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.
