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are operated by other utilities. Florida Power provides public
electric utility services in Florida. Florida Power is subject
to the regulatory rules of the Federal Energy Regulatory
Commission (FERC) and the Florida Public Service Commission
(FPSC). The FERC regulates the rates that Florida Power may
charge to its wholesale customers. The FPSC regulates the rates
that Florida Power may charge to its retail customers.
For regulatory purposes, property at Florida Power’s
electric generating plants (electric plants) is considered as
consisting of “retirement units” and “minor items of property”.
A retirement unit is the overall unit of property while the minor
items of property are the associated parts or items which compose
a retirement unit. Examples of retirement units include air-
conditioning systems, bridges, elevators, and cars. The
regulatory rules determine which expenditures at Florida Power’s
electric plants are capitalized and which expenditures are
expensed for regulatory accounting purposes. Expenditures for
the addition or replacement of a retirement unit are required to
be capitalized, while the replacement of a minor item of property
is generally deducted as a repair expense.2 Florida Power, as a
2Under regulatory accounting, expenses that are capitalized
are taken into the capital base for ratemaking purposes (i.e.,
they receive an allowed “rate of return” on capital investment).
On the other hand, expenditures deducted as current expenses are
passed on to customers (and, therefore, reimbursed dollar-for-
dollar) in the allowed rates.
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Last modified: May 25, 2011