FERC to Change How it Receives Financial and Operational Information of Wind, Solar and Other Non-Hydro Renewables

The Federal Energy Regulatory Commission (FERC) recently issued a Notice of Proposed Rulemaking (NOPR) to update FERC’s current Uniform System of Accounts (USofA), as it does not adequately account for non-hydro renewable energy assets, such as wind, solar, and storage. The NOPR also proposes to codify accounting for renewable energy credits (RECs). 

The USofA was created by the Federal Power Commission to facilitate the Commission’s ratemaking responsibilities and uniformly capture financial and operational information. Over time, USofA has been modified to account for changing technological, legal, and market conditions. The proposed revisions have addressed many economic and technological developments.

Proposed changes to USofA

The NOPR proposes four changes to the USofA for public utilities and licensees, as follows:

1. Creating new production accounts specifically dedicated for wind, solar, and other non-hydro renewable assets:
   At present, utilities use a broad category of accounts called “other production” to record non-hydro renewable generation and related activities. Once separate accounts have been created for these assets, it will provide uniformity and transparency in reporting practices.
2. Creating a single dedicated functional class for energy storage accounts:
   Currently, utilities has to re-allocate costs between production, transmission, and distribution accounts, based on usage of the storage assets. This has preliminarily been found to create a significant burden and is impractical, according to Commission staff analysis, industry outreach and a review of industry comments. The NOPR has also preliminarily found that a new dedicated storage account would allow utilities to avoid cumbersome accounting practices and would help in using traditional and meaningful ratemaking allocation methodologies.

   
   

3. To codify the accounting treatment of renewable energy credits and other similar financial instruments:
   The NOPR proposes that dedicated inventory accounts be created to record renewable energy credits, based on the Commission’s prior guidance on emission allowances, industry input, and in order to promote uniformity in practice.
4. Adding new dedicated accounts for computer hardware, software, and communications equipment to promote uniformity within existing functions of the UsofA:
   The NOPR has collected comments on whether the Commission should create such accounts for natural gas pipelines, oil pipelines, and service companies; and whether the Chief Accountant should issue guidance on accounting for hydrogen, that would apply to natural gas companies, as well as both public utilities and licensees.

The purpose of these proposed reforms is to modernize the USofA and add functional detail needed to inform the Commission’s ratemaking responsibilities.

To read the press release issued by FERC, click here.