- 6 -
of costs charged to expense, while decreasing the size of
retirement units would increase the amount of capitalized costs.
During the years in issue, petitioner utilized the FPSC
requirements for regulatory accounting purposes. Florida Power
made more than 450 changes between 1988 and 1992 to the FPSC list
of retirement units and semiannually notified the FPSC of the
changes. However, the retirement units used by Florida Power for
FPSC purposes did not exceed the limits for retirement units as
prescribed by the FERC. Thus, Florida Power’s utilization of the
FPSC requirements in defining retirement units automatically
conformed with the FERC regulatory accounting requirements.3
3An example of the aforementioned regulatory concepts
illustrates the accounting principles of the FERC and FPSC.
Suppose that P owns five cars. Each car is defined as a
retirement unit in the FERC list. The wheels, seats, and other
components of the car would be considered minor items of
property. Under the FERC, P could add more cars or replace
existing cars, and the corresponding costs would be capitalized.
The costs of the replacement of the wheels, seats, etc., would
generally be considered as expenditures related to minor items of
property and generally would be expensed. Theoretically, P could
subdivide the car into smaller retirement units, so that the
wheels, seats, etc., would be considered separate retirement
units. This would increase the amount of capitalized costs
because additions or replacements of the wheels, seats, etc.,
would be required to be capitalized under regulatory rules.
However, under the FERC, P is prohibited from increasing the size
of the retirement units; i.e., defining a retirement unit to
include all five cars. The FPSC has the discretion to allow P to
increase the size of the retirement units. This action, if
available to P, might theoretically allow all five cars to be
identified as one retirement unit; thus, the individual cars
might be defined as minor items of property. This would result
in an increase in the size of the retirement unit (from one car
to five cars), and the amount of costs charged to repair expense
(continued...)
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011