Question: A utility installs a gas turbine generating unit or units on its system, or on customers' premises, to provide electric service to some or all of its customers. Exhaust heat or heat produced in the operation of these generating units, is in turn used to produce steam which is also sold for steam heating, cooling or other purposes. Electric service provided is billed at tariff rates and the hearing or cooling service provided is billed in accordance with a contract between the parties and, in some cases, paid for partly in cash and partly in fuel supplied the utility by the customer for use in the production of electricity by the utility. What is the proper accounting for this type of operation?
Answer: The exhaust heat sold, or used to produce steam which is sold, is incidental to the main function of producing a electricity by the turbine generator and, therefore, is a by-product of such operation. Under the Uniform System of Accounts this should be accounted for by including all items of plant, including any special steam piping and equipment, in the appropriate electric plant accounts, and by including all revenues and expenses resulting from the operation of such equipment, whether stemming from the production and sale of electricity or of heat or steam, in the appropriate electric operations accounts. Specifically, revenues from any of such sale of heat or steam, whether or not they constitute a utility function under applicable state law, should be credited to Account 456, Other Electric Revenues, and contra charges recorded in Account 142, Customer Accounts Receivable. Fuel received as partial payment for electric and/or steam service should be valued in accordance with contract provisions (or at market value if no monetary value is stated in the contract) and charged to Account 501, fuel, or Account 547, Fuel, as appropriate, with contra credit to Account 142.
Arthur L. Litke
Chief Accountant
Effective: March 6, 1969