FERC Issues Letter Order Approving Florida Power & Light Company 1/27/14 Request to Adjust FPL's Books and Records to Reflect a Prospective...
(Targeted News Service Via Acquire Media NewsEdge) FERC Issues Letter Order Approving Florida Power & Light Company 1/27/14 Request to Adjust FPL's Books and Records to Reflect a Prospective Change in Its Accounting Method for the Precapitalization of Transformers Under AC14-39
WASHINGTON, March 14 -- The U.S. Department of Energy's Federal Energy Regulatory Commission issued the text of the following delegated order:
In Reply Refer To:
Office of Enforcement
Docket No. AC14-39-000
March 14, 2014
Florida Power & Light Company
Attention: Kim Ousdahl
Vice President, Controller, and CAO
700 Universe Boulevard
Juno Beach, FL 33408
Dear Ms. Ousdahl:
This is in response to your letter dated January 27, 2014 requesting approval to adjust Florida Power & Light Company (FPL)'s books and records to reflect a prospective change in its accounting method for the precapitalization of transformers.
FPL's request is approved for accounting purposes only. This accounting approval is not intended to influence the outcome of any rate treatment that may be established for this transaction.
FPL states that the change would treat transformers as inventory items and capitalize them at the time of installation rather than the time of purchase. Specifically, FPL proposes to record this change in accounting method by:
- Debiting Account 154, Plant Material and Operating Supplies, and crediting Account 101, Electric Plant in Service, to remove the gross original cost of transformers not in service.
- Debiting the appropriate maintenance expense account, and crediting Account 101, Electric Plant in Service, to remove the capitalized installation costs of transformers.
FPL states that subsequent capitalization of transformers would occur, as with other inventory items, when issued and utilized in capital construction of a retirement unit. The amount capitalized would be the unit cost of the transformer issued plus actual installation costs. When the transformers are issued, FPL proposes to debit Account 107, Construction Work in Progress, and credit Account 154. To close construction when the transformers are placed in service, FPL proposes to debit Account 101 and credit Account 107.
FPL proposes to retire transformers that are removed from service by debiting Account 108, Accumulated Provision for Depreciation of Electric Utility Plant, and crediting Account 101. Once a transformer is removed from service and determined to be reusable, FPL proposes to charge the item to inventory at original cost, with a corresponding credit to Account 108, and record any repair expenses to the appropriate maintenance account.
Further, FPL states that the proposed change will align its accounting practice with field operations since it no longer refurbish transformers and simplify its business processes while maintaining compliance with Electric Plant Instruction 10, Additions and Retirements of Electric Plant. FPL's request to change its accounting method for the precapitalization of transformers is approved. However, the proposed change may require FPL to reevaluate its depreciation practices to ensure that depreciation rates are adequate to properly recognize, through depreciation expense, the installation and removal costs.
The Commission delegated authority to act on this matter to the Director of the Office of Enforcement or his designee under 18 C.F.R. section 375.311 (2013). The Director has designated this authority to the Chief Accountant. This letter constitutes final agency action. Your company may file a request for rehearing with the Commission within 30 days of the date of this order under 18 C.F.R. section 385.713 (2013).
Bryan K. Craig
Director and Chief Accountant
Division of Audits and Accounting
Office of Enforcement
TNS 18EstebanLiz-140316-30FurigayJane-4670020 30FurigayJane
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