FERC Points Discover of Investigation into Doable Enlargement of Accounting and Reporting Necessities for Renewable Power Property – JD Supra

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On January 19, 2021, the Federal Energy Regulation Commission (“FERC”) published an investigation to investigate the treatment of accounting for certain costs related to renewable energies.[1] In particular, FERC invites the public to comment on whether FERC:
(1) Creation of new accounts in the Single System of Accounts (“USoA”) to account for the cost of non-hydropower assets such as solar, wind and biomass; (2) modify FERC Form # 1 to reflect accounts ultimately created; and (3) updating its accounts to reflect the costs associated with renewable energy credits (“RECs”).

While most generator owners are granted a waiver of the USofA and FERC Form # 1 requirements when granted a market-based tariff authority, FERC's determination in this process could have a potential impact on solar and wind turbine developers and owners who apply for approval from FERC for a tariff plan for reactive power or other cost-based compensation. One of the primary purposes in classifying costs under USoA is to break down the costs into accounts that are reimbursable at cost-based rates. The cost recovery often depends on the account to which the equipment or costs are booked. Generally, if the cost of equipment or expenses is paid into one of the “Reimbursable” accounts, those expenses are reimbursable in installments. Because renewable assets do not have accounts specifically designed for those assets, litigation regularly arises over the appropriate classification of costs when a renewable developer or owner seeks a cost-based refund.

Currently, the USoA only divides generation (or production) assets into four categories: steam, nuclear, hydropower, and the bulk production “other production”.[2] In the absence of a non-renewable hydropower category, solar and wind developers and owners had to use the Other Production category when classifying the costs associated with these assets. However, unlike the steam, nuclear and hydropower categories, which are specifically designed to take into account the unique properties and associated features of these assets, the Other Production category is general and has forced renewable owners to create a “reasonable To exercise judgment ”. in determining which other production account should be used to post these assets.[3] For example, there are no USoA accounts that specifically track the cost of solar panels, photovoltaic inverters, wind turbine blades, wind turbines, solar and wind collection systems, and computer hardware and software required to operate wind and solar power remotely.[4] This practice has created inconsistencies in the classification of renewable resources in the USoA and can create difficulties when a developer or owner is seeking cost-based compensation.

Similarly, the USofA accounts do not currently explicitly address accounting for expenses and income related to the purchase, generation, or use of RECs, which are often associated with renewable assets. FERC's practice in relation to purchased or generated RECs was to record these RECs in account 158.1 (Allowance Inventory) and to post them to account 509 (Allowances).[5] This NOI seeks comments on whether FERC should clarify and codify this accounting practice by changing the account instructions on these inventory and expense accounts to explicitly include RECs.[6]

As FERC is considering changes to the USoA to specifically address non-hydropower renewable assets, FERC has recognized that such changes will require a revision of FERC Form No. 1. FERC Form No. 1 includes the cost of the Utilities for the previous year classified according to USoA. The FERC Form No. 1 is a tool for FERC and the public that makes utility costs more transparent so that FERC can fulfill its legal obligation to ensure that tariffs are (and remain) fair and reasonable. To this end, FERC is seeking an opinion on how to amend FERC Form No. 1 in light of any changes to the USoA.[7]

Comments in response to the NOI, including related matters or alternative suggestions that commentators may wish to discuss, are due no later than 60 days from the date the NOI is published in the Federal Register, and reply comments are due 30 days later.[8]

[1] Accounting and Reporting Treatment of Certain Renewable Energy Assets, 174 FERC ¶ 61.032 (2021) (“NOI”).

[5] Ameren Illinois Co., 170 FERC 61.267, p. 52 (2020).


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