65407 Chapter 730 Page 4 65407 PUBLIC UTILITIES COMMISSION

65-407 chapter 730 page 4 65-407 public utilities commission chapter 730: compliance by public utilities with the requirements of sta

65-407 Chapter 730 page 4
65-407 PUBLIC UTILITIES COMMISSION
Chapter 730: COMPLIANCE BY PUBLIC UTILITIES WITH THE REQUIREMENTS OF
STATEMENT OF FINANCIAL ACCOUNTING STANDARD NO. 109 ESTABLISHED BY THE
FINANCIAL ACCOUNTING STANDARDS BOARD
SUMMARY: This rule establishes the regulatory accounting and reporting
requirements related to compliance by public utilities in Maine that
are subject to the Generally Accepted Accounting Principles that are
set forth by the Financial Accounting Standards Board in Statement of
Financial Accounting Standard No. 109, Accounting for Income Taxes.
1. Purpose and Scope
This rule adopts for regulatory accounting and reporting purposes the
standards established by the Financial Accounting Standards Board
(FASB) in its Statement of Financial Accounting Standard No. 109,
Accounting for Income Taxes (SFAS 109). All public utilities that are
required by Generally Accepted Accounting Principles (GAAP) to adopt
SFAS 109 for external reporting purposes must also do so for
regulatory accounting and reporting purposes. The rule establishes the
process for implementation of the standard, as well as any specific
reporting requirements which public utilities must follow. Finally,
the rule sets forth the mechanism by which the amounts recorded as
deferred tax assets or liabilities are to be included in a utility's
rate base during a rate case proceeding.
Any public utilities which are not subject to the requirements of GAAP
may adopt this rule with notification to the Commission.
The Commission's authority to establish regulatory accounting
procedures derives from 35-A M.R.S.A. § 501.
2. Definitions
A. Regulatory Asset. An asset established on the books of a public
utility pursuant to the actions of a regulatory body having
jurisdiction over the utility.
B. Flow-Through Income Tax Accounting. A methodology for calculating
income tax expense for regulatory purposes whereby amounts of revenue
or expense related to designated item(s) are included in the
calculation of regulatory income taxes in the same time period as when
the items are included on the company's actual tax return, even though
the amount(s) are included on the utility's income statement for
regulatory purposes in a different time period than that of the tax
return, and for which no deferred taxes are recorded on the company's
books.
C. Net‑of‑Tax Accounting. An accounting procedure whereby an asset or
a liability is recorded on a company's books and reported on its
financial statements at an amount which includes the effect of income
taxes owed or receivable.
3. Compliance Required for Regulatory Accounting
A. SFAS 109 Compliance Required. All public utilities that are
required to do so for external financial reporting purposes shall
comply with the requirements of SFAS 109 for regulatory accounting and
reporting purposes to the Commission. Each utility shall begin
compliance with the requirements of the standard at the time required
by the standard.
Any public utility that is not required by GAAP to comply with the
standard may do so, but must notify the Commission of its intent at
least thirty (30) days in advance of its adoption of the standard.
Prior notification is not required for any public utility which
chooses to voluntarily adopt the requirements of the standard for
fiscal years beginning on January 1, 1993. For good cause a utility
may seek a waiver of the notification requirement.
B. Accounts to be Used. Each public utility shall record any debit
amount required by SFAS 109 in the appropriate miscellaneous asset
account as defined in the Uniform System of Accounts applicable to the
utility. Each public utility shall maintain sufficient detail to allow
specific identification of the amounts recorded as deferred tax assets
or liabilities. Should the regulatory body (e.g., the Federal Energy
Regulatory Commission or the Federal Communications Commission) whose
Uniform System of Accounts has been approved for use by the respective
utilities in this State designate or establish a specific account or
subaccount to be used for recording the deferred tax asset, that
account shall be used for state regulatory accounting purposes.
C. Flow-Through Tax Accounting. Each public utility shall use the
flow-through method when calculating regulatory income tax expense
unless:
1. The flow-through method is not allowed under the then applicable
requirements of the Internal Revenue Code; or
2. A waiver of this requirement has been granted by the Commission.
D. Accounting Treatment.
1. Items which are flowed through in the calculation of regulatory
income tax expense shall have deferred taxes established on the
utility's books of account, as required by SFAS 109.
2. The deferred tax liability so created shall be offset by a
regulatory asset (deferred taxes receivable) which recognizes that the
amount of future taxes payable when the timing differences reverse
themselves shall be recoverable from ratepayers when approved by the
Commission in a base rate proceeding. As required by SFAS 109, the
regulatory asset so established is itself a timing difference for
which a deferred tax liability must also be recorded.
3. The Commission retains the ability to examine the prudence of the
recovery of such assets, but shall not deny recovery on grounds of
retroactivity or claims that a utility failed to follow proper
accounting procedures.
4. Amounts which were subject to flow-through accounting prior to the
adoption of SFAS 109, and for which a deferred tax liability must be
established according to SFAS 109, shall have a deferred tax asset
recorded in order to recognize that such amounts are recoverable from
ratepayers when the timing differences that created such amounts
reverse themselves and the utility seeks recovery in a base rate
proceeding.
4. Reporting and Filing Requirements
Each public utility shall submit with its first annual report to the
Commission following the implementation of SFAS 109 a report showing
the accounting effects of the adoption of the standard. Specifically,
the utility shall indicate the accounting entries that were required
in order to comply with the provisions of the standard. Sufficient
detail shall be provided to identify the major categories and amounts
of deferred tax assets and liabilities created by the adoption of the
standard.
Utilities that recorded certain assets or liabilities at net‑of‑tax
amounts should show any reclassification entries which were required
due to the fact that this method is not allowed by SFAS 109. Utilities
may seek waivers from the net‑of‑tax prohibition. Such requests must
be in writing to the Commission and must contain justification for the
use of net‑of‑tax accounting method.
5. Waiver
For good cause shown, the Commission may waive any of the requirements
of this Rule, provided such waiver will not unduly undermine the
purposes of this Rule. The Commission may also subsequently rescind,
alter or amend any such waiver for good cause. The Commission
delegates to the Director of Finance the authority to issue, rescind,
alter or amend a waiver with respect to any of the requirements of
this Rule. This delegation in no way limits the Commission's authority
to review the decision of the Director of Finance or to issue,
rescind, alter or amend a waiver directly.
STATUTORY AUTHORITY: 35-A M.R.S.A. § 501.
EFFECTIVE DATE:
This rule was approved as to form and legality by the Attorney General
on September 10, 1993. It was filed with the Secretary of State on
September 10, 1993 and will be effective on September 15, 1993.
EFFECTIVE DATE (ELECTRONIC CONVERSION):
May 4, 1996
NON-SUBSTANTIVE CHANGES:
March 26, 1999 - converted to MS Word.