation of, 
and defense against, actions for the injuries and damages. Insurance 
recovered or recoverable on account of compensation paid for injuries 
to persons incident to construction must be credited to the account or 
accounts to which such compensation is charged. Insurance recovered or 
recoverable on account of property damages incident to construction 
must be credited to the account or accounts charged with the cost of 
the damages.
    (9) Privileges and permits includes payments for and expenses 
incurred in securing temporary privileges, permits or rights in 
connection with construction work, such as for the use of private or 
public property, streets, or highways, but it does not include rents.
    (10) Rents include amounts paid for the use of construction 
quarters and office space occupied by construction forces and amounts 
properly includible in construction costs for the facilities jointly 
used.
    (11) Engineering and supervision includes the portion of the pay 
and expenses of engineers, surveyors, draftsmen, inspectors, 
superintendents

[[Page 28482]]

and their assistants applicable to construction work.
    (12) General administration capitalized includes the portion of the 
pay and expenses of the general officers and administrative and general 
expenses applicable to construction work.
    (13) Engineering services includes amounts paid to other companies, 
firms, or individuals engaged by the service company to plan, design, 
prepare estimates, supervise, inspect, or give general advice and 
assistance in connection with construction work.
    (14) Insurance includes premiums paid or amounts provided or 
reserved as self-insurance for the protection against loss and damages 
in connection with construction, by fire or other casualty injuries to 
or death of persons other than employees, damages to property of 
others, defalcation of employees and agents, and the nonperformance of 
contractual obligations of others. It does not include workmen's 
compensation or similar insurance on employees included as labor in 
paragraph (a)(2) of this section.
    (15) Law expenditures includes the general law expenditures 
incurred in connection with construction and the directly related court 
and legal costs, other than law expenses included in protection in 
paragraph (a)(7) of this section, and in injuries and damages in 
paragraph (a)(8) of this section.
    (16) Taxes include taxes on physical property (including land) 
during the period of construction and other taxes properly includible 
in construction costs before the facilities become available for 
service.
    (17) Allowance for funds used during construction includes the net 
cost for the period of construction of borrowed funds used for 
construction purposes and a reasonable rate on other funds when so 
used, not to exceed, without prior approval of the Commission, 
allowances computed in accordance with the formula prescribed in 
paragraph (i) of this section. No allowance for funds used during 
construction charges must be included in these accounts upon 
expenditures for construction projects which have been abandoned.
    (i) The formula and elements for the computation of the allowance 
for funds used during construction must be:
    (A) Ai=s(S/W)+d(D/D+P+C)(1-S/W)
    (B) Ae=[1-S/W][p(P/D+P+C)+c(C/D+P+C)]
    (C) Ai=Gross allowance for borrowed funds used during construction 
rate.
    (D) Ae=Allowance for other funds used during construction rate.
    (E) S=Average short-term debt.
    (F) s=Short-term debt interest rate.
    (G) D=Long-term debt.
    (H) d=Long-term debt interest rate.
    (I) P=Preferred stock.
    (J) p=Preferred stock cost rate.
    (K) C=Common equity.
    (L) c=Common equity cost rate.
    (M) W= Average balance in construction work in progress, less asset 
retirement costs (See General Instructions in Sec.  367.22) related to 
property under construction.
    (ii) The rates must be determined annually. The balances for long-
term debt, preferred stock and common equity must be the actual book 
balances as of the end of the prior year. The cost rates for long-term 
debt and preferred stock must be the weighted average cost determined 
in the manner indicated in Sec.  35.13 of this chapter. The cost rate 
for common equity must be the rate granted common equity in the last 
rate proceeding before the ratemaking body of any associate public 
utility company for which services were provided during the year. If 
this cost rate is not available, the average rate actually earned 
during the preceding three years must be used. The short-term debt 
balances and related cost and the average balance for construction work 
in progress must be estimated for the current year with appropriate 
adjustments as actual data becomes available.
    (iii) When a part only of a property or project is placed in 
operation or is completed and ready for service but the construction 
work as a whole is incomplete, that part of the cost of the property 
placed in operation or ready for service, must be treated as service 
company property and allowance for funds used during the construction 
as a charge to construction must cease. Allowance for funds used during 
construction on that part of the cost of the property that is 
incomplete may be continued as a charge to construction until such time 
as it is placed in operation or is ready for service, except as limited 
in paragraph (a)(17) of this section.
    (18) Earnings and expenses during construction. The earnings and 
expenses during construction must constitute a component of 
construction costs.
    (19) Training costs. When it is necessary that employees be trained 
to operate or maintain property that is being constructed and the 
property is not conventional in nature, or is new to the company's 
operations, these costs may be capitalized as a component of 
construction cost. Once property is placed in service, the 
capitalization of training costs must cease and subsequent training 
costs must be expensed. (See Operating Expense Instructions in Sec.  
367.83.)
    (20) Studies include the costs of studies such as safety or 
environmental studies mandated by regulatory bodies relative to 
property under construction. Studies relative to facilities in service 
must be charged to account 183, Preliminary Survey and Investigation 
Charges (Sec.  367.1830).
    (21) Asset retirement costs. The costs recognized as a result of 
asset retirement obligations incurred during the construction and 
testing of service company property must constitute a component of 
construction costs.


Sec.  367.52  Overhead construction costs.

    (a) All overhead construction costs, such as engineering, 
supervision, general office salaries and expenses, construction 
engineering and supervision by others than the service company, law 
expenses, insurance, injuries and damages, relief and pensions, taxes 
and interest, must be charged to particular jobs or units on the basis 
of the amounts of the reasonably applicable overheads.
    (b) As far as practicable, the determination of payroll charges 
includible in construction overheads must be based on the related time 
card distributions. Where this procedure is impractical, special 
studies must be made periodically of the time of supervisory employees 
devoted to construction activities to the end that only the overhead 
costs that have a definite relation to construction must be 
capitalized.
    (c) The records supporting the entries for overhead construction 
costs must be kept so as to show the total amount of each overhead for 
each year, the nature and amount of each overhead expenditure charged 
to each construction work order and to each property account, and the 
bases of distribution of such costs.


Sec.  367.53  Service company property purchased or sold.

    (a) When service company property is acquired by purchase, merger, 
consolidation, liquidation, or otherwise, after the effective date of 
this system of accounts, the costs of acquisition, including related 
incidental expenses, must be charged to the appropriate service company 
property accounts and account 107, Construction work in progress (Sec.  
367.1070), as appropriate.
    (b) If property acquired is in a physical condition so that it is 
necessary to rehabilitate it substantially in order to bring the 
property up to the standards of the service company, the cost of the 
work, except replacements, must be

[[Page 28483]]

accounted for as a part of the purchase price of the property.
    (c) Unless otherwise authorized by the Commission, all service 
company property acquired from an affiliate company must be at its book 
value. Additionally, if property is acquired that is in excess of $10 
million and has been previously devoted to public service at a price 
above book value, the service company must file with the Commission the 
proposed journal entries associated with the acquisition within six 
months from the date of acquisition of the property.
    (d) When service company property is sold, conveyed, or transferred 
to another by sale, merger, consolidation, or otherwise, the book cost 
of the property sold or transferred to another must be credited to the 
appropriate service company property accounts. The amounts (estimated, 
if not known) carried with respect the accounts for accumulated 
provision for depreciation and amortization must be charged to those 
accounts. The difference, if any, between the net amount of debits and 
credits and the consideration received for the property (less 
commissions and other expenses of making the sale) must be included in 
account 421.1, Gain on disposition of property (Sec.  367.4211), or 
account 421.2, Loss on disposition of property (Sec.  367.4212).
    (e) In connection with the acquisition of service company property 
previously devoted to service company operations or acquired from an 
associate company, the service company must procure, if possible, all 
existing records relating to the property acquired or related certified 
copies, and must preserve the records in conformity with regulations or 
practices governing the preservation of records of its own 
construction.


Sec.  367.54  Expenditures on leased property.

    (a) The cost of substantial initial improvements (including 
repairs, rearrangements, additions, and betterments) made to prepare 
service company property leased to be used for a period of more than 
one year, and the cost of subsequent substantial additions, 
replacements, or betterments to the property, must be charged to the 
service company property account appropriate for the class of property 
leased. If the service life of the improvements is terminable by action 
of the lease, the cost, less net salvage, of the improvements must be 
spread over the life of the lease by charges to account 404, 
Amortization of limited-term service property. However, if the service 
life is not terminated by action of the lease but by depreciation 
proper, the cost of the improvements, less net salvage, must be 
accounted for as depreciable property. The provisions of this paragraph 
are applicable to property leased under either capital leases or 
operating leases.
    (b) If improvements made to property leased for a period of more 
than one year are of relatively minor cost, or if the lease is for a 
period of not more than one year, the cost of the improvements must be 
charged to the account in which the rent is included, either directly 
or by amortization.


Sec.  367.55  Land and land rights.

    (a) The accounts for land and land rights must include the cost of 
land owned in fee by the service company and rights. Interests, and 
privileges held by the service company in land owned by others, such as 
leaseholds, easements, water and water power rights, diversion rights, 
submersion rights, rights-of-way, and other like interests in land. Do 
not include in the accounts for land and land rights and rights-of-way 
costs incurred in connection with first clearing and grading of land 
and rights-of-way and the damage costs associated with the construction 
and installation of property. The costs must be included in the 
appropriate property accounts directly benefited.
    (b) Where special assessments for public improvements provide for 
deferred payments, the full amount of the assessments must be charged 
to the appropriate land account and the unpaid balance must be carried 
in an appropriate liability account. Interest on unpaid balances must 
be charged to the appropriate interest account. If any part of the cost 
of public improvements is included in the general tax levy, the related 
amount must be charged to the appropriate tax account.
    (c) The net profit from the sale of timber, cord wood, sand, 
gravel, other resources or other property acquired with the rights-of-
way or other lands must be credited to the appropriate property account 
to which it is related. Where land is held for a considerable period of 
time and timber and other natural resources on the land at the time of 
purchase increases in value, the net profit (after giving effect to the 
cost of the natural resources) from the sales of timber or its products 
or other natural resources must be credited to the appropriate 
operating income account when the land has been recorded in account 
101, Service company property (Sec.  367.1010), otherwise to account 
421, Miscellaneous income or loss (Sec.  367.4210).
    (d) Separate entries must be made for the acquisition, transfer, or 
retirement of each parcel of land, and each land right (except rights 
of way for distribution lines), or water right, having a life of more 
than one year. A record must be maintained showing the nature of 
ownership, full legal description, area, map reference, purpose for 
which used, city, county, and tax district on which situated, from whom 
purchased or to whom sold, payment given or received, other costs, 
contract date and number, date of recording of deed, and book and page 
of record. Entries transferring or retiring land or land rights must 
refer to the original entry recording its acquisition.
    (e) Any difference between the amount received from the sale of 
land or land rights, less agents' commissions and other costs incident 
to the sale, and the book cost of such land or rights, must be included 
in account 421.1, Gains on disposition of property (Sec.  367.4211), or 
account 421.2, Losses on disposition of property (Sec.  367.4212), when 
the property has been recorded in account 101, Service company property 
(Sec.  367.1010). Appropriate adjustments of the accounts must be made 
with respect to any structures or improvements located on the land 
sold.
    (f) The cost of buildings and other improvements (other than public 
improvements) must not be included in the land accounts. If, at the 
time of acquisition of an interest in land the interest extends to 
buildings or other improvements (other than public improvements) that 
are then devoted to operations, the land and improvements must be 
separately appraised and the cost allocated to land and buildings or 
improvements on the basis of the appraisals. If the improvements are 
removed or wrecked without being used in operations, the cost of 
removing or wrecking must be charged and the salvage credited to the 
account in which the cost of the land is recorded.
    (g) Provisions must be made for amortizing amounts carried in the 
accounts for limited-term interests in land so as to apportion 
equitably the cost of each interest over the life thereof. (See account 
111, Accumulated provision for amortization of service company property 
in Sec.  367.1110, and account 404, Amortization of limited-term 
property in Sec.  367.4040.)
    (h) The items of cost to be included in the accounts for land and 
land rights are as follows:
    (1) Bulkheads, buried, not requiring maintenance or replacement.
    (2) Cost, first, of acquisition including mortgages and other liens 
assumed (but not the related subsequent interest).
    (3) Condemnation proceedings, including court and counsel costs.

[[Page 28484]]

    (4) Consents and abutting damages, payment for.
    (5) Conveyancers' and notaries' fees.
    (6) Fees, commissions, and salaries to brokers, agents and others 
in connection with the acquisition of the land or land rights.
    (7) Leases, cost of voiding upon purchase to secure possession of 
land.
    (8) Removing, relocating, or reconstructing, property of others, 
such as buildings, highways, railroads, bridges, cemeteries, churches, 
telephone and power lines, in order to acquire quiet possession.
    (9) Retaining walls unless identified with structures.
    (10) Special assessments levied by public authorities for public 
improvements on the basis of benefits for new roads, new bridges, new 
sewers, new curbing, new pavements, and other public improvements, but 
not taxes levied to provide for the maintenance of such improvements.
    (11) Surveys in connection with the acquisition, but not amounts 
paid for topographical surveys and maps where the costs are 
attributable to structures or plant equipment erected or to be erected 
or installed on the land.
    (12) Taxes assumed, accrued to date of transfer of title.
    (13) Title, examining, clearing, insuring and registering in 
connection with the acquisition and defending against claims relating 
to the period prior to the acquisition.
    (14) Appraisals prior to closing title.
    (15) Cost of dealing with distributees or legatees residing outside 
of the state or county, such as recording power of attorney, recording 
will or exemplification of will, recording satisfaction of state tax.
    (16) Filing satisfaction of mortgage.
    (17) Documentary stamps.
    (18) Photographs of property at acquisition.
    (19) Fees and expenses incurred in the acquisition of water rights 
and grants.
    (20) Cost of fill to extend bulkhead line over land under water, 
where riparian rights are held, that is not occasioned by the erection 
of a structure.
    (21) Sidewalks and curbs constructed by the service company on 
public property.
    (22) Labor and expenses in connection with securing rights of way, 
where performed by company employees and company agents.


Sec.  367.56  Structures and improvements.

    (a) The accounts for structures and improvements must include the 
cost of all buildings and facilities to house, support, or safeguard 
property or persons, including all fixtures permanently attached to and 
made a part of buildings and that cannot be removed from the buildings 
and facilities without cutting into the walls, ceilings, or floors, or 
without in some way impairing the buildings, and improvements of a 
permanent character on, or to, land. Also include those costs incurred 
in connection with the first clearing and grading of land and rights-
of-way and the damage costs associated with construction and 
installation of property.
    (b) The cost of specially-provided foundations not intended to 
outlast the machinery or apparatus for which provided, and associated 
costs, such as angle irons, castings, and other items installed at the 
base of an item of equipment, must be charged to the same account as 
the cost of the machinery, apparatus, or equipment.
    (c) Where the structure of a dam also forms the foundation of the 
service company building, the foundation must be considered a part of 
the dam.
    (d) The cost of disposing of materials excavated in connection with 
construction of structures must be considered as a part of the cost of 
that work, except as follows:
    (1) When the material is used for filling, the cost of loading, 
hauling, and dumping must be equitably apportioned between the work in 
connection with which the removal occurs and the work in connection 
with which the material is used.
    (2) When the material is sold, the net amount realized from the 
sales must be credited to the work in connection with which the removal 
occurs. If the amount realized from the sale of excavated materials 
exceeds the removal costs and the costs in connection with the sale, 
the excess must be credited to the land account in which the site is 
carried.
    (e) Lighting or other fixtures temporarily attached to buildings 
for purposes of display or demonstration must not be included in the 
cost of the building but in the appropriate equipment account.
    (f) This account must include the following items:
    (1) Architects' plans and specifications including supervision.
    (2) Ash pits (when located within the building).
    (3) Athletic field structures and improvements.
    (4) Boilers, furnaces, piping, wiring, fixtures, and machinery for 
heating, lighting, signaling, ventilating, and air-conditioning 
systems, plumbing, vacuum cleaning systems, incinerator and smoke pipe, 
flues and similar items.
    (5) Bulkheads, including dredging, riprap fill, piling, decking, 
concrete, fenders, and similar items when exposed and subject to 
maintenance and replacement.
    (6) Chimneys.
    (7) Coal bins and bunkers.
    (8) Commissions and fees to brokers, agents, architects, and 
others.
    (9) Conduit (not to be removed) with its contents.
    (10) Damages to abutting property during construction.
    (11) Docks.
    (12) Door checks and door stops.
    (13) Drainage and sewerage systems.
    (14) Elevators, cranes, hoists, and the machinery for operating 
them.
    (15) Excavation, including shoring, bracing, bridging, refill and 
disposal of excess excavated material, cofferdams around foundation, 
pumping water from cofferdams during construction, and test borings.
    (16) Fences and fence curbs (not including protective fences 
isolating items of equipment, which must be charged to the appropriate 
equipment account).
    (17) Fire protection systems when forming a part of a structure.
    (18) Flagpole.
    (19) Floor covering (permanently attached).
    (20) Foundations and piers for machinery, constructed as a 
permanent part of a building or other item listed in this paragraph.
    (21) Grading and clearing when directly occasioned by the building 
of a structure.
    (22) Intrasite communication system, poles, pole fixtures, wires, 
and cables.
    (23) Landscaping, lawns, shrubbery and similar items.
    (24) Leases, voiding upon purchase to secure possession of 
structures.
    (25) Leased property, expenditures on.
    (26) Lighting fixtures and outside lighting system.
    (27) Mail chutes when part of a building.
    (28) Marquee, permanently attached to building.
    (29) Painting, first cost.
    (30) Permanent paving, concrete, brick, flagstone, asphalt, within 
the property lines.
    (31) Partitions, including movable.
    (32) Permits and privileges.
    (33) Platforms, railings, and gratings when constructed as a part 
of a structure.
    (34) Power boards for services to a building.
    (35) Refrigerating systems for general use.
    (36) Retaining walls except when identified with land.

[[Page 28485]]

    (37) Roadways, railroads, bridges, and trestles intrasite except 
railroads provided for in equipment accounts.
    (38) Roofs.
    (39) Scales, connected to and forming a part of a structure.
    (40) Screens.
    (41) Sewer systems, for general use.
    (42) Sidewalks, culverts, curbs and streets constructed by the 
service company on its property.
    (43) Sprinkling systems.
    (44) Sump pumps and pits.
    (45) Stacks--brick, steel, or concrete, when set on foundation 
forming part of general foundation and steelwork of a building.
    (46) Steel inspection during construction.
    (47) Storage facilities constituting a part of a building.
    (48) Storm doors and windows.
    (49) Subways, areaways, and tunnels, directly connected to and 
forming part of a structure.
    (50) Tanks, constructed as part of a building or as a distinct 
structural unit.
    (51) Temporary heating during construction (net cost).
    (52) Temporary water connection during construction (net cost).
    (53) Temporary shanties and other facilities used during 
construction (net cost).
    (54) Topographical maps.
    (55) Tunnels, intake and discharge, when constructed as part of a 
structure, including sluice gates, and those constructed to house 
mains.
    (56) Vaults constructed as part of a building.
    (57) Watchmen's sheds and clock systems (net cost when used during 
construction only).
    (58) Water basins or reservoirs.
    (59) Water front improvements.
    (60) Water meters and supply system for a building or for general 
company purposes.
    (61) Water supply piping, hydrants and wells.
    (62) Wharves.
    (63) Window shades and ventilators.
    (64) Yard drainage system.
    (65) Yard lighting system.
    (66) Yard surfacing, gravel, concrete, or oil. (First cost only.)
    (g) Structures and Improvements accounts must be credited with the 
cost of structures created to house, support, or safeguard equipment, 
the use of which has terminated with the removal of the equipment with 
which they are associated even though they have not been physically 
removed.


Sec.  367.57  Equipment.

    (a) The cost of equipment chargeable to the service company 
property accounts, unless otherwise indicated in the text of an 
equipment account, includes the related net purchase price, sales 
taxes, investigation and inspection expenses necessary to such 
purchase, expenses of transportation when borne by the service company, 
labor employed, materials and supplies consumed, and expenses incurred 
by the service company in unloading and placing the equipment in 
readiness to operate. Also include those costs incurred in connection 
with the first clearing and grading of land and rights-of-way and the 
damage costs associated with construction and installation of property.
    (b) Exclude from equipment accounts hand and other portable tools, 
that are likely to be lost or stolen or that have relatively small 
value (for example, $500 or less) or short life, unless the correctness 
of the related accounting as service company property is verified by 
current inventories. Special tools acquired and included in the 
purchase price of equipment must be included in the appropriate 
property account. Portable drills and similar tool equipment when used 
in connection with the operation and maintenance of a particular plant 
or department, such as production, transmission, distribution, or 
similar items, or in stores, must be charged to the property account 
appropriate for their use.
    (c) The equipment accounts must include angle irons and similar 
items that are installed at the base of an item of equipment, but piers 
and foundations that are designed to be as permanent as the buildings 
that house the equipment, or that are constructed as a part of the 
building and that cannot be removed without cutting into the walls, 
ceilings or floors or without in some way impairing the building, must 
be included in the building accounts.
    (d) The cost of efficiency or other tests made subsequent to the 
date equipment becomes available for service must be charged to the 
appropriate expense accounts, except that tests to determine whether 
equipment meets the specifications and requirements as to efficiency, 
performance, and similar items, guaranteed by manufacturers, made after 
operations have commenced and within the period specified in the 
agreement or contract of purchase may be charged to the appropriate 
service company property account.


Sec.  367.58  Work order and property record system required for 
service company property.

    (a) Each service company must record all construction and 
retirements of service company property by means of work orders or job 
orders. Separate work orders may be opened for additions to, and 
retirements of, service company property or the retirements may be 
included with the construction work order. All items relating to the 
retirements must be kept separate from those relating to construction 
and any maintenance costs involved in the work likewise must be 
segregated.
    (b) Each service company must keep its work order system so as to 
show the nature of each addition to or retirement of service company 
property, the related total cost, the source or sources of costs, and 
the property account or accounts to which charged or credited. Work 
orders covering jobs of short duration may be cleared monthly.
    (c) Each service company must maintain records in which, for each 
property account, the amounts of the annual additions and retirements 
are classified so as to show the number and cost of the various record 
units or retirement units.


Sec.  367.59  Additions and retirements of property.

    (a) For the purpose of avoiding undue refinement in accounting for 
additions to and retirements and replacements of service company 
property, all property will be considered as consisting of retirement 
units and minor items of property. Each company must maintain a written 
property units listing for use in accounting for additions and 
retirements of property and apply the listing consistently.
    (b) The addition and retirement of retirement units must be 
accounted for as follows:
    (1) When a retirement unit is added, the related cost must be added 
to the appropriate service company property account.
    (2) When a retirement unit is retired, with or without replacement, 
the related book cost must be credited to the property account in which 
it is included, determined in the manner provided in paragraph (d) of 
this section. If the retirement unit is of a depreciable class, the 
book cost of the unit retired and credited to service company property 
must be charged to the accumulated provision for depreciation 
applicable to the property. The cost of removal and the salvage must be 
charged or credited, as appropriate, to the depreciation account.
    (c) The addition and retirement of minor items of property must be 
accounted for as follows:
    (1) When a minor item of property that did not previously exist is 
added to service company property, the related

[[Page 28486]]

cost must be accounted for in the same manner as for the addition of a 
retirement unit, as provided in paragraph (b)(1) of this section, if a 
substantial addition results, otherwise the charge must be to the 
appropriate maintenance expense account.
    (2) When a minor item of property is retired and not replaced, the 
related book cost must be credited to the property account in which it 
is included; and, in the event the minor item is a part of depreciable 
property, the account for accumulated provision for depreciation must 
be charged with the book cost and cost of removal and credited with the 
salvage. If, however, the book cost of the minor item retired and not 
replaced has been or will be accounted for by its inclusion in the 
retirement unit of which it is a part when the unit is retired, no 
separate credit to the property account is required when the minor item 
is retired.
    (3) When a minor item of depreciable property is replaced 
independently of the retirement unit of which it is a part, the cost of 
replacement must be charged to the maintenance account appropriate for 
the item. However, if the replacement effects a substantial betterment 
(the primary aim of which is to make the property affected more useful, 
more efficient, of greater durability, or of greater capacity), the 
excess cost of the replacement over the estimated cost at current 
prices of replacing without betterment must be charged to the 
appropriate property account.
    (d) The book cost of service company property retired must be the 
amount at which the property is included in the property accounts, 
including all components of construction costs. The book cost must be 
determined from the service company's records and, if this cannot be 
done, it must be estimated. Service companies must furnish the 
particulars of the estimates to the Commission, if requested. When it 
is impracticable to determine the book cost of each unit, due to the 
relatively large number or related small cost, an appropriate average 
book cost of the units, with due allowance for any differences in size 
and character, must be used as the book cost of the units retired.
    (e) The book cost of land retired must be credited to the 
appropriate land account. If the land is sold, the difference between 
the book cost (less any accumulated provision for related depreciation 
or amortization that has been authorized and provided) and the sale 
price of the land (less commissions and other expenses of making the 
sale) must be recorded in accounts 421.1, Gain on disposition of 
property (Sec.  367.4211) or 421.2, Loss on disposition of property 
(Sec.  367.4212), as appropriate.
    (f) The book cost less net salvage of depreciable service company 
property retired must be charged in its entirety to account 108, 
Accumulated provision for depreciation of service company property 
(Sec.  367.1080).
    (g) The accounting for the retirement of amounts included in 
account 303, Miscellaneous intangible property (Sec.  367.3030), and 
the items of limited-term interest in land included in the accounts for 
land and land rights, must be as provided for in the text of account 
111, Accumulated provision for amortization of service company property 
(Sec.  367.1110), account 404, Amortization of limited-term property 
(Sec.  367.4040), and account 405, Amortization of other property 
(Sec.  367.4050).

Subpart D--Operating Expense Instructions


Sec.  367.80  Supervision and engineering.

    (a) The supervision and engineering includible in the operating 
expense accounts must consist of the pay and expenses of 
superintendents, engineers, clerks, other employees and consultants 
engaged in supervising and directing the operation and maintenance of 
each service company function. Wherever allocations are necessary in 
order to arrive at the amount to be included in any account, the method 
and basis of allocation must be reflected by underlying records.
    (b) This account must include the following labor items:
    (1) Special tests to determine efficiency of equipment operation.
    (2) Preparing or reviewing budgets, estimates, and drawings 
relating to operation or maintenance for departmental approval.
    (3) Preparing instructions for operations and maintenance 
activities.
    (4) Reviewing and analyzing operating results.
    (5) Establishing organizational setup of departments and executing 
related changes.
    (6) Formulating and reviewing routines of departments and executing 
related changes.
    (7) General training and instruction of employees by supervisors 
whose pay is chargeable to the training and instruction. Specific 
instruction and training in a particular type of work is chargeable to 
the appropriate functional expense account (See Service Company 
Property in Sec.  367.51(a)(19)).
    (8) Secretarial work for supervisory personnel, but not general 
clerical and stenographic work chargeable to other accounts.
    (c) This account must include the following expense items:
    (1) Consultants' fees and expenses.
    (2) Meals, traveling and incidental expenses.


Sec.  367.81  Maintenance.

    (a) The cost of maintenance chargeable to the various operating 
expense and clearing accounts includes labor, materials, overheads and 
other expenses incurred in maintenance work. A list of work operations 
applicable generally to service company property is included in 
paragraph (d) of this section. Other work operations applicable to 
specific classes of property are listed in functional maintenance 
expense accounts.
    (b) Materials recovered in connection with the maintenance of 
property must be credited to the same account to which the maintenance 
cost was charged.
    (c) Maintenance of property leased from others must be treated as 
provided in operating expense instruction in Sec.  367.82.
    (d) This account must include the following items:
    (1) Direct field supervision of maintenance.
    (2) Inspecting, testing, and reporting on condition of property 
specifically to determine the need for repairs, replacements, 
rearrangements and changes and inspecting and testing the adequacy of 
repairs which have been made.
    (3) Work performed specifically for the purpose of preventing 
failure, restoring serviceability or maintaining life of property.
    (4) Rearranging and changing the location of property.
    (5) Repairing for reuse materials recovered from property.
    (6) Testing for locating and clearing trouble.
    (7) Net cost of installing, maintaining, and removing temporary 
facilities to prevent interruptions in service.
    (8) Replacing or adding minor items of plant which do not 
constitute a retirement unit. (See Service Company Property Instruction 
in Sec.  367.59.)


Sec.  367.82  Rents.

    (a) The rent expense accounts provided under the several functional 
groups of expense accounts must include all rents, including taxes paid 
by the lessee on leased property, for property used in the operations 
of the service company, except:
    (1) Minor amounts paid for occasional or infrequent use of any 
property or

[[Page 28487]]

equipment and all amounts paid for use of equipment that, if owned, 
would be includible in property accounts 391 to 398 (Sec. Sec.  
367.3910 to 367.3980), inclusive, that must be treated as an expense 
item and included in the appropriate functional account, and
    (2) Rents that are chargeable to clearing accounts, and distributed 
from the clearing accounts to the appropriate account. If rents cover 
property used for more than one function, such as production and 
transmission, or by more than one department, the rents must be 
apportioned to the appropriate rent expense or clearing accounts of 
each department on an actual, or, if necessary, an estimated basis.
    (b) When a portion of property or equipment rented from others for 
use in connection with service company operations is subleased, the 
revenue derived from the subleasing must be credited to the rent 
revenue account in operating revenues. However, if the rent was charged 
to a clearing account, amounts received from subleasing the property 
must be credited to the clearing account.
    (c) The cost, when incurred by the lessee, of operating and 
maintaining leased property, must be charged to the accounts 
appropriate for the expense if the property were owned.
    (d) The cost incurred by the lessee of additions and replacements 
to property leased from others must be accounted for as provided in 
Service Company Property Instruction in Sec.  367.54.


Sec.  367.83  Training costs.

    When it is necessary that employees be trained to specifically 
operate or maintain facilities that are being constructed, the related 
costs must be accounted for as a current operating and maintenance 
expense. These expenses must be charged to the appropriate functional 
accounts currently as they are incurred. However, when the training 
costs involved relate to facilities that are not conventional in 
nature, or are new to the service company's operations, these costs may 
be capitalized until the time that the facilities are ready for 
functional use.

Subpart E--Special Instructions


Sec.  367.100  Accounts 131--174, Current and accrued assets.

    Current and accrued assets are cash, those assets which are readily 
convertible into cash or are held for current use in operations or 
construction, current claims against others, payment of which is 
reasonably assured, and amounts accruing to the service company that 
are subject to current settlement, except those items for which 
accounts other than those designated as current and accrued assets are 
provided. There must not be included in the group of accounts 
designated as current and accrued assets any item, the amount or 
collectibility of which is not reasonably assured, unless an adequate 
provision for the related possible loss has been made. Items of current 
character but of doubtful value may be written down and for record 
purposes carried in these accounts at nominal value.


Sec.  367.101  Accounts 231--243, Current and accrued liabilities.

    Current and accrued liabilities are those obligations which have 
either matured or which become due within one year from the date from 
the date of issuance or assumption, except for: bonds, receivers' 
certificates and similar obligations which must be classified as long-
term debt until date of maturity; accrued taxes, such as income taxes, 
which must be classified as accrued liabilities even though payable 
more than one year from date; compensation awards, which must be 
classified as current liabilities regardless of date due; and minor 
amounts payable in installments which may be classified as current 
liabilities. If a liability is due more than one year from date of 
issuance or assumption by the service company, it shall be credited to 
a long-term debt account appropriate for the transaction, except, 
however, the current liabilities previously mentioned.


Sec.  367.102  Accounts 408.1 and 408.2, Taxes other than income taxes.

    (a) These accounts must include the amounts of ad valorem, gross 
revenue or gross receipts taxes, state unemployment insurance, 
franchise taxes, Federal excise taxes, social security taxes, and all 
other taxes assessed by Federal, state, county, municipal, or other 
local governmental authorities, except income taxes.
    (b) These accounts shall be charged in each accounting period with 
the amounts of taxes which are applicable to each account, with 
concurrent credits to account 236, Taxes accrued (Sec.  367.2360), or 
account 165, Prepayments (Sec.  367.1650), as appropriate. When it is 
not possible to determine the exact amounts of taxes, the amounts shall 
be estimated and adjustments made in current accruals as the actual tax 
levies become known.
    (c) The accruals for these taxes must be apportioned among service 
company departments and to Other Income and Deductions so that, as 
nearly as practicable, each tax is included in the expenses of the 
service company department or Other Income and Deductions, the item 
from which gave rise to the tax.
    (d) Special assessments for street and similar improvements must be 
included in the appropriate service company property account.
    (e) Taxes specifically applicable to construction must be included 
in the cost of construction.
    (f) Gasoline and other sales taxes must be charged as far as 
practicable to the same account as the materials on which the tax is 
levied.
    (g) Social security and other forms of so-called payroll taxes must 
be distributed to utility and non-utility functions on a basis related 
to payroll. Amounts applicable to construction must be charged to the 
appropriate plant account.
    (h) Interest on tax refunds or deficiencies must not be included in 
these accounts but in account 419, Interest and dividend income (Sec.  
367.4190), or 431, Other interest expense (Sec.  367.4310), as 
appropriate.


Sec.  367.103  Accounts 409.1, 409.2, and 409.3, Income taxes.

    (a) These accounts must include the amounts of local, state and 
Federal income taxes on income properly accruable during the period 
covered by the income statement to meet the actual liability for such 
taxes. Concurrent credits for the tax accruals must be made to account 
236, Taxes accrued (Sec.  367.2360), and as the exact amounts of taxes 
become known, the current tax accruals must be adjusted by charges or 
credits to these accounts, so that these accounts include the actual 
taxes payable by the service company.
    (b) The accruals for income taxes shall be apportioned among 
service company departments and to Other Income and Deductions so that, 
as nearly as practicable, each tax will be included in the expenses of 
the service company department or Other Income and Deductions, the 
income from which gave rise to the tax.
    (c) Taxes assumed by the service company on interest must be 
charged to account 431, Other interest expense (Sec.  367.4310).
    (d) Interest on tax refunds or deficiencies must not be included in 
these accounts but in account 419, Interest and dividend income (Sec.  
367.4190), or account 431, Other interest expense (Sec.  367.4310), as 
appropriate.

[[Page 28488]]

Sec.  367.104  Accounts 410.1, 410.2, 411.1, and 411.2, Provision for 
deferred income taxes.

    (a) Accounts 410.1 (Sec.  367.4101) and 410.2 (Sec.  367.4102) must 
be debited, and Accumulated Deferred Income Taxes must be credited, 
with amounts equal to any current deferrals of taxes on income or any 
allocations of deferred taxes originating in prior periods, as provided 
by the texts of accounts 190 (Sec.  367.1900), 282 (Sec.  367.2820), 
and 283 (Sec.  367.2830). There must not be netted against entries 
required to be made to these accounts any credit amounts appropriately 
includible in accounts 411.1 (Sec.  367.4111) or 411.2 (Sec.  
367.4112).
    (b) Accounts 411.1 (Sec.  367.4111) and 411.2 (Sec.  367.4112) must 
be credited, and Accumulated Deferred Income Taxes must be debited, 
with amounts equal to any allocations of deferred taxes originating in 
prior periods or any current deferrals of taxes on income, as provided 
by the texts of accounts 190 (Sec.  367.1900), 282 (Sec.  367.2820), 
and 283 (Sec.  367.2830). There must not be netted against entries 
required to be made to these accounts any debit amounts appropriately 
includible in account 410.1 (Sec.  367.4101) or 410.2 (Sec.  367.4102).


Sec.  367.105  Accounts 411.4, and 411.5, Investment tax credit 
adjustments.

    (a) Account 411.4 (Sec.  367.4114) must be debited with the amounts 
of investment tax credits related to service company property that are 
credited to account 255, Accumulated deferred investment tax credits 
(Sec.  367.2550), by companies which do not apply the entire amount of 
the benefits of the investment credit as a reduction of the overall 
income tax expense in the year in which such credit is realized (See 
account 255 in Sec.  367.2550).
    (b) Account 411.4 (Sec.  367.4114) must be credited with the 
amounts debited to account 255 (Sec.  367.2550) for proportionate 
amounts of tax credit deferrals allocated over the average useful life 
of service company property to which the tax credits relate or such 
lesser period of time as may be adopted and consistently followed by 
the company.
    (c) Account 411.5 (Sec.  367.4115) must also be debited and 
credited as directed in paragraphs (a) and (b), for investment tax 
credits related to other income and deductions.


Sec.  367.106  Accounts 426.1, 426.2, 426.3, 426.4, and 426.5, 
Miscellaneous expense accounts.

    These accounts must include miscellaneous expense items which are 
nonoperating in nature but which are properly deductible before 
determining total income before interest charges.

Subpart F--Balance Sheet Chart of Accounts

Service Company Property


Sec.  367.1010  Account 101, Service company property.

    (a) This account must include the cost of service company property, 
included in accounts 301 (Sec.  367.3010), 303 (Sec.  367.3030) and 389 
to 399.1 (Sec. Sec.  376.3890 to 367.3991), owned and used by the 
service company in its operations, and having an expectation of life in 
service of more than one year from date of installation.
    (b) The cost of additions to, and betterments of, property leased 
from others, that are includible in this account, must be recorded in 
subaccounts separate and distinct from those relating to owned 
property. (See Service Company Property Instruction in Sec.  367.54.)


Sec.  367.1011  Account 101.1, Property under capital leases.

    (a) This account must include the amount recorded under capital 
leases for property leased from others and used by the service company 
in its operations.
    (b) The property included in this account must be classified 
separately according to detailed accounts 301 (Sec.  367.3010), 303 
(Sec.  367.3030) and 389 to 399.1 (Sec. Sec.  367.3890 to 367.3991) 
prescribed for service company property.
    (c) Records must be maintained with respect to each capital lease 
reflecting:
    (1) Name of lessor,
    (2) Basic details of lease,
    (3) Terminal date,
    (4) Original cost or fair market value of property leased,
    (5) Future minimum lease payments,
    (6) Executory costs,
    (7) Present value of minimum lease payments,
    (8) The amount representing interest and the interest rate used, 
and
    (9) Expenses paid.


Sec.  367.1070  Account 107, Construction work in progress.

    (a) This account must include the total of the balances of work 
orders for service company property in process of construction.
    (b) Work orders must be cleared from this account as soon as 
practicable after completion of the job. Further, if a project is 
designed to consist of two or more units that may be placed in service 
at different dates, any expenditures that are common to and that will 
be used in the operation of the project as a whole must be included in 
service company property upon the completion and the readiness for 
service of the first unit. Any expenditures that are identified 
exclusively with units of property not yet in service must be included 
in this account.
    (c) Expenditures on research, development, and demonstration 
projects for construction of facilities are to be included in a 
separate subaccount in this account. Records must be maintained to show 
separately each project along with complete detail of the nature and 
purpose of the research, development, and demonstration project 
together with the related costs.


Sec.  367.1080  Account 108, Accumulated provision for depreciation of 
service company property.

    (a) This account must be credited with the following:
    (1) Amounts charged to account 403, Depreciation expense (Sec.  
367.4030), or to clearing accounts for current depreciation expense for 
service company property.
    (2) Amounts charged to account 416, Costs and expenses of 
merchandising, jobbing, and contract work (Sec.  367.4160), or to 
clearing accounts for current depreciation expense.
    (3) Amounts of depreciation applicable to properties acquired. (See 
Service Company Property Instruction in Sec.  367.53.)
    (4) Amounts of depreciation applicable to service company property 
donated to the service company.
    (b) The service company must maintain separate subaccounts for 
depreciation applicable to service company property.
    (c) At the time of retirement of depreciable service company 
property, this account must be charged with the book cost of the 
property retired and the cost of removal, and must be credited with the 
salvage value and any other amounts recovered, such as insurance. When 
retirement, costs of removal and salvage are entered originally in 
retirement work orders, the net total of such work orders may be 
included in a separate related subaccount. Upon completion of the work 
order, the proper distribution to subaccounts of this account must be 
made as provided in paragraph (d) of this section.
    (d) The subsidiary records for this account must reflect the 
current credits and debits to this account in sufficient detail to show 
the following separately:
    (1) The amount of accrual for depreciation,
    (2) The book cost of property retired,
    (3) Cost of removal,
    (4) Salvage, and
    (5) Other items, including recoveries from insurance.

[[Page 28489]]

    (e) The service company is restricted in its use of the accumulated 
provision for depreciation to the purposes identified in paragraphs (a) 
through (d) of this section. It must not transfer any portion of this 
account to retained earnings or make any other use of the depreciation 
without authorization by the Commission.


Sec.  367.1110  Account 111, Accumulated provision for amortization of 
service company property.

    (a) This account must be credited with the following:
    (1) Amounts charged to account 404, Amortization of limited-term 
property (Sec.  367.4040), for the current amortization of limited-term 
service company property investments.
    (2) Amounts charged to account 405, Amortization of other property 
(Sec.  367.4050).
    (3) Amounts charged to account 425, Miscellaneous amortization 
(Sec.  367.4250), for the amortization of intangible or other property, 
that does not have a definite or terminable life and is not subject to 
charges for depreciation expense, with Commission approval.
    (b) The service company must maintain subaccounts of this account 
for the amortization applicable to service company property and 
property leased to others.
    (c) When any property to which this account applies is sold, 
relinquished, or otherwise retired from service, this account must be 
charged with the amount previously credited in respect to the property. 
The book cost of the retired property less the amount chargeable to 
this account and less the net proceeds realized at retirement must be 
included in account 421.1, Gain on disposition of property (Sec.  
367.4211), or account 421.2, Loss on disposition of property (Sec.  
367.4212), as appropriate.
    (d) For general ledger and balance sheet purposes, this account 
must be regarded and treated as a single composite provision for 
amortization. The subsidiary records must reflect the current credits 
and debits to this account in sufficient detail to show the following 
separately:
    (1) The amount of accrual for amortization,
    (2) The book cost of property retired,
    (3) Cost of removal,
    (4) Salvage, and
    (5) Other items, including recoveries from insurance.
    (e) The service company is restricted in its use of the accumulated 
provision for amortization to the purposes provided in paragraphs (a) 
through (d) of this section. It must not transfer any portion of this 
account to retained earnings or make any other use of the amortization 
without authorization by the Commission.


Sec.  367.1230  Account 123, Investment in associate companies.

    (a) This account must include the book cost of investments in 
securities issued or assumed by associate companies and investment 
advances to the companies, including related accrued interest when the 
interest is not subject to current settlement, provided that the 
investment does not relate to a subsidiary company. (If the investment 
relates to a subsidiary company, it must be included in account 123.1, 
Investment in subsidiary companies (Sec.  367.1231).) Include in this 
account the offsetting entry to the recording of amortization of 
discount or premium on interest-bearing investments. (See account 419, 
Interest and dividend income (Sec.  367.4190).)
    (b) This account must be maintained in a manner so as to show the 
investment in securities of, and advances to, each associate company 
together with full particulars regarding any of the investments that 
are pledged.
    (c) Securities and advances of associate companies owned and 
pledged must be included in this account, but the securities, if held 
in special deposits or in special funds, must be included in the 
appropriate deposit or fund account. A complete record of securities 
pledged must be maintained.
    (d) Securities of associate companies held as temporary cash 
investments are includible in account 136, Temporary cash investments 
(Sec.  367.1360).
    (e) Balances in open accounts with associate companies that are 
subject to current settlement are includible in account 146, Accounts 
receivable from associate companies (Sec.  367.1460).
    (f) The service company must write down the cost of any security in 
recognition of a decline in the related value. Securities must be 
written off or written down to a nominal value if there is no 
reasonable prospect of substantial value. Fluctuations in market value 
must not be recorded but a permanent impairment in the value of 
securities must be recognized in the accounts. When securities are 
written off or written down, the amount of the adjustment must be 
charged to account 426.5, Other deductions (Sec.  367.4265), or to an 
appropriate account for accumulated provisions for loss in value 
established as a separate subdivision of this account.


Sec.  367.1240  Account 124, Other investments.

    (a) This account must include the book cost of investments in 
securities issued or assumed by non-associate companies, investment 
advances to these companies, and any investments not accounted for 
elsewhere. This account must also include unrealized holding gains and 
losses on trading and available-for-sale types of security investments. 
Include also the offsetting entry to the recording of amortization of 
discount or premium on interest-bearing investments. (See account 419, 
Interest and dividend income (Sec.  367.4190).)
    (b) The records must be maintained in a manner so as to show the 
amount of each investment and the investment advances to each person.


Sec.  367.1280  Account 128, Other special funds.

    (a) This account must include the amount of cash and book cost of 
investments that have been segregated in special funds for insurance, 
employee pensions, savings, relief, hospital, and other purposes not 
provided for elsewhere. This account must also include unrealized 
holding gains and losses on trading and available-for-sale types of 
security investments. A separate account with appropriate title, must 
be kept for each fund.
    (b) Amounts deposited with a trustee under the terms of an 
irrevocable trust agreement for pensions or other employee benefits 
must not be included in this account.

Current and Accrued Assets


Sec.  367.1310  Account 131, Cash.

    This account must include the amount of current cash funds except 
working funds.


Sec.  367.1340  Account 134, Other special deposits.

    (a) This account must include deposits with fiscal agents or others 
for special purposes other than the payment of interest and dividends. 
The special deposits may include, among other things, cash deposited 
with federal, state, or municipal authorities as a guaranty for the 
fulfillment of obligations; cash deposited with trustees to be held 
until mortgaged property sold, destroyed, or otherwise disposed of is 
replaced; cash realized from the sale of the accounting service 
company's securities and deposited with trustees to be held until 
invested in property of the service company. Entries to this account 
must specify the purpose for which the deposit is made.
    (b) Assets available for general corporate purposes must not be

[[Page 28490]]

included in this account. Further, deposits for more than one year, 
that are not offset by current liabilities, must be charged to account 
128, Other special funds (Sec.  367.1280).


Sec.  367.1350  Account 135, Working funds.

    This account must include cash advanced to officers, agents, 
employees, and others as petty cash or working funds.


Sec.  367.1360  Account 136, Temporary cash investments.

    (a) This account must include the book cost of investments, such as 
demand and time loans, bankers' acceptances, United States Treasury 
certificates, marketable securities, and other similar investments, 
acquired for the purpose of temporarily investing cash.
    (b) This account must be maintained so as to show separately 
temporary cash investments in securities of associate companies and of 
others. Records must be kept of any pledged investments.


Sec.  367.1410  Account 141, Notes receivable.

    (a) This account must include the book cost, not includible 
elsewhere, of all collectible obligations in the form of notes 
receivable and similar evidences (except interest coupons) of money due 
on demand or within one year from the date of issue, except, however, 
notes receivable from associate companies. (See account 136, Temporary 
cash investments (Sec.  367.1360), and account 145, Notes receivable 
from associate companies (Sec.  367.1450).)
    (b) The face amount of notes receivable discounted, sold, or 
transferred without releasing the service company from liability as a 
related endorser, must be credited to a separate subaccount of this 
account and appropriate disclosure must be made in financial statements 
of any contingent liability arising from the transactions.


Sec.  367.1420  Account 142, Customer accounts receivable.

    (a) This account must include amounts due from customers for 
service, and for merchandising, jobbing and contract work. This account 
must not include amounts due from associate companies.
    (b) This account must be maintained so as to permit ready 
segregation of the amounts due for merchandising, jobbing and contract 
work.


Sec.  367.1430  Account 143, Other accounts receivable.

    (a) This account must include amounts due the service company upon 
open accounts, other than amounts due from associate companies and from 
customers for services and merchandising, jobbing and contract work.
    (b) This account must be maintained so as to show separately 
amounts due on subscriptions to capital stock and from officers and 
employees, but the account must not include amounts advanced to 
officers or others as working funds. (See account 135, Working funds 
(Sec.  367.1350).)


Sec.  367.1440  Account 144, Accumulated provision for uncollectible 
accounts--Credit.

    (a) This account must be credited with amounts provided for losses 
on accounts receivable that may become uncollectible, and also with 
collections on related previously charged accounts. Concurrent charges 
must be made to account 904, Uncollectible accounts (Sec.  367.9040), 
for amounts applicable to service company operations, and to 
corresponding accounts for other operations. Records must be maintained 
so as to show the write-offs of account receivable for each service 
company department.
    (b) This account must be subdivided to show the provision 
applicable to the following classes of accounts receivable:
    (1) Service company customers.
    (2) Merchandising, jobbing and contract work.
    (3) Officers and employees.
    (4) Others.
    (c) Accretions to this account must not be made in excess of a 
reasonable provision against losses of the related character.
    (d) If provisions for uncollectible notes receivable or for 
uncollectible receivables from associate companies are necessary, 
separate related subaccounts must be established under the account in 
which the receivable is carried.


Sec.  367.1450  Account 145, Notes receivable from associate companies.

    (a) This account must include notes and drafts upon which associate 
companies are liable, and that mature and are expected to be paid in 
full not later than one year from the date of issue, together with any 
related interest, and debit balances subject to current settlement in 
open accounts with associate companies. Items that do not bear a 
specified due date but that have been carried for more than twelve 
months and items that are not paid within twelve months from due date 
must be transferred to account 123, Investment in associate companies 
(Sec.  367.1230).
    (b) On the balance sheet, accounts receivable from an associate 
company may be set off against accounts payable to the same company.
    (c) The face amount of notes receivable discounted, sold or 
transferred without releasing the service company from liability as 
endorser thereon, must be credited to a separate subaccount of this 
account and appropriate disclosure must be made in financial statements 
of any contingent liability arising from such transactions.


Sec.  367.1460  Account 146, Accounts receivable from associate 
companies.

    (a) This account must include notes and drafts upon which associate 
companies are liable, and that mature and are expected to be paid in 
full not later than one year from the date of issue, together with any 
related interest thereon, and debit balances subject to current 
settlement in open accounts with associate companies. Items that do not 
bear a specified due date but that have been carried for more than 
twelve months and items that are not paid within twelve months from due 
date must be transferred to account 123, Investment in associate 
companies (Sec.  367.1230).
    (b) On the balance sheet, accounts receivable from an associate 
company may be set off against accounts payable to the same company.
    (c) The face amount of notes receivable discounted, sold or 
transferred without releasing the service company from liability as the 
related endorser, must be credited to a separate subaccount of this 
account and appropriate disclosure must be made in financial statements 
of any contingent liability arising from the transactions.


Sec.  367.1520  Account 152, Fuel stock expenses undistributed.

    The service company must utilize this account, where appropriate, 
to include the cost of service company labor and of office supplies 
used and operating expenses incurred with respect to the review, 
analysis and management of fuel supply contracts or agreements, the 
accumulation of fuel information and its interpretation, the logistics 
and handling of fuel, and other related support functions, as a service 
to the company engaged in the procurement and transportation of fuel. 
This account must be maintained to show the expenses attributable to 
each company through the use of work orders. All expenses of a service 
company's fuel department or functions must be cleared through this 
account.


Sec.  367.1540  Account 154, Materials and operating supplies.

    (a) This account must include the cost of materials purchased 
primarily for use

[[Page 28491]]

in the service company business for construction, operation and 
maintenance purposes. It must include the book cost of materials 
recovered in connection with construction, maintenance or the 
retirement of service company property, the materials being credited to 
construction, maintenance or accumulated depreciation provision, 
respectively. This account must include the following items:
    (1) Reusable materials consisting of large individual items must be 
included in this account at original cost, estimated if not known. The 
cost of repairing the items must be charged to the maintenance account 
appropriate for the previous use.
    (2) Reusable materials consisting of relatively small items, the 
identity of which (from the date of original installation to the 
related final abandonment or sale) cannot be ascertained without undue 
refinement in accounting, must be included in this account at current 
prices new for the items. The cost of repairing the items must be 
charged to the appropriate expense account as indicated by previous 
use.
    (3) Scrap and non-usable materials included in this account must be 
carried at the estimated net amount realizable. The difference between 
the amounts realized for scrap and non-usable materials sold and the 
net amount at which the materials were carried in this account, as far 
as practicable, must be adjusted to the accounts credited when the 
materials were charged to this account.
    (b) Materials and supplies issued must be credited in this account 
and charged to the appropriate construction, operating expense, or 
other account on the basis of a unit price determined by the use of 
cumulative average, first-in-first-out, or any other method of 
inventory accounting that conforms with accepted accounting standards 
consistently applied.
    (c) This account must include the following items:
    (1) Invoice price of materials less cash or other discounts.
    (2) Freight, switching or other transportation charges when 
practicable to include as part of the cost of particular materials to 
which they relate.
    (3) Customs duties and excise taxes.
    (4) Costs of inspection and special tests prior to acceptance.
    (5) Insurance and other directly assignable charges.
    (d) Where expenses applicable to materials purchased cannot be 
directly assigned to particular purchases, they may be charged to a 
stores expense clearing account (account 163, Stores expense 
undistributed (Sec.  367.1630)), and distributed from there to the 
appropriate account.
    (e) When materials and supplies are purchased for immediate use, 
they need not be carried through this account, but may be charged 
directly to the appropriate service company property or expense 
account.


Sec.  367.1630  Account 163, Stores expense undistributed.

    (a) This account must include the cost of supervision, labor and 
expenses incurred in the operation of general storerooms, including 
purchasing, storage, handling and distribution of materials and 
supplies.
    (b) This account must be cleared by adding to the cost of materials 
and supplies issued a suitable loading charge that will distribute the 
expense equitably over stores issues. The balance in the account at the 
close of the calendar year must not exceed the amount of stores 
expenses reasonably attributable to the inventory of materials and 
supplies exclusive of fuel, as any amount applicable to fuel costs 
should be included in account 152, Fuel stock expenses undistributed 
(Sec.  367.1520).
    (c) This account must include the following labor items:
    (1) Inspecting and testing materials and supplies when not 
assignable to specific items.
    (2) Unloading from shipping facility and putting in storage.
    (3) Supervision of purchasing and stores department to extent 
assignable to materials handled through stores.
    (4) Getting materials from stock and in readiness to go out.
    (5) Inventorying stock received or stock on hand by stores 
employees but not including inventories by general department employees 
as part of internal or general audits.
    (6) Purchasing department activities in checking material needs, 
investigating sources of supply, analyzing prices, preparing and 
placing orders, and related activities to extent applicable to 
materials handled through stores. (Optional. Purchasing department 
expenses may be included in administrative and general expenses.)
    (7) Maintaining stores equipment.
    (8) Cleaning and tidying storerooms and stores offices.
    (9) Keeping stock records, including recording and posting of 
material receipts and issues and maintaining inventory record of stock.
    (10) Collecting and handling scrap materials in stores.
    (d) This account must include the following supplies and expenses 
items:
    (1) Adjustments of inventories of materials and supplies, but not 
including large differences that can readily be assigned to important 
classes of materials and equitably distributed among the accounts to 
which the classes of materials have been charged since the previous 
inventory.
    (2) Cash and other discounts not practically assignable to specific 
materials.
    (3) Freight, express, and similar items, when not assignable to 
specific items.
    (4) Heat, light and power for storerooms and store offices.
    (5) Brooms, brushes, sweeping compounds and other supplies used in 
cleaning and tidying storerooms and stores offices.
    (6) Injuries and damages.
    (7) Insurance on materials and supplies and on stores equipment.
    (8) Losses due to breakage, leakage, evaporation, fire or other 
causes, less credits for amounts received from insurance, 
transportation companies or others in compensation of the losses.
    (9) Postage, printing, stationery and office supplies.
    (10) Rent of storage space and facilities.
    (11) Communication service.
    (12) Excise and other similar taxes not assignable to specific 
materials.
    (13) Transportation expense on inward movement of stores and on 
transfer between storerooms, but not including charges on materials 
recovered from retirements that must be accounted for as part of cost 
of removal.
    (e) A physical inventory of each class of materials and supplies 
must be made at least every two years.


Sec.  367.1650  Account 165, Prepayments.

    This account must include amounts representing prepayments of 
insurance, rents, taxes, interest and miscellaneous items, and must be 
kept or supported in a manner so as to disclose the amount of each 
class of prepayment.


Sec.  367.1710  Account 171, Interest and dividends receivable.

    (a) This account must include the amount of interest on bonds, 
mortgages, notes, commercial paper, loans, open accounts, deposits, and 
other similar items, the payment of which is reasonably assured, and 
the amount of dividends declared or guaranteed on stocks owned.
    (b) Interest that is not subject to current settlement must not be 
included in this account, but in the account in which is carried the 
principal on which the interest is accrued.
    (c) Interest and dividends receivable from associate companies must 
be

[[Page 28492]]

included in account 146, Accounts receivable from associate companies 
(Sec.  367.1460).


Sec.  367.1720  Accounts 172, Rents receivable.

    (a) This account must include rents receivable or accrued on 
property rented or leased by the service company to others.
    (b) Rents receivable from associate companies must be included in 
account 146, Accounts receivable from associate companies (Sec.  
367.1460).


Sec.  367.1730  Account 173, Accrued revenues.

    At the option of the service company, the estimated amount accrued 
for service rendered, but not billed at the end of any accounting 
period, may be included in this account. In case accruals are made for 
unbilled revenues, they must be made likewise for unbilled expenses, 
such as for the purchase of energy.


Sec.  367.1740  Account 174, Miscellaneous current and accrued assets.

    This account must include the book cost of all other current and 
accrued assets, appropriately designated and supported so as to show 
the nature of each asset included in the account.

Deferred Debits


Sec.  367.1810  Account 181, Unamortized debt expense.

    This account must include expenses related to the issuance or 
assumption of debt securities. Amounts recorded in this account must be 
amortized over the life of each respective issue under a plan that will 
distribute the amount equitably over the life of the security. The 
amortization must be on a monthly basis, and the related amounts must 
be charged to account 428, Amortization of debt discount and expense 
(Sec.  367.4280). Any unamortized amounts outstanding at the time that 
the related debt is prematurely reacquired must be accounted for as 
indicated in General Instructions in Sec.  367.16.


Sec.  367.1830  Account 183, Preliminary survey and investigation 
charges.

    (a) This account must be charged with all expenditures for 
preliminary surveys, plans, investigations, and other similar items, 
made for the purpose of determining the feasibility of service company 
projects under contemplation. If construction results, this account 
must be credited and the appropriate service company property account 
charged. If the work is abandoned, the charge must be made to account 
426.5, Other deductions (Sec.  367.4265), or to the appropriate 
operating expense account.
    (b) The records supporting the entries to this account must be kept 
so that the service company can furnish complete information as to the 
nature and the purpose of the survey, plans, or investigations and the 
nature and amounts of the several charges.
    (c) The amount of preliminary survey and investigation charges 
transferred to service company property must not exceed the 
expenditures that may reasonably be determined to contribute directly 
and immediately and without duplication to service company property.


Sec.  367.1840  Account 184, Clearing accounts.

    This account must include undistributed balances in clearing 
accounts at the date of the balance sheet. Balances in clearing 
accounts must be substantially cleared not later than the end of the 
calendar year unless the items held relate to a future period.


Sec.  367.1850  Account 185, Temporary facilities.

    This account must include amounts shown by work orders for property 
installed for temporary use for a period of less than one year. Such 
work orders must be charged with the cost of temporary facilities and 
credited with payments received from customers and net salvage realized 
on removal of the temporary facilities. Any net credit or debit 
resulting must be cleared to the construction or service work order to 
which the facilities relate.


Sec.  367.1860  Account 186, Miscellaneous deferred debits.

    (a) This account must include all debits not provided for 
elsewhere, such as miscellaneous work in progress, and unusual or 
extraordinary expenses, not included in other accounts, that are in the 
process of amortization and items the proper final disposition of which 
is uncertain.
    (b) The records supporting the entries to this account must be kept 
so that the service company can furnish full information as to each 
deferred debit included in this account.


Sec.  367.1880  Account 188, Research, development, or demonstration 
expenditures.

    (a) This account must be charged with the cost of all expenditures 
coming within the meaning of research, development and demonstration 
(RD&D) of this Uniform System of Accounts (See Definitions Sec.  
367.1(a)(37)), except those expenditures properly chargeable to account 
107, Construction work in progress (Sec.  367.1070).
    (b) Costs that are minor or of a general or recurring nature must 
be transferred from this account to the appropriate operating expense 
function or, if the costs are common to the overall operations or 
cannot be feasibly allocated to the various operating accounts, then 
the costs must be recorded in account 930.2, Miscellaneous general 
expenses (Sec.  367.9302).
    (c) In certain instances, a service company may incur large and 
significant research, development, and demonstration expenditures that 
are nonrecurring and that would distort the annual research, 
development, and demonstration charges for the period. In such a case, 
the portion of such amounts that causes the distortion may be amortized 
to the appropriate operating expense account over a period not to 
exceed five years, unless otherwise authorized by the Commission.
    (d) The entries in this account must be maintained so as to show 
separately each project along with complete detail of the nature and 
purpose of the research, development, and demonstration project 
together with the related costs.


Sec.  367.1900  Account 190, Accumulated deferred income taxes.

    (a) This account must be debited and account 411.1, Provision for 
deferred income taxes--Credit, operating income (Sec.  367.4111), or 
account 411.2, Provision for deferred income taxes--Credit, other 
income and deductions (Sec.  367.4112), as appropriate, must be 
credited with an amount equal to that by which income taxes payable for 
the year are higher because of the inclusion of certain items in income 
for tax purposes, which items for general accounting purposes will not 
be fully reflected in the service company's determination of annual net 
income until subsequent years.
    (b) This account must be credited and account 410.1, Provision for 
deferred income taxes, operating income (Sec.  367.4101), or account 
410.2, Provision for deferred income taxes, other income and deductions 
(Sec.  367.4102), as appropriate, must be debited with an amount equal 
to that by which income taxes payable for the year are lower because of 
prior payment of taxes as provided by paragraph (a) of this section, 
because of difference in timing for tax purposes of particular items of 
income or income deductions from that recognized by the utility for 
general accounting purposes. The credit to this account and debit to 
account 410.1 (Sec.  367.4101), or 410.2 (Sec.  367.4102) must, in 
general, represent the effect on taxes payable in the current year of 
the

[[Page 28493]]

smaller amount of book income recognized for tax purposes as compared 
to the amount recognized in the service company's current accounts with 
respect to the item or class of items for which deferred tax accounting 
by the service company was authorized by the Commission.
    (c) The service company is restricted in its use of this account to 
the purpose provided in paragraphs (a) and (b) of this section. The 
service company must not make use of the balance in this account or any 
related portion except as provided in the text of this account, without 
prior approval of the Commission. Any remaining deferred tax account 
balance with respect to an amount for any prior year's tax deferral, 
the amortization of which or other recognition in the service company's 
income accounts has been completed, or other disposition made, must be 
debited to account 410.1, Provision for deferred income taxes, 
operating income (Sec.  367.4101), or account 410.2, Provision for 
deferred income taxes, other income and deductions (Sec.  367.4102), as 
appropriate, or otherwise disposed of as the Commission may authorize 
or direct. (See General Instructions in Sec.  367.17.)

Proprietary Capital


Sec.  367.2010  Account 201, Common stock issued.

    This account must include the par or stated value of all common 
capital stock issued and outstanding.


Sec.  367.2040  Account 204, Preferred stock issued.

    This account must include the par or stated value of all preferred 
stock issued and outstanding.


Sec.  367.2110  Account 211, Miscellaneous paid-in capital.

    This account must include the balance of all other credits for 
paid-in capital that is not properly included in proprietary capital 
accounts. This account may include all commissions and expenses 
incurred in connection with the issuance of capital stock.


Sec.  367.2150  Account 215, Appropriated retained earnings.

    This account must include the amount of retained earnings that has 
been appropriated or set aside for special purposes. Separate 
subaccounts must be maintained under titles that will designate the 
purpose for which each appropriation was made.


Sec.  367.2160  Account 216, Unappropriated retained earnings.

    This account must include the balances, either debit or credit, of 
unappropriated retained earnings arising from earnings of the service 
company. This account must not include any amounts representing the 
undistributed earnings of subsidiary companies.


Sec.  367.2161  Account 216.1, Unappropriated undistributed subsidiary 
earnings.

    This account must include the balances, either debit or credit, of 
undistributed retained earnings of subsidiary companies since their 
acquisition. When dividends are received from subsidiary companies 
relating to amounts included in this account, this account must be 
debited and account 216, Unappropriated retained earnings (Sec.  
367.2160), credited.


Sec.  367.2190  Account 219, Accumulated other comprehensive income.

    (a) This account must include revenues, expenses, gains, and losses 
that are properly includable in other comprehensive income during the 
period. Examples of other comprehensive income include, but are not 
limited to, minimum pension liability adjustments, and unrealized gains 
and losses on certain investments in debt and equity securities. 
Records supporting the entries to this account must be maintained so 
that the service company can furnish the amount of other comprehensive 
income for each item included in this account.
    (b) This account also must be debited or credited, as appropriate, 
with amounts of accumulated other comprehensive income that have been 
included in the determination of net income during the period and in 
accumulated other comprehensive income in prior periods. Separate 
records for each category of items must be maintained to identify the 
amount of the reclassification adjustments from accumulated other 
comprehensive income to earnings made during the period.

Long-Term Debt


Sec.  367.2230  Account 223, Advances from associate companies.

    (a) This account must include the face value of notes payable to 
associate companies and the amount of open book accounts representing 
advances from associate companies. It does not include notes and open 
accounts representing indebtedness subject to current settlement that 
are includible in account 233, Notes payable to associate companies 
(Sec.  367.2330), or account 234, Accounts payable to associate 
companies (Sec.  367.2340).
    (b) The records supporting the entries to this account must be kept 
so that the service company can furnish complete information concerning 
each note and open account.


Sec.  367.2240  Account 224, Other long-term debt.

    (a) This account must include, until maturity, all long-term debt 
not otherwise provided for. This covers items such as receivers' 
certificates, real estate mortgages executed or assumed, assessments 
for public improvements, notes and unsecured certificates of 
indebtedness not owned by associate companies, receipts outstanding for 
long-term debt, and other obligations maturing more than one year from 
date of issue or assumption.
    (b) Separate accounts must be maintained for each class of 
obligation, and records must be maintained to show for each class all 
details as to date of obligation, date of maturity, interest dates and 
rates, security for the obligation, and other similar items.


Sec.  367.2250  Account 225, Unamortized premium on long-term debt.

    (a) This account must include the excess of the cash value of 
consideration received over the face value upon the issuance or 
assumption of long-term debt securities.
    (b) Amounts recorded in this account must be amortized over the 
life of each respective issue under a plan that will distribute the 
amount equitably over the life of the security. The amortization must 
be on a monthly basis, with the related amounts credited to account 
429, Amortization of premium on debt--Credit (Sec.  367.4290). (See 
General Instructions in Sec.  367.16.)


Sec.  367.2260  Account 226, Unamortized discount on long-term debt--
Debit.

    (a) This account must include the excess of the face value of long-
term debt securities over the related cash value of consideration 
received, related to the issue or assumption of all types and classes 
of debt.
    (b) Amounts recorded in this account must be amortized over the 
life of the respective issues under a plan that will distribute the 
amount equitably over the life of the securities. The amortization must 
be on a monthly basis, with the related amounts charged to account 428, 
Amortization of debt discount and expense (Sec.  367.4280). (See 
General Instructions in Sec.  367.16.)

Other Noncurrent Liabilities


Sec.  367.2270  Account 227, Obligations under capital lease--Non-
current.

    This account must include the portion not due within one year, of 
the obligations recorded for the amounts

[[Page 28494]]

applicable to leased property recorded as assets in account 101.1, 
Property under capital leases (Sec.  367.1011).


Sec.  367.2300  Account 230, Asset retirement obligations.

    (a) This account must include the amount of liabilities for the 
recognition of asset retirement obligations related to service company 
property. This account must be credited for the amount of the 
liabilities for asset retirement obligations with amounts charged to 
the appropriate property account to record the related asset retirement 
costs.
    (b) The service company must charge the accretion expense to 
account 411.10, Accretion expense (Sec.  367.4116), and credit account 
230, Asset retirement obligations (Sec.  367.2300).
    (c) This account must be debited with amounts paid to settle the 
asset retirement obligations recorded in this account.
    (d) The service company must clear from this account any gains or 
losses resulting from the settlement of asset retirement obligations in 
accordance with the instructions prescribed in the General Instructions 
in Sec.  367.22.

Current and Accrued Liabilities


Sec.  367.2310  Account 231, Notes payable.

    This account must include the face value of all notes, drafts, 
acceptances, or other similar evidences of indebtedness, payable on 
demand or within a time not exceeding one year from date of issue, to 
other than associate companies.


Sec.  367.2320  Account 232, Accounts payable.

    This account must include all amounts payable by the service 
company within one year, that are not provided for in other accounts.


Sec.  367.2330  Account 233, Notes payable to associate companies.

    (a) This account must include amounts owing to associate companies 
on notes, drafts, acceptances, or other similar evidences of 
indebtedness, and open accounts payable on demand or not more than one 
year from date of issue or creation.
    (b) Exclude from this account notes and accounts that are 
includible in account 223, Advances from associate companies (Sec.  
367.2230).


Sec.  367.2340  Account 234, Accounts payable to associate companies.

    (a) This account must include amounts owing to associate companies 
on notes, drafts, acceptances, or other similar evidences of 
indebtedness, and open accounts payable on demand or not more than one 
year from date of issue or creation.
    (b) Exclude from this account notes and accounts that are included 
in account 223, Advances from associate companies (Sec.  367.2230).


Sec.  367.2360  Account 236, Taxes accrued.

    (a) This account must be credited with the amount of taxes accrued 
during the accounting period, corresponding debits being made to the 
appropriate accounts for tax charges. The credits may be based upon 
estimates, but from time to time during the year as the facts become 
known, the amount of the periodic credits must be adjusted so as to 
include as nearly as can be determined in each year the related 
applicable taxes. Any amount representing a prepayment of taxes 
applicable to the period subsequent to the date of the balance sheet, 
must be shown under account 165, Prepayments (Sec.  367.1650).
    (b) If accruals for taxes are found to be insufficient or 
excessive, corrections must be made through current tax accruals.
    (c) Accruals for taxes must be based upon the net amounts payable 
after credit for any discounts, and must not include any amounts for 
interest on tax deficiencies or refunds. Interest received on refunds 
must be credited to account 419, Interest and dividend income (Sec.  
367.4190), and interest paid on deficiencies must be charged to account 
431, Other interest expense (Sec.  367.4310).
    (d) The records supporting the entries to this account must be kept 
so as to show for each class of taxes, the amount accrued, the basis 
for the accrual, the accounts to which charged, and the amount of tax 
paid.


Sec.  367.2370  Account 237, Interest accrued.

    This account must include the amount of interest accrued but not 
matured on all liabilities of the service company not including, 
however, interest that is added to the principal of the debt on which 
it is incurred. Supporting records must be maintained so as to show the 
amount of interest accrued on each obligation.


Sec.  367.2380  Account 238, Dividends declared.

    This account must include the amount of dividends that have been 
declared but not paid. Dividends must be credited to this account when 
they become a liability.


Sec.  367.2410  Account 241, Tax collections payable.

    (a) This account must include the amount of taxes collected by the 
service company through payroll deductions or otherwise pending 
transmittal of the taxes to the proper taxing authority.
    (b) Do not include liability for taxes assessed directly against 
the service company that is accounted for as part of the service 
company's own tax expense.


Sec.  367.2420  Account 242, Miscellaneous current and accrued 
liabilities.

    This account must include the amount of all other current and 
accrued liabilities not provided for in accounts 231 through 243 
(Sec. Sec.  367.2310 through 367.2430), appropriately designated and 
supported so as to show the nature of each liability.


Sec.  367.2430  Account 243, Obligations under capital leases--current.

    This account must include the portion, due within one year, of the 
obligations recorded for the amounts applicable to leased property 
recorded as assets in account 101.1, Property under capital leases 
(Sec.  367.1011).

Deferred Credits


Sec.  367.2530  Account, 253, Other deferred credits.

    This account must include advance billings and receipts and other 
deferred credit items, not provided for elsewhere, including amounts 
which cannot be entirely cleared or disposed of until additional 
information has been received.


Sec.  367.2550  Account 255, Accumulated deferred investment tax 
credits.

    This account must be credited with all investment tax credits 
deferred by companies that have elected to follow deferral accounting, 
partial or full, rather than recognizing in the income statement the 
total benefits of the tax credit as realized. After this election, a 
company may not transfer amounts from this account, except as 
authorized in this account and in accounts 411.4, Investment tax credit 
adjustments, service company property (Sec.  367.4114) or 411.5, 
Investment tax credit adjustments, other income and deductions (Sec.  
367.4115), or with approval of the Commission.


Sec.  367.2820  Account 282, Accumulated deferred income taxes--Other 
property.

    (a) This account must include the tax deferrals resulting from 
adoption of the principle of comprehensive inter-period income tax 
allocation described in the General Instructions in Sec.  367.17 that 
are related to all property other than accelerated amortization 
property.
    (b) This account must be credited and accounts 410.1, Provision for 
deferred income taxes, operating income (Sec.  367.4101), or 410.2, 
Provision for deferred income taxes, Other income and deductions (Sec.  
367.4102), as appropriate, must be debited with tax

[[Page 28495]]

effects related to property described in paragraph (a) of this section 
where taxable income is lower than pretax accounting income due to 
differences between the periods in which revenue and expense 
transactions affect taxable income and the periods in which they enter 
into the determination of pretax accounting income.
    (c) This account must be debited, and accounts 411.1, Provision for 
deferred income taxes--credit, operating income (Sec.  367.4111), or 
411.2, Provision for deferred income taxes--credit, other income and 
deductions (Sec.  367.4112), as appropriate, must be credited with tax 
effects related to property described in paragraph (a) of this section 
where taxable income is higher than pretax accounting income due to 
differences between the periods in which revenue and expense 
transactions affect taxable income and the periods in which they enter 
into the determination of pretax accounting income.
    (d) The service company is restricted in its use of this account to 
the purposes described in paragraphs (a) through (c) of this account. 
It must not transfer the balance in this account or any related portion 
to retained earnings or make any other use of the balance except as 
provided in paragraph (a) through (c) of this account without prior 
approval of the Commission. Upon the disposition by sale, exchange, 
transfer, abandonment or premature retirement of property on which 
there is a related balance, this account must be charged with an amount 
equal to the related income tax expense, if any, arising from the 
disposition and accounts 411.1, Income taxes deferred in prior years--
Credit (Sec.  367.4111), or 411.2, Income taxes deferred in prior 
years--Credit, other income and deductions (Sec.  367.4112), must be 
credited. When property is disposed of by transfer to a wholly-owned 
subsidiary, the related balance in this account also must be 
transferred. When the disposition relates to retirement of an item or 
items under a group method of depreciation where there is no tax effect 
in the year of retirement, no entries are required in this account if 
it can be determined that the related balance must be retained to 
offset future group item tax deficiencies.


Sec.  367.2830  Account 283, Accumulated deferred income taxes--Other.

    (a) This account must include all credit tax deferrals resulting 
from the adoption of the principles of comprehensive inter-period 
income tax allocation described in the General Instructions in Sec.  
367.17 other than those deferrals that are includible in accounts and 
account 282, Accumulated deferred income taxes--Other property (Sec.  
367.2820).
    (b) This account must be credited, and accounts 410.1 Provision for 
deferred income taxes, operating income (Sec.  367.4101), or 410.2 
Provision for deferred income taxes, other income and deductions (Sec.  
367.4102), as appropriate, must be debited with tax effects related to 
items described in paragraph (a) of this account where taxable income 
is lower than pretax accounting income due to differences between the 
periods in which revenue and expense transactions affect taxable income 
and the periods in which they enter into the determination of pretax 
accounting income.
    (c) This account must be debited, and accounts 411.1, Provision for 
deferred income taxes--Credit, operating income (Sec.  367.4111), or 
411.2, Provision for deferred income taxes--Credit, other income and 
deductions (Sec.  367.4112), as appropriate, must be credited with tax 
effects related to items described in paragraph (a) of this account 
where taxable income is higher than pretax accounting income due to 
differences between the periods in which revenue and expense 
transactions affect taxable income and the periods in which they enter 
into the determination of pretax accounting income.
    (d) Records with respect to entries to this account, as described 
in paragraphs (a) through (c) of this account, and the account balance, 
must be maintained so as to show the factors of calculation with 
respect to each annual amount of the item or class of items.
    (e) The service company is restricted in its use of this account to 
the purposes described in paragraphs (a) through (c) of this account. 
It must not transfer the balance in the account or any portion of the 
account to retained earnings or to any other account or make any use of 
the account except as provided in the text of this account, without 
prior approval of the Commission. Upon the disposition by sale, 
exchange, transfer, abandonment or premature retirement of items on 
which there is a related balance herein, this account must be charged 
with an amount equal to the related income tax effect, if any, arising 
from the disposition and accounts 411.1, Provision for deferred income 
taxes--Credit, operating income (Sec.  367.4111), or 411.2, Provision 
for deferred income taxes--Credit, other income and deductions (Sec.  
367.4112), as appropriate, must be credited.
    (f) When property is disposed of by transfer to a wholly-owned 
subsidiary, the related balance in this account also must be 
transferred. When the disposition relates to retirement of an item or 
items under a group method of depreciation where there is no tax effect 
in the year of retirement, no entries are required in this account if 
it can be determined that the related balance must be retained to 
offset future group item tax deficiencies.

Subpart G--Service Company Property Chart of Accounts


Sec.  367.3010  Account 301, Organization.

    (a) This account must include all fees paid to federal or state 
governments for the privilege of incorporation and expenditures 
incident to organizing the corporation, partnership, or other 
enterprise and putting it into readiness to do business
    (b) This account must include the following items:
    (1) Cost of obtaining certificates authorizing the service company 
to engage in its business.
    (2) Fees and expenses for incorporation.
    (3) Fees and expenses for mergers or consolidations.
    (4) Office expenses incident to organizing the service company.
    (5) Stock and minute books and corporate seal.
    (c) This account must not include any discounts upon securities 
issued or assumed; nor may it include any costs incident to negotiating 
loans, selling bonds or other evidences of debt or expenses in 
connection with the authorization, issuance or sale of capital stock.
    (d) Exclude from this account and include in the appropriate 
expense account, the cost of preparing and filing papers in connection 
with the extension of the term of incorporation unless the first 
organization costs have been written off. When charges are made to this 
account for expenses incurred in mergers, consolidations, or 
reorganizations, amounts previously included in this account or in 
similar accounts in the books of the companies concerned must be 
excluded from this account.


Sec.  367.3030  Account 303, Miscellaneous intangible property.

    (a) This account must include the cost of patent rights, licenses, 
privileges, and other intangible property necessary or valuable in the 
conduct of service company operations and not specifically chargeable 
to any other account.
    (b) When any item included in this account is retired or expires, 
the related book cost must be credited to this account and charged to 
account 426.5, Other deductions (Sec.  367.4265), or account 111, 
Accumulated provision for amortization of property (Sec.  367.1110).

[[Page 28496]]

    (c) This account must be maintained in a manner so that the service 
company can furnish full information with respect to the amounts 
included in this account.


Sec.  367.3890  Account 389, Land and land rights.

    This account must include the cost of land and land rights used for 
service company purposes, the cost of which is not properly includible 
in other land and land rights accounts. (See Service Company Property 
Instructions in Sec.  367.55.)


Sec.  367.3900  Account 390, Structures and improvements.

    This account must include the cost in place of structures and 
improvements used for service company purposes, the cost of which is 
not properly includible in other structures and improvements accounts 
(See Service Company Property Instructions in Sec.  367.56).


Sec.  367.3910  Account 391, Office furniture and equipment.

    (a) This account must include the cost of office furniture and 
equipment owned by the service company and devoted to service company 
operations, and not permanently attached to buildings, except the cost 
of the furniture and equipment that the service company elects to 
assign to other property accounts on a functional basis.
    (b) This account must include the following items:
    (1) Bookcases and shelves.
    (2) Desks, chairs, and desk equipment.
    (3) Drafting-room equipment.
    (4) Filing, storage, and other cabinets.
    (5) Floor covering.
    (6) Library and library equipment.
    (7) Mechanical office equipment, such as accounting machines, 
typewriters, and other similar items.
    (8) Safes.
    (9) Tables.


Sec.  367.3920  Account 392, Transportation equipment.

    (a) This account must include the cost of transportation vehicles 
used for service company purposes.
    (b) This account must include the following items:
    (1) Airplanes.
    (2) Automobiles.
    (3) Bicycles.
    (4) Electrical vehicles.
    (5) Motor trucks.
    (6) Motorcycles.
    (7) Repair cars or trucks.
    (8) Tractors and trailers.
    (9) Other transportation vehicles.


Sec.  367.3930  Account 393, Stores equipment.

    (a) This account must include the cost of equipment used for the 
receiving, shipping, handling, and storage of materials and supplies.
    (b) This account must include the following items:
    (1) Chain falls.
    (2) Counters.
    (3) Cranes (portable).
    (4) Elevating and stacking equipment (portable).
    (5) Hoists.
    (6) Lockers.
    (7) Scales.
    (8) Shelving.
    (9) Storage bins.
    (10) Trucks, hand and power driven.
    (11) Wheelbarrows.


Sec.  367.3940  Account 394, Tools, shop and garage equipment.

    (a) This account must include the cost of tools, implements, and 
equipment used in construction, repair work, general shops and garages 
and not specifically provided for or includible in other accounts.
    (b) This account must include the following items:
    (1) Air compressors.
    (2) Anvils.
    (3) Automobile repair shop equipment.
    (4) Battery charging equipment.
    (5) Belts, shafts and countershafts.
    (6) Boilers.
    (7) Cable pulling equipment.
    (8) Concrete mixers.
    (9) Drill presses.
    (10) Derricks.
    (11) Electric equipment.
    (12) Engines.
    (13) Forges.
    (14) Furnaces.
    (15) Foundations and settings specially constructed for equipment 
in this account and not expected to outlast the equipment for which 
provided.
    (16) Gas producers.
    (17) Gasoline pumps, oil pumps and storage tanks.
    (18) Greasing tools and equipment.
    (19) Hoists.
    (20) Ladders.
    (21) Lathes.
    (22) Machine tools.
    (23) Motor-driven tools.
    (24) Motors.
    (25) Pipe threading and cutting tools.
    (26) Pneumatic tools.
    (27) Pumps.
    (28) Riveters.
    (29) Smithing equipment.
    (30) Tool racks.
    (31) Vises.
    (32) Welding apparatus.
    (33) Work benches.


Sec.  367.3950  Account 395, Laboratory equipment.

    (a) This account must include the cost installed of laboratory 
equipment used for general laboratory purposes.
    (b) This account must include the following items:
    (1) Ammeters.
    (2) Balances and scales.
    (3) Barometers.
    (4) Calorimeters-bomb, flow, recording types, and other similar 
items.
    (5) Current batteries.
    (6) Electric furnaces.
    (7) Frequency changers.
    (8) Galvanometers.
    (9) Gas burning equipment.
    (10) Gauges.
    (11) Glassware, beakers, burettes, and other similar items.
    (12) Humidity testing apparatus.
    (13) Inductometers.
    (14) Laboratory hoods.
    (15) Laboratory standard millivolt meters.
    (16) Laboratory standard volt meters.
    (17) Laboratory tables and cabinets.
    (18) Meter-testing equipment.
    (19) Millivolt meters.
    (20) Motor generator sets.
    (21) Muffles.
    (22) Oil analysis apparatus.
    (23) Panels.
    (24) Phantom loads.
    (25) Piping.
    (26) Portable graphic ammeters, voltmeters, and wattmeters.
    (27) Portable loading devices.
    (28) Potential batteries.
    (29) Potentiometers.
    (30) Rotating standards.
    (31) Specific gravity apparatus.
    (32) Standard bottles for meter prover testing.
    (33) Standard cell, reactance, resistor, and shunt.
    (34) Stills.
    (35) Sulphur and ammonia apparatus.
    (36) Switchboards.
    (37) Synchronous timers.
    (38) Tar analysis apparatus.
    (39) Testing panels.
    (40) Testing resistors.
    (41) Thermometers-indicating and recording.
    (42) Transformers.
    (43) Voltmeters.
    (44) Other testing, laboratory, or research equipment not provided 
for elsewhere.
    (45) Other items of equipment for testing gas, fuel, flue gas, 
water, residuals, and other similar items.


Sec.  367.3960  Account 396, Power operated equipment.

    (a) This account must include the cost of power operated equipment 
used in construction or repair work exclusive of equipment includible 
in other accounts. Include, also, the tools and accessories acquired 
for use with the equipment and the vehicle on which the equipment is 
mounted.

[[Page 28497]]

    (b) This account must include the following items:
    (1) Air compressors, including driving unit and vehicle.
    (2) Back filling machines.
    (3) Boring machines.
    (4) Bulldozers.
    (5) Cranes and hoists.
    (6) Diggers.
    (7) Engines.
    (8) Pile drivers.
    (9) Pipe cleaning machines.
    (10) Pipe coating or wrapping machines.
    (11) Tractors--Crawler type.
    (12) Trenchers.
    (13) Other power operated equipment.
    (b) It is intended that this account include only the large units 
that are generally self-propelled or mounted on movable equipment.


Sec.  367.3970  Account 397, Communication equipment.

    (a) This account must include the cost installed of telephone, 
telegraph, and wireless equipment for general use in connection with 
service company operations.
    (b) This account must include the following items:
    (1) Amplifiers.
    (2) Antennae.
    (3) Booths.
    (4) Cables.
    (5) Carrier terminal equipment.
    (6) Conductors.
    (7) Distributing boards.
    (8) Extension cords.
    (9) Gongs.
    (10) Hand sets, manual and dial.
    (11) Insulators.
    (12) Intercommunicating sets.
    (13) Loading coils.
    (14) Microwave equipment.
    (15) Operators' desks.
    (16) Paraboloids.
    (17) Poles and fixtures used wholly for telephone or telegraph 
wire.
    (18) Power supply equipment.
    (19) Radio transmitting and receiving sets.
    (20) Reflectors.
    (21) Repeaters.
    (22) Remote control equipment and lines.
    (23) Sending keys.
    (24) Storage batteries.
    (25) Switchboards.
    (26) Telautograph circuit connections.
    (27) Telegraph receiving sets.
    (28) Telephone and telegraph circuits.
    (29) Testing instruments.
    (30) Towers.
    (31) Underground conduit used wholly for telephone or telegraph 
wires and cable wires.


Sec.  367.3980  Account 398, Miscellaneous equipment.

    (a) This account must include the cost of equipment, apparatus, and 
other similar items, used in the service company's operations, that is 
not included in any other account of this system of accounts.
    (b) This account must include the following items:
    (1) Hospital and infirmary equipment.
    (2) Kitchen equipment.
    (3) Employees' recreation equipment.
    (4) Radios.
    (5) Restaurant equipment.
    (6) Soda fountains.
    (7) Operators' cottage furnishings.
    (8) Other miscellaneous equipment.


Sec.  367.3990  Account 399, Other tangible property.

    This account must include the cost of tangible service company 
property not provided for elsewhere.


Sec.  367.3991  Account 399.1, Asset retirement costs for service 
company property.

    This account must include asset retirement cost on service company 
property.

Subpart H--Income Statement Chart of Accounts

Service Company Operating Income


Sec.  367.4000  Account 400, Operating revenues.

    There must be shown under this caption the total amount included in 
the service company operating revenue accounts 457 through 459 
(Sec. Sec.  367.4570 through 367.4590).


Sec.  367.4010  Account 401, Operation expense.

    There must be shown under this caption the total amount included in 
the service company operation expense accounts 500 through 589 
(Sec. Sec.  367.5000 through 367.5890), 800 through 881 (Sec. Sec.  
367.8000 through 367.8810) and 901 through 931 (Sec. Sec.  367.9010 
through 367.9310).


Sec.  367.4020  Account 402, Maintenance expense.

    There must be shown under this caption the total amount included in 
the service company maintenance expense accounts 500 through 598 
(Sec. Sec.  367.5000 through 367.5890), 800 though 894 (Sec. Sec.  
367.8000 through 367.8810), and 935 (Sec.  367.9350).


Sec.  367.4030  Account 403, Depreciation expense.

    (a) This account must include the amount of depreciation for all 
service company property, the cost of which is included in accounts 390 
through 399.1 (Sec. Sec.  367.3900 through 367.3991). Provide 
subaccounts by each class of service company property owned or leased 
except the depreciation expense that is charged to clearing accounts or 
to account 416, Costs and expenses of merchandising, jobbing and 
contract work (Sec.  367.4160).
    (b) The service company must keep the records of property and 
property retirements that will reflect the service life of property 
that has been retired and aid in estimating probable service life by 
mortality, turnover, or other appropriate methods; and also the records 
that will reflect the percentage of salvage and costs of removal for 
property retired from each account, or related subaccount, for 
depreciable property.
    (c) Depreciation expenses applicable to transportation equipment, 
shop equipment, tools, work equipment, power operated equipment and 
other general equipment may be charged to clearing accounts as 
necessary in order to obtain a proper distribution of expenses between 
construction and operation.


Sec.  367.4031  Account 403.1, Depreciation expense for asset 
retirement costs.

    This account must include the depreciation expense for asset 
retirement costs included in service company property.


Sec.  367.4040  Account 404, Amortization of limited-term property.

    This account must include amortization charges applicable to 
amounts included in the service company property's accounts for 
limited-term franchises, licenses, patent rights, limited-term 
interests in land, and expenditures on leased property where the 
service life of the improvements is terminable by action of the lease. 
The charges to this account must be sufficient to distribute the book 
cost of each investment as evenly as may be over the period of its 
benefit. (See account 111, Accumulated provision for amortization of 
service company property (Sec.  367.1110).)


Sec.  367.4050  Account 405, Amortization of other property.

    (a) When authorized by the Commission, this account must include 
charges for amortization of intangible or other property that does not 
have a definite or terminable life and that is not subject to charges 
for depreciation expense.
    (b) This account must be supported in sufficient detail to show the 
amortization applicable to each investment being amortized, together 
with the book cost of the investment and the period over which it is 
being written off.

[[Page 28498]]

Sec.  367.4081  Account 408.1, Taxes other than income taxes, operating 
income.

    This account must include those taxes, other than income taxes, 
that relate to service company operating income. This account must be 
maintained so as to allow ready identification of the various classes 
of taxes.


Sec.  367.4082  Account 408.2, Taxes other than income taxes, other 
income and deductions.

    This account must include those taxes, other than income taxes, 
that relate to other income and deductions.


Sec.  367.4091  Account 409.1, Income taxes, operating income.

    This account must include the amount of those local, state and 
Federal income taxes that relates to service company operating income.


Sec.  367.4092  Account 409.2, Income taxes, other income and 
deductions.

    This account must include the amount of those local, state and 
Federal income taxes (both positive and negative), that relate to other 
income and deductions.


Sec.  367.4093  Account 409.3, Income taxes, extraordinary items.

    This account must include the amount of those local, state and 
Federal income taxes (both positive and negative), that relate to 
extraordinary items.


Sec.  367.4101  Account 410.1, Provision for deferred income taxes, 
operating income.

    This account must include the amounts of those deferrals of taxes 
and allocations of deferred taxes that relate to service company 
operating income.


Sec.  367.4102  Account 410.2, Provision for deferred income taxes, 
other income and deductions.

    This account must include the amounts of those deferrals of taxes 
and allocations of deferred taxes that relate to other income and 
deductions.


Sec.  367.4111  Account 411.1, Provision for deferred income taxes--
Credit, operating income.

    This account must include the amounts of those allocations of 
deferred taxes and deferrals of taxes, credit, that relate to service 
company operating income.


Sec.  367.4112  Account 411.2, Provision for deferred income taxes--
Credit, other income and deductions.

    This account must include the amounts of those allocations of 
deferred taxes and deferrals of taxes, credit, that relate to other 
income and deductions.


Sec.  367.4114  Account 411.4, Investment tax credit adjustments, 
service company property.

    This account must include the amount of those investment tax credit 
adjustments that relate to service company property.


Sec.  367.4115  Account 411.5, Investment tax credit adjustments, 
other.

    This account must include the amount of those investment tax credit 
adjustments not properly included in other accounts.


Sec.  367.4116  Account 411.10, Accretion expense.

    This account must be charged for accretion expense on the 
liabilities associated with asset retirement obligations included in 
account 230, Asset retirement obligations (Sec.  367.2300), related to 
service company property.


Sec.  367.4150  Account 415, Revenues from merchandising, jobbing and 
contract work.

    (a) These accounts shall include respectively, all revenues derived 
from the sale of merchandise and jobbing or contract work, including 
any profit or commission accruing to the service company on jobbing 
work performed by it as agent under contracts whereby it does jobbing 
work for another for a stipulated profit or commission, and all 
expenses incurred in such activities. Interest related income from 
installment sales must be recorded in Account 419, Interest and 
Dividend income (Sec.  367.4190).
    (b) Records in support of this account must be so kept as to permit 
ready summarization of revenues by such major items as are feasible.
    (c) This account must include revenues from the sale of merchandise 
and from jobbing and contract work, and discounts and allowances made 
in settlement of bills for merchandise and jobbing work.
    (d) Related taxes must be recorded in account 408.2, Taxes other 
than income taxes, other income and deductions (Sec.  367.4082), or 
account 409.2, Income taxes, other income and deductions (Sec.  
367.4092), as appropriate.


Sec.  367.4160  Account 416, Costs and expenses of merchandising, 
jobbing and contract work.

    (a) This account must include the following labor items:
    (1) Canvassing and demonstrating appliances in homes and other 
places for the purpose of selling appliances.
    (2) Demonstrating and selling activities in sales rooms.
    (3) Installing appliances on customer premises where the work is 
done only for purchasers of appliances from the utility.
    (4) Installing wiring, piping, or other property work, on a jobbing 
or contract basis.
    (5) Preparing advertising materials for appliance sales purposes.
    (6) Receiving and handling customer orders for merchandise or for 
jobbing services.
    (7) Cleaning and tidying sales rooms.
    (8) Maintaining display counters and other equipment used in 
merchandising.
    (9) Arranging merchandise in sales rooms and decorating display 
windows.
    (10) Reconditioning repossessed appliances.
    (11) Bookkeeping and other clerical work in connection with 
merchandise and jobbing activities.
    (12) Supervising merchandise and jobbing operations.
    (b) This account must include the following materials and expenses 
items:
    (1) Advertising in newspapers, periodicals, radio, television, and 
other similar items.
    (2) Cost of merchandise sold and of materials used in jobbing work.
    (3) Stores expenses on merchandise and jobbing stocks.
    (4) Fees and expenses of advertising and commercial artists' 
agencies.
    (5) Printing booklets, dodgers, and other advertising data.
    (6) Premiums given as inducement to buy appliances.
    (7) Light, heat and power.
    (8) Depreciation on equipment used primarily for merchandise and 
jobbing operations.
    (9) Rent of sales rooms or of equipment.
    (10) Transportation expense in delivery and pick-up of appliances 
by the utility's facilities or by others.
    (11) Stationery and office supplies and expenses.
    (12) Losses from uncollectible merchandise and jobbing accounts.
    (c) Records in support of this account shall be so kept as to 
permit ready summarization of costs and expenses by such major items as 
are feasible.
    (d) Related taxes must be recorded in account 408.2, Taxes other 
than income taxes, other income and deductions (Sec.  367.4082), or 
account 409.2, Income taxes, other income and deductions (Sec.  
367.4092), as appropriate.


Sec.  367.4171  Account 417.1, Expenses of non-utility related 
operations.

    (a) This account will include expenses incurred in providing 
services to non-utility companies where the revenues from which are 
included in Account 459, Services rendered to non-utility companies 
(Sec.  367.4590).

[[Page 28499]]

Expenses related to providing customer, sales or administrative and 
general services to non-utility companies will initially be recorded in 
the 900 series of accounts and transferred to Account 417.1 (Sec.  
367.4171), through credit to Account 922, Administrative expenses 
transferred--Credit (Sec.  367.9220). The cost of other services 
provided to non-utility companies will be charged directly to Account 
417.1 (Sec.  367.4171).
    (b) Related taxes must be recorded in account 408.1, Taxes other 
than income taxes, operating income (Sec.  367.4081), or account 409.1, 
Income taxes, operating income (Sec.  367.4091).


Sec.  367.4181  Account 418.1, Equity in earnings of subsidiary 
companies.

    This account must include the service company's equity in the 
earnings or losses of subsidiary companies for the year.


Sec.  367.4190  Account 419, Interest and dividend income.

    (a) This account must include interest revenues on securities, 
loans, notes, advances, special deposits, tax refunds and all other 
interest-bearing assets, and dividends on stocks of other companies, 
whether the securities on which the interest and dividends are received 
are carried as investments or included in sinking or other special fund 
accounts.
    (b) This account may include the pro rata amount necessary to 
extinguish (during the interval between the date of acquisition and the 
date of maturity) the difference between the cost to the service 
company and the face value of interest-bearing securities. The amounts 
credited or charged must be concurrently included in the accounts in 
which the securities are carried.
    (c) Where significant in amount, expenses, excluding operating 
taxes and income taxes, applicable to security investments and to 
interest and dividend revenues on the account must be charged in this 
account.
    (d) Related taxes must be recorded in account 408.2, Taxes other 
than income taxes, other income and deductions (Sec.  367.4082), or 
account 409.2 Income taxes, other income and deductions (Sec.  
367.4092).
    (e) Interest accrued, the payment of which is not reasonably 
assured, dividends receivable that have not been declared or 
guaranteed, and interest or dividends upon reacquired securities issued 
or assumed by the service company must not be credited to this account.


Sec.  367.4191  Account 419.1, Allowance for other funds used during 
construction.

    This account must include concurrent credits for allowance for 
other funds used during construction.


Sec.  367.4210  Account 421, Miscellaneous income or loss.

    This account must include all revenue and expense items except 
taxes properly includible in the income account and not provided for 
elsewhere. Related taxes must be recorded in account 408.2, Taxes other 
than income taxes, other income and deductions (Sec.  367.4082), or 
account 409.2, Income taxes, other income and deductions (Sec.  
367.4092).


Sec.  367.4211  Account 421.1, Gain on disposition of property.

    This account must be credited with the gain on the sale, 
conveyance, exchange, or transfer of service or other property to 
another. Income taxes on gains recorded in this account must be 
recorded in account 409.2, Income taxes, other income and deductions 
(Sec.  367.4092).


Sec.  367.4212  Account 421.2, Loss on disposition of property.

    This account must be charged with the loss on the sale, conveyance, 
exchange or transfer of service or other property to another. The 
reduction in income taxes relating to losses recorded in this account 
must be recorded in account 409.2 Income taxes, other income and 
deductions (Sec.  367.4092).


Sec.  367.4250  Account 425, Miscellaneous amortization.

    (a) This account must include amortization charges not includible 
in other accounts which are properly deductible in determining the 
income of the service company before interest charges. Charges included 
in this account, if significant in amount, must be in accordance with 
an orderly and systematic amortization program.
    (b) This account must include the following items:
    (1) Amortization of intangibles included in service company 
property.
    (2) Other miscellaneous amortization charges authorized to be 
included in this account by the Commission.


Sec.  367.4261  Account 426.1, Donations.

    This account must include all payments or donations for charitable, 
social or community welfare purposes.


Sec.  367.4262  Account 426.2, Life insurance.

    This account must include all payments for life insurance of 
officers and employees where the service company is beneficiary (net 
premiums less increase in cash surrender value of policies).


Sec.  367.4263  Account 428.3, Penalties.

    This account must include payments by the service company for 
penalties or fines for violation of any regulatory statutes by the 
service company or its officials.


Sec.  367.4264  Account 426.4, Expenditures for certain civic, 
political and related activities.

    (a) This account must include expenditures for the purpose of 
influencing public opinion with respect to the election or appointment 
of public officials, referenda, legislation, or ordinances (either with 
respect to the possible adoption of new referenda, legislation or 
ordinances or repeal or modification of existing referenda, legislation 
or ordinances) or approval, modification, or revocation of franchises; 
or for the purpose of influencing the decisions of public officials.
    (b) This account must not include expenditures that are directly 
related to appearances before regulatory or other governmental bodies 
in connection with an associate utility company's existing or proposed 
operations.


Sec.  367.4265  Account 426.5, Other deductions.

    This account must include other miscellaneous expenses that are not 
properly included in service company operations.


Sec.  367.4270  Account 427, Interest on long-term debt.

    (a) This account must include the amount of interest on outstanding 
long-term debt issued or assumed by the service company, the liability 
for which is included in account 224, Other long-term debt (Sec.  
367.2240).
    (b) This account must be kept or supported so as to show the 
interest accruals on each class and series of long-term debt.
    (c) This account must not include interest on nominally issued or 
nominally outstanding long-term debt, including securities assumed.


Sec.  367.4280  Account 428, Amortization of debt discount and expense.

    (a) This account must include the amortization of unamortized debt 
discount and expense on outstanding long-term debt. Amounts charged to 
this account must be credited concurrently to accounts 181, Unamortized 
debt expense (Sec.  367.1810), and 226, Unamortized discount on long-
term debt--Debit (Sec.  367.2260).
    (b) This account must be kept or supported so as to show the debt

[[Page 28500]]

discount and expense on each class and series of long-term debt.


Sec.  367.4290  Account 429, Amortization of premium on debt--Credit.

    (a) This account must include the amortization of unamortized net 
premium on outstanding long-term debt. Amounts credited to this account 
must be charged concurrently to account 225, Unamortized premium on 
long-term debt (Sec.  367.2250).
    (b) This account must be kept or supported so as to show the 
premium on each class and series of long-term debt.
    (c) This account must include the following items:
    (1) Loss relating to investments in securities written-off or 
written-down.
    (2) Loss on sale of investments.
    (3) Loss on reacquisition, resale or retirement of service 
company's debt securities.
    (4) Preliminary survey and investigation expenses related to 
abandoned projects, when not written-off to the appropriate operating 
expense account.


Sec.  367.4300  Account 430, Interest on debt to associate companies.

    This account must include interest accrued on amounts included in 
account 223, Advances from associate companies (Sec.  367.2230), and 
account 233, Notes payable to associate companies (Sec.  367.2330). The 
records supporting the entries to this account must be kept so as to 
show to whom the interest is to be paid, the period covered by the 
accrual, the rate of interest and the principal amount of the advances 
or other obligations on which the interest is accrued. Separate 
subaccounts must be maintained for each related debt account.


Sec.  367.4310  Account 431, Other interest expense.

    This account must include all interest charges not provided for 
elsewhere.


Sec.  367.4320  Account 432, Allowance for borrowed funds used during 
construction--Credit.

    This account must include concurrent credits for allowance for 
borrowed funds used during construction.

Subpart I--Retained Earnings Accounts


Sec.  367.4330  Account 433, Balance transferred from income.

    This account must include the net credit or debit transferred from 
income for the year.


Sec.  367.4340  Account 434, Extraordinary income.

    This account must be credited with gains of unusual nature and 
infrequent occurrence, that would significantly distort the current 
year's income computed before extraordinary items, if reported other 
than as extraordinary items. Income tax relating to the amounts 
recorded in this account must be recorded in account 409.3, Income 
taxes, extraordinary items (Sec.  367.4093). (See General Instructions 
in Sec.  367.8.)


Sec.  367.4350  Account 435, Extraordinary deductions.

    This account must be debited with losses of unusual nature and 
infrequent occurrence that would significantly distort the current 
year's income computed before extraordinary items, if reported other 
than as extraordinary items. Income tax relating to the amounts 
recorded in this account must be recorded in account 409.3, Income 
taxes, extraordinary items (Sec.  367.4093). (See General Instructions 
in Sec.  367.8.)


Sec.  367.4360  Account 436, Appropriations of retained earnings.

    This account must include appropriations of retained earnings as 
follows:
    (a) Appropriations required under terms of mortgages, orders of 
courts, contracts, or other agreements.
    (b) Appropriations required by action of regulatory authorities.
    (c) Other appropriations made at option of the service company for 
specific purposes.


Sec.  367.4370  Account 437, Dividends declared--preferred stock.

    (a) This account must include amounts declared payable out of 
retained earnings as dividends on actually outstanding preferred or 
prior lien capital stock issued by the service company.
    (b) Dividends must be segregated for each class and series of 
preferred stock as to those payable in cash, stock, and other forms. If 
not payable in cash, the medium of payment must be described with 
sufficient detail to identify it.


Sec.  367.4380  Account 438, Dividends declared--common stock.

    (a) This account must include amounts declared payable out of 
retained earnings as dividends on actually outstanding common capital 
stock issued by the service company.
    (b) Dividends must be segregated for each class of common stock as 
to those payable in cash, stock and other forms. If not payable in 
cash, the medium of payment must be described with sufficient detail to 
identify it.


Sec.  367.4390  Account 439, Adjustments to retained earnings.

    (a) This account must, with prior Commission approval, include 
significant non-recurring transactions accounted for as prior period 
adjustments, as follows:
    (1) Correction of an error in the financial statements of a prior 
year.
    (2) Adjustments that result from realization of income tax benefits 
of reacquisition operating loss carry forwards of purchased 
subsidiaries. All other items of profit and loss recognized during a 
year must be included in the determination of net income for that year.
    (b) Adjustments, charges, or credits due to losses on 
reacquisition, resale or retirement of the company's own capital stock 
must be included in this account.

Subpart J--Operating Revenue Chart of Accounts


Sec.  367.4570  Account 457, Services rendered to associate utility 
companies.

    This account must include amounts billed to associate utility 
companies for services rendered at cost. (See accounts 457.1 through 
457.3 in Sec. Sec.  367.4571 through 367.4573). Overbillings or 
underbillings arising from adjustments of estimated costs to actual 
costs must be cleared through this account and concurrent adjustments 
made to other accounts involved.


Sec.  367.4571  Account 457.1, Direct costs charged to associate 
utility companies.

    This account must include those direct costs that can be identified 
through a work order system as being applicable to services performed 
for associate utility companies. This account must not include any 
compensation for use of equity capital or inter-company interest on 
indebtedness.


Sec.  367.4572  Account 457.2, Indirect costs charged to associate 
utility companies.

    This account must include recovery of those indirect costs that 
cannot be separately identified to a single or group of associate 
companies and therefore must be allocated. Only journal or memorandum 
entries should be prepared monthly, by departments, for all such cost 
accumulated and billed to customers. Amounts billed to associate 
utility companies must be included in this account. This account must 
not include any compensation for use of equity capital or inter-company 
interest on indebtedness.

[[Page 28501]]

Sec.  367.4573  Account 457.3, Compensation for use of capital-
associate utility companies.

    This account must include only the portion of compensation for use 
of equity capital and inter-company interest on indebtedness before 
income taxes that is properly allocable to services rendered to each 
associate utility company.


Sec.  367.4580  Account 458, Services rendered to non-associate utility 
companies.

    This account must include amounts billed for services rendered to 
non-associate utility companies. (See accounts 458.1 through 458.4 
(Sec. Sec.  367.4581 through 367.4584).)


Sec.  367.4581  Account 458.1, Direct costs charged to non-associate 
utility companies.

    This account must include those direct costs that can be identified 
through a work order system as being applicable to services performed 
for non-associate utility companies. This account must not include any 
compensation for use of equity capital or interest on indebtedness.


Sec.  367.4582  Account 458.2, Indirect costs charged to non-associate 
utility companies.

    This account must include recovery of those indirect costs of 
services performed for non-associate utility companies that cannot be 
specifically assigned and therefore must be allocated. This account 
must not include any compensation for use of equity capital or inter-
company interest on indebtedness.


Sec.  367.4583  Account 458.3, Compensation for use of capital--Non-
associate utility companies.

    This account must include only the portion of compensation for use 
of equity capital and inter-company interest on indebtedness before 
income taxes that is properly allocable to services rendered to non-
associate utility companies. A statement to support the basis for the 
compensation and how it was calculated must be attached to a separate 
journal entry, ledger system, or memorandum file.


Sec.  367.4584  Account 458.4, Excess or deficiency on servicing non-
associate utility companies.

    This account must include the amount by which the aggregate price 
received for services rendered to non-associate utility companies 
differs from the sum of the total direct and indirect costs and 
compensation for use of capital which are properly allocable to such 
services. (See accounts 458.1 through 458.3 (Sec. Sec.  367.4581 
through 367.4583) and General Instructions in Sec.  367.23.)


Sec.  367.4590  Account 459, Services rendered to non-utility 
companies.

    This account must include amounts billed for services rendered to 
non-utility companies. (See accounts 459.1 through 459.4 (Sec. Sec.  
367.4591 through 367.4594).)


Sec.  367.4591  Account 459.1, Direct costs charged to non-utility 
companies.

    This account must include those direct costs that can be identified 
through a work order system as being applicable to services performed 
for associate and non-associate companies except utility companies. 
This account must not include any compensation for use of equity 
capital or interest on indebtedness.


Sec.  367.4592  Account 459.2, Indirect costs charged to non-utility 
companies.

    This account must include recovery of those indirect costs of 
services performed for associate and non-associate companies except 
utility companies that cannot be separately identified and therefore 
must be allocated. This account must exclude amounts billed to 
associate and non-associate utility companies. This account must not 
include any compensation for use of equity capital or inter-company 
interest on indebtedness.


Sec.  367.4593  Account 459.3, Compensation for use of capital--non-
utility companies.

    This account must include only the portion of compensation for use 
of equity capital and inter-company interest on indebtedness before 
income taxes that is properly allocable to services rendered to 
associate and non-associate companies except utility companies. A 
statement to support the basis for the compensation and how it was 
calculated must be attached to a separate journal entry, ledger system, 
or memorandum file.


Sec.  367.4594  Account 459.4, Excess or deficiency on servicing non-
associate non-utility companies.

    This account must include the amount by which the aggregate price 
received for services rendered to non-associate companies except 
utility companies differs from the sum of the total direct and indirect 
costs and compensation for use of capital which are properly allocable 
to such services. (See Accounts 459.1 through 459.3 (Sec. Sec.  
367.4591 through 367.4593) and General Instructions (Sec.  367.23).)

Subpart K--Operation and Maintenance Expense Chart of Accounts


Sec.  367.5000  Accounts 500-598, Electric operation and maintenance 
accounts.

    Service companies must use accounts 500 through 598 in part 101 of 
this chapter.


Sec.  367.8000  Accounts 800-894, Gas operation and maintenance 
accounts.

    Service companies must use accounts 800 through 894 in part 201 of 
this chapter.


Sec.  367.9010  Account 901, Supervision.

    This account must include the cost of labor and expenses incurred 
in the general direction and supervision of customer accounting and 
collecting activities. Direct supervision of a specific activity must 
be charged to account 902, Meter reading expenses (Sec.  367.9020), or 
account 903, Customer records and collection expenses (Sec.  367.9030), 
as appropriate. (See Operating Expense Instructions in Sec.  367.80.)


Sec.  367.9020  Account 902, Meter reading expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in reading customer meters, and determining 
consumption when performed by employees engaged in reading meters.
    (b) This account must include the following labor items:
    (1) Addressing forms for obtaining meter readings by mail.
    (2) Changing and collecting meter charts used for billing purposes.
    (3) Inspecting time clocks, checking seals, and other similar 
items, when performed by meter readers and the work represents a minor 
activity incidental to regular meter reading routine.
    (4) Reading meters, including demand meters, and obtaining load 
information for billing purposes. Exclude and charge to account 586, 
Meter expenses (Sec.  367.5860), account 878, Meter and house regulator 
expenses (Sec.  367.8780), or to account 903, Customer records and 
collection expenses (Sec.  367.9030), as applicable, the cost of 
obtaining meter readings, first and final, if incidental to the 
operation of removing or resetting, sealing, or locking, and 
disconnecting or reconnecting meters.
    (5) Computing consumption from meter reader's book or from reports 
by mail when done by employees engaged in reading meters.
    (6) Collecting from prepayment meters when incidental to meter 
reading.

[[Page 28502]]

    (7) Maintaining record of customers' keys.
    (8) Computing estimated or average consumption when performed by 
employees engaged in reading meters.
    (c) This account must include the following materials and expenses 
items:
    (1) Badges, lamps, and uniforms.
    (2) Demand charts, meter books and binders and forms for recording 
readings, but not the cost of preparation.
    (3) Postage and supplies used in obtaining meter readings by mail.
    (4) Transportation, meals, and incidental expenses.


Sec.  367.9030  Account 903, Customer records and collection expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in work on customer applications, contracts, orders, 
credit investigations, billing and accounting, collections and 
complaints.
    (b) This account must include the following labor items:
    (1) Receiving, preparing, recording and handling routine orders for 
service, disconnections, transfers or meter tests initiated by the 
customer, excluding the cost of carrying out the orders, that is 
chargeable to the account appropriate for the work called for by the 
orders.
    (2) Investigations of customers' credit and keeping of records 
pertaining to the investigations, including records of uncollectible 
accounts written off.
    (3) Receiving, refunding or applying customer deposits and 
maintaining customer deposit, line extension, and other miscellaneous 
records.
    (4) Checking consumption shown by meter readers' reports where 
incidental to preparation of billing data.
    (5) Preparing address plates and addressing bills and delinquent 
notices.
    (6) Preparing billing data.
    (7) Operating billing and bookkeeping machines.
    (8) Verifying billing records with contracts or rate schedules.
    (9) Preparing bills for delivery, and mailing or delivering bills.
    (10) Collecting revenues, including collection from prepayment 
meters unless incidental to meter-reading operations.
    (11) Balancing collections, preparing collections for deposit, and 
preparing cash reports.
    (12) Posting collections and other credits or charges to customer 
accounts and extending unpaid balances.
    (13) Balancing customer accounts and controls.
    (14) Preparing, mailing, or delivering delinquent notices and 
preparing reports of delinquent accounts.
    (15) Final meter reading of delinquent accounts when done by 
collectors incidental to regular activities.
    (16) Disconnecting and reconnecting service because of nonpayment 
of bills.
    (17) Receiving, recording, and handling of inquiries, complaints, 
and requests for investigations from customers, including preparation 
of necessary orders, but excluding the cost of carrying out such 
orders, which is chargeable to the account appropriate for the work 
called for by the orders.
    (18) Statistical and tabulating work on customer accounts and 
revenues, but not including special analyses for sales department, rate 
department, or other general purposes, unless incidental to regular 
customer accounting routines.
    (19) Preparing and periodically rewriting meter reading sheets.
    (20) Determining consumption and computing estimated or average 
consumption when performed by employees other than those engaged in 
reading meters.
    (c) This account must include the following materials and expenses 
items:
    (1) Address plates and supplies.
    (2) Cash overages and shortages.
    (3) Commissions or fees to others for collecting.
    (4) Payments to credit organizations for investigations and 
reports.
    (5) Postage.
    (6) Transportation expenses (Major only), including transportation 
of customer bills and meter books under centralized billing procedure.
    (7) Transportation, meals, and incidental expenses.
    (8) Bank charges, exchange, and other fees for cashing and 
depositing customers' checks.
    (9) Forms for recording orders for services removals, and other 
similar forms.
    (10) Rent of mechanical equipment.
    (d) The cost of work on meter history and meter location records is 
chargeable to account 586, Meter expenses (Sec.  367.5860) or account 
878, Meter and house regulator expenses (Sec.  367.8780).


Sec.  367.9040  Account 904, Uncollectible accounts.

    This account must be charged with amounts sufficient to provide for 
losses from uncollectible service company revenues. Concurrent credits 
must be made to account 144, Accumulated provision for uncollectible 
accounts--Credit (Sec.  367.1440). Losses from uncollectible accounts 
also must be charged to account 144 (Sec.  367.1440).


Sec.  367.9050  Account 905, Miscellaneous customer accounts expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred not provided for in other accounts.
    (b) This account must include the following labor items:
    (1) General clerical and stenographic work.
    (2) Miscellaneous labor.
    (c) This account must include the following materials and expenses 
items:
    (1) Communication service.
    (2) Miscellaneous office supplies and expenses and stationery and 
printing other than those specifically provided for in accounts 902 and 
903 (Sec. Sec.  367.9020 and 367.9030).


Sec.  367.9070  Account 907, Supervision.

    This account must include the cost of labor and expenses incurred 
in the general direction and supervision of customer service 
activities, the object of which is to encourage safe, efficient and 
economical use of the associate utility company's service. Direct 
supervision of a specific activity within customer service and 
informational expense classification must be charged to the account 
wherein the costs of such activity are included. (See Operating Expense 
Instructions in Sec.  367.80.)


Sec.  367.9080  Account 908, Customer assistance expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in providing instructions or assistance to customers, 
the object of which is to encourage safe, efficient and economical use 
of the associate utility company's service.
    (b) This account must include the following labor items:
    (1) Direct supervision of department.
    (2) Processing customer inquiries relating to the proper use of 
electric equipment, the replacement of such equipment and information 
related to the equipment.
    (3) Advice directed to customers as to how they may achieve the 
most efficient and safest use of electric equipment.
    (4) Demonstrations, exhibits, lectures, and other programs designed 
to instruct customers in the safe, economical or efficient use of 
electric service, and/or oriented toward conservation of energy.
    (5) Engineering and technical advice to customers, the object of 
which is to promote safe, efficient and economical use of the associate 
utility company's service.
    (c) This account must include the following materials and expenses 
items:
    (1) Supplies and expenses pertaining to demonstrations, exhibits, 
lectures, and other programs.
    (2) Loss in value on equipment and appliances used for customer 
assistance programs.

[[Page 28503]]

    (3) Office supplies and expenses.
    (4) Transportation, meals, and incidental expenses.
    (d) Do not include in this account expenses that are provided for 
elsewhere, such as accounts 416, Costs and expenses of merchandising, 
jobbing and contract work (Sec.  367.4160), 587, Customer installations 
expenses (Sec.  368.5870), 879, Customer installations expenses (Sec.  
367.8790), and 912, Demonstrating and selling expenses (Sec.  
367.9120).


Sec.  367.9090  Account 909, Informational and instructional 
advertising expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in activities which primarily convey information as 
to what the associate utility company urges or suggests customers 
should do in utilizing service to protect health and safety, to 
encourage environmental protection, to utilize their equipment safely 
and economically, or to conserve energy.
    (b) This account must include the following labor items:
    (1) Direct supervision of informational activities.
    (2) Preparing informational materials for newspapers, periodicals, 
billboards, and other similar forms of advertisement, and preparing and 
conducting informational motion pictures, radio and television 
programs.
    (3) Preparing informational booklets, bulletins, and other similar 
forms of advertisement, used in direct mailings.
    (4) Preparing informational window and other displays.
    (5) Employing agencies, selecting media and conducting negotiations 
in connection with the placement and subject matter of information 
programs.
    (c) This account must include the following materials and expenses 
items:
    (1) Use of newspapers, periodicals, billboards, radio, and other 
similar forms of advertisement, for informational purposes.
    (2) Postage on direct mailings to customers exclusive of postage 
related to billings.
    (3) Printing of informational booklets, dodgers, bulletins, and 
other similar items.
    (4) Supplies and expenses in preparing informational materials for 
the associate utility company.
    (5) Office supplies and expenses.
    (d) Exclude from this account and charge to account 930.2, 
Miscellaneous general expenses, the cost of publication of stockholder 
reports, dividend notices, bond redemption notices, financial 
statements, and other notices of a general corporate character. Also 
exclude all expenses of a promotional, institutional, goodwill or 
political nature, that are included in accounts 913, Advertising 
expenses (Sec.  367.9130), 930.1, General advertising expenses (Sec.  
367.9301), and 426.4, Expenditures for certain civic, political, and 
related expenses (Sec.  367.4264).
    (e) Entries relating to informational advertising included in this 
account must contain or refer to supporting documents that identify the 
specific advertising message. If references are used, copies of the 
advertising message must be readily available.


Sec.  367.9100  Account 910, Miscellaneous customer service and 
informational expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in connection with customer service and informational 
activities that are not includible in other customer information 
expense accounts.
    (b) This account must include the following labor items:
    (1) General clerical and stenographic work not assigned to specific 
customer service and informational programs.
    (2) Miscellaneous labor.
    (c) This account must include the following materials and expenses 
items:
    (1) Communication service.
    (2) Printing, postage and office supplies expenses.


Sec.  367.9110  Account 911, Supervision.

    This account must include the cost of labor and expenses incurred 
in the general direction and supervision of sales activities, except 
merchandising. Direct supervision of a specific activity, such as 
demonstrating, selling, or advertising, must be charged to the account 
wherein the costs of such activity are included. (See Operating Expense 
Instructions in Sec.  367.80.)


Sec.  367.9120  Account 912, Demonstrating and selling expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in promotional, demonstrating, and selling 
activities, except by merchandising, the object of which is to promote 
or retain the use of utility services by present and prospective 
customers.
    (b) This account must include the following labor items:
    (1) Demonstrating uses of utility services.
    (2) Conducting cooking schools, preparing recipes, and related home 
service activities.
    (3) Exhibitions, displays, lectures, and other programs designed to 
promote use of utility services.
    (4) Experimental and development work in connection with new and 
improved appliances and equipment, prior to general public acceptance.
    (5) Solicitation of new customers or of additional business from 
old customers, including commissions paid employees.
    (6) Engineering and technical advice to present or prospective 
customers in connection with promoting or retaining the use of utility 
services.
    (7) Special customer canvasses when their primary purpose is the 
retention of business or the promotion of new business.
    (c) This account must include the following materials and expenses 
items:
    (1) Supplies and expenses pertaining to demonstration and 
experimental and development activities.
    (2) Booth and temporary space rental.
    (3) Loss in value on equipment and appliances used for 
demonstration purposes.
    (4) Transportation, meals, and incidental expenses.


Sec.  367.9130  Account 913, Advertising expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in advertising designed to promote or retain the use 
of utility service, except advertising the sale of merchandise by the 
utility company.
    (b) This account must include the following labor items:
    (1) Direct supervision of department.
    (2) Preparing advertising material for newspapers, periodicals, 
billboards, and other similar forms of advertisement, and preparing and 
conducting motion pictures, radio and television programs.
    (3) Preparing booklets, bulletins, and other similar forms of 
advertisement, used in direct mail advertising.
    (4) Preparing window and other displays.
    (5) Clerical and stenographic work.
    (6) Investigating advertising agencies and media and conducting 
negotiations in connection with the placement and subject matter of 
sales advertising.
    (c) This account must include the following materials and expenses 
items:
    (1) Advertising in newspapers, periodicals, billboards, radio, and 
other similar forms of advertisement, for sales promotion purposes, but 
not including institutional or goodwill advertising included in account 
930.1, General advertising expenses.
    (2) Materials and services given as prizes or otherwise in 
connection with civic lighting contests, canning, or cooking contests, 
bazaars, and other similar materials and services, in order to 
publicize and promote the use of utility services.

[[Page 28504]]

    (3) Fees and expenses of advertising agencies and commercial 
artists.
    (4) Novelties for general distribution.
    (5) Postage on direct mail advertising.
    (6) Premiums distributed generally, such as recipe books, and other 
similar items, when not offered as inducement to purchase appliances.
    (7) Printing booklets, dodgers, bulletins, and other similar forms 
of advertisement.
    (8) Supplies and expenses in preparing advertising material.
    (9) Office supplies and expenses.
    (d) The cost of advertisements which set forth the value or 
advantages of utility service without reference to specific appliances 
or, if reference is made to appliances invites the reader to purchase 
appliances from his dealer or refer to appliances not carried for sale 
by the utility company, must be considered sales promotion advertising 
and charged to this account. However, advertisements that are limited 
to specific makes of appliances sold by the utility company and prices, 
terms, and other similar items, without referring to the value or 
advantages of utility service, must be considered as merchandise 
advertising and the cost must be charged to account 416, Costs and 
expenses of merchandising, jobbing and contract work.
    (e) Advertisements that substantially mention or refer to the value 
or advantages of utility service, together with specific reference to 
makes of appliances sold by the utility company and the price, terms, 
and other similar items, and designed for the joint purpose of 
increasing the use of utility service and the sales of appliances, must 
be considered as a combination advertisement and the costs must be 
distributed between this account and account 416 (Sec.  367.4160) on 
the basis of space, time, or other proportional factors.
    (f) Exclude from this account and charge to account 930.2, 
Miscellaneous general expenses (Sec.  367.9302), the cost of 
publication of stockholder reports, dividend notices, bond redemption 
notices, financial statements, and other notices of a general corporate 
character. Exclude also all institutional or goodwill advertising. (See 
account 930.1, General advertising expenses (Sec.  367.9301).)


Sec.  367.9160  Account 916, Miscellaneous sales expenses.

    (a) This account must include the cost of labor, materials used and 
expenses incurred in connection with sales activities, except 
merchandising, which are not includible in other sales expense 
accounts.
    (b) This account must include the following labor items:
    (1) General clerical and stenographic work not assigned to specific 
functions.
    (2) Special analysis of customer accounts and other statistical 
work for sales purposes not a part of the regular customer accounting 
and billing routine.
    (3) Miscellaneous labor.
    (c) This account must include the following materials and expenses 
items:
    (1) Communication service.
    (2) Printing, postage, and office supplies and expenses applicable 
to sales activities, except those chargeable to account 913, 
Advertising expenses (Sec.  367.9130).


Sec.  367.9200  Account 920, Administrative and general salaries.

    (a) This account must include salaries, wages, bonuses and other 
consideration for services, with the exception of director's fees paid 
directly to officers and employees of the service company.
    (b) This account must be supported by time records and 
appropriately referenced to detailed records subdividing salaries and 
wages by departments or other functional organization units.


Sec.  367.9210  Account 921, Office supplies and expenses.

    (a) This account must include office supplies and expenses incurred 
in connection with the general administration of service company 
operations assignable to specific administrative or general departments 
and not specifically provided for in other accounts. This includes the 
expenses of the various administrative and general departments, the 
salaries and wages of which are included in account 920 (Sec.  
367.9200).
    (b) This account may be subdivided in accordance with a 
classification appropriate to the departmental or other functional 
organization of the service company. The following items must be 
included in this account:
    (1) Automobile service, including charges through clearing account.
    (2) Bank messenger and service charges.
    (3) Books, periodicals, bulletins and subscriptions to newspapers, 
newsletters, tax service, and other similar items.
    (4) Building service expenses for customer accounts, sales, and 
administrative and general purposes.
    (5) Communication service expenses to include telephone, telegraph, 
wire transfer, micro-wave, and other similar items.
    (6) Cost of individual items of office equipment used by general 
departments which are of small value or short life.
    (7) Membership fees and dues in trade, technical, and professional 
associations paid by a utility for employees. (Company memberships must 
be included in account 930.2 in Sec.  367.9302.)
    (8) Office supplies and expenses.
    (9) Payment of court costs, witness fees, and other expenses of 
legal department.
    (10) Postage, printing and stationery.
    (11) Meals, traveling, entertainment and incidental expenses.
    (c) Records must be so maintained to permit ready analysis by item 
showing the nature of the expense and identity of the person furnishing 
the service.


Sec.  367.9220  Account 922, Administrative expenses transferred--
Credit.

    This account must be credited with administrative expenses recorded 
in accounts 920 and 921 (Sec. Sec.  367.9200 and 367.9210) that are 
transferred to construction costs or to other accounts. (See Service 
Company Property Instructions in Sec.  367.51.) Also, this account must 
be credited with the amount of operating expenses related to services 
provided to non-utility companies and account 417.1, Expenses of non-
utility company related operations (Sec.  367.4171), must be debited.


Sec.  367.9230  Account 923, Outside services employed.

    (a) This account must include the fees and expenses of professional 
consultants and others for general services with the exception of fees 
and expenses for outside services of account 928, Regulatory commission 
expense (Sec.  367.9280), and account 930.1, General advertising 
expenses (Sec.  367.9301). Separate subaccounts must be provided for 
auditing, legal, engineering, management consulting fees and any other 
fees for professional or outside services.
    (b) Records must be maintained so as to permit ready analysis 
showing nature of service, identity of the person furnishing the 
service, affiliation to the service company, and, if allocated to more 
than one company, the specific method of allocation.


Sec.  367.9240  Account 924, Property insurance.

    (a) This account must include the cost of insurance or reserve 
accruals to protect the service company against losses and damages to 
owned or leased property used in service company operations. It also 
must include the cost of labor and related supplies and

[[Page 28505]]

expenses incurred in property insurance activities.
    (b) Recoveries from insurance companies or others for property 
damages must be credited to the account charged with the cost of the 
damage. If the damaged property has been retired, the credit must be to 
the appropriate account for accumulated provision for depreciation.
    (c) Records must be kept so as to show the amount of coverage for 
each class of insurance carried, the property covered, and the 
applicable premiums. Any dividends distributed by mutual insurance 
companies must be credited to the accounts to which the insurance 
premiums were charged. The following items must be included in this 
account:
    (1) Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    (2) Special costs incurred in procuring insurance.
    (3) Insurance inspection service.
    (4) Insurance counsel, brokerage fees, and expenses.
    (d) The cost of insurance or reserve accruals capitalized must be 
charged to construction either directly or by transfer to construction 
work orders from this account.
    (e) The cost of insurance or reserve accruals for the following 
classes of property must be charged as indicated.
    (1) Materials and supplies and stores equipment, to account 163, 
Stores expense undistributed (Sec.  367.1630), or appropriate materials 
account.
    (2) Transportation and other general equipment to appropriate 
clearing accounts that may be maintained.
    (3) Merchandise and jobbing property, to account 416, Costs and 
expenses of merchandising, jobbing and contract work (Sec.  367.4160).
    (f) The cost of labor and related supplies and expenses of 
administrative and general employees who are only incidentally engaged 
in property insurance work may be included in accounts 920 and 921 
(Sec. Sec.  367.9200 and 367.9210), as appropriate.


Sec.  367.9250  Account 925, Injuries and damages.

    (a) This account must include the cost of insurance or reserve 
accruals to protect the service company against injuries and damages 
claims of employees or others, losses of such character not covered by 
insurance, and expenses incurred in settlement of injuries and damages 
claims. It also must include the cost of labor and related supplies and 
expenses incurred in injuries and damages activities.
    (b) Reimbursements from insurance companies or others for expenses 
charged to this account because of injuries and damages and insurance 
dividends or refunds must be credited to this account. The following 
items must be included in this account:
    (1) Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, and other 
similar items.
    (2) Losses not covered by insurance or reserve accruals on account 
of injuries or deaths to employees or others and damages to the 
property of others.
    (3) Fees and expenses of claim investigators.
    (4) Payment of awards to claimants for court costs and attorneys' 
services.
    (5) Medical and hospital service and expenses for employees as the 
result of occupational injuries, or resulting from claims of others.
    (6) Compensation payments under workmen's compensation laws.
    (7) Compensation paid while incapacitated as the result of 
occupational injuries. (See paragraph (c) of this section.)
    (8) Cost of safety, accident prevention and similar educational 
activities.
    (c) Payments to or on behalf of employees for accident or death 
benefits, hospital expenses, medical supplies or for salaries while 
incapacitated for service or on leave of absence beyond periods 
normally allowed, when not the result of occupational injuries, must be 
charged to account 926, Employee pensions and benefits (Sec.  
367.9260). (See also paragraph (e) of account 926 (Sec.  367.9260).)
    (d) The cost of injuries and damages or reserve accruals 
capitalized must be charged to construction directly or by transfer to 
construction work orders from this account.
    (e) Exclude the time and expenses of employees (except those 
engaged in injuries and damages activities) spent in attendance at 
safety and accident prevention educational meetings, if occurring 
during the regular work period.
    (f) The cost of labor and related supplies and expenses of 
administrative and general employees who are only incidentally engaged 
in injuries and damages activities may be included in accounts 920 and 
921 (Sec. Sec.  367.9200 and 367.9210), as appropriate.


Sec.  367.9260  Account 926, Employee pensions and benefits.

    (a) This account must include pensions paid to, or on behalf of, 
retired employees, or accruals to provide for pensions, or payments for 
the purchase of annuities for this purpose, when the service company 
has definitely, by contract, committed itself to a pension plan under 
which the pension funds are irrevocably devoted to pension purposes, 
and payments for employee accident, sickness, hospital, and death 
benefits, or insurance related to this account. Include, also, expenses 
incurred in medical, educational or recreational activities for the 
benefit of employees, and administrative expenses in connection with 
employee pensions and benefits.
    (b) The service company must maintain a complete record of accruals 
or payments for pensions and be prepared to furnish full information to 
the Commission of the plan under which it has created or proposes to 
create a pension fund and a copy of the declaration of trust or 
resolution under which the pension plan is established.
    (c) Records in support of this account must be kept so that the 
total pensions expense, the total benefits expense, the administrative 
expenses included in this account, and the amounts of pensions and 
benefits expenses transferred to construction or other accounts will be 
readily available. The following items must be included in this 
account:
    (1) Payment of pensions under a non-accrual or non-funded basis.
    (2) Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    (3) Group and life insurance premiums (credit dividends received).
    (4) Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    (5) Payments for accident, sickness, hospital, and death benefits 
or insurance.
    (6) Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed, when not the result of 
occupational injuries, or in excess of statutory awards.
    (7) Expenses in connection with educational and recreational 
activities for the benefit of employees.
    (d) The cost of labor and related supplies and expenses of 
administrative and general employees who are only incidentally engaged 
in employee pension and benefit activities may be included in accounts 
920 and 921 (Sec. Sec.  367.9200 and 367.9210), as appropriate.
    (e) Salaries paid to employees during periods of non-occupational 
sickness may be charged to the appropriate labor

[[Page 28506]]

account rather than to employee benefits.


Sec.  367.9280  Account 928, Regulatory commission expense.

    (a) This account must include all expenses, properly included in 
service company operating expenses, incurred by the service company in 
connection with formal cases before regulatory commissions, or other 
regulatory bodies, on its own behalf or on behalf of associate 
companies, including payments made to a regulatory commission for fees 
assessed to the service company for pay and expenses of such 
commission, its officers, agents and employees, and for filings or 
reports made under regulations of regulatory commissions. The service 
company must be prepared to show the cost of each formal case. The 
following items must be included in this account:
    (1) Salaries, fees, retainers, and expenses of counsel, solicitors, 
attorneys, accountants, engineers, clerks, attendants, witnesses, and 
others engaged in the prosecution of, or defense against petitions or 
complaints presented to regulatory bodies.
    (2) Office supplies and expenses, payments to public service or 
other regulatory commissions, stationery and printing, traveling 
expenses, and other expenses incurred directly in connection with 
formal cases before regulatory commissions.
    (b) Exclude from this account and include in other appropriate 
operating expense accounts, expenses incurred in the improvement of 
service, additional inspection, or rendering reports, which are made 
necessary by the rules and regulations, or orders, of regulatory 
bodies.


Sec.  367.9301  Account 930.1, General advertising expenses.

    (a) This account must include the cost of labor, materials used, 
and expenses incurred in advertising and related activities, the cost 
of which by their content and purpose are not provided for elsewhere.
    (b) This account must include the following labor items:
    (1) Supervision.
    (2) Preparing advertising material for newspapers, periodicals, 
billboards, and other similar items, and preparing or conducting motion 
pictures, radio and television programs.
    (3) Preparing booklets, bulletins, and other similar forms of 
advertisement, used in direct mail advertising.
    (4) Preparing window and other displays.
    (5) Clerical and stenographic work.
    (6) Investigating and employing advertising agencies, selecting 
media and conducting negotiations in connection with the placement and 
subject matter of advertising.
    (c) This account must include the following materials and expenses 
items:
    (1) Advertising in newspapers, periodicals, billboards, radio, and 
other similar forms of advertisement.
    (2) Advertising matter such as posters, bulletins, booklets, and 
related items.
    (3) Fees and expenses of advertising agencies and commercial 
artists.
    (4) Postage and direct mail advertising.
    (5) Printing of booklets, dodgers, bulletins, and other related 
items.
    (6) Supplies and expenses in preparing advertising materials.
    (7) Office supplies and expenses.
    (d) Properly includible in this account is the cost of advertising 
activities on a local or national basis of a good will or institutional 
nature, which is primarily designed to improve the image of the 
associate utility company or the industry, including advertisements 
which inform the public concerning matters affecting the associate 
utility company's operations, such as, the cost of providing service, 
the associate utility company's efforts to improve the quality of 
service, the company's efforts to improve and protect the environment, 
and other similar forms of advertisement. Entries relating to 
advertising included in this account must contain or refer to 
supporting documents which identify the specific advertising message. 
If references are used, copies of the advertising message must be 
readily available.
    (e) Exclude from this account and include in account 426.4, 
Expenditures for certain civic, political and related activities (Sec.  
367.4264), expenses for advertising activities that are designed to 
solicit public support or the support of public officials in matters of 
a political nature.


Sec.  367.9302  Account 930.2, Miscellaneous general expenses.

    (a) This account must include the cost of expenses incurred in 
connection with the general management of the service company not 
provided for elsewhere.
    (b) This account must include labor items including miscellaneous 
labor not elsewhere provided for.
    (c) This account must include the following expenses items:
    (1) Industry association dues for company memberships.
    (2) Contributions for conventions and meetings of the industry.
    (3) Research, development, and demonstration expenses not charged 
to other operation and maintenance expense accounts on a functional 
basis.
    (4) Communication service not chargeable to other accounts.
    (5) Trustee, registrar, and transfer agent fees and expenses.
    (6) Stockholders meeting expenses.
    (7) Dividend and other financial notices.
    (8) Printing and mailing dividend checks.
    (9) Directors' fees and expenses.
    (10) Publishing and distributing annual reports to stockholders.
    (11) Public notices of financial, operating and other data required 
by regulatory statutes, not including, however, notices required in 
connection with security issues or acquisitions of property.
    (d) Records must be maintained so as to permit ready analysis by 
item showing the nature of the expense and identity of the person 
furnishing the service.


Sec.  367.9310  Account 931, Rents.

    This account must include rents, including taxes, paid for the 
property of others used, occupied or operated in connection with 
service company functions. Provide subaccounts for major groupings such 
as office space, warehouses, other structure, office furniture, 
fixtures, computers, data processing equipment, microwave and 
telecommunication equipment, airplanes, automobiles, and other similar 
groupings of property. The cost, when incurred by the lessee, of 
operating and maintaining leased property, must be charged to the 
accounts appropriate for the expense as if the property were owned.


Sec.  367.9350  Account 935, Maintenance of structures and equipment.

    This account must include materials used and expenses incurred in 
the maintenance of property owned, the cost of which is included in 
accounts 390 through 399 (Sec. Sec.  367.3900 through 367.3990), and of 
property leased from others. Provide subaccounts by major classes of 
structures and equipment, owned and leased.
    6. Part 368 is added to read as follows:

PART 368--PRESERVATION OF RECORDS OF HOLDING COMPANIES AND SERVICE 
COMPANIES

Sec.
368.1 Promulgation.
368.2 General instructions.
368.3 Schedule of records and periods of retention.

    Authority: 42 U.S.C. 16451-16463.


Sec.  368.1  Promulgation.

    This part is prescribed and promulgated as the regulations

[[Page 28507]]

governing the preservation of records by any holding company and by any 
service company within a holding company system subject to the 
jurisdiction of the Commission under the PUHCA 2005.


Sec.  368.2  General instructions.

    (a) Scope of this part. (1) The regulations in this part apply to 
all books of account and other records prepared, maintained or held by 
any agent or employee on behalf of the company. The specification in 
the schedule in Sec.  368.3 of a record related to a type of 
transaction includes all documents and correspondence, not redundant or 
duplicative of other records retained, needed to explain or verify the 
transaction.
    (2) Company means a service company or a holding company as defined 
in Sec.  367.1 of this chapter. Public utilities, licensees, and 
natural gas companies must continue to use parts 125 and 225 of this 
chapter.
    (3) Any company subject to this regulation, that, as agent, 
operator, lessor or otherwise, maintains or has possession of any 
records relating to the operation, property or obligations of a public 
utility, licensee, or natural gas company, as defined in the Federal 
Power Act, the Natural Gas Act, or the laws of any state within which 
the public utility, licensee, or natural gas company operates, must 
comply with the laws or regulations as to record retention and 
destruction which would apply to the records if they were records of 
the public utility, licensee, or natural gas company as codified in 
parts 125 and 225 of the Commission's regulations.
    (4) The regulations in this part should not be construed as 
excusing compliance with other lawful requirements of any other 
governmental body, Federal or State, prescribing other record keeping 
requirements or for preservation of records longer than those 
prescribed in this part.
    (5) To the extent that any Commission regulations may provide for a 
different record retention period, the records must be retained for the 
longer of the retention periods.
    (6) Records, other than those listed in the schedule, may be 
destroyed at the option of the company. However, records that are used 
in lieu of those listed must be preserved for the periods prescribed 
for the records used for substantially similar purposes. Additionally, 
retention of records pertaining to added services, functions, plant, 
and other similar service, the establishment of which cannot be 
presently foreseen, must conform to the principles embodied in this 
section.
    (7) Notwithstanding the provisions of the records retention 
schedule in this section, the Commission may, upon the request of the 
company, authorize a shorter period of retention for any record listed 
in the schedule upon a showing by the company that preservation of the 
record for a longer period is not necessary or appropriate, in the 
public interest or for the protection of investors or consumers.
    (b) Designation of supervisory official. Each company subject to 
these record retention regulations must designate one or more officials 
to supervise the preservation or authorized destruction of its records.
    (c) Protection and storage of records. The company must provide 
reasonable protection from damage by fire, flood, and other hazards for 
records required by these record retention regulations to be preserved 
and, in the selection of storage space, safeguard such records from 
unnecessary exposure to deterioration from excessive humidity, dryness, 
or lack of proper ventilation.
    (d) Index of records. At each site or location where company 
records are kept or stored, the records must be arranged, filed, and 
currently indexed so that records may be readily identified and made 
available for inspection by authorized representatives of any 
regulatory agency concerned, including the Commission.
    (e) Record storage media. Each company has the flexibility to 
select its own storage media subject to the following conditions.
    (1) The storage media must have a life expectancy at least equal to 
the applicable record retention period provided in Sec.  368.3 unless 
there is a quality transfer from one media to another with no loss of 
data.
    (2) Each company is required to implement internal control 
procedures that assure the reliability of, and ready access to, data 
stored on machine readable media. Internal control procedures must be 
documented by a responsible supervisory official.
    (3) Each transfer of data from one media to another must be 
verified for accuracy and documented. Software and hardware required to 
produce readable records must be retained for the same period the media 
format is used.
    (f) Destruction of records. At the expiration of the retention 
period, the company may use any appropriate method to destroy records. 
Precautions should be taken, however, to macerate or otherwise destroy 
the legibility of records, the content of which is forbidden by law to 
be divulged to unauthorized persons.
    (g) Premature destruction or loss of records. When records are 
destroyed or lost before the expiration of the prescribed period of 
retention, a certified statement listing, as far as may be determined, 
the records destroyed and describing the circumstances of accidental or 
other premature destruction or loss must be filed with the Commission 
within 90 days from the date of discovery of the destruction.
    (h) Schedule of records and periods of retention. The schedule of 
records retention periods constitutes a part of these record retention 
regulations. The schedule prescribes the periods of time that 
designated records must be preserved. Plant records related to public 
utilities and licensees and natural gas companies must be retained in 
accordance with Sec. Sec.  125.3 and 225.3 of this chapter.
    (i) Retention periods designated ``Destroy at option''. ``Destroy 
at option'' constitutes authorization for destruction of records at 
managements' discretion if the destruction does not conflict with other 
legal retention requirements or usefulness of the records in satisfying 
pending regulatory actions or directives. ``Destroy at option after 
audit'' requires retention until the company has received an opinion 
from its independent accountants with respect to the financial 
statements including the transactions to which the records relate.
    (j) Records of services performed by associate companies. Holding 
companies and service companies must assure the availability of records 
of services performed by and for public utilities and licensees and 
natural gas companies with supporting cost information for the periods 
indicated in Sec. Sec.  125.3 and 225.3 of this chapter as necessary to 
be able to readily furnish detailed information as to the nature of the 
transaction, the amounts involved, and the accounts used to record the 
transactions.
    (k) Rate case. Notwithstanding the minimum retention periods 
provided in these regulations, the company must retain the appropriate 
records to support the costs and adjustments proposed in any rate case.
    (l) Pending complaint litigation or governmental proceedings. 
Notwithstanding the minimum requirements, if a company is involved in 
pending litigation, complaint procedures, proceedings remanded by the 
court, or governmental proceedings, it must retain all relevant 
records.
    (m) Life or mortality study data. Life or mortality study data for 
depreciation purposes must be retained for 25 years

[[Page 28508]]

or for 10 years after property is retired, whichever is longer.


Sec.  368.3  Schedule of records and periods of retention.

              Schedule of Records and Periods of Retention
------------------------------------------------------------------------
        Item No. and description                 Retention period
------------------------------------------------------------------------
         Corporate and General

1. Reports to stockholders: Annual       5 years.
 reports or statements to stockholders.
2. Organizational documents:
    (a) Minute books of stockholders,    5 years or termination of the
     directors' and directors'            corporation's existence,
     committee meetings.                  whichever occurs first.
    (b) Title, franchises, and           6 years after final non-
     licenses: Copies of formal orders    appealable order.
     of regulatory commissions served
     upon the company.
        (1) Certificates of              Life of corporation.
         incorporation, or equivalent
         agreements and amendments
         thereto.
        (2) Deeds, leases and other      6 years after property or
         title papers (including          investment is disposed of
         abstracts of title and           unless delivered to
         supporting data), and            transferee.
         contracts and agreements
         related to the acquisition or
         disposition of property or
         investments.
3. Contracts and agreements: Contracts,
 including amendments and agreements
 (except contracts provided for
 elsewhere):
    (a) Service contracts, such as for   All contracts, related
     management, consulting,              memoranda, and revisions
     accounting, legal, financial or      should be retained for 4 years
     engineering services.                after expiration or until the
                                          conclusion of any contract
                                          disputes pertaining to such
                                          contracts, whichever is later.
    (b) Memoranda essential to clarify   For same period as contract to
     or explain provisions of contracts   which they relate.
     and agreements.
    (c) Card or book records of          For the same periods as
     contracts, leases, and agreements    contracts to which they
     made, showing dates of expirations   relate.
     and of renewals, memoranda of
     receipts, and payments under such
     contracts.
    (d) Contracts and other agreements   All contracts, related
     relating to services performed in    memoranda, and revisions
     connection with construction of      should be retained for 4 years
     property (including contracts for    after expiration or until the
     the construction of property by      conclusion of any contract
     others for the company and for       disputes or governmental
     supervision and engineering          proceedings pertaining to such
     relating to construction work).      contracts, whichever is later.
4. Accountants' and auditors' reports:
    (a) Reports of examinations and      5 years after the date of the
     audits by accountants and auditors   report.
     not in the regular employ of the
     company (such as reports of public
     accounting firms and commission
     accountants).
    (b) Internal audit reports and       5 years after the date of the
     working papers.                      report.

   Information Technology Management

5. Automatic data processing records     Retain as long as it represents
 (retain original source data used as     an active viable program or
 input for data processing and data       for periods prescribed for
 processing report printouts for the      related output data, whichever
 applicable periods prescribed            is shorter.
 elsewhere in the schedule): Software
 program documentation and revisions
 thereto.

       General Accounting Records

6. General and subsidiary ledgers:
    (a) Ledgers:
        (1) General ledgers............  10 years.
        (2) Ledgers subsidiary or        10 years.
         auxiliary to general ledgers
         except ledgers provided for
         elsewhere.
    (b) Indexes:
        (1) Indexes to general ledgers.  10 years.
        (2) Indexes to subsidiary        10 years.
         ledgers except ledgers
         provided for elsewhere.
    (c) Trial balance sheets of general  2 years.
     and subsidiary ledgers.
7. Journals: General and subsidiary....  10 years.
8. Journal vouchers and journal entries
 including supporting detail:
    (a) Journal vouchers and journal     10 years.
     entries.
    (b) Analyses, summarization,
     distributions, and other
     computations which support journal
     vouchers and journal entries:
        (1) Charging property accounts.  25 years. See Sec.  Sec.
                                          125.2(g) and 225.2(g) of this
                                          chapter for public utilities
                                          and licensees and natural gas
                                          companies.
        (2) Charging all other accounts  6 years.
9. Cash books: General and subsidiary    5 years after close of fiscal
 or auxiliary books.                      year.
10. Voucher registers: Voucher           5 years. See Sec.  Sec.
 registers or similar records when used   125.2(g) and 225.2(g) of this
 as a source document.                    chapter for public utilities
                                          and licensees and natural gas
                                          companies.
11. Vouchers:
    (a) Paid and canceled vouchers (one  5 years. See Sec.  Sec.
     copy-analysis sheets showing         125.2(g) and 225.2(g) of this
     detailed distribution of charges     chapter for public utilities
     on individual vouchers and other     and licensees and natural gas
     supporting papers).                  companies.
    (b) Original bills and invoices for  5 years. See Sec.  Sec.
     materials, services, etc., paid by   125.2(g) and 225.2(g) of this
     vouchers.                            chapter for public utilities
                                          and licensees and natural gas
                                          companies.
    (c) Paid checks and receipts for     5 years.
     payments of specific vouchers.

[[Page 28509]]


    (d) Authorization for the payment    5 years. See Sec.  Sec.
     of specific vouchers.                125.2(g) and 225.2(g) of this
                                          chapter for public utilities
                                          and licensees and natural gas
                                          companies.
    (e) Lists of unaudited bills         Destroy at option.
     (accounts payable), list of
     vouchers transmitted, and
     memoranda regarding changes in
     audited bills.
    (f) Voucher indexes................  Destroy at option.
    (g) Purchases and stores records     5 years.
     related to disbursement vouchers.

               Insurance

12. Insurance records:
    (a) Records of insurance policies    Destroy at option after
     in force, showing coverage,          expiration of such policies.
     premiums paid, and expiration
     dates.
    (b) Records of amounts recovered     6 years. See Sec.  Sec.
     from insurance companies in          125.2(g) and 225.2(g) of this
     connection with losses and of        chapter for public utilities
     claims against insurance             and licensees and natural gas
     companies, including reports of      companies.
     losses, and supporting papers.
    (c) Records of self-insurance
     against:
        (1) Losses from fire and         6 years after date of last
         casualty.                        accounting entry with respect
                                          thereto.
        (2) Damage to property of        6 years after date of last
         others, and.                     accounting entry with respect
                                          thereto.
        (3) personal injuries..........  6 years after date of last
                                          accounting entry with respect
                                          thereto.
    (d) Inspectors' reports and reports  Destroy when superseded.
     of condition of property.

              Maintenance

13. Maintenance work orders and job
 orders:
    (a) Authorizations for expenditures  5 years.
     for maintenance work to be covered
     by work orders, including
     memoranda showing the estimates of
     costs to be incurred.
    (b) Work order sheets to which are   5 years.
     posted in detail the entries for
     labor, material, and other charges
     in connection with maintenance,
     and other work pertaining to
     company operations.
    (c) Summaries of expenditures on     5 years.
     maintenance and job orders and
     clearances to operating other
     accounts (exclusive of property
     accounts).

 Property, Depreciation and Investments

14. Property records, excluding
 documents included in Item 2(a)(2):
    (a) Ledgers of property accounts     25 years. See Sec.  Sec.
     including land and other detailed    125.2(g) and 225.2(g) of this
     ledgers showing the cost of          chapter for public utilities
     property by classes.                 and licensees and natural gas
                                          companies.
    (b) Continuing property inventory    25 years. See Sec.  Sec.
     ledger, book or card records         125.2(g) and 225.2(g) of this
     showing description, location,       chapter for public utilities
     quantities, cost, etc., of           and licensees and natural gas
     physical units (or items) of         companies.
     property owned.
    (c) Operating equipment records....  3 years after disposition,
                                          termination of lease, or write-
                                          off of property or investment.
    (d) Office furniture and equipment   3 years after disposition,
     records.                             termination of lease or write-
                                          off of property or investment.
    (e) Automobiles, other vehicles and  3 years after disposition,
     related garage equipment records.    termination of lease or write-
                                          off of property or investment.
    (f) Aircraft and airport equipment   3 years after disposition,
     records.                             termination of lease or write-
                                          off of property or investment.
    (g) Other property records not       3 years after disposition,
     defined elsewhere.                   termination of lease or write-
                                          off of property or investment.
15. Construction work in progress
 ledgers, work orders, and supplemental
 records:
    (a) Construction work in progress    5 years after clearance to
     ledgers.                             property account, provided
                                          continuing inventory records
                                          are maintained; otherwise 5
                                          years after property is
                                          retired.
    (b) Work orders sheets to which are  5 years after clearance to
     posted in summary form or in         property account, provided
     detail the entries for labor,        continuing inventory records
     materials, and other charges for     are maintained; otherwise 5
     property additions and the entries   years after property is
     closing the work orders to           retired.
     property records at completion.
    (c) Authorizations for expenditures  5 years after clearance to
     for additions to property,           property account.
     including memoranda showing the
     detailed estimates of cost, and
     the bases therefore (including
     original and revised or subsequent
     authorizations).
    (d) Requisitions and registers of    5 years after clearance to
     authorizations for property          property account.
     expenditures.
    (e) Completion or performance        5 years after clearance to
     reports showing comparison between   property account.
     authorized estimates and actual
     expenditures for property
     additions.
    (f) Analysis or cost reports         5 years after clearance to
     showing quantities of materials      property account.
     used, unit costs, number of man-
     hours etc., in connection with
     completed construction project.

[[Page 28510]]


    (g) Records and reports pertaining   Destroy at option.
     to progress of construction work,
     the order in which jobs are to be
     completed, and similar records
     which do not form a basis of
     entries to the accounts.
16. Retirement work in progress
 ledgers, work orders, and supplemental
 records:
    (a) Work order sheets to which are   5 years after the property is
     posted the entries for removal       retired.
     costs, materials recovered, and
     credits to property accounts for
     cost of property retirement.
    (b) Authorizations for retirement    5 years after the property is
     of property, including memoranda     retired.
     showing the basis for
     determination to be retired and
     estimates of salvage and removal
     costs.
    (c) Registers of retirement work...  5 years.
17. Summary sheets, distribution         5 years.
 sheets, reports, statements, and
 papers directly supporting debits and
 credits to property accounts not
 covered by construction or retirement
 work orders and their supporting
 records.
18. Appraisals and valuations:
    (a) Appraisals and valuations made   3 years after appraisal.
     by the company of its properties
     or investments or of the
     properties or investments of any
     associated companies. (Includes
     all records essential thereto.).
    (b) Determinations of amounts by
     which properties or investments of
     the company or any of its
     associated companies will be
     either written up or written down
     as a result of:
        (1) Mergers or acquisitions....  10 years after completion of
                                          transaction or as ordered by
                                          the Commission.
        (2) Asset impairments..........  10 years after recognition of
                                          asset impairment.
        (3) Other bases................  10 years after the asset was
                                          written up or down.
19. Production maps, geological maps,    6 years after completion of
 reproductions, including aerial          work order.
 photographs, showing the location of
 all facilities the subject matter of
 which falls within the work orders of
 the company.
20. Engineering records, drawings,       6 years after completion of
 supporting data to include diagrams,     work order.
 profiles, photographs, field-survey
 notes, plot plans, detail drawings,
 and records of engineering studies
 that are part of or performed by the
 company within the work order system.
21. Records of building space occupied   6 years.
 by various departments of the company.
22. Contracts relating to property:
(a) Contracts relating to acquisition    6 years after property is
 or sale of property.                     retired or sold.
(b) Contracts and other agreements       6 years after property is
 relating to services performed in        retired or sold.
 connection with construction of
 property (including contracts for the
 construction of property by others for
 the company and for supervision and
 engineering relating to construction
 work).
23. Records pertaining to                6 years.
 reclassification of property accounts
 to conform to prescribed systems of
 accounts including supporting papers
 showing the bases for such
 reclassifications.
24. Records of accumulated provisions
 for depreciation and depletion of
 property and amortization of
 intangible property and supporting
 computation of expense:
    (a) Detailed records or analysis     25 years.
     sheets segregating the accumulated
     depreciation according to the
     classification of property.
    (b) Records reflecting the service   25 years.
     life of property and the
     percentage of salvage and cost of
     removal for property retired from
     each account for depreciable
     company property.
25. Investment records:
    (a) Records of investment in         3 years after disposition of
     associate companies.                 investment.
    (b) Records of other investments,    3 years after disposition of
     including temporary investments of   investment.
     cash.

          Purchase and Stores

26. Procurement:
    (a) Agreements entered into for the
     acquisition of goods or the
     performance of services. Includes
     all forms of agreements such as
     but not limited to: Letters of
     intent, exchange of
     correspondence, master agreements,
     term contracts, rental agreements,
     and the various types of purchase
     orders:
        (1) For goods or services        6 years. See Sec.  Sec.
         relating to property             125.2(g) and 225.2(g) of this
         construction.                    chapter for public utilities
                                          and licensees and natural gas
                                          companies.
        (2) For other goods or services  6 years.
    (b) Supporting documents including   6 years. See Sec.  Sec.
     accepted and unaccepted bids or      125.2(g) and 225.2(g) of this
     proposals (summaries of unaccepted   chapter for public utilities
     bids or proposals may be kept in     and licensees and natural gas
     lieu of originals) evidencing all    companies.
     relevant elements of the
     procurement.

[[Page 28511]]


27. Material ledgers: Ledger sheets of   6 years after the date the
 materials and supplies received,         records/ledgers were created.
 issued, and on hand.
28. Materials and supplies received and  6 years. See Sec.  Sec.
 issued: Records showing the detailed     125.2(g) and 225.2(g) of this
 distribution of materials and supplies   chapter for public utilities
 issued during accounting periods.        and licensees and natural gas
                                          companies).

           Revenue Accounting

29. Miscellaneous billing data: Billing  5 years.
 department's copies of contracts with
 customers (other than contracts in
 general files).
30. Revenue summaries: Summaries of      5 years.
 monthly revenues according to classes
 of service. Including summaries of
 forfeited discounts and penalties.
                  Tax

31. Tax records:
    (a) Copies of tax returns and
     supporting schedules filed with
     taxing authorities, supporting
     working papers, records of appeals
     of tax bills, and receipts for
     payment. See Item 11 for vouchers
     evidencing disbursements:
        (1) Income tax returns.........  2 years after final tax
                                          liability is determined.
        (2) Agreements between and       2 years after final tax
         schedule of allocation by        liability is determined.
         associate companies of
         consolidated Federal income
         taxes.
    (b) Other taxes, including State or
     local property or income taxes.
        (1) Property tax returns.......  2 years after final tax
                                          liability is determined.
        (2) Sales and other use taxes..  2 Years.
        (3) Other Taxes................  2 years after final tax
                                          liability is determined.
    (c) Filings with taxing authorities  5 years after discontinuance of
     to qualify employee benefit plans.   plan.
    (d) Information returns and reports  3 years after final tax
     to taxing authorities.               liability is determined.
                Treasury

32. Statements of funds and deposits:
    (a) Summaries and periodic           Destroy at option after
     statements of cash balances on       completion of audit by
     hand and with depositories for       independent accountants.
     company or associate.
    (b) Requisitions and receipts for    Destroy at option after funds
     funds furnished associates and       have been returned or
     others.                              accounted for.
    (c) Statements of periodic deposits  Retain records for the most
     with external fund administrators    recent 3 years.
     or trustees.
    (d) Statements of periodic           Retain records for the most
     withdrawals from external fund.      recent 3 years.
33. Records of deposits with banks and
 others:
    (a) Statements from depositories     Destroy at option after
     showing the details of funds         completion of audit by
     received, disbursed, transferred,    independent accountants.
     and balances on deposit, bank
     reconcilement papers and
     statements of interest credits.
    (b) Check stubs, registers, or       6 years.
     other records of checks issued.

            Payroll Records

34. Payroll records:
    (a) Payroll sheets or registers of   6 years.
     payments of salaries and wages,
     pensions and annuities paid by
     company or by contractors of its
     account.
    (b) Records showing the              6 years.
     distribution of salaries and wages
     paid for each payroll period and
     summaries or recapitulations of
     such distribution.

             Miscellaneous

    35. Financial, operating and         5 years.
     statistical annual reports
     regularly prepared in the course
     of business for internal
     administrative or operating
     purposes.
    36. Budgets and other forecasts      3 years.
     (prepared for internal
     administrative or operating
     purposes) of estimated future
     income, receipts and expenditures
     in connection with financing,
     construction and operations,
     including acquisitions and
     disposals of properties or
     investments.
37. Periodic or special reports filed
 by the company on its own behalf with
 the Commission or with any other
 Federal or State rate-regulatory
 agency, including exhibits or
 amendments to such reports:
    (a) Reports to Federal and State     5 years.
     regulatory commissions including
     annual financial, operating and
     statistical reports.
    (b) Monthly and quarterly reports    5 years.
     of operating revenues, expenses,
     and statistics.

[[Page 28512]]


38. Advertising: Copies of               2 years.
 advertisements by or for the company
 on behalf of itself or any associate
 company in newspapers, magazines, and
 other publications, including costs
 and other records relevant thereto
 (excluding advertising of appliances,
 employment opportunities, routine
 notices, and invitations for bids all
 of which may be destroyed at option).
------------------------------------------------------------------------

    7. Part 369 is added to read as follows:

PART 369--STATEMENTS AND REPORTS (SCHEDULES)

    Authority: Sections 1261 et seq. Pub. L. 109-58, 119 Stat. 594.


Sec.  369.1  FERC Form No. 60, Annual report of service company.

    (a) Prescription. The Form of Annual Report for Centralized Service 
Companies, designated as FERC Form No. 60, is prescribed for the 
reporting year 2007 and each subsequent year.
    (b) Filing requirements--(1) Who must file. Each centralized 
service company (See Sec.  367.2 of this chapter) in a holding company 
system must prepare and file electronically with the Commission the 
FERC Form No. 60 pursuant to the General Instructions set out in the 
form.
    (2) When to file and what to file. (i) The annual report for the 
year ending December 31, 2005 and 2006 must be filed by May 1, 2006 and 
May 1, 2007, respectively. The annual report for each year thereafter 
must be filed by April 18 of the subsequent years.
    (ii) This report must be filed with the Commission as prescribed in 
Sec.  385.2011 of this chapter and as indicated in the General 
Instructions set out in the form, and must be properly completed and 
verified. Filing on electronic media pursuant to Sec.  385.2011 of this 
chapter is required.

PART 375--THE COMMISSION

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

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

    9. In Sec.  375.303, paragraphs (c), (d), (e), (f), (g) and (h) are 
revised to read as follows:


Sec.  375.303  Delegations to the Chief Accountant.

* * * * *
    (c) Issue interpretations of the Uniform System of Accounts for 
public utilities and licensees, centralized service companies, natural 
gas companies and oil pipeline companies.
    (d) Pass upon any proposed accounting matters submitted by or on 
behalf of jurisdictional companies that require Commission approval 
under the Uniform Systems of Accounts, except that if the proposed 
accounting matters involve unusually large transactions or unique or 
controversial features, the Chief Accountant must present the matters 
to the Commission for consideration.
    (e) Pass upon applications to increase the size or combine property 
units of jurisdictional companies.
    (f) Accept for filing FERC Form No. 60 and Quarterly Financial 
Report Form Nos. 3-Q and 6-Q if such filings are in compliance with 
Commission orders or decisions, and when appropriate, notify the party 
of such acceptance. Issue and sign deficiency letters if the filing 
fails to comply with applicable statutory requirements, and with all 
applicable Commission rules, regulations, and orders for which a waiver 
has not been granted.
    (g) Deny or grant, in whole or in part, requests for waiver of the 
reporting requirements for the forms under Sec. Sec.  141.400, 260.300, 
357.4, 366.23 and 369 of this chapter and the filing of these forms on 
electronic media under Sec.  385.2011 of this chapter.
    (h) Deny or grant, in whole or in part, requests for waiver of the 
requirements of parts 352, 356, 367 and 368 of this chapter, except if 
the matters involve unusually large transactions or unique or 
controversial features, the Chief Accountant must present the matters 
to the Commission for consideration.

[FR Doc. 06-4043 Filed 5-15-06; 8:45 am]

BILLING CODE 6717-01-P
