In Reply Refer To:
OED-DRAP

Docket No. AI01-2-000

August 30, 2001

TO ALL JURISDICTIONAL PUBLIC UTILITIES

In recent years, the Commission has approved new jurisdictional entities that operate and administer power exchanges and perform related market monitoring. These are new functions for public utilities. As a result, there are no specific instructions on how to account for performing these activities under the Commission's Uniform System of Accounts (USofA) for Public Utilities and Licensees.

The enclosed Accounting Release No. 16 provides clarification on the correct accounting for revenues received from operating and administering an electric power exchange. In addition, it clarifies the correct accounting for operation and maintenance expenses incurred in operating and administering the exchange and monitoring the market. The accounting guidance provided here will allow consistency and uniformity in accounting on an interim basis until changes to the USofA can be made. This Accounting Release is effective October 1, 2001.

Authority to act on this matter is delegated to the Chief Accountant pursuant to 375.303 of the Commission's regulations. This Accounting Release constitutes final agency action. Requests for rehearing by the Commission may be filed within 30 days of the date of issuance of this letter order, pursuant to 18 C.F.R. 385.713.

John Delaware
Deputy Executive Director and
Chief Accountant

Enclosure

Question

In recent years, new jurisdictional entities have come into existence that operate and administer an electric power exchange. The direct functions of a power exchange include, among other things, aggregating supply bids from generators and demand bids from utilities and power marketers, determining market clearing prices and notifying bidders of market results. These new entities also monitor their energy markets for identification of market design flaws and improvements, manipulation and abuses by participants and the need for initiation of mitigation actions.

What is the proper accounting treatment for revenues received from operating and administering an electric power exchange? Additionally, how should entities account for operation and maintenance expenses incurred in operating and administering the power exchange and related market monitoring activity expenses?

Revenues received from operating and administering an electric power exchange are to be recorded in a separate subaccount of Account, 456, Other Electric Revenues. These revenues are properly includible in Account 456 since they are derived from an electric operating activity and not properly included in any other accounts.

Operation and maintenance expenses incurred in operating and administering the exchange and monitoring the market are to be recorded in separate subaccounts of Account 557, Other Expenses. These expenses are properly includible in Account 557 since they are incurred directly in connection with the purchase of electricity and not properly included in any other accounts.

Effective October 1, 2001