Fla. Admin. Code Ann. R. 25-30.140 - Depreciation

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(1) For the purpose of the rule, the following definitions apply:

(a) Account - Water and wastewater plant accounts are defined in the NARUC Uniform System of Accounts adopted by Rule 25-30.115, F.A.C.

(b) Amortization - The gradual extinguishment of an amount in an account by distributing such amount over a fixed period.

(d) Average Remaining Life - The future expected service in years of the surviving plant at a given age.

(e) Average Service Life - The period of service that can be reasonably expected from the plant type in question. It is measured by the period of time the subject plant and its associated investment is included on the company's books as in service to the public. The average service life will typically be less than the potential physical life due to factors such as governmental requirements, growth or adverse operating conditions.

(f) Average Service Life Depreciation Rate - The depreciation rate based on the expected average service to be experienced by the investment or account in question.

A.S.L. Rate =	100% - Average Net Salvage %
	Average Service Life

(g) Capitalization - Measures of the propriety of capitalization versus expensing as follows:

1. The addition of any retirement unit, or

2. Any replacement with a retirement unit that materially enhances the value, use, life expectancy, strength or capacity of the asset prior to replacement shall be capitalized.

3. The cost of incidental repairs that neither materially add to the value of the property nor appreciably prolong its life and that were made to keep the property in an ordinary efficient operating condition shall be accounted for as a maintenance expense.

(h) Cost of removal - The cost of demolishing, dismantling, tearing down or otherwise removing utility plant, including the cost of transportation and handling incidental thereto.

(i) Continuing Property Record (CPR) - A perpetual collection of records required by the NARUC Uniform System of Accounts showing the detailed original costs, quantities, and locations of plant in service. Generally, a CPR should contain 1) an inventory of property record units which can be readily checked for proof of physical existence, 2) the association of costs with such property record units to ensure accurate accounting for retirements, and 3) the dates of installation and removal of plant to provide data for use in connection with depreciation studies.

(j) Depreciation - As applied to depreciable utility plant, the loss in service value not restored by current maintenance incurred in connection with the consumption or prospective retirement of utility plant in the course of service from causes that are known to be in current operation and against which the utility is not protected by insurance. Among the causes to be given consideration are wear and tear, decay, action of the elements, inadequacy, obsolescence, changes in the art, changes in demand and requirements of public authorities. The intent of depreciation per this rule is to provide for recovery of invested capital and to match this recovery as nearly as possible to the useful life of the depreciable investment.

(k) Depreciation Accounting - The process of charging the book cost of depreciable property, adjusted for net salvage, to operations over the associated useful life.

(l) Depreciation Expense - The periodic charge to expense to allocate the original cost of a depreciable group of assets over the life of those assets.

(m) Depreciable Group - A homogeneous grouping of assets expected to experience similar life and salvage patterns. Unless otherwise ordered by the Commission, depreciable groups are the accounts defined in the NARUC Uniform System of Accounts adopted by Rule 25-30.115, F.A.C.

(n) Function - defined as follows:

Water	Wastewater
Source of Supply	Collection Plant
(Accounts 304 to 311 and 339)	(Accounts 354, 355 and 360 to 367)
	Pumping Plant
	(Accounts 354, 355, 370, 371)
Water Treatment Plant	Treatment & Disposal Plant
(Accounts 304, 310, 311, 320, and 339)	(Accounts 354 and 380 to 389)
	Reclaimed Water Treatment Plant
Transmission & Distribution Plant	(Accounts 354, 355, 371, 374, 380, 381, 389)
(Accounts 304, 310, 311 and 330 to 339) General Plant	Reclaimed Water Distribution Plant (Accounts 354, 355, 366, 367, 371, 375, 389)
(Accounts 304 and 340 to 348)	General Plant
	(Accounts 354 and 390 to 398)

(o) Group Depreciation - An accounting procedure under which depreciation charges are accrued on the basis of the original cost of all property included in each depreciable group. Under the group concept, no attempt is made to keep track of the accumulated provision for depreciation applicable to individual assets of property, in view of the many items making up a utility system. The group approach recognizes that some assets within the group may live longer or shorter than the average life of the group but the group is expected to live the average service life. Every item in the group is assumed to be fully depreciated at retirement.

(p) Mortality Data - See plant activity data.

(q) Net Salvage - The salvage value of property retired less the cost of removal. This is expressed as a percent of retirements in the depreciation rate formula.

(r) Original Cost - The cost of acquiring an asset and placing it into service for first utility use. This includes the direct costs of acquiring the asset and the cost of labor, materials, and associated costs of installation to prepare the asset for first utility use. The cost is used in the computation of depreciation expense. In the event that an asset is acquired that is already in public service, the original historic cost of the asset should be recorded in plant in service, and the historic accumulated depreciation should be charged to the accumulated depreciation account. In the event the historic cost of an asset that is already in utility service cannot be determined, an independent engineer's evaluation based on an original cost study may be used.

(s) Plant Activity Data - Annual additions, retirements, adjustments or transfers, sales or purchases, and investment balances at end of year.

(t) Property Retired - As applied to utility plant, property that has been removed, sold, abandoned, destroyed or which has been withdrawn from service for any cause.

(u) Remaining Life Depreciation Rate - The depreciation rate based on the average remaining portion of the service life expected to be experienced by the investment or account in question and on the net unrecovered capital for that investment or account.

R.L. Rate =		100% - Accumulated Reserve % - Future Net Salvage %
		Average Remaining Life

The average remaining life for an account or sub-account is a function of known planned retirement or of the average age of that account and its appropriate mortality table.

(v) Replacing or Replacement - The construction or installation of utility plant in place of property retired, together with the removal of the property retired.

(w) Reserve - The accumulated provision for depreciation. The accumulated depreciation reserve is the net of depreciation accruals (expenses) and retired investment with related gross salvage and cost of removal as well as any appropriate adjustments or transfers.

(x) Reserve Activity Data - Annual depreciation expense, retirements, transfers or adjustments, gross salvage realized, cost of removal, and end of year balance for the accumulated provision for depreciation.

(y) Retirement Units - Those items of utility plant which, when retired with or without replacement, are accounted for by crediting the book cost to the utility plant account in which it is included.

(z) Salvage Value - 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.

(aa) Straight-Line Method - A depreciation method by which the service value of a depreciable group is charged to depreciation expense (or a clearing account) and credited to the accumulated provision for depreciation account through equal annual charges over the service life of the group.

(bb) Unit Depreciation - An accounting procedure under which the original cost, depreciation expense, and accumulated provision for depreciation, and all associated activity are maintained for each individual asset. Service life and salvage parameters are estimated for each individual asset with a depreciation rate designed to recover each asset's original cost over its related life. If the asset lives longer than its expected life, depreciation expense stops accruing when the asset is fully recovered. If the asset retires earlier than its expected service life, the associated unrecovered amount is immediately written-off as a loss.

(cc) Unrecovered Amount - Original cost less the accumulated provision for depreciation less expected net salvage.

(2) The average service life and salvage components for each class of utility are as follows:

(a) Water System Guideline Average Service Lives.

		Large	Small	Small
		Utility	Utility	Utility
		(Class	(Class	Function	Net
Account	Description	A&B)	C)	Composite³	Salvage %⁴
1. Intangible Plant
351	Organization	40	40
352	Franchise Cost	40⁵	40⁵
2. Source of Supply				28
304	Structures & Improvements	32¹	27¹
	Wood	28	25
	Masonry	30	27
	Reinforced Concrete	40	37
	Steel Building	40	35
	Tanks or Sheds	25	20
	Fiberglass	20	18
305	Collecting and Impounding Resevoirs	50	40
306	Lake, River and Other Intakes	40	40
307	Wells and Springs
	Drilled & Cased Well (Floridan or Non-Corrosive)	30	27
	Shallow Well (Sand Aquifer or Corrosive Water)	20	18
308	Infiltration Galleries and Tunnels	40	N/A
309	Supply Mains	35	32
310	Power Generation Equipment	20	17
311	Pumping Equipment	20¹	17¹
	Pumping Equipment Electric	20	15
	Pumping Equipment Chemical	8	6
339	Other Miscellaneous Equipment	18	15
3. Water Treatment Plant				21
304	Structures and Improvements (see "Source of Supply" for subcategory lives)
		32¹	27¹
310	Power Generation Equipment	20	17
311	Pumping Equipment	20¹	17¹
	Pumping Equipment-Electric	20	15
	Pumping Equipment-Chemical	8	6
320	Water Treatment Equipment	22¹	17¹
	Chlorination Equipment	10	7
	Membrane Elements	5	5
	Other Mechanical Equipment	25	20
339	Other Miscellaneous Equipment	18	15
4.Transmission & Distribution Plant				36
304	Structures & Improvements (See "Source of Supply" for subcategory lives)	32¹	27¹
310	Power Generation Equipment	20	17
311	Pumping Equipment	20¹	17¹
	Pumping Equipment - Electric	20	15
	Pumping Equipment - Chemical	8	6
330	Distribution Reservoirs & Stand
	Pipes	37¹	33¹
	Steel Pneumatic Tank Concrete Ground	35	30
	Storage Reservoir	40	37
331	Transmission & Distribution Mains	43¹	38¹
	Galvanized Steel pipe & Fittings	35	33
	Black Steel Pipe	20	18
	Plastic Pipe²	45	40
	Asbestos - Cement	40	35
	Cast Iron or Ductile Iron	40	35
	Valves & Valve Boxes	25	20
	Fire Mains	33	30
333	Services²	40	35
334	Meters and Meter Installations	20	17
335	Hydrants	45	40
336	Backflow Prevention Devices	15	10
339	Other Plant and Miscellaneous Equipment	25	20
5. General Plant
304	Structures & Improvements	40¹	35¹
	Wood Building	35	30
	Masonry Building	40	35
	Reinforced Concrete Building	40	37
	Steel Building	40	35
	Tanks or Sheds	25	20
340	Office Furniture & Equipment	15	15
	Computers	6	6
341	Transportation Equipment	6	6		10
342	Stores Equipment	18	N/A	14 (composite of 342-348)
343	Tools, Shop & Garage Equipment	16	15
344	Laboratory Equipment	15	N/A
345	Power Operated Equipment	12	10		5
346	Communication Equipment	10	N/A		10
347	Miscellaneous Equipment	15	N/A
348	Other Tangible Plant	10	10

(b) Wastewater System Guideline Average Services Lives.

		Large	Small	Small
		Utility	Utility	Utility
		(Class	(Class	Function	Net
Account	Description	A&B)	C)	Composite³	Salvage %⁴
1. Intangible Plant
351	Organization	40	40
352	Franchise Cost	40⁵	40⁵
2. Collection System				35
354	Structures &
	Improvements Above
	Grade	32¹	27¹
	Wood	28	25
	Masonry	30	27
	Reinforced Concrete	38	35
	Steel Below Grade	25	22
	Concrete	35	32
	Steel	22	20
	Lift Stations	25	22
355	Power Generation Equipment	20	17
360	Collection Sewers-Force²	30¹	27¹

361	Collection Sewers-Gravity²	45	40
	Manholes	30	27
362	Special Collecting	40	37
	Structures
363	Services to Customers²	38	35
364	Flow Measuring Devices	5	5
365	Flow Measuring Installations	38	35
389	Other Miscellaneous Equipment	18	15
3. Pumping Plant				18
354	Structures & Improvements	32¹	27¹
355	Power Generating Equipment	20	17
370	Receiving Wells	30	25
371	Pumping Equipment	18	15
	Pumping Equipment - Electric	18	15
	Pumping Equipment - Chemical	7	5
389	Other Miscellaneous Equipment	18	15
4. Treatment and Disposal Plant				18
354	Structures & Improvements (see "Collection System" for subcategory lives)	32¹	27¹
355	Power Generating Equipment	20	17
371	Pumping Equipment	18¹	15¹
	Pumping Equipment - Electric	18	15
	Pumping Equipment - Chemical	7	5
380	Treatment & Disposal Equipment	18¹	15¹
	Blowers, Motors, Pumps Electric Controls	15	12
	Chlorination Equipment	10	7
	Other Mechanical Equipment	23	18
381	Plant Sewers	35	32
382	Outfall Sewer Lines	30	30
389	Other Plant and Miscellaneous Equipment	18	15
5. Reclaimed Water Treatment Plant				21
354	Structures & Improvements (see "Collection System" for subcategory lives)	32¹	27¹
355	Power Generating Equipment	20	17
371	Pumping Equipment	18¹	15¹
	Pumping Equipment - Electric	18	15
	Pumping Equipment - Chemical	7	5
374	Reuse Distribution
	Reservoirs	37¹	33¹
	Steel Pneumatic Tank	35	30
	Concrete Ground Storage Reservoir	40	37
380	Treatment & Disposal Equipment	18¹	15¹
	Blowers, Motors, Pumps, Electric Controls	15	12
	Chlorination Equipment	10	7
	Other Mechanical Equipment	23	18
381	Plant Sewers	35	32
389	Other Plant and Miscellaneous Equipment	18	15
6. Reclaimed Water Distribution Plant				36
354	Structures & Improvements (see "Collection System" for subcategory lives)	32¹	27¹
355	Power Generating Equipment	20	17
366	Reuse Services	40	35
367	Reuse Meters and Meter Installation	20	17
371	Pumping Equipment	18¹	15¹
	Pumping Equipment - Electric	18¹	15
	Pumping Equipment - Chemical	7	5
375	Reuse Transmission & Distribution System	43¹	38¹
	Plastic Pipe²	45	40
	Valves & Valve Boxes	25	20
	Fire Mains	33	30
389	Other Plant and Miscellaneous Equipment	18	15
7. General Plant
354	Structures & Improvements	40¹	35¹
	Reinforced Concrete Building	45	40
	Masonry Building	40	35
	Wood Building	35	30
	Steel Building	40	35
	Tanks or Sheds	25	20
390	Office Furniture & Equipment	15	15
	Computers	6	6
391	Transportation Equipment	6	6		10
392	Stores Equipment	18	N/A	14 (composite
				of 392-398)
393	Tools, Shop & Garage Equipment	16	15
394	Laboratory Equipment	15	N/A
395	Power Operated Equipment	12	10		5
396	Communication Equipment	10	N/A		10
397	Miscellaneous Equipment	15	N/A
398	Other Tangible Plant	10	10

1. ¹ Denotes composite life.

2. ² Plastic pipe footnote - assumes use of AWWA standard pipe only. Assumes AWWA DR18 used for all mains of 6'' or more.

3. ³ To be used only when acceptable company plant balances are not available for developing composites using account lives.

4. ⁴ Net Salvage zero except as indicated.

5. ⁵ Franchise costs shall be amortized over a period of 40 years unless a specific time period is designated in the utility franchise agreement.

(3)

(a) Average service life depreciation rates based on guideline lives and salvages shall be used in any Commission proceeding in which depreciation rates are addressed, except for those utilities using depreciation rates in accordance with the requirements listed in subsections (6) and (7) of this rule. A utility shall also implement the applicable guideline rates for any new plant to be placed in service.

(b) A utility may implement applicable guideline rates without specific approval by the Commission. Guideline rates, if implemented for any account, must be implemented for all accounts. If a utility implements applicable guideline rates outside of a rate proceeding, the utility shall provide written notification to the Director of Economics within 30 days of such implementation.

(c) If guideline depreciation rates have been implemented, the rates shall not be changed unless approved by the Commission.

(4)

(a) All Class A and B utilities shall maintain depreciation rates and reserve activity data by account as prescribed by this Commission.

(b) All Class C utilities shall maintain depreciation rates and reserve activity data by total depreciable plant, function or account as prescribed by this Commission.

(5) Computation of depreciation expense. Regulatory book depreciation expense shall be computed on a monthly basis in conformity with group depreciation accounting procedures.

(6)

(a) At the time a utility applies for a change in its revenue rates and charges, it may also petition for average service life depreciation rates different from those in the above schedule if it can justify the service lives that the utility is proposing in lieu of the guideline lives. That justification should be in the form of historic data, technical information or utility planning for the affected accounts or sub-accounts. Common causes of need for different depreciation rates include composition of account, adverse environmental conditions, high growth or regulatory changes.

(b) A utility filing for such a revision of depreciation rates shall submit six copies of the filing to the office of the Office of Commission Clerk.

1. A comparison of current and proposed depreciation rates and service lives. The proposed effective date of the new rates shall be identified.

2. A comparison of depreciation expenses resulting from current rates with those produced by the proposed rates. Plant balances used in this calculation shall be those as of the effective date of the proposed rates.

3. A general narrative defining the service environment of the applicant utility and the factors (e.g., composition of account, growth, environmental conditions, regulatory changes) leading to the present application for a revision in rates in the affected accounts.

4. Any statistics, data, analyses or calculations used in the development of the proposed average service lives.

(7)

(a) A Class A, B, or C utility may apply for guidelines for a proposal for implementation of remaining life depreciation rates if the utility has maintained both plant activity data by account and accumulated provision for depreciation (reserve) data by account, function or total depreciable plant generally in accord with the Uniform System of Accounts for either at least ten years or since the inception of the utility, whichever is less.

(b) To provide time for study development, any application for remaining life guidelines should be submitted at least six months before the filing for a test year in connection with a request for a revenue rate increase.

(8) Prior to the date of retirement of major installations, the Commission may approve capital recovery schedules to correct associated calculated deficiencies in recovery where a utility demonstrates that retirement of the installation or group of installations is prudent and the associated investment will not be recovered by the time of retirement through the normal depreciation process.

(9)

(a) Beginning with the year ending December 31, 2003, all Class A and B utilities shall maintain separate sub-accounts for:

(1) each type of Contributions-in-Aid-of-Construction (CIAC) charge collected including, but not limited to, plant capacity, meter installation, main extension or system capacity;

(2) contributed plant;

(3) contributed lines; and

(4) other contributed plant not mentioned previously. Establishing balances for each new sub-account may require an allocation based upon historical balances. Each CIAC sub-account shall be amortized in the same manner that the related contributed plant is depreciated. Separate sub-accounts for accumulated amortization of CIAC shall be maintained to correspond to each sub-account for CIAC.

(b) Beginning with the year ending December 31, 2003, for Class C utilities, where adequate CIAC records are maintained in sub-accounts, by type of charge or contributed plant, CIAC amortization rates shall be applied separately to each sub-account. Where CIAC records are not kept by sub-account, a composite depreciation rate for total plant, excluding general plant, shall be applied to the entire CIAC account.

(c) Any composite rate used shall be recalculated each year based on the applicable plant balances and depreciation rates.

Notes

Fla. Admin. Code Ann. R. 25-30.140

Rulemaking Authority 350.127(2), 367.121(1) FS. Law Implemented 350.115, 367.081(2), 367.121(1) FS.

New 3-22-84, Formerly 25-10.32, 25-10.032, Amended 11-10-86, 5-8-88, 11-21-95, 12-4-03, 5-29-08.

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