Financial Accounting, Reporting & Records Retention Requirements Under Public Utility Holding Co. Act of 2005, 042406 FERC, RM06-11-000

Docket Nº:RM06-11-000
Party Name:Financial Accounting, Reporting and Records Retention Requirements Under the Public Utility Holding Company Act of 2005 18 CFR Parts 366, 367, 368, 369 and 375
Judge Panel:Magalie R. Salas, Secretary.
Case Date:April 24, 2006
Court:Federal Energy Regulatory Commission
 
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Financial Accounting, Reporting and Records Retention Requirements Under the Public Utility Holding Company Act of 2005

No. RM06-11-000

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

United States of America, Federal Energy Regulatory Commission

April 24, 2006

AGENCY: Federal Energy Regulatory Commission.

ACTION: Notice of Proposed Rulemaking.

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 [insert date 30 days after date of publication in the FEDERAL REGISTER].

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, N.E., Washington, D.C. 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, N.E. Washington, D.C. 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, N.E. Washington, D.C. 20426 Telephone: (202) 502-8370 E-mail: julia.lake@ferc.gov

SUPPLEMENTARY INFORMATION:

NOTICE OF PROPOSED RULEMAKING

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.

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

3. Order No. 667 required that, unless otherwise exempted by Commission rule or order, holding companies6 and service companies7 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.

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 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...

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