associated utility companies is recorded in Account 416, Costs and
expenses of merchandizing, jobbing and contract work for associate
companies; revising Sec.  367.9120 and Sec.  367.9130 to clarify that
demonstrating, selling and advertising costs incurred to promote/retain
either the service companies services/customers or associate companies
services/customers are recorded in these accounts; and revising Sec.
367.9301 to clarify that only general advertising costs incurred on
behalf of associated utility companies are recorded in this
account.\120\
---------------------------------------------------------------------------

    \120\ NARUC at 9-12.
---------------------------------------------------------------------------

Commission Determination
    133. The Commission agrees that Sec. Sec.  367.416, 367.912 and
367.913 should be clarified. We will adopt the revisions suggested by
NARUC for Sec. Sec.  367.912 and 367.913 and incorporate others that
will clarify what amounts are properly included in these accounts. In
considering the suggested revisions to Sec.  367.416, the Commission
has determined that services related to merchandising, jobbing and
contract work could be performed on behalf of associate, non-associate,
utility or non-

utility companies. Consequently, we do not believe the use of Account
416 should be limited to costs of merchandising, jobbing and contract
work performed for associate utility companies. Additionally, we have
concluded that it is inappropriate to place Account 416 within the
Other Income section of FERC Form No. 60, Schedule XV--Comparative
Income Statement, as proposed in the NOPR. Services performed related
to merchandising, jobbing and contract work are an operating activity
of a service company and the cost of those services should be included
in an account that enters into the determination of net operating
income of the service company. Therefore, we will revise Schedule XV to
reflect Account 416, Costs and expenses of merchandizing, jobbing and
contract work, as an operating expense account and require revenues
related to merchandising, jobbing and contract work to be recorded in
Accounts 457, Services rendered to associate companies and 458,
Services rendered to non-associate companies, as appropriate. Account
415, Revenues for merchandising, jobbing and contract work, will be
eliminated from the USofA for centralized service companies. Finally,
we consider Account 930.1 to be a general ``catch all'' account for
recording advertising costs not provided for elsewhere in the accounts.
Therefore, we will not adopt NARUC's recommendation to limit its use to
advertising related to associate utility companies.
(e) Sections 367.4263, 367.4117, 367.4180--Miscellaneous Income
Statement Issues
Comments
    134. EEI states that the numbering appears to be incorrect in Sec.
367.4263.\121\ EEI also states the following accounts should be added
to subpart H: Account 411.7, Losses from disposition of service company
plant; and Account 418, Non-operating rental income.\122\
---------------------------------------------------------------------------

    \121\ EEI at 26.
    \122\ Id. at 27.
---------------------------------------------------------------------------

Commission Determination
    135. EEI did not explain in its comments why the numbering should
be corrected in Sec.  367.4263 or why the Commission should add the
recommended accounts. However, our review of a number of the FERC Form
No. 60s filed with the Commission for calendar year 2005 indicates that
these accounts are used by some service companies.\123\ Therefore, we
will correct the numbering in Sec.  367.4263, and add Account 411.7,
Losses from disposition of service company plant, and Account 418, Non-
operating rental income.

8. Records Retention Requirements

    136. Order No. 667 required all holding companies and all service
companies, which were not granted a waiver or otherwise exempted by the
Commission, to follow the Commission's records retention requirements
in parts 125 and 225. The NOPR proposed to establish, as new part 368
of the Commission's regulations, records retention requirements for all
holding companies and all service companies. The records retention
requirements proposed were based on the requirements contained in
Sec. Sec.  125.3 and 225.3 of the Commission's regulations,\124\ with
certain modifications considered appropriate for holding companies and
service companies.
---------------------------------------------------------------------------

    \123\ See, 2005 FERC Form No. 60, Schedule XV, Comparative
Income Statement for American Electric Power Service Corporation.
    \124\ See 18 CFR 125.3 and 225.3.
---------------------------------------------------------------------------

Comments
    137. EEI notes that the NOPR is unclear as to whether a holding
company that also is a public utility would be subject to both the
Commission's holding company and public utility records retention
requirements. EEI requests that the Commission specify that only one
set of records retention requirements apply and allow the company
involved to select the most appropriate set to apply. Furthermore, if
the holding company is already following the public utility records
retention requirements, it should be able to continue to do so without
also having to follow the new holding company records retention
requirements.\125\
---------------------------------------------------------------------------

    \125\ EEI at 39.
---------------------------------------------------------------------------

    138. NARUC requests that the records retention general instruction
at Sec.  368.2(g) be amended to include the requirement for companies
to file a copy of a certified statement of records prematurely lost or
destroyed with state commissions to facilitate the state commissions'
ability to monitor the activities of service companies.\126\
---------------------------------------------------------------------------

    \126\ NARUC at 12.
---------------------------------------------------------------------------

    139. Southern requests that the records retention requirements be
better tailored for a service company. Specifically, Southern proposes
that the retention period for accumulated depreciation records should
be reduced because the majority of service company property has useful
lives significantly less than the 25-year retention period proposed in
the NOPR.\127\
---------------------------------------------------------------------------

    \127\ Southern at 6.
---------------------------------------------------------------------------

Commission Determination
    140. The records retention requirements originally proposed, and as
adopted here, generally are based on the requirements contained in
parts 125 and 225 of the Commission's regulations,\128\ with certain
minor modifications appropriate for holding companies and service
companies. As a result, most retention periods proposed for holding
companies and service companies are identical to the retention periods
required for public utilities and licensees and natural gas pipelines.
Additionally, the general instructions for parts 125 and 225 and
proposed Sec.  368.2(a)(5) make clear that ``To the extent that any
Commission regulations may provide for a different records retention
period, the records must be retained for the longer of the retention
periods.'' If a holding company that is also a public utility has a
conflict between the retention period specified for a public utility
and the retention period specified for a holding company, the longer of
the retention periods must be observed. Therefore, we do not believe it
is appropriate to specify that only one set of records retention
requirements apply.
---------------------------------------------------------------------------

    \128\ See 18 CFR 125.2(a)(3) and 225.2(a)(3).
---------------------------------------------------------------------------

    141. We deny NARUC's request to amend the records retention
instruction at Sec.  368.2(g) to include a requirement for companies to
file a copy of a certified statement of records prematurely lost or
destroyed with state commissions. We do not believe it is necessary for
the Commission to establish filing requirements for state commissions.
All filings of this nature are docketed by the Commission and can be
viewed electronically by all interested parties. Accordingly, state
commissions will be able to monitor the report of prematurely lost or
destroyed records without imposing an additional reporting burden on
companies. We note that this is the same treatment applied to public
utilities, licensees, and natural gas companies under the Commission's
regulations in parts 125 and 225.
    142. We agree with Southern's observation related to holding and
service company property, and will tailor the schedule of records
retention periods. Specifically, we will reduce the retention period
for accumulated depreciation records reflecting the service life of
property at Sec.  368.3--Item 24, Records of accumulated provisions for
depreciation and depletion from 25

years to 3 years after retirement or disposition of property.\129\
---------------------------------------------------------------------------

    \129\ Most holding and service company property typically has a
useful life significantly less than 25 years, for example office
furniture and equipment and computer software have shorter useful
lives than generating facilities or transmission towers. Therefore,
establishing a shorter retention period for accumulated depreciation
records that closely corresponds to the expected useful life of the
related property is more reasonable.
---------------------------------------------------------------------------

9. FERC Form No. 60

(a) Use of GAAP Financial Statement Instead of Structured FERC Form No.
60
    143. The Commission proposed a structured reporting format in
proposed FERC Form No. 60 in the NOPR. Under the structured format, a
centralized service company must report in specified data fields the
financial information called for in the report.
Comments
    144. In its supplemental comments, in contrast to its initial
comments,\130\ EEI suggests the FERC Form No. 60 be based on the
original FERC Form No. 60 set out in the Commission's December 8, 2005
Order No. 667 Final Rule (December 2005 FERC Form No. 60), with
additional changes EEI requests to streamline the form. EEI believes a
streamlined version of the December 2005 FERC Form No. 60, together
with data the Commission receives directly from public utilities and
the Commission's new FPA section 203 regulations,\131\ should suffice
to enable the Commission to perform its regulatory
responsibilities.\132\ In its supplemental comments, EEI further
encourages the Commission to work with a streamlined version of the
December 2005 FERC Form No. 60 with changes EEI has requested to
further streamline the form.\133\ Southern, PHI Companies, and
FirstEnergy support EEI's comments that the FERC Form No. 60 be a
streamlined version of the December 2005 FERC Form No. 60. These
commenters, together with EEI, believe this streamlined FERC Form No.
60 provides the transparency and uniformity that the Commission desires
without imposing undue burden. However, Southern also suggests that the
Commission should allow companies the option of submitting their
audited GAAP financial statements instead of FERC Form No. 60.\134\
---------------------------------------------------------------------------

    \130\ In its initial comments to the NOPR, EEI proposed the
Commission rely on information provided in the SEC Forms 10-K and
10-Q supplemented by selected additional information the Commission
may need instead of the new FERC Form No. 60.
    \131\ See 18 CFR part 33.
    \132\ EEI Supplemental Comments at 2.
    \133\ Id.
    \134\ Southern at 2.
---------------------------------------------------------------------------

    145. Conversely, APPA thinks that the revised FERC Form No. 60 will
be very useful in auditing and understanding centralized service
company cost allocations to public utility operating companies.\135\
---------------------------------------------------------------------------

    \135\ APPA at 3.
---------------------------------------------------------------------------

Commission Determination
    146. The December 2005 FERC Form No. 60 is essentially the SEC's
old Form U13-60 for service companies with certain streamlining changes
adopted in Order No. 667. The December 2005 FERC Form No. 60, like the
old SEC Form U13-60, is a non-structured reporting format that permits
filers wide latitude and flexibility in how they report required
financial information. While the Commission understands the centralized
service companies'' desire to have flexibility in reporting, the
Commission believes that it is necessary to have a structured reporting
system. A structured report format results in disclosure and display of
predetermined financial information in a uniform manner by all
centralized service companies. This promotes comparability of the data
not only between entities but also between accounts prescribed.
Increasing the comparability of the data makes the information
inherently more useful. Moreover, a structured report format allows for
the creation of a financial database that can be used for more complex
and sophisticated analysis of the information. These items are
important to allow the Commission to perform its duties. It also will
facilitate electronic submission using Commission-supplied software.
This system will help ensure the integrity of the data and make
completing the FERC Form No. 60 easier.
    147. In response to Southern's suggestion, we do not believe that
audited GAAP financial statements would be sufficient for carrying out
the Commission's regulatory responsibilities. GAAP financial statements
are prepared primarily for investors, and do not provide information in
enough detail to ensure that jurisdictional rates charged are just and
reasonable or to review cost allocations under section 1275 of PUHCA
2005 \136\ if called upon to do so. Therefore, the Commission will not
modify the proposed requirement for a structured FERC Form No. 60.
---------------------------------------------------------------------------

    \136\ Supra note 5.
---------------------------------------------------------------------------

(b) FERC Form No. 60 Schedules
(1) Schedule II, Service Company Property
    148. Proposed Schedule II requires centralized service companies to
report the amounts recorded in the service company primary property
accounts and construction work in progress at the beginning of the
year, changes to the accounts during the year, and the balance at the
end of the year.
Comments
    149. Southern does not see the added value of the supplemental
information provided in Instructions 2-4 \137\ and proposes their
elimination. Southern comments the break out of the property by account
gives sufficient information.\138\
---------------------------------------------------------------------------

    \137\ Instruction 2 requires a breakdown of each equipment
subaccount for each class of equipment property owned. Instruction 3
requires a description of other company property. Instruction 3
requires a listing of construction work-in-progress projects and the
beginning, additions and end-of-year balance for each.
    \138\ Southern at 2.
---------------------------------------------------------------------------

Commission Determination
    150. The Commission agrees that the information required by
Instructions 2 and 3 is of little value to the Commission and will be
deleted. However, we will continue to require centralized service
companies to provide information about construction projects similar to
the December 2005 current FERC Form No. 60, Instruction 4. Instead of
providing the information in a footnote format, we are revising the
schedule to provide for additional lines on the schedule for reporting
this information.\139\
---------------------------------------------------------------------------

    \139\ The December 2005 FERC Form No. 60 requires this
information to be reported in a footnote.
---------------------------------------------------------------------------

(2) Schedule III-A, Summary of Service Company Property and Accumulated
Provisions for Depreciation and Amortization
    151. Schedule III-A would require companies to split out property
devoted to utility versus non-utility services.
Comments
    152. EEI contends this reporting requirement should be deleted
because company records do not differentiate service company property
between utility related and non-utility services.\140\ FirstEnergy
argues that assets devoted exclusively to the utility are on the books
of the utility and not on the service company books.\141\
---------------------------------------------------------------------------

    \140\ EEI at 29.
    \141\ FirstEnergy Supplemental Comments at 3.

---------------------------------------------------------------------------

Commission Determination
    153. We agree with EEI and will eliminate this schedule from FERC
Form No. 60. All service company property will be reported in Account
101.
(3) Schedule IV, Investments and Schedule XII, Long-Term Debt
    154. Proposed Schedule IV provides detailed information on service
company investments in associate companies and temporary cash
investments. Proposed Schedule XII provides detailed information on
long-term debt of the service company. Both schedules require the same
information as in the current FERC Form No. 60.
Comments
    155. EEI proposes to eliminate schedules that include information
already available on the face of the Balance Sheet or within the
detailed footnotes. Examples include Schedule IV, Investments and
Schedule XII, Long Term Debt.\142\
---------------------------------------------------------------------------

    \142\ EEI at 29.
---------------------------------------------------------------------------

Commission Determination
    156. We disagree with EEI that the information reported on Schedule
IV and Schedule XII is available on the Balance Sheet. Long-term debt
and investments are reported on the Balance Sheet as aggregate totals.
Schedule IV and Schedule XII provide significant additional details
that allow for a greater understanding of the aggregate totals reported
on the Balance Sheet. For example, short-term investment schedules
provide specific details on where centralized service companies have
invested excess cash flows from operations and Schedule XII provides
specific details on service company long-term capital. We do not agree
that footnote disclosure is an adequate substitution for these
supporting schedules because the format for footnotes is unstructured
and does not allow for database archiving and retrieval. Therefore, the
Commission will retain these schedules.
(4) Schedule V, Accounts Receivable From Associate Companies
    157. This schedule identifies accounts receivable for each
associate company and reports convenience payments.
Comments
    158. EEI and Southern recommend the portion of this schedule
identifying convenience payments \143\ should be eliminated. If
retained, EEI recommends the Commission modify the schedule to report
the total convenience payments made during the year, consistent with
the December 2005 FERC Form No. 60 reporting. EEI states that service
companies do not necessarily identify convenience payments separately,
and this information would be time consuming to gather. Also, EEI does
not understand the usefulness of this information to the Commission;
beginning and ending convenience payment balances are not meaningful
because convenience payments are Expense accounts, rather than Balance
Sheet accounts.\144\
---------------------------------------------------------------------------

    \143\ Convenience payments represent payments such as benefits,
outside legal, and consulting paid by service companies to outside
vendors and others on behalf of associate companies.
    \144\ EEI at 33; Southern at 2-3.
---------------------------------------------------------------------------

Commission Determination
    159. We agree it is not necessary to require beginning and ending
convenience payment balances. Consequently, we will not adopt that
portion of the proposed Schedule V that would require reporting the
beginning and ending balances of convenience payments. Instead, we will
retain the December 2005 FERC Form No. 60 requirement of reporting
total convenience payments by associate company.
(5) Schedule VI, Fuel Stock Expenses Undistributed
    160. Proposed Schedule VI requires centralized service companies to
report labor and expenses incurred during the year with respect to fuel
stock and the amounts attributable to each associate company. It also
requires a summary of the fuel functions performed by the service
company.
Comments
    161. Southern comments that Schedule VI requires extracting data
from work order billings through an annual process to meet the annual
report requirement. Southern recommends elimination of this schedule
based on its limited value.\145\
---------------------------------------------------------------------------

    \145\ Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    162. For centralized service companies performing fuel services for
utilities, this is an important supporting schedule. Some companies
report large amounts of labor and other expenses. The reported
information includes amounts billed to each associate company including
electric and gas utilities, which ultimately could be reflected in cost
of service. Consequently we will retain this schedule.
(6) Schedule X, Research, Development or Demonstration Expenses
    163. Proposed Schedule X requires a description of all research,
development and demonstration projects engaged in by the centralized
service company and the related costs incurred during the year.
Comments
    164. EEI and Southern state project titles may not provide
meaningful information to the Commission. EEI and Southern recommend
that service companies have the option instead to list account balance
by project partner, citing the U.S. Department of Energy, as an
example.\146\
---------------------------------------------------------------------------

    \146\ EEI at 34; Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    165. The Commission disagrees with EEI and Southern that Schedule X
requires a project title. The schedule requires a description of the
project, not the project title. Knowing the project partner alone does
not provide useful information. More relevant information is a
description of the nature of the project and not just who is the
project partner. Therefore, the schedule will be retained the same as
in the FERC Form No. 60.
(7) Schedule XI, Proprietary Capital
    166. Proposed Schedule XI discloses common and preferred stock
shares authorized, outstanding, par or stated value, as well as
information on miscellaneous paid-in capital, appropriated retained
earnings and other comprehensive income. The second part of the
schedule presents information similar to a statement of retained
earnings.
Comments
    167. EEI and Southern state the first section of this schedule
duplicates Schedule I, Comparative Balance Sheet except for shares
outstanding.\147\ EEI argues the second section of this schedule is
new, and generally not applicable to a service company.\148\ EEI and
Southern recommend including the shares outstanding on Schedule I,
Comparative Balance Sheet, and deleting this schedule.\149\
---------------------------------------------------------------------------

    \147\ EEI at 34; Southern at 3.
    \148\ EEI at 34.
    \149\ EEI 34; Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    168. The Commission disagrees with commenters regarding what is
reported on this schedule. Commenters indicate only outstanding shares
of stock are reported. The schedule asks for class of

stock, number of shares authorized, par or stated value per share, and
outstanding shares. Further, the schedule requests explanations about
transactions which gave rise to miscellaneous paid-in capital and
appropriated retained earnings. Additionally, the schedule requests
information on changes in unappropriated retained earnings such as net
income and dividends paid. This requirement is not new; it is part of
the FERC Form No. 60. The requirements are not overly burdensome.
Consequently, we will retain the current requirements. A statement of
retained earnings is a basic financial statement. However, we agree
with EEI's suggestion that a statement of retained earnings is not
applicable to a service company; so, we will delete that portion of the
schedule which includes the added statement of retained earnings.
(8) Schedule XIV, Notes to Financial Statements
    169. Instruction No. 3 of Schedule XIV states ``Furnish particulars
as to any significant increase in services rendered or expenses
incurred during the year.''
Comments
    170. EEI recommends the Commission not implement this reporting
requirement in the notes section.\150\ EEI states this introduces an
element of Management's Discussion and Analysis (MD&A) that is part of
GAAP disclosure requirements, but has never been a requirement of the
FERC Form No. 60, Form No. 1, or Form No. 2. EEI indicates that an
explanation of service company expense variances is frequently
scrutinized by state regulators and would unnecessarily add to the
administrative burden of annual reporting. EEI contends this level of
detail could be provided on an ad hoc basis as needed, and, when it is
needed, companies would like the flexibility of attaching a Microsoft
Word file rather than re-keying voluminous footnote data into the
Commission's automated reporting application.
---------------------------------------------------------------------------

    \150\ EEI at 34.
---------------------------------------------------------------------------

Commission Determination
    171. Contrary to EEI's assertion, Instruction No. 3 is not a new
reporting requirement. Instruction No. 3 is included in the December
2005 FERC Form No. 60 under Schedule XVIII, Notes to the Statement of
Income. Any large increase in services and expenses could impact cost
allocations which would be useful information to the Commission and
others. The disclosure of significant increases in services rendered or
expenses incurred is particularly relevant to understanding the
business operations of the centralized service company and the
efficiency or inefficiency of providing services on a centralized basis
to associated utilities. Furthermore, reporting this information should
not be administratively burdensome. As EEI notes, this type of
information is already part of the MD&A in its GAAP disclosures. The
Commission's FERC Form No. 60 submission software will allow copy and
paste of this information into the footnote page. Consequently, we will
retain the instruction as proposed.\151\
---------------------------------------------------------------------------

    \151\ EEI at 34 and 35.
---------------------------------------------------------------------------

(9) Schedule XV, Comparative Income Statement
    172. Proposed Schedule XV requires centralized service companies to
report revenues, expenses, gains and losses for the current and prior
year by account.
Comments
    173. EEI states that the Commission should not require reporting of
information broken down into accounts that do not make sense for a
given service company. EEI states that there seems to be a presumption
in the NOPR that the service company income statement can be presented
in a ratemaking format, with an ``above the line'' and ``below the
line'' character. EEI points out, that just as with the proposed use of
the 500 and 800 series of operational and maintenance expense accounts,
this presumption does not fit well with many service company
operations, which typically consist primarily of labor services to
other companies.\152\
---------------------------------------------------------------------------

    \152\ EEI at 30.
---------------------------------------------------------------------------

Commission Determination
    174. The Schedule XV, Comparative Income Statement, we are adopting
for the revised FERC Form No. 60 will require centralized service
companies to report the amounts entered in the income statement
accounts adopted in this Final Rule. These accounts were developed to
be of sufficient scope and breadth to allow for recording the economic
effects of all transactions and events that could impact a centralized
service company. As noted elsewhere in this Final Rule, not all service
companies are engaged in all of the activities for which use of the new
accounts would be required. This, however, does not mean that the
accounts do not ``fit well'' or do not ``make sense'' for centralized
service companies, as EEI seems to suggest. It means only that more
accounts exist under the USofA than might be used by any particular
centralized service company. If a centralized service company does not
incur costs properly included in one of the new accounts adopted in
this Final Rule, it simply would not record anything in that account.
(10) Schedule XV-A, Schedule of Utility Operating Expenses; Schedule
XVI, Analysis of Charges for Service; Schedule XVII, Schedule of
Expense Distribution by Department or Service Function
    175. Proposed Schedule XV-A requires centralized service companies
to report all amounts entered in the 500 and 800 series of operation
and maintenance expense accounts. Proposed Schedule XVI requires
centralized service companies to report direct and indirect costs
charged to associate utility companies, associate non-utility
companies, non-associate utility companies and non-associate non-
utility companies. Proposed Schedule XVII requires centralized service
companies to report service cost billed by department or service
function and overhead costs.
Comments
    176. EEI recommends that the Commission consider deleting Schedule
XV-A and either Schedule XVI or XVII.\153\ EEI states that, whichever
of these schedules the Commission retains, the Commission should allow
companies to report total amounts for each account or group of accounts
listed rather than by direct and indirect or overhead costs. In EEI's
opinion, the breakdown by direct, indirect, and use of capital would
require companies to parse the information in each account or set of
accounts to too fine a degree with no clear benefit. EEI indicates that
if Schedule XVI is retained, the Commission should follow the SEC's
past practice of having companies distinguish the information for
associate and non-associate companies, ideally by group of accounts
rather than by utility versus non-utility.\154\
---------------------------------------------------------------------------

    \153\ EEI at 36.
    \154\ Id.
---------------------------------------------------------------------------

    177. In addition, EEI encourages the Commission not to require
information to be broken down as shown on Schedule XVII by service
company department or service function.\155\ As presented, EEI states,
the schedule would require companies to break down internal financials
across the array of USofA accounts by department or

function, requiring far too much detail with no clear benefit.\156\
Southern states departmental/functional reporting by account adds
difficulty and would not be consistent among companies.\157\
---------------------------------------------------------------------------

    \155\ EEI at 36.
    \156\ Id.
    \157\ Southern Supplemental Comments at 3.
---------------------------------------------------------------------------

    178. NARUC, on the other hand, states Schedule XVI is important
since it allows a comparison of direct and indirect costs allocated to
utility companies and non-utility companies while showing the
allocation of 100 percent of these costs to the various billing
groups.\158\ NARUC indicates this is needed to ensure utility companies
are not treated differently from non-utility companies. NARUC suggests
simplifying this schedule, at least for the 500 and 800 series of
operation and maintenance expense accounts; NARUC contends it may be
possible to allow companies to provide information by group of
accounts.
---------------------------------------------------------------------------

    \158\ NARUC Supplemental Comments at 7.
---------------------------------------------------------------------------

    179. NARUC explains that Schedule XVII assists state regulators in
classifying charges on the utility's records, helps in judging the
reasonableness of service company charges and whether such charges
duplicate what the utility incurs internally, and focuses attention on
comparisons between what gets charged to the associated utility
companies and non-utility companies. NARUC proposes expanding Schedule
XVII to provide a breakdown by associate utilities and non-utilities,
and by non-associate companies. NARUC states this is important to make
a comparison of departmental costs allocated to associate utility and
non-utility companies because these comparisons ensure that associate
utility companies are not treated differently from associated non-
utility companies.\159\
---------------------------------------------------------------------------

    \159\ Id.
---------------------------------------------------------------------------

Commission Determination
    180. The Commission agrees with EEI that the information required
in proposed Schedule XV-A is unnecessary, and will delete Schedule XV-
A. The same information is reported in Schedule XVI, Analysis of
Charges for Services, except for comparable information for the prior
year. Therefore, the Commission will delete Schedule XV-A.
    181. The Commission will also delete Schedule XVII. With regard to
Schedule XVII, Southern notes that departmental/functional reporting
would not be consistent among companies. Departments and functions are
not standardized and, therefore, comparison across companies is not
possible. While we agree with NARUC that Schedule XVII may provide some
useful departmental/functional information, on a company by company
basis, requiring the reporting on an annual basis may be an unnecessary
burden. NARUC's proposal to expand Schedule XVII to include reporting
by individual associate and non-associate utility companies, associate
non-utility companies and non-associate companies points to a weakness
in the current schedule. In fact, the schedule does not disclose
information on charges to utility companies except through the
department service or functional category. The additional expense
accounts required under the new USofA will provide better functional
information and lessen the need for this schedule. The information
provided in Schedule XVI will enable the Commission to capture
information about charges for services provided to utility companies.
If departmental/functional information is needed, the information can
be obtained from each centralized service company on a case-by-case
basis without the need to be reported annually. Therefore, the
Commission will delete Schedule XVII.
    182. The Commission will retain Schedule XVI, but modify the
schedule to remove the utility versus non-utility expense separation,
consistent with our decision concerning the service company revenue
accounts discussed elsewhere in this Final Rule. While the utility
versus non-utility expense separation is removed, the total amounts
assigned to individual utility companies are available in the Analysis
of Billing schedules. This will result in returning to the associate
company/non-associate company expense separation contained in the
December 2005 FERC Form No. 60. We also will revise Schedule XVI to
roll up certain expense classifications suggested by EEI and NARUC to
reduce the burden associated with completing this schedule.
(11) Analysis of Billing Schedules
    183. In the NOPR, the Commission proposed to modify the Analysis of
Billing schedules that report billings to each company for services
provided by the centralized service companies by breaking out the
schedules into associate utility, non-associate utility and non-utility
companies.
Comments
    184. EEI indicates the Commission should not require reporting of
information broken down into utility and non-utility services, in
particular for non-associate companies where the service company often
will not have this information. Service companies currently report
their services provided by individual company in the FERC Form No. 60,
on schedules ``Analysis of Billing--Associate Companies'' and
``Analysis of Billing--Non-associate Companies.'' EEI argues these
schedules provide ample information of the sort being proposed and that
no additional detail is necessary.\160\
---------------------------------------------------------------------------

    \160\ EEI at 29.
---------------------------------------------------------------------------

    185. Southern recommends the schedule, Analysis of Billing--Non-
associate Companies, be revised to request the names and amounts for
non-associate companies only for those that exceed 10% of the total
non-associate billings. Southern argues this would reduce the time
spent in preparation of this schedule while still providing the
Commission with the names of all non-associate companies of
consequence.\161\
---------------------------------------------------------------------------

    \161\ Southern Supplemental Comments at 3.
---------------------------------------------------------------------------

Commission Determination
    186. We agree with EEI's comments that the Analysis of Billing
schedules contained in the December 2005 FERC Form No. 60 provide
sufficient information concerning the customers to whom amounts are
billed, and a further separation of those customers into utility and
non-utility classifications for purposes of this schedule is not needed
by the Commission since specific information about utilities is already
reported separately in the current Analysis of Billing schedules.
Therefore, consistent with our decision above to eliminate Account 459,
Services rendered to non-utility companies, we will also eliminate the
proposed schedule ``Analysis of Billing Nonutility Companies--Account
459.'' Also, we will revise the ``Analysis of Billing Schedules'' for
Accounts 457, Services rendered to associate companies, and 458,
Services rendered to non-associate companies to reflect only a
separation of billings between associate and non-associate companies,
consistent with our decision on the service company revenue accounts
discussed elsewhere in this Final Rule. The Commission will not adopt
Southern's proposal to reduce the reported number of non-associate
companies. The requirement is not overly burdensome and allows the
Commission to observe all billings to such companies.
(12) Departmental Analysis of Salaries Schedule; Methods of Allocation
Schedule; and Organizational Chart Schedule
    187. The proposed Departmental Analysis of Salaries Schedule
reports the amount of service company salaries

billed by department or service function to the parent holding company,
associate companies, and non-associate companies and the number of
employees. The Methods of Allocation Schedule reports the allocation
factors used to allocate indirect costs to each associate company. The
Organizational Chart schedule reports how the service company is
organized.
Comments
    188. EEI states these schedules involve what it considers
organizational reporting and recommends eliminating the schedules
because adequate oversight can be accomplished without this level of
detail, and accurate comparisons between companies would be very
difficult.\162\ If the Methods of Allocation schedule is retained, EEI
requests the Commission continue its current practice of allowing
companies to list their allocation methods, as they currently do in the
FERC Form No. 60, rather than having to elaborate on the methods in the
form. EEI indicates companies should not be required to key voluminous
formulas, by service rendered, into the automated reporting
application.\163\
---------------------------------------------------------------------------

    \162\ EEI at 30.
    \163\ EEI at 31.
---------------------------------------------------------------------------

    189. Southern does not see the benefit to the Commission of
providing a current Organizational Chart in the FERC Form No. 60 and
proposes that this requirement be eliminated. Southern argues it is not
required for FERC Form No. 1.\164\
---------------------------------------------------------------------------

    \164\ Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    190. The Commission will eliminate the Departmental Analysis of
Salaries Schedule. Consistent with our decision above regarding our
decision to eliminate Schedule XVII, departmental or functional
categories are difficult to compare because they are not standardized.
If needed, the information can be obtained from centralized service
companies on a case-by-case basis.
    191. The Commission will retain the Methods of Allocation schedule,
however, because that is the only means readily available to determine
how indirect costs are being allocated to services provided. The
current schedule has no instructions and Staff's review of 2005 FERC
Form No. 60s indicated poor reporting. The main purpose of the schedule
is to disclose what allocation ratios are used and what numerator and
denominator were used to create the ratio. We are revising the
instruction, accordingly.
    192. The Commission will also continue to require submission of an
Organization Chart in the FERC Form No. 60 as proposed. An Organization
Chart provides basic information about the hierarchical structure of
the service company. It provides useful information to the Commission
about how the centralized service company deploys its resources and the
relationship between organizational departments within the centralized
service company and the allocation of costs to services, functions and
projects. We recognize the FERC Form No. 1 does not require an
Organization Chart. However, our need to know the organizational
structure of a centralized service company is greater as opposed to the
organizational structure of an electric utility company.
(13) Annual Statement of Compensation for Use of Capital Billed
    193. This schedule reports the amount of compensation for use of
capital billed to each associate company.
Comments
    194. EEI proposes to eliminate the Annual Statement of Compensation
for Use of Capital Billed, and the associated revenue Accounts 457.3,
Compensation for use of capital-associate companies, 458.3,
Compensation for use of capital--Non-associate companies, and 459.3,
Compensation for use of capital--Non-associate non-utility companies.
EEI argues compensation for use of capital is so minor that it does not
warrant special treatment in reporting. Moreover, EEI states details of
significant financial arrangements are included in the notes to the
balance sheet, and total interest costs are disclosed in the income
statement.\165\
---------------------------------------------------------------------------

    \165\ EEI at 31.
---------------------------------------------------------------------------

    195. Conversely, NARUC indicates the Annual Statement of
Compensation for Use of Capital Billed should be required in FERC Form
No. 60. NARUC argues this statement provides the calculation of the use
of capital that will be billed to the centralized service companies'
associate companies during the calendar year. In addition, NARUC
indicates this statement in the FERC Form No. 60 is a resource for
verifying and reconciling the costs that are included in centralized
service company billings. NARUC notes the FERC Form No. 60 requires a
separate statement for each associate company. However, NARUC claims, a
separate statement for each associate company may not be necessary if
the calculations are consistent.\166\
---------------------------------------------------------------------------

    \166\ NARUC Supplemental Comments at 8 and 9.
---------------------------------------------------------------------------

Commission Determination
    196. We agree with EEI that footnote disclosure would be a suitable
substitute for this schedule, and so, we will delete the Annual
Statement of Compensation for Use of Capital Billed. However, we will
not delete Accounts 457.3 or 458.3. The amounts recorded in these
accounts will continue to be reported on the Analysis of Billing
Schedules for Accounts 457 and 458. Centralized service companies
should disclose the basis of how the amounts are assigned to the
associate and non-associate companies in a footnote to the Analysis of
Billing Schedules for Accounts 457 and 458. As long as all companies
are treated similarly, we believe this should satisfy NARUC's
requirements.
(14) Miscellaneous General Expenses Schedule (Account 930.2)
    197. This schedule lists the items included in Account 930.2,
Miscellaneous general expenses.
Comments
    198. EEI and Southern recommend deleting the schedule or only
requiring disclosure of items that exceed $1 million. EEI and Southern
contend this schedule requires considerable detailed analysis to
complete.\167\
---------------------------------------------------------------------------

    \167\ EEI at 37; Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    199. The Commission will retain this schedule. Many service
companies report significant amounts in Account 930.2. This schedule
provides the nature of the amounts included in a miscellaneous catchall
account where the account title does not provide descriptive
information of the amounts included in the account. This schedule
currently has no threshold level. However, in response to EEI's and
Southern's proposal, we will adopt a threshold requiring the separate
reporting of items over $50,000.\168\ We believe a $1,000,000 threshold
alternative suggested by commenters is unreasonably high and would not
provide for adequate disclosure of the nature of the items included in
this account.\169\
---------------------------------------------------------------------------

    \168\ Our staff review of FERC Form No. 60 submissions for
calendar year 2005 indicates that $50,000 is a reasonable threshold
that will provide sufficient information without eliminating
necessary detail.
    \169\ The FERC Form No. 1 threshold for this account schedule is
$5,000.
---------------------------------------------------------------------------

(c) General Instruction IX
    200. General Instruction IX states that prior period comparison
figures must be the same as reported in the previous

report, or ``an appropriate explanation given as to why the different
figures were used.''
Comments
    201. EEI states that in general, companies would like to follow the
GAAP practice of reclassifying prior period amounts when necessary,
with a footnote to the effect that ``certain prior amounts have been
reclassified to conform to the current year presentation.'' \170\ EEI
indicates any material reclassifications would include a footnote
disclosure. Therefore, EEI recommends the Commission insert the word
``materially'' before ``different figures were used.''
---------------------------------------------------------------------------

    \170\ EEI at 32-33.
---------------------------------------------------------------------------

Commission Determination
    202. As an initial matter, we note that instances in which prior
year data in current reports is different than previously reported
should be rare. The instances should be limited to such things as
corrections of accounting errors and changes in accounting principles.
The Commission and other users of the FERC Form No. 60 are particularly
interested in understanding the economic effects of these types of
occurrences, including the particular accounts affected and the related
amounts. An explanation that ``certain prior amounts have been
reclassified to conform to the current year presentation'' does not
provide an adequate explanation. Footnote disclosure of only material
amounts as EEI suggests also is insufficient because amounts below the
material threshold could affect cost allocations or have rate
implications. Consequently, we will adopt the proposed instruction
unmodified.
(d) Raising the Threshold for Individually Itemized Items
    203. Some of the supporting schedules contained in the FERC Form
No. 60 require reporting individual items when the amount for such
items exceeds a specified threshold amount. For instance, some
schedules list individual items and amounts less than a $5,000
threshold can be grouped together rather than reported separately.
Comments
    204. EEI proposes the establishment of a higher threshold to apply
to itemizations on schedules. Currently, when stated, the minimum for
itemization is $5,000 or $10,000. EEI states that, due to the
difference in company sizes, the establishment of a relative threshold
(for example, five percent of total) would minimize unnecessary
itemization and still provide meaningful data.\171\ EEI further
recommends the Commission allow companies to set a materiality
threshold, so that items less than some de minimis amount do not need
to be broken out in the FERC Form No. 60.\172\ EEI suggests using as
the de minimis amount $100,000, one to five percent of company
billings, or 10 percent of the total amount on a particular schedule,
whichever is higher. Further, EEI points out that the SEC's ``PUHCA
Staff Examination Instructional Manual,'' section IV.A.3(c), which
advised their staff to use a $50,000 or five percent threshold to
determine if allocation methods should come to the attention of the SEC
for approval.
---------------------------------------------------------------------------

    \171\ EEI at 30-31.
    \172\ EEI Supplemental Comments at 12.
---------------------------------------------------------------------------

Commission Determination
    205. We agree with EEI that the thresholds can be raised without
losing appropriate detail. However, the thresholds suggested by EEI are
extremely high and would eliminate needed disclosure.\173\ The SEC
Staff manual threshold suggested by EEI addressed allocations, and did
not apply to thresholds in individual schedules. The Commission will
raise or add thresholds over the current FERC Form No. 60 schedules. We
believe a threshold of $50,000 would reduce the reporting burden
without the loss of appropriate detail. Therefore, we will establish a
threshold of $50,000 for the following schedules: Schedules IV, VIII,
IX, X, XIII, and XIX.
---------------------------------------------------------------------------

    \173\ For example, for one centralized service company, one
percent of its billings represents a $9,000,000 threshold, at five
percent, it would represent $45,000,000. These thresholds would
eliminate reporting in most itemized schedules.
---------------------------------------------------------------------------

(e) Reporting in Whole Dollars or Alternatively in Thousands
    206. In the NOPR, the Commission proposed to require reporting
companies to use whole dollars as the reported dollar amounts.
Comments
    207. EEI proposes that centralized service companies should have
the option to report all dollars consistently in thousands, as opposed
to whole dollars as proposed in the NOPR, as long as the companies
indicate what they are doing. EEI indicates the added digits do not add
significant information, but rather, make the schedules substantially
harder to produce and read. EEI notes this is consistent with the way
amounts were reported in the SEC Form U-13-60.\174\
---------------------------------------------------------------------------

    \174\ SEC instructions to SEC Form U-13-60, the predecessor to
December 2005 FERC Form No. 60, allowed service companies to report
in either whole dollars, thousands of dollars, hundreds of thousand
of dollars, or millions of dollars.
---------------------------------------------------------------------------

Commission Determination
    208. When centralized service companies filed with the SEC their
filings were text based and did not allow for data retrieval and
analysis. The Commission supports the use of submission software to
ensure data integrity and permit ready analysis of forms data. The
Commission plans to issue submission software for the FERC Form No. 60
in the early part of 2007. The software would allow companies to reduce
costs of completing FERC Form No. 60 and allow for data retrieval and
analysis not currently possible in the hard copy FERC Form No. 60.
However, electronic reporting requires selecting one common reporting
basis. Comparability is important, and can not be achieved without one
common reporting basis. Consequently, we will adopt reporting in whole
dollars. However, during a transition period covering the 2006 and 2007
reporting years, for the FERC Form No. 60s due May 1, 2007 and May 1,
2008, respectively, we will allow centralized service companies that
report in thousands to round to the nearest $1000 (reporting $123,000
instead of $123,456).\175\
---------------------------------------------------------------------------

    \175\ Supra note 34.
---------------------------------------------------------------------------

(f) Comparative Information
    209. Some FERC Form No. 60 schedules present data from the current
year along with the same data from the prior year.
Comments
    210. EEI states that comparative information provided in the
revised FERC Form No. 60 should not be required until the following
year, at least to the extent the information being compared is not
already presented in the December 2005 FERC Form No. 60.\176\
---------------------------------------------------------------------------

    \176\ EEI at 49.
---------------------------------------------------------------------------

Commission Determination
    211. In response to EEI's proposal and in order to reduce the
possible administrative burden that may be incurred by respondents
during the initial reporting year for the FERC Form No. 60 adopted in
this Final Rule, i.e., the FERC Form No. 60 for the 2008 reporting year
due May 1, 2009, the Commission will only require current year data.
Respondents will be required

to report prior year's amounts beginning with the second year the FERC
Form No. 60 adopted in this Final Rule is required, i.e., the FERC Form
No. 60 for the 2009 reporting year due May 1, 2010.
(g) Request To Expand Data Collection in FERC Form No. 60 Comments
    212. NARUC proposes adding a new schedule showing charges from
affiliated companies to the service company. NARUC states the schedule
would show the affiliate, the nature of the charges, and the basis of
the charges--i.e., cost, market, or other. NARUC states this schedule
is important, since an affiliate may charge the service company a
marked-up price. Since this would become a cost to the service company,
the marked-up item then could be charged to a public utility at a cost
higher than if it had been directly charged to the utility. NARUC also
proposes adding a new schedule showing goods and services provided by
the service company both internally and externally. NARUC's concern is
that, once a good or service becomes profitable, it will be moved from
the service company and offered by another affiliate.\177\
---------------------------------------------------------------------------

    \177\ NARUC Supplemental Comments at 8.
---------------------------------------------------------------------------

    213. NARUC notes that in Order No. 667, the Commission deleted two
supporting schedules concerning outside services employed (Account 923)
and employee pensions and benefits (Account 926) from the FERC Form No.
60.\178\ NARUC proposes to add these schedules back in the revised FERC
Form No. 60. NARUC argues outside services and employee expenses are
major components of expense (along with labor) incurred by a service
company. According to NARUC, the detail in these schedules would
provide an important tool for understanding service company costs and
functions. As a result, according to NARUC, these schedules are
essential in the evaluation of whether cross-subsidization exists
within the holding company organization.
---------------------------------------------------------------------------

    \178\ NARUC Supplemental Comments at 9.
---------------------------------------------------------------------------

Commission Response
    214. We share NARUC's concerns about the possibility of
inappropriate cross subsidization or other unfair results obtained
through affiliate relationships and transactions. At this time,
however, we are not convinced that it is necessary to require
centralized service companies to report as extensively about its
affiliated transactions as NARUC recommends. With regard to adding back
schedules for outside services employed (Account 923) and employee
pensions and benefits (Account 926) which we deleted in Order No. 667,
we deleted the schedules because they are not required in the FERC Form
No. 1. Our need to weigh centralized service company burden versus
protecting the public interest is difficult. Our requirement to report
services performed for public utilities in the 500 and 800 accounts
should reduce the amounts reported in Account 923. Centralized service
companies do report information on pensions and benefits in their notes
to the financial statements. Therefore, the Commission will not adopt
NARUC's recommendations to add Schedules for Account 923 and Account
926 back in the revised FERC Form No. 60 in this Final Rule. However,
as we gain additional knowledge about our needs for centralized service
company information we may revisit these proposals.
(h) Schedule Numbering
Comments
    215. Southern notes that some of the schedules within the revised
FERC Form No. 60 have a schedule number while others are referenced by
the account number. Southern states that it would be helpful if the
schedules were all labeled consistently with schedule numbers.\179\
---------------------------------------------------------------------------

    \179\ Southern at 3.
---------------------------------------------------------------------------

Commission Determination
    216. The Commission agrees that assigning schedule numbers to all
schedules in the revised FERC Form No. 60 would be helpful for
referencing purposes for both users and preparers. Therefore, we will
label all schedules with schedule numbers.
(i) Chief Accountant's Delegated Authority
    217. The NOPR proposed to revise Sec.  375.303(c), (d), (e), (f),
(g) and (h) to update the delegations to the Chief Accountant or the
Chief Accountant's designee. These authorities are similar to those
that the Chief Accountant has for public utilities and licensees,
natural gas companies and oil pipeline companies.
Comments
    218. EEI and National Grid request clarification of proposed Sec.
375.303(f), that authorizes the Chief Accountant or the Chief
Accountant's designee to ``accept for filing'' FERC Form Nos. 60, 3-Q,
and 6-Q. The commenters believe that the requirement appears to imply
that the Commission, its Chief Accountant, or the Chief Accountant's
designee would issue a formal order accepting such forms, which is not
the current practice. They argue that because such a delegation could
raise the expectation (especially on the part of auditors) that orders
accepting Form Nos. 60, 3-Q and 6-Q would be issued, the Commission
should clarify either that it will, in fact, issue such acceptance
orders, or that the regulatory text is not intended to provide for the
issuance of formal acceptance orders.\180\
---------------------------------------------------------------------------

    \180\ EEI at 43-44; National Grid at 13.
---------------------------------------------------------------------------

    219. EEI and National Grid also request that the Commission clarify
proposed Sec.  375.303(g) that permits the Chief Accountant or the
Chief Accountant's designee to grant or deny requests for waiver of
various regulations including Sec.  366.23, which requires the filing
of FERC Form No. 60. The commenters assert that the authority to act on
motions for extensions of time is not explicitly provided for in the
revisions in Sec.  375.303(g). The commenters ask that the Commission
clarify that this delegated authority includes the authority to grant
an extension of time.\181\
---------------------------------------------------------------------------

    \181\ National Grid at 13-14; EEI at 44.
---------------------------------------------------------------------------

    220. Southern asserts that, in the proposed Sec.  375.303(f), the
reference to the Form Nos. 3-Q and 6-Q is erroneous for service
companies.\182\
---------------------------------------------------------------------------

    \182\ Southern at 6.
---------------------------------------------------------------------------

Commission Determination
    221. We grant EEI and National Grid's request for clarification of
Sec.  375.303(f), that the authorization granted to the Chief
Accountant or designee to ``accept for filing'' FERC Form Nos. 60, 3-Q,
and 6-Q is not intended to provide for the issuance of formal
acceptance orders; the term ``accept for filing'' is merely a
designation of the office or Commission officer responsible for the
management and oversight of the applicable form.
    222. We acknowledge Southern's comment that the proposed Sec.
375.303(f) reference to the Form Nos. 3-Q and 6&Q would be erroneous
for centralized service companies. Form Nos. 3-Q and 6-Q are not filing
requirements for centralized service companies. However, the delegation
of authority to accept the financial forms filed with the Commission,
including Form Nos. 3-Q and 6-Q, and, with this Final Rule, the revised
FERC Form No. 60, is not directed solely to centralized service
companies but to all regulated public utilities and licensees, natural
gas pipelines, oil pipelines and with this Final Rule centralized
service companies. In this Final Rule, the

Commission adopts the delegations to the Chief Accountant in Sec.
375.303(f) as proposed in the NOPR with one modification, to include an
additional form, FERC-61. Holding companies are required to file FERC-
61, Narrative description of service company functions, annually with
the Commission those centralized for service companies that do not file
FERC Form No. 60, and, similar to the other reporting Forms, included
in this delegation should be handled under delegated authority by the
Chief Accountant.\183\
---------------------------------------------------------------------------

    \183\ 18 CFR 366.23(a)(2) (2006).
---------------------------------------------------------------------------

    223. We will grant EEI and National Grid's request to clarify Sec.
375.303(g) to include the authority to act on motions for extensions of
time to file FERC Form No. 60. While the Commission has previously
delegated the authority to grant extensions of time to file FERC Form
No. 60 to the Chief Accountant in Sec.  366.23(a)(3), for ease of
administration we will include this delegation in Sec.  375.303(g).

V. Information Collection Statement

    224. The following collections of information referenced in this
Final Rule have been submitted to the Office of Management and Budget
(OMB) for review under section 3507(d) of the Paperwork Reduction Act
of 1995.\184\ OMB's regulations require OMB to approve certain
information collection requirements imposed by agency rule.\185\ Upon
approval of a collection of information, OMB will assign an OMB control
number and expiration date. Respondents subject to the filing
requirements of this Final Rule will not be penalized for failing to
respond to these collections of information unless the collections of
information display a valid OMB control number or the Commission had
provided a justification as to why the control number should be
displayed.
---------------------------------------------------------------------------

    \184\ See 44 U.S.C. 3507(d) (2000).
    \185\ 5 CFR 1320.11 (2006).
---------------------------------------------------------------------------

    225. In the NOPR, the Commission provided burden estimates for
complying with the rule as follows:
response = 380 Total Annual Hours; and
respondent = 324,000 Total Annual Hours.
    226. In response to comments the Commission received (see below),
the Commission is revising its estimates as follows:

----------------------------------------------------------------------------------------------------------------
                                                     Number of       Number of       Hours per
                 Data collection                    respondents      responses       response          Total
----------------------------------------------------------------------------------------------------------------
1 FERC Form No. 60..............................              38              38              75           2,850
2 FERC-555A.....................................             300  ..............           1,080         324,000
                                                 ---------------------------------------------------------------
    Totals......................................  ..............  ..............  ..............         326,850
----------------------------------------------------------------------------------------------------------------

    Information Collection Costs: The Commission also projected (and
has revised) the average annualized cost of all respondents to be the
following:

    FERC-555A = The Commission projected an annualized cost of all
4 staff) = $22,032,000 (staffing) + $6,696,000 (storage) = $28,728,000.
These costs assume that the average office storage space is $7,440 for
retaining records on-site. (Usually after the initial year records are
transferred to an off-site location where the storage costs drop to
$925 (on average).) As these requirements are being approved for an
initial three-year period, the assumption was made that during that
period the records would be retained on-site). These cost estimates
used as an example: 120 cubic feet (20 four-drawer file cabinets) and
include the cubic feet of storage plus the cost of floor space plus the
costs for records storage cartons. Greater saving can be accomplished
if documents are stored electronically, i.e., one file cabinet (four-
drawer) (10,000 pages on average) = 500 MegaBytes (MByte) = one CD ROM.
    The Total Costs for reporting and recordkeeping ($342,000 +
$28,728,000) = $29,070,000.
    227. As noted above, the Commission sought comments on both the
burden estimates and corresponding costs: it should be noted that the
Commission's initial estimates were based on its review of the SEC's
burden estimates and its first year of experience in implementing the
FERC Form No. 60 reporting requirement. The Commission received one
comment specifically addressing the burden estimate for completing the
revised FERC Form No. 60. This commenter, Southern, provided an
estimate for completion of the revised FERC Form No. 60 prior to our
adoption of the requirements contained in this Final Rule. The
Commission notes that Southern has significant operations, and it is to
be expected that its estimates would exceed the average projected by
the Commission. Otherwise, the majority of the commenters, while not
providing specific comments on the estimates, in general opposed the
Commission's proposal of establishing new accounting and reporting
requirements for centralized service companies. These objections were
also repeated in the staff technical conference where some participants
stated that the NOPR's proposed requirements would be burdensome and
costly to implement as changes would have to be made to their
accounting systems. The Commission did not receive any specific
comments concerning the estimates for the recordkeeping requirements.
    228. The Commission has addressed commenters' substantive concerns
elsewhere in this Final Rule and will not repeat its responses here.
The actions taken in this Final Rule should ameliorate the concerns of
a significant burden increase and any corresponding cost increase.
    229. Further, in Order No. 667, the Commission provided its initial
estimate for completing the FERC Form No. 60, and did not receive any
comments in response to that estimate. In Order No. 667-A, the
Commission made offsetting changes to those reporting requirements and,
in light of the changes and the absence of comments, let the original
projected burden estimates stand. However, we went on to say that, with
additional experience, including comments received in response to our
initiatives, we would adjust the burden estimates. In view of the
comments received specifically concerning the burden estimates and the
implementation of the reporting requirements contained in this Final
Rule, we are revising the estimates accordingly. On the other hand, as
the Commission is adopting electronic submission of this information in
a

separate rulemaking proceeding in Docket No. RM06-25-000, this will
save time and resources for all parties since electronic filings
require fewer personnel than paper filings by avoiding the need for
paper processing and mailing and consequently reduce the burden.\186\
---------------------------------------------------------------------------

    \186\ Supra note 34.
---------------------------------------------------------------------------

    Title: FERC Form No. 60, ``Annual Report of Centralized Service
Companies'' and FERC-555A, ``Preservation of Records for Service
Companies Subject to PUHCA 2005.''
    Action: Proposed collections.
    OMB Control Nos.: 1902-0215 (FERC Form No. 60) and 1902-XXXX (to be
determined) (FERC-555A).
    Respondents: Businesses or other for profit.
    Frequency of Responses: Annually and on occasion.
    Necessity of the Information: This Final Rule amends the
Commission's regulations to implement PUHCA 2005 as enacted by the
EPAct 2005. Specifically, the Commission is adopting a USofA for
Centralized Service Companies, adding preservation of records
requirements for holding companies and service companies, revising the
FERC Form No. 60 in order to provide for financial reporting consistent
with the new USofA, and providing for the electronic filing of revised
FERC Form No. 60. In Order No. 667, the Commission also set forth its
objective to prescribe uniform accounting requirements for centralized
service companies, i.e., service companies that are not special purpose
companies, within holding company systems, and records retention
requirements for both service companies and holding companies. The
addition of these accounts and related changes in the reporting, as
well as uniform records retention requirements, provides uniformity and
transparency for costs that are billed to regulated entities, allows
for comparability of like costs across centralized service companies,
provides for comparisons of year-to-year changes in a centralized
service company's costs and billings, and facilitates the uniform
compilation of consolidated financial statements. Without specific
instructions and accounts for recording and reporting the above
transactions and events, and retaining relevant records and
information, inconsistent and incomplete accounting and reporting will
result.
    230. Interested persons may obtain information on the reporting
requirements by contacting the following: Federal Energy Regulatory
Commission, 888 First Street, NE., Washington, DC 20426 [Attention:
Michael Miller, Office of the Executive Director, phone<PHONE_NUMBER>,
fax:<PHONE_NUMBER>, e-mail:
<EMAIL_ADDRESS>    231. For submitting comments concerning the collection of
information(s) and the associated burden estimates, please send your
comments to the contact listed above and to the Office of Management
and Budget, Office of Information and Regulatory Affairs, Washington,
DC 20503, Attention: Desk Officer for the Federal Energy Regulatory
Commission; Phone:<PHONE_NUMBER>, fax:<PHONE_NUMBER>.

VI. Environmental Analysis

    232. The Commission is required to prepare an Environmental
Assessment or an Environmental Impact Statement for any action that may
have a significant adverse effect on the human environment.\187\ No
environmental consideration is necessary for the promulgation of a rule
that addresses information gathering, analysis, and dissemination,\188\
and, also, that addresses accounting.\189\ This Final Rule addresses
information gathering, analysis, and dissemination. In addition, this
Final Rule involves accounting requirements. Therefore, the Final Rule
falls within categorical exemptions provided in the Commission's
regulations. Consequently, neither an Environmental Impact Statement
nor an Environmental Assessment is required.
---------------------------------------------------------------------------

    \187\ See Regulations Implementing the National Environmental
Policy Act, Order No. 486, 52 FR 47897 (Dec. 17, 1987), FERC Stats.
& Regs. ] 30,783 (1987).
    \188\ See 18 CFR 380.4(a)(5).
    \189\ See 18 CFR 380.4(c)(16).
---------------------------------------------------------------------------

VII. Regulatory Flexibility Act

    233. The Regulatory Flexibility Act of 1980 (RFA) \190\ generally
requires a description and analysis of the effect that a Final Rule
will have on small entities or a certification that a rule will not
have a significant economic impact on a substantial number of small
entities.
---------------------------------------------------------------------------

    \190\ See 5 U.S.C. 601-612.
---------------------------------------------------------------------------

    234. The Commission concludes that this Final Rule will not have
such an impact on a substantial number of small entities. Most holding
companies to which this Final Rule would be applicable do not fall
within the RFA's definition of a small entity.\191\ Moreover, the
Commission also concludes that this Final Rule will not impose a
significant burden since the information is already being captured by
existing accounting systems and generally being reported at a
consolidated business level.
---------------------------------------------------------------------------

    \191\ See 5 U.S.C. 601(3) citing to section 3 of the Small
Business Act, 15 U.S.C. 632. Section 3 of the Small Business Act
defines a ``small-business concern'' as a business which is
independently owned and operated and which is not dominant in its
field of operation. The Small Business Size Standards component of
the North American Industry Classification System (NAICS) defines a
small electric utility as one that, including its affiliates, is
primarily engaged in generation, transmission, and/or distribution
of electric energy for sale and whose total electric output for the
preceding fiscal years did not exceed 4 million MWh. NAICS defines a
small natural gas pipeline company as one that transports natural
gas and whose annual receipts (total income including cost of goods
sold) did not exceed $6.5 million dollars for the preceding years.
13 CFR 121.201.
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VIII. Document Availability

    235. In addition to publishing the full text of this document in
the Federal Register, the Commission provides all interested persons an
opportunity to view and/or print the contents of this document via the
Internet through the Commission's Home Page (http://www.ferc.gov) and

in the Commission's Public Reference Room during normal business hours
(8:30 a.m. to 5 p.m. Eastern time) at 888 First Street, NE., Room 2A,
Washington DC 20426.
    236. From the Commission's Home Page on the Internet, this document
is available in the Commission's document management system, e-Library.
The full text of this document is available on e-Library in PDF and
Microsoft Word format for viewing, printing, and/or downloading. To
access this document in e-Library, type the docket number excluding the
last three digits of this document in the docket number field.
    237. User assistance is available for e-Library and the
Commission's Web site during normal business hours. For assistance,
please contact FERC Online Support at 1-866-208-3676 (toll free) or
202-502-6652 (e-mail at<EMAIL_ADDRESS>or the Public
Reference Room at<PHONE_NUMBER>, TTY<PHONE_NUMBER> (e-mail at
public.referenceroom@ferc.gov).

IX. Effective Date and Congressional Notification

    238. This Final Rule will take effect January 8, 2007; however, the
revised FERC Form No. 60 adopted herein will be implemented with the
reporting year 2008 (due by May 1, 2009) and the accounting and records
retention requirements adopted herein will be implemented January 1,
2008.
    239. The Commission has determined with the concurrence of the
Administrator of the Office of Information and Regulatory Affairs of

the Office of Management and Budget that this Final Rule is not a major
rule within the meaning of section 251 of the Small Business Regulatory
Enforcement Fairness Act of 1996.\192\ The Commission will submit the
Final Rule to both houses of Congress and the General Accounting
Office.
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    \192\ 5 U.S.C. 801.
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List of Subjects

18 CFR Part 366

    Electric power, Natural gas, Reporting and recordkeeping
requirements.

18 CFR Part 367

    Electric power, Natural gas, Uniform System of Accounts, Reporting
and recordkeeping requirements.

18 CFR Part 368

    Electric power, Natural gas, Reporting and recordkeeping
requirements.

18 CFR Part 369

    Electric power, Natural gas, Reporting and recordkeeping
requirements.

18 CFR Part 375

    Authority delegations (Government agencies), Seals and insignia,
Sunshine Act.

    By the Commission.
Magalie R. Salas,
Secretary.
    In consideration of the foregoing, under the authority of EPAct
2005, the Commission amends parts 366, and 375 and adds parts 367, 368
and 369, to Chapter I, Title 18 of the Code of Federal Regulations, as
set forth below:

PART 366--PUBLIC UTILITY HOLDING COMPANY ACT OF 2005

0
1. The authority citation for part 366 is revised to read as follows:

    Authority: 42 U.S.C. 16451-16463.

0
2. In Sec.  366.21, paragraph (b) is revised to read as follows:

Sec.  366.21  Accounts and records of holding companies.

* * * * *
    (b) Unless otherwise exempted or granted a waiver by Commission
rule or order pursuant to Sec. Sec.  366.3 and 366.4, beginning January
1, 2008, all holding companies must comply with the Commission's
records retention requirements for holding companies and service
companies as prescribed in part 368 of this chapter. Until December 31,
2007, holding companies registered under the Public Utility Holding
Company Act of 1935 (15 U.S.C. 79a et seq.) may follow either the
Commission's records retention rules for public utilities and licensees
or for natural gas companies, as appropriate (parts 125 and 225 of this
chapter), or the Securities and Exchange Commission's record retention
rules in 17 CFR part 257.
* * * * *

0
3. In Sec.  366.22, paragraphs (a)(1), (a)(2) (b)(1) and (b)(2) are
revised to read as follows:

Sec.  366.22  Accounts and records of service companies.

    (a) Records retention requirements--(1) General. Unless otherwise
exempted or granted a waiver by Commission rule or order pursuant to
Sec. Sec.  366.3 and 366.4, beginning January 1, 2008, every service
company must maintain and make available to the Commission such books,
accounts, memoranda, and other records in such manner and preserve them
for such periods as the Commission prescribes in part 368 of this
chapter, in sufficient detail to permit examination, audit, and
verification, as necessary and appropriate for the protection of
utility customers with respect to jurisdictional rates.
    (2) Transition period. Until December 31, 2007, service companies
in holding company systems registered under the Public Utility Holding
Company Act of 1935 (15 U.S.C. 79a et seq.) may follow either the
Commission's records retention requirements in parts 125 and 225 of
this chapter or the Securities and Exchange Commission's records
retention rules in 17 CFR part 257.
* * * * *
    (b) Accounting requirements--(1) General. Unless otherwise exempted
or granted a waiver by Commission rule or order pursuant to Sec. Sec.
366.3 and 366.4, beginning January 1, 2008, every centralized service
company (See Sec.  367.2 of this chapter) must maintain and make
available to the Commission such books, accounts, memoranda, and other
records as the Commission prescribes in part 367 of this chapter, in
sufficient detail to permit examination, audit, and verification, as
necessary and appropriate for the protection of utility customers with
respect to jurisdictional rates. Every such service company must
maintain and make available such books, accounts, memoranda, and other
records in such manner as are prescribed in part 367 of this chapter,
and must keep no other records with respect to the same subject matter
except:
    (i) Records other than accounts;
    (ii) Records required by Federal or State law;
    (iii) Subaccounts or supporting accounts which are not inconsistent
with the accounts required either by the Uniform System of Accounts for
Centralized Service Companies in part 367 of this chapter; and
    (iv) Any other accounts that may be authorized by the Commission.
    (2) Transition period. Until December 31, 2007, service companies
in holding company systems registered under the Public Utility Holding
Company Act of 1935 (15 U.S.C. 79a et seq.), as described in paragraph
(b)(1) of this section, may follow either the Commission's Uniform
System of Accounts in parts 101 and 201 of this chapter or the
Securities and Exchange Commission's Uniform System of Accounts in 17
CFR part 256.
* * * * *

0
4. In Sec.  366.23, the section heading and paragraphs (a)(1) and (b)
are revised to read as follows:

Sec.  366.23  FERC Form No. 60, Annual report of centralized service
companies, and FERC-61, Narrative description of service company
functions.

    (a) General.
    (1) FERC Form No. 60. Unless otherwise exempted or granted a waiver
by Commission rule or order pursuant to Sec. Sec.  366.3 and 366.4,
every centralized service company (See Sec.  367.2 of this chapter) in
a holding company system must file an annual report, FERC Form No. 60,
as provided in Sec.  369.1 of this chapter. Every report must be
submitted on the FERC Form No. 60 then in effect and must be prepared
in accordance with the instructions incorporated in that form.
* * * * *
    (b) Transition period. Service companies in holding company systems
exempted from the requirements of the Public Utility Holding Company
Act of 1935 (15 U.S.C. 79a et seq.) need not file an annual report,
FERC Form No. 60, for calendar years 2005 through 2007, after which
they must comply with the provisions of this section.
* * * * *

0
5. Part 367 is added to subchapter U to read as follows:

PART 367--UNIFORM SYSTEM OF ACCOUNTS FOR CENTRALIZED SERVICE
COMPANIES SUBJECT TO THE PROVISIONS OF PUBLIC UTILITY HOLDING
COMPANY ACT OF 2005

Subpart A--Definitions
Sec.
367.1 Definitions.

Subpart B--General Instructions
367.2 Companies for which this system of accounts is prescribed.
367.3 Records.
367.4 Numbering system.
367.5 Accounting period.
367.6 Submittal of questions.
367.7 Item list.
367.8 Extraordinary items.
367.9 Prior period items.
367.10 Unaudited items.
367.11 Distribution of pay and expenses of employees.
367.12 Payroll distribution.
367.13 Accounting to be on accrual basis.
367.14 Transactions with associate companies.
367.15 Contingent assets and liabilities.
367.16 Long-term debt: Premium, discount and expense, and gain or
loss on reacquisition.
367.17 Comprehensive inter-period income tax allocation.
367.18 Criteria for classifying leases.
367.19 Accounting for leases.
367.20 Depreciation accounting.
367.22 Accounting for asset retirement obligations
367.23 Transactions with non-associate companies.
367.24 Construction and service contracts for other companies.
367.25 Determination of service cost.
367.26 Departmental classification.
367.27 Billing procedures.
367.28 Methods of allocation.
367.29 Compensation for use of capital.
367.30 Cost allocation system for associate companies.
Subpart C--Service Company Property Instructions
367.50 Service company property to be recorded at cost.
367.51 Components of construction.
367.52 Overhead construction costs.
367.53 Service company property purchased or sold.
367.54 Expenditures on leased property.
367.55 Land and land rights.
367.56 Structures and improvements.
367.57 Equipment.
367.58 Property record system required for service company property.
367.59 Additions and retirements of property.
Subpart D--Operating Expense Instructions
367.80 Supervision and engineering.
367.81 Maintenance.
367.82 Rents.
367.83 Training costs.
Subpart E--Special Instructions
367.100 Accounts 131-174, Current and accrued assets.
367.101 Accounts 231-243, Current and accrued liabilities.
367.102 Accounts 408.1 and 408.2, Taxes other than income taxes.
367.103 Accounts 409.1, 409.2, and 409.3, Income taxes.
367.104 Accounts 410.1, 410.2, 411.1, and 411.2, Provision for
deferred income taxes.
367.105 Accounts 411.4, and 411.5, Investment tax credit
adjustments.
367.106 Accounts 426.1, 426.2, 426.3, 426.4, and 426.5,
Miscellaneous expense accounts.
Subpart F--Balance Sheet Chart of Accounts

Service Company Property

367.1010 Account 101, Service company property.
367.1011 Account 101.1, Property under capital leases.
367.1060 Account 106, Completed construction not classified.
367.1070 Account 107, Construction work in progress.
367.1080 Account 108, Accumulated provision for depreciation of
service company property.
367.1110 Account 111, Accumulated provision for amortization of
service company property.

Other Property and Investments

367.1230 Account 123, Investment in associate companies.
367.1240 Account 124, Other investments.
367.1280 Account 128, Other special funds.

Current and Accrued Assets

367.1310 Account 131, Cash.
367.1340 Account 134, Other special deposits.
367.1350 Account 135, Working funds.
367.1360 Account 136, Temporary cash investments.
367.1410 Account 141, Notes receivable.
367.1420 Account 142, Customer accounts receivable.
367.1430 Account 143, Other accounts receivable.
367.1440 Account 144, Accumulated provision for uncollectible
accounts-Credit.
367.1450 Account 145, Notes receivable from associate companies.
367.1460 Account 146, Accounts receivable from associate companies.
367.1520 Account 152, Fuel stock expenses undistributed.
367.1540 Account 154, Materials and operating supplies.
367.1630 Account 163, Stores expense undistributed.
367.1650 Account 165, Prepayments.
367.1710 Account 171, Interest and dividends receivable.
367.1720 Account 172, Rents receivable.
367.1730 Account 173, Accrued revenues.
367.1740 Account 174, Miscellaneous current and accrued assets.
367.1750 Account 175, Derivative instrument assets.
367.1760 Account 176, Derivative instrument assets--Hedges.

Deferred Debits

367.1810 Account 181, Unamortized debt expense.
367.182.3 Account 182.3, Other regulatory assets.
367.1830 Account 183, Preliminary survey and investigation charges.
367.1840 Account 184, Clearing accounts.
367.1850 Account 185, Temporary facilities.
367.1860 Account 186, Miscellaneous deferred debits.
367.1880 Account 188, Research, development and demonstration
expenditures.
367.1890 Account 189, Unamortized loss on reacquired debt.
367.1900 Account 190, Accumulated deferred income taxes.

Proprietary Capital

367.2010 Account 201, Common stock issued.
367.2040 Account 204, Preferred stock issued.
367.2110 Account 211, Miscellaneous paid-in-capital.
367.2150 Account 215, Appropriated retained earnings.
367.2160 Account 216, Unappropriated retained earnings.
367.2161 Account 216.1, Unappropriated undistributed subsidiary
earnings.
367.2190 Account 219, Accumulated other comprehensive income.

Long-Term Debt

367.2230 Account 223, Advances from associate companies.
367.2240 Account 224, Other long-term debt.
367.2250 Account 225, Unamortized premium on long-term debt.
367.2260 Account 226, Unamortized discount on long-term debt--Debit.

Other Noncurrent Liabilities

367.2270 Account 227, Obligations under capital lease--Non-current.
367.2282 Account 228.2, Accumulated provision for injuries and
damages.
367.2283 Account 228.3, Accumulated provision for pensions and
benefits.
367.2300 Account 230, Asset retirement obligations.

Current and Accrued Liabilities

367.2310 Account 231, Notes payable.
367.2320 Account 232, Accounts payable.
367.2330 Account 233, Notes payable to associate companies.
367.2340 Account 234, Accounts payable to associate companies.
367.2360 Account 236, Taxes accrued.
367.2370 Account 237, Interest accrued.
367.2380 Account 238, Dividends declared.
367.2410 Account 241, Tax collections payable.
367.2420 Account 242, Miscellaneous current and accrued liabilities.
367.2430 Account 243, Obligations under capital leases-Current.
367.2440 Account 244, Derivative instrument liabilities.
367.245 Account 245, Derivative instrument liabilities--Hedges.

Deferred Credits

367.2530 Account 253, Other deferred credits.
367.2540 Account 254, Other regulatory liabilities.
367.2550 Account 255, Accumulated deferred investment tax credits.
367.2820 Account 282, Accumulated deferred income taxes--Other
property.
367.2830 Account 283, Accumulated deferred income taxes--Other.

Subpart G--Service Company Property Chart of Accounts
367.3010 Account 301, Organization.
367.3030 Account 303, Miscellaneous intangible property.
367.3060 Account 306, Leasehold improvements.
367.3890 Account 389, Land and land rights.
367.3900 Account 390, Structures and improvements.
367.3910 Account 391, Office furniture and equipment.
367.3920 Account 392, Transportation equipment.
367.3930 Account 393, Stores equipment.
367.3940 Account 394, Tools, shop and garage equipment.
367.3950 Account 395, Laboratory equipment.
367.3960 Account 396, Power operated equipment.
367.3970 Account 397, Communication equipment.
367.3980 Account 398, Miscellaneous equipment.
367.3990 Account 399, Other tangible property.
367.3991 Account 399.1, Asset retirement costs for service company
property.
Subpart H--Income Statement Chart of Accounts

Service Company Operating Income

367.4000 Account 400, Operating revenues.
367.4010 Account 401, Operation expense.
367.4020 Account 402, Maintenance expense.
367.4030 Account 403, Depreciation expense.
367.4031 Account 403.1, Depreciation expense for asset retirement
costs.
367.4040 Account 404, Amortization of limited-term property.
367.4050 Account 405, Amortization of other property.
367.4073 Account 407.3, Regulatory debits.
367.4074 Account 407.4, Regulatory credits.
367.4081 Account 408.1, Taxes other than income taxes, operating
income.
367.4082 Account 408.2, Taxes other than income taxes, other income
and deductions.
367.4091 Account 409.1, Income taxes, operating income.
367.4092 Account 409.2, Income taxes, other income and deductions.
367.4093 Account 409.3, Income taxes, extraordinary items.
367.4101 Account 410.1, Provision for deferred income taxes,
operating income.
367.4102 Account 410.2, Provision for deferred income taxes, other
income and deductions.
367.4111 Account 411.1, Provision for deferred income taxes--Credit,
operating income.
367.4112 Account 411.2, Provision for deferred income taxes--Credit,
other income and deductions.
367.4114 Account 411.4, Investment tax credit adjustments, service
company property.
367.4115 Account 411.5, Investment tax credit adjustments, other.
367.4116 Account 411.6, Gains from disposition of service company
plant.
367.4117 Account 411.7, Losses from disposition of service company
plant.
367.4118 Account 411.10, Accretion expense.
367.4120 Account 412, Costs and expenses of construction or other
services.
367.4160 Account 416, Costs and expenses of merchandising, jobbing
and contract work.
367.4180 Account 418, Non-operating rental income.
367.4181 Account 418.1, Equity in earnings of subsidiary companies.
367.4190 Account 419, Interest and dividend income.
367.4191 Account 419.1, Allowance for other funds used during
construction.
367.4210 Account 421, Miscellaneous income or loss.
367.4211 Account 421.1, Gain on disposition of property.
367.4212 Account 421.2, Loss on disposition of property.
367.4250 Account 425, Miscellaneous amortization.
367.4261 Account 426.1, Donations.
367.4262 Account 426.2, Life insurance.
367.4263 Account 426.3, Penalties.
367.4264 Account 426.4, Expenditures for certain civic, political
and related activities.
367.4265 Account 426.5, Other deductions.
367.4270 Account 427, Interest on long-term debt.
367.4280 Account 428, Amortization of debt discount and expense.
367.4290 Account 429, Amortization of premium on debt--Credit.
367.4300 Account 430, Interest on debt to associate companies.
367.4310 Account 431, Other interest expense.
367.4320 Account 432, Allowance for borrowed funds used during
construction--Credit.
Subpart I--Retained Earnings Accounts
367.4330 Account 433, Balance transferred from income.
367.4340 Account 434, Extraordinary income.
367.4350 Account 435, Extraordinary deductions.
367.4360 Account 436, Appropriations of retained earnings.
367.4370 Account 437, Dividends declared--Preferred stock.
367.4380 Account 438, Dividends declared--Common stock.
367.4390 Account 439, Adjustments to retained earnings.
Subpart J--Operating Revenue Chart of Accounts
367.4570 Account 457, Services rendered to associate companies.
367.4571 Account 457.1, Direct costs charged to associate companies.
367.4572 Account 457.2, Indirect costs charged to associate
companies.
367.4573 Account 457.3, Compensation for use of capital-associate
companies.
367.4580 Account 458, Services rendered to non-associate companies.
367.4581 Account 458.1, Direct costs charged to non-associate
companies.
367.4582 Account 458.2, Indirect costs charged to non-associate
companies.
367.4583 Account 458.3, Compensation for use of capital--Non-
associate companies.
367.4584 Account 458.4, Excess or deficiency on servicing non-
associate utility companies.
Subpart K--Operation and Maintenance Expense Chart of Accounts
367.5000 Accounts 500-598, Electric operation and maintenance
accounts.
367.8000 Accounts 800-894, Gas operation and maintenance accounts.
367.9010 Account 901, Supervision.
367.9020 Account 902, Meter reading expenses.
367.9030 Account 903, Customer records and collection expenses.
367.9040 Account 904, Uncollectible accounts.
367.9050 Account 905, Miscellaneous customer accounts expenses.
367.9070 Account 907, Supervision.
367.9080 Account 908, Customer assistance expenses.
367.9090 Account 909, Informational and instructional advertising
expenses.
367.9100 Account 910, Miscellaneous customer service and
informational expenses.
367.9110 Account 911, Supervision.
367.9120 Account 912, Demonstrating and selling expenses.
367.9130 Account 913, Advertising expenses.
367.9160 Account 916, Miscellaneous sales expenses.
367.9200 Account 920, Administrative and general salaries.
367.9210 Account 921, Office supplies and expenses.
367.9230 Account 923, Outside services employed.
367.9240 Account 924, Property insurance.
367.9250 Account 925, Injuries and damages.
367.9260 Account 926, Employee pensions and benefits.
367.9280 Account 928, Regulatory commission expenses.
367.9301 Account 930.1, General advertising expenses for associated
companies.
367.9302 Account 930.2, Miscellaneous general expenses.
367.9310 Account 931, Rents.
367.9350 Account 935, Maintenance of structures and equipment.

    Authority: 42 U.S.C. 16451-16463.

Subpart A--Definitions

Sec.  367.1  Definitions.

    (a) When used in this system of accounts:
    (1) Accounts mean the accounts prescribed by this Uniform System of
Accounts.
    (2) Actually issued, as applied to securities issued or assumed by
the service companies, means those which have been sold to bona fide
purchasers

for a valuable consideration, those issued as dividends on stock, and
those which have been issued in accordance with contractual
requirements direct to trustees of sinking funds.
    (3) Actually outstanding, as applied to securities issued or
assumed by the service company, means those which have been actually
issued and are neither retired nor held by or for the service company;
provided, however, that securities held by trustees must be considered
as actually outstanding.
    (4) Amortization means the gradual extinguishment of an amount in
an account by distributing such amount over a fixed period, over the
life of the asset or liability to which it applies, or over the period
during which it is anticipated the benefit will be realized.
    (5) Associate company means any company in the same holding company
system with such company.
    (6) Book cost means the amount at which property is recorded in
these accounts without deduction of related provisions for accrued
depreciation, amortization, or for other purposes.
    (7) Centralized service company means a service company that
provides services such as administrative, managerial, financial,
accounting, recordkeeping, legal or engineering services, which are
sold, furnished, or otherwise provided (typically for a charge) to
other companies in the same holding company system. Centralized service
companies are different from other service companies that only provide
a discrete good or service.
    (8) Commission means the Federal Energy Regulatory Commission.
    (9) Company, when not otherwise indicated in the context, means a
service company.
    (10) Construction, when used in the context of a service provided
to other companies, means any construction, extension, improvement,
maintenance, or repair of the facilities or any part thereof of a
company, which is performed for a charge.
    (11) Cost means the amount of money actually paid for property or
services. When the consideration given is other than cash in a purchase
and sale transaction, as distinguished from a transaction involving the
issuance of common stock in a merger, the value of such consideration
must be determined on a cash basis.
    (12) Cost accumulation system means a system for the accumulation
of service company costs on a job, project, or functional basis. It
includes schedules and worksheets used to account for charges billed to
single and groups of associate and non-associate companies. It can be a
variety of systems, including but not limited to, a work order system
or an activity-based accounting software system.
    (13) Cost of removal means the cost of demolishing, dismantling,
tearing down or otherwise removing service property, including the cost
of transportation and handling incidental thereto. It does not include
the cost of removal activities associated with asset retirement
obligations that are capitalized as part of the tangible long-lived
assets that give rise to the obligation (See General Instructions in
Sec.  367.22).
    (14) Debt expense means all expenses in connection with the
issuance and initial sale of evidences of debt, such as fees for
drafting mortgages and trust deeds; fees and taxes for issuing or
recording evidences of debt; cost of engraving and printing bonds and
certificates of indebtedness; fees paid trustees; specific costs of
obtaining governmental authority; fees for legal services; fees and
commissions paid underwriters, brokers, and salesmen for marketing such
evidences of debt; fees and expenses of listing on exchanges; and other
like costs.
    (15) Depreciation, as applied to depreciable service company
property, means the loss in service value not restored by current
maintenance. Among the causes to be used as consideration for causes of
loss in service value are wear and tear, decay, action of the elements,
inadequacy, obsolescence, changes in the art, changes in demand and
requirements of public authorities.
    (16) Direct cost means the labor costs and expenses which can be
identified through a cost allocation system as being applicable to
services performed for a single or group of associate and non-associate
companies. Cost incidental to or related to a directly charged item
must be classified as direct costs.
    (17) Discount, as applied to the securities issued or assumed by
the service company, means the excess of the par (stated value of no-
par stocks) or face value of the securities plus interest or dividends
accrued at the date of the sale over the cash value of the
consideration received from their sale.
    (18) Electric utility company means any company that owns or
operates facilities used for the generation, transmission, or
distribution of electric energy for sale. For the purposes of this
subchapter, ``electric utility company'' shall not include entities
that engage only in marketing of electric energy.
    (19) Gas utility company means any company that owns or operates
facilities used for distribution at retail (other than the distribution
only in enclosed portable containers or distribution to tenants or
employees of the company operating such facilities for their own use
and not for resale) of natural or manufactured gas for heat, light, or
power. For the purposes of this subchapter, ``gas utility company''
shall not include entities that engage only in marketing of natural and
manufactured gas.
    (20) Goods means any goods, equipment (including machinery),
materials, supplies, appliances, or similar property (including coal,
oil, or steam, but not including electric energy, natural or
manufactured gas, or utility assets) which is sold, leased, or
furnished, for a charge.
    (21) Holding company.
    (i) In general. The term ``holding company'' means--
    (A) Any company that directly or indirectly owns, controls, or
holds, with power to vote, 10 percent or more of the outstanding voting
securities of a public-utility company or of a holding company of any
public-utility company; and
    (B) Any person, determined by the Commission, after notice and
opportunity for hearing, to exercise directly or indirectly (either
alone or pursuant to an arrangement or understanding with one or more
persons) such a controlling influence over the management or policies
of any public-utility company or holding company as to make it
necessary or appropriate for the rate protection of utility customers
with respect to rates that such person be subject to the obligations,
duties, and liabilities imposed by this subchapter upon holding
companies.
    (ii) Exclusions. The term ``holding company'' does not include--
    (A) A bank, savings association, or trust company, or their
operating subsidiaries that own, control, or hold, with the power to
vote, public utility or public utility holding company securities so
long as the securities are--
    (1) Held as collateral for a loan;
    (2) Held in the ordinary course of business as a fiduciary; or
    (3) Acquired solely for purposes of liquidation and in connection
with a loan previously contracted for and owned beneficially for a
period of not more than two years; or
    (B) A broker or dealer that owns, controls, or holds with the power
to vote public utility or public utility holding company securities so
long as the securities are--
    (1) Not beneficially owned by the broker or dealer and are subject
to any voting instructions which may be given by customers or their
assigns; or

    (2) Acquired in the ordinary course of business as a broker,
dealer, or underwriter with the bona fide intention of effecting
distribution within 12 months of the specific securities so acquired.
    (22) Holding company system means a holding company, together with
its subsidiary companies.
    (23) Indirect cost means the costs of a general overhead nature
such as general services, housekeeping costs, and other support cost
which cannot be separately identified to a single or group of associate
and non-associate companies and, therefore, must be allocated. Costs
incidental to or related to indirect items should also be classified as
an indirect cost.
    (24) Investment advances means advances, represented by notes or by
book accounts only, with respect to which it is mutually agreed or
intended between the creditor and debtor that they must be settled by
the issuance of securities or must not be subject to current
settlement.
    (25) Lease, capital means a lease of property used by the service
company, which meets one or more of the criteria stated in General
Instructions in Sec.  367.18.
    (26) Lease, operating means a lease of property used by a service
company, which does not meet any of the criteria stated in General
Instructions in Sec.  367.18.
    (27) Minor items of property means the associated parts or items of
which retirement units are composed.
    (28) Natural gas company means a person engaged in the
transportation of natural gas in interstate commerce or the sale of
such gas in interstate commerce for resale.
    (29) Net salvage value means the salvage value of property retired
less the cost of removal.
    (30) Nominally issued, as applied to securities issued or assumed
by the service company, means those which have been signed, certified,
or otherwise executed, and placed with the proper officer for sale and
delivery, or pledged, or otherwise placed in some special fund of the
service company, but which have not been sold, or issued direct to
trustees of sinking funds in accordance with contractual requirements.
    (31) Nominally outstanding, as applied to securities issued or
assumed by the service company, means those which, after being actually
issued, have been reacquired by or for the service company under
circumstances which require them to be considered as held alive and not
retired, provided, however, that securities held by trustees must be
considered as actually outstanding.
    (32) Non-associate company means a person, partnership,
organization, government body or company which is not a member of the
holding company system.
    (33) Non-utility company means a company that is not a utility
company.
    (34) Person means an individual or company.
    (35) Premium, as applied to securities issued or assumed by the
service company, means the excess of the cash value of the
consideration received from their sale over the sum of their par
(stated value of no-par stocks) or face value and interest or dividends
accrued at the date of sale.
    (36) Public utility means any person who owns or operates
facilities used for transmission of electric energy in interstate
commerce or sales of electric energy at wholesale in interstate
commerce.
    (37) Public-utility company means an electric utility company or
gas utility company.
    (38) Regulatory assets and liabilities are the assets and
liabilities that result from rate actions for regulatory agencies.
Regulatory assets and liabilities arise from specific revenues,
expenses, gains, or losses that would have been included in net income
determination in one period under the general requirements of the
Uniform System of Accounts but for it being probable:
    (i) That such items will be included in a different period(s) for
purposes of developing rates the service company is authorized to
charge for its services; or
    (ii) In the case of regulatory liabilities, that refunds to
customers, not provided for in other accounts, will be required.
    (39) Replacing or replacement, when not otherwise indicated in the
context, means the construction or installation of service property in
place of property retired, together with the removal of the property
retired.
    (40) Research, development, and demonstration (RD&D) means
expenditures incurred by a service company, for the service company or
on behalf of others, either directly or through another person or
organization (such as research institute, industry association,
foundation, university, engineering company or similar contractor) in
pursuing research, development, and demonstration activities including
experiment, design, installation, construction, or operation. This
definition includes expenditures for the implementation or development
of new and/or existing concepts until technically feasible and
commercially feasible operations are verified. When conducted on behalf
of an associate or non-associate utility company such research,
development, and demonstration costs should be reasonably related to
the existing or future business of such company. The term includes, but
is not limited to: All the costs incidental to the design, development
or implementation of an experimental facility, a plant process, a
product, a formula, an invention, a system or similar items, and the
improvement of already existing items of a like nature; amounts
expended in connection with the proposed development and/or proposed
delivery of alternate sources of electricity or substitute or synthetic
gas supplies (alternate fuel sources, for example, an experimental coal
gasification plant or an experimental plant synthetically producing gas
from liquid hydrocarbons); and the costs of obtaining its own patent,
such as attorney's fees expended in making and perfecting a patent
application. The term includes preliminary investigations and detailed
planning of specific projects for securing for customers' non-
conventional electric power or pipeline gas supplies that rely on
technology that has not been verified previously to be feasible. The
term does not include expenditures for efficiency surveys; studies of
management, management techniques and organization; consumer surveys,
advertising, promotions, or items of a like nature.
    (41) Retained earnings means the accumulated net income of the
service company less distribution to stockholders and transfers to
other capital accounts.
    (42) Retirement units means those items of property which, when
retired, with or without replacement, are accounted for by crediting
the book cost of the retirement units to the property account in which
it is included.
    (43) Salvage value means the amount received for property retired,
less any expenses incurred in connection with the sale or in preparing
the property for sale; or, if retained, the amount at which the
material recoverable is chargeable to materials and supplies, or other
appropriate account.
    (44) Service means any managerial, financial, legal, engineering,
purchasing, marketing, auditing, statistical, advertising, publicity,
tax, research, or any other service (including supervision or
negotiation of construction or of sales), information or data, which is
sold or furnished for a charge.
    (45) Service company means any associate company within a holding
company system organized specifically

for the purpose of providing non-power goods or services or the sale of
goods or construction work to any public utility in the same holding
company system.
    (46) Service cost means the total of direct and indirect costs
incurred to provide a service to an associate or non-associate company
which are properly charged to expense by the service company.
    (47) Service life means the time between the date property is
placed in service, or property is leased to others, and the date of its
retirement. If depreciation is accounted for on a production basis
rather than on a time basis, then service life should be measured in
terms of the appropriate unit of production.
    (48) Service value means the difference between the cost and net
salvage value of service property.
    (49) State commission means any commission, board, agency, or
officer, by whatever name designated, of a State, municipality, or
other political subdivision of a State that, under the laws of such
State, has jurisdiction to regulate public-utility companies.
    (50) Uniform System of Accounts (USofA) means the Uniform System of
Accounts for Centralized Service Companies prescribed in this part, as
amended from time to time.
    (51) Utility company means a public-utility company or natural gas
company whose rates are regulated by the Commission, state commission
or other similar regulatory body.
    (b) [Reserved]

Subpart B--General Instructions

Sec.  367.2  Companies for which this system of accounts is prescribed.

    (a) Unless otherwise exempted or granted a waiver by Commission
rule or order pursuant to Sec. Sec.  366.3 and 366.4 of this chapter,
this Uniform System of Accounts applies to any centralized service
company operating, or organized specifically to operate, within a
holding company system for the purpose of providing non-power services
to any public utility in the same holding company system.
    (b) This Uniform System of Accounts is not applicable to:
    (1) Service companies that are specifically organized as a special-
purpose company such as a fuel supply company or a construction
company.
    (2) Electric or gas utility companies.
    (3) Companies primarily engaged:
    (i) In the production of goods, including exploration and
development of fuel resources,
    (ii) In the provision of water, telephone, or similar services, the
sale of which is normally subject to public rate regulation,
    (iii) In the provision of transportation, whether or not regulated,
or
    (iv) In the ownership of property, including leased property and
fuel reserves, for the use of associate companies.
    (4) A service company that provides services exclusively to a local
gas distribution company.
    (5) Holding companies.
    (c) To the extent that the term service company is used in this
Uniform System of Accounts, it applies only to centralized service
companies.

Sec.  367.3  Records.

    (a) Each service company must keep its books of account, and all
other books, records, and memoranda that support the entries in the
books of account, so as to be able to furnish full information on any
item included in any account. Each entry must be supported by
sufficient detailed information that will permit ready identification,
analysis, and verification of all facts relevant and related to the
records.
    (b) The books and records referred to in this part include not only
accounting records in a limited technical sense, but all other records,
such as minutes books, stock books, reports, correspondence, and
memoranda, that may be useful in developing the history of or facts
regarding any transaction.
    (c) No service company may destroy any books or records unless the
destruction is permitted by the rules and regulations of the
Commission.
    (d) In addition to prescribed accounts, clearing accounts,
temporary or experimental accounts, and subaccounts of any accounts may
be kept, provided the integrity of the prescribed accounts is not
impaired.
    (e) The arrangement or sequence of the accounts prescribed in this
part must not be controlling as to the arrangement or sequence in
report forms that may be prescribed by the Commission.

Sec.  367.4  Numbering system.

    (a) The account numbering plan used in this part consists of a
system of three-digit whole numbers as follows:
    (1) 100-199, Assets and other debits.
    (2) 200-299, Liabilities and other credits.
    (3) 300-399, Property accounts.
    (4) 400-432 and 434-435, Income accounts.
    (5) 433, 436 and 439, Retained earnings accounts.
    (6) 457-458, Revenue accounts.
    (7) 500-599, Electric operating expenses.
    (8) 800-894, Gas operating expenses.
    (9) 900-949, Customer accounts, customer service and informational,
sales, and general and administrative expenses.
    (b) The numbers prefixed to account titles are to be considered as
parts of the titles. Each service company, however, may adopt for its
own purposes a different system of account numbers (See also General
Instructions in Sec.  367.3(d)) provided that the numbers prescribed in
this part must appear in the descriptive headings of the ledger
accounts and in the various sources of original entry; however, if a
service company uses a different system of account numbers and it is
not practicable to show the prescribed account numbers in the various
sources of original entry, the reference to the prescribed account
numbers may be omitted from the various sources of original entry. Each
service company using different account numbers for its own purposes
must keep readily available a list of the account numbers that it uses
and a reconciliation of those account numbers with the account numbers
provided in this part. It is intended that the service company's
records must be kept so as to permit ready analysis by prescribed
accounts (by direct reference to sources of original entry to the
extent practicable) and to permit preparation of financial and
operating statements directly from the records at the end of each
accounting period according to the prescribed accounts.

Sec.  367.5  Accounting period.

    Each service company must keep its books on a monthly basis so that
for each month all transactions applicable to the account, as nearly as
may be ascertained, must be entered in the books of the service
company. Amounts applicable or assignable to a single or group of
associate and non-associate companies must be segregated monthly. Each
service company must close its books at the end of each calendar year
unless otherwise authorized by the Commission.

Sec.  367.6  Submittal of questions.

    To maintain uniformity of accounting, service companies must submit
questions of doubtful interpretation to the Commission for
consideration and decision.

Sec.  367.7  Item list.

    Lists of items appearing in the texts of the accounts or elsewhere
in this part are for the purpose of indicating clearly the application
of the prescribed accounting. The lists are intended to be

representative, but not exhaustive. The appearance of an item in a list
warrants the inclusion of the item in the account mentioned only when
the text of the account also indicates inclusion inasmuch as the same
item frequently appears in more than one list. The proper entry in each
instance must be determined by the texts of the accounts.

Sec.  367.8  Extraordinary items.

    Extraordinary items are to be recognized according to the rules
which are considered generally accepted accounting principles. These
items are related to the effects of events and transactions that have
occurred during the current period and that are of an unusual nature
and infrequent occurrence. Each item recognized as extraordinary must
be disclosed in the notes to financial statements (See Accounts 434 and
435 in Sec. Sec.  367.4340 and 367.4350).

Sec.  367.9  Prior period items.

    (a) Items of profit and loss related to the following must be
accounted for as prior period adjustments and excluded from the
determination of net income for the current year:
    (1) Correction of an error in the financial statements of a prior
year.
    (2) Adjustments that result from realization of income tax benefits
of pre-acquisition operating loss carry forwards of purchased
subsidiaries.
    (b) All other items of profit and loss recognized during the year
must be included in the determination of net income for that year.

Sec.  367.10  Unaudited items.

    Whenever a financial statement is required by the Commission, if it
is known that a transaction has occurred that affects the accounts but
the amount involved in the transaction and its effect upon the accounts
cannot be determined with absolute accuracy, the amount must be
estimated and the estimated amount included in the proper accounts. The
service company is not required to anticipate minor items that would
not appreciably affect the accounts.

Sec.  367.11  Distribution of pay and expenses of employees.

    The charges to property, operating expense and other accounts for
services and expenses of employees engaged in activities chargeable to
various accounts, such as construction, maintenance, and operations,
must be based upon the actual time engaged in the respective classes of
work, or an appropriate allocation method.

Sec.  367.12  Payroll distribution.

    Underlying accounting data must be maintained so that the
distribution of the cost of labor charged direct to the various
accounts will be readily available. The underlying data must permit a
reasonably accurate distribution to be made of the cost of labor
charged initially to clearing accounts so that the total labor cost may
be classified among construction, cost of removal, or operating
functions.

Sec.  367.13  Accounting to be on accrual basis.

    (a) The service company is required to keep its accounts on the
accrual basis. This requires the inclusion in its accounts of all known
transactions of appreciable amount that affect the accounts. If bills
covering the transactions have not been received or rendered, the
amounts must be estimated and appropriate adjustments made when the
bills are received. When the amount is ascertained, the necessary
adjustments must be made through the accounts in which the estimate was
recorded. If it is determined during the interval that a material
adjustment will be required, the estimate must be adjusted through the
current accounts. The service company is not required to anticipate
minor items which would not appreciably affect these accounts.
    (b) When payments are made in advance for items such as insurance,
rents, taxes or interest, the amount applicable to future periods must
be charged to account 165, Prepayments (Sec.  367.1650), and spread
over the periods to which they are applicable by credits to account 165
(Sec.  367.1650), and charges to the accounts appropriate for the
expenditure.

Sec.  367.14  Transactions with associate companies.

    Each service company must keep its accounts and records so as to be
able to furnish accurately and expeditiously statements of all
transactions with associate companies. The statements may be required
to show the general nature of the transactions, the amounts involved in
the transactions and the amounts included in each account prescribed in
this part with respect to such transactions. Transactions with
associate companies must be recorded in the appropriate accounts for
transactions of the same nature. Nothing contained in this part,
however, must be construed as restraining the service company from
subdividing accounts for the purpose of recording separately
transactions with associate companies.

Sec.  367.15  Contingent assets and liabilities.

    Contingent assets represent a possible source of value to the
service company contingent upon the fulfillment of conditions regarded
as uncertain. Contingent liabilities include items that, under certain
conditions, may become obligations of the service company but that are
neither direct nor assumed liabilities at the date of the balance
sheet. The service company must be prepared to give a complete
statement of significant contingent assets and liabilities (including
cumulative dividends on preference stock) in its annual report and at
such other times as may be requested by the Commission.

Sec.  367.16  Long-term debt: Premium, discount and expense, and gain
or loss on reacquisition.

    (a) A separate premium, discount and expense account must be
maintained for each class and series of long-term debt (including
receivers' certificates) issued or assumed by the service company. The
premium must be recorded in account 225, Unamortized premium on long-
term debt (Sec.  367.2250), the discount must be recorded in account
226, Unamortized discount on long-term debt--Debit (Sec.  367.2260),
and the expense of issuance must be recorded in account 181,
Unamortized debt expense (Sec.  367.1810). The premium, discount and
expense must be amortized over the life of the respective issues under
a plan that will distribute the amounts equitably over the life of the
securities. The amortization must be on a monthly basis, and the
amounts relating to discounts and expenses must be charged to account
428, Amortization of debt discount and expense (Sec.  367.4280). The
amounts relating to premiums must be credited to account 429,
Amortization of premium on debt--Credit (Sec.  367.4290).
    (b) When long-term debt is reacquired the difference between the
amount paid upon reacquisition of any long-term debt and the face
value, adjusted for unamortized discount, expenses or premium, as the
case may be, applicable to the debt redeemed must be recognized
currently in income and recorded in account 421, Miscellaneous income
or loss (Sec.  367.4210), or account 426.5, Other deductions (Sec.
367.4265).

Sec.  367.17  Comprehensive inter-period income tax allocation.

    (a) Where there are timing differences between the periods in which
transactions affect taxable income and the periods in which they enter