[Federal Register Volume 88, Number 192 (Thursday, October 5, 2023)]
[Rules and Regulations]
[Pages 69294-69388]
[FR Doc No: 2023-14994]

Vol. 88

Thursday,

No. 192

October 5, 2023

Part II

 Department of Energy

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Federal Energy Regulatory Commission

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18 CFR Part 101

Accounting and Reporting Treatment of Certain Renewable Energy Assets;
Final Rule

Federal Register / Vol. 88 , No. 192 / Thursday, October 5, 2023 /
Rules and Regulations

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 101

[Docket No. RM21-11-000; Order No. 898]

Accounting and Reporting Treatment of Certain Renewable Energy
Assets

AGENCY: Federal Energy Regulatory Commission, DOE.

ACTION: Final rule.

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SUMMARY: In this final rule, the Federal Energy Regulatory Commission
(Commission or FERC) is amending the Uniform System of Accounts (USofA)
for public utilities and licensees to: create new accounts for wind,
solar, and other renewable generating assets; create a new functional
class for energy storage accounts; codify the accounting treatment of
environmental credits; and create new accounts within existing
functions for computer hardware, software, and communication equipment.
We also amend the relevant FERC forms to accommodate these changes.

DATES: Effective date: This rule is effective January 1, 2025.

FOR FURTHER INFORMATION CONTACT:

Daniel Birkam (Technical Information), Office of Enforcement, Federal
Energy Regulatory Commission, 888 First Street NE, Washington, DC
20426,<PHONE_NUMBER>, [email protected]
Todd Kuzniewski (Technical Information), Office of Enforcement, Federal
Energy Regulatory Commission, 888 First Street NE, Washington, DC
20426,<PHONE_NUMBER>, [email protected]
Nathan Lobel (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426,<PHONE_NUMBER>, [email protected]

SUPPLEMENTARY INFORMATION:

Table of Contents

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                                                               Paragraph
                                                                numbers
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I. Introduction.............................................           1
II. Background..............................................           4
    A. Previous Changes to the USofA........................           4
    B. Locke Lord Petition..................................           9
    C. Notice of Inquiry....................................          12
    D. Notice of Proposed Rulemaking........................          16
III. Need for Reform........................................          17
IV. Proposed Reforms........................................          22
    A. Creation of New Subfunctions and Accounts for Non-             22
     Hydro Renewables.......................................
    1. NOPR.................................................          22
    2. Comments.............................................          31
    3. Commission Determination.............................          47
    B. Creation of Energy Storage Function and Accounts.....          66
    1. NOPR.................................................          66
    2. Comments.............................................          68
    3. Commission Determination.............................          72
    C. Accounting Treatment for Renewable Energy Credits....          76
    1. NOPR.................................................          76
    2. Comments.............................................          78
    3. Commission Determination.............................          87
    D. Creation of Computer Hardware, Software, and                   99
     Communication Equipment Accounts.......................
    1. NOPR.................................................          99
    2. Comments.............................................         103
    3. Commission Determination.............................         110
    E. Reporting............................................         117
    1. NOPR.................................................         117
    2. Comments.............................................         122
    3. Commission Determination.............................         125
    F. Other Issues.........................................         129
    1. Account Numbering....................................         129
    a. Comments.............................................         129
    b. Commission Determination.............................         130
    2. Issues Beyond the Scope of This Rulemaking...........         131
    a. Comments.............................................         131
    b. Commission Determination.............................         132
    G. Proposed Compliance Procedures.......................         133
    1. Comments.............................................         133
    2. Commission Determination.............................         136
V. Information Collection Statement.........................         139
VI. Environmental Analysis..................................         148
VII. Regulatory Flexibility Act.............................         149
VIII. Document Availability.................................         152
IX. Effective Date and Congressional Notification...........         155
X. Appendix A: New and Amended Form 1/1F/3-Q (Electric).....
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I. Introduction

    1. In this final rule, the Commission is revising the Uniform
System of Accounts (USofA) \1\ to account for rapid changes in
technology and resource mix in the U.S. energy industry over recent
decades. The reforms adopted in this final rule will add functional
detail to the USofA in order to provide uniformity, consistency, and
transparency in accounting and reporting for investments in these
technologies, and to assist the Commission in fulfilling its
responsibilities under the Federal Power Act (FPA) to ensure that rates
remain just and reasonable. Therefore, pursuant to the Commission's
authority to prescribe accounting and financial reporting requirements
for jurisdictional companies under section 301 of the FPA,\2\ we modify
part 101 \3\ of the Commission's regulations to: (1) create new
subfunctions and accounts for wind, solar, and other renewable
generating assets; (2) establish a new functional class and accounts
for energy storage assets; (3) create new accounts and codify
accounting treatment for environmental credits; and (4) create new
accounts for computer hardware, software, and communication equipment
within existing functions that do not already include them. The final
rule also makes corresponding changes to the following FERC Forms to
implement the USofA changes: FERC Form Nos. 1, 1-F, 3-Q (electric), and
60.\4\
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    \1\ Uniform System of Accounts Prescribed for Public Utilities &
Licensees Subject to the Provisions of the Federal Power Act, 18 CFR
part 101. Unless otherwise indicated, references to the USofA in
this final rule refer to the USofA for public utilities and
licensees.
    \2\ 16 U.S.C. 825.
    \3\ 18 CFR part 101.
    \4\ Edits to the FERC Form No. 60 Annual Report of Centralized
Service Companies, governed under the Public Utility Holding Company
Act, are the result of changes to the FERC forms for public
utilities and licensees from which FERC Form No. 60 summarily
references accounts.
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    2. Generally, we are adopting the specific reforms proposed in the
Notice of Proposed Rulemaking (NOPR) (87 FR 59870 (Oct. 3, 2022)), but
with certain revisions based on the record in this proceeding. In
particular, certain proposals in the NOPR have been altered in this
final rule to effectuate the Commission's intent, better address the
needs of different stakeholders, and facilitate solutions to potential
technical challenges.
    3. As discussed further below in section IV.G (Proposed Compliance
Procedures), each utility must implement the requirements of this final
rule by January 1, 2025.

II. Background

A. Previous Changes to the USofA

    4. The USofA was created by the Federal Power Commission to
facilitate the Commission's ratemaking responsibilities and uniformly
capture financial and operational information for, first, traditional
public utilities, and then natural gas pipelines.\5\ The USofA has been
modified over time to account for changing technological, legal, and
market conditions.
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    \5\ 18 CFR part 101.
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    5. For example, in Order No. 552, the Commission revised the USofA
to account for sulfur dioxide emissions allowances under the 1990 Clean
Air Act Amendments.\6\ In that order, the Commission created new
inventory Accounts 158.1 (Allowance Inventory) and 158.2 (Allowances
Withheld) and new expense Account 509 (Allowances) to accommodate the
new sulfur dioxide emissions allowances. The Commission noted that some
commenters sought to classify allowances in existing accounts to
facilitate a desired ratemaking result; however, the Commission found
these comments unpersuasive because accounting rules provide sound and
uniform accounting rather than dictating particular ratemaking
results.\7\
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    \6\ Revisions to Uniform System of Accounts to Account for
Allowances under the Clean Air Act Amendments of 1990 & Regulatory-
Created Assets & Liabilities & to Form Nos. 1, 1-F, 2 & 2-A, Order
No. 552, 62 FR 61299 (Nov. 17, 1997), FERC Stats. & Regs. ] 30,967
(1993) (cross-referenced at 62 FERC ] 61,299).
    \7\ Id. at 30,799.
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    6. In 2013, the Commission issued Order No. 784, which revised the
USofA and related forms to codify accounting treatment for energy
storage.\8\ The Commission created: (1) new electric plant and
associated operating and maintenance expense accounts (O&M accounts) to
record investments in, and operations and maintenance costs associated
with, energy storage assets; (2) a new purchased power account to
record the cost of power purchased for use in storage operations; and
(3) new FERC Form Nos. 1 and 1-F schedules.\9\ Order No. 784 also
amended existing schedules in FERC Form Nos. 1, 1-F, and 3-Q (electric)
to report operational and statistical data on storage assets.
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    \8\ Third-Party Provision of Ancillary Services; Accounting &
Financial Reporting for New Electric Storage Technologies, Order No.
784, 78 FR 46178 (July 30, 2013), 144 FERC ] 61,056 (2013), order on
clarification, Order No. 784-A, 146 FERC ] 61,114 (2014).
    \9\ Id. P 123.
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    7. Specifically, the Commission created electric plant accounts for
energy storage assets within the existing USofA functions: Account 348
(Energy Storage Equipment--Production), Account 351 (Energy Storage
Equipment--Transmission), and Account 363 (Energy Storage Equipment--
Distribution).\10\ The Commission created corresponding new O&M
accounts: Account 548.1 (Operation of Energy Storage Equipment) and
Account 553.1 (Maintenance of Energy Storage Equipment) for energy
storage plant classified as production; Account 562.1 (Operation of
Energy Storage Equipment) and Account 570.1 (Maintenance of Energy
Storage Equipment) for energy storage plant classified as transmission;
and Account 582.1 (Operation of Energy Storage Equipment) and Account
592.2 (Maintenance of Energy Storage Equipment) for energy storage
plant classified as distribution.\11\
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    \10\ Id. P 141.
    \11\ Id. P 147.
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    8. In these energy storage accounts, the installed cost of energy
storage assets is recorded based on the function or purpose the assets
serve. Where an energy storage asset performs more than one purpose or
function, Order No. 784 requires the cost of the asset to be allocated
among the accounts based on the functions performed and approved rate
recovery.\12\ While some commenters argued that the requirement to
allocate energy storage assets that perform multiple functions across
the relevant accounts places an undue administrative burden on
utilities, the Commission nevertheless provided for functional
recording because utilities that recover the costs of storage
operations on a cost of service basis must already maintain cost
allocation information on the assets.\13\ Furthermore, the Commission
in Order No. 784 found that the alternative of recording all costs of
energy storage assets in a single plant account would result in less
transparent reporting.\14\
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    \12\ Id. P 126.
    \13\ Id. P 133.
    \14\ Id. P 135.
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B. Locke Lord Petition

    9. In Docket No. AC20-103, Locke Lord submitted a petition to the
Chief Accountant requesting confirmation that the costs of certain wind
and solar generating assets should be booked to Other Production
Accounts 343 (Prime Movers), 344 (Generators), and 345 (Accessory
Electric Equipment).\15\ Specifically, Locke Lord proposed to record:
(1) wind turbines, solar modules, combiner circuits, and inverters to
Account 343 (Prime

Movers); (2) wind turbine generators to Account 344 (Generators); and
(3) DC conductors, individual low-voltage step-up transformers, AC
conductors (34.5 kV) associated with collector systems, power cables,
conduit and underground duct banks, circuit breakers, disconnect
switches and accessories, grounding conductors and grounding
transformers, collector system buses, main and/or auxiliary transfer
buses, collector system control systems, Supervisory Control and Data
Acquisition (SCADA) systems, static capacitors and reactors, and
collector system substations to Account 345 (Accessory Electric
Equipment).
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    \15\ Locke Lord LLP, 174 FERC ] 61,033, at P 1 (2021).
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    10. Some commenters in that proceeding argued that the petition
proposed recording inappropriate costs, including costs related to the
collector system and SCADA,\16\ into Account 345 (Accessory Electric
Equipment), which would implicate broader issues of compensation for
reactive power.\17\ Some commenters, including Edison Electric
Institute (EEI), suggested that the Commission consider creating new
accounts for wind, solar, and other non-hydro renewables to resolve
this dispute.\18\
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    \16\ Id. P 6.
    \17\ Id. PP 10, 13. Specifically, the AEP Methodology identifies
costs associated with four groups of plant investment: (1) the
generators/exciters; (2) generator step-up transformers; (3)
accessory electric equipment; and (4) the remaining production plant
investment. These costs are then allocated between real and reactive
power using an allocation factor. Id. P 10 n.12.
    \18\ Id. PP 8, 13, 16.
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    11. The Commission denied the petition, noting that the record
reflected substantial disagreement about equipment functions and
categorizations.\19\ In so doing, the Commission also noted that it
would concurrently issue a Notice of Inquiry (NOI) to consider creating
separate categories of accounts in the USofA for wind and solar
generating assets.\20\ The Commission has since opened a separate
proceeding under Docket No. RM22-2-000 to gather comments and
information about potential alternative reactive power compensation.
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    \19\ Id. P 19.
    \20\ Id. P 20.
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C. Notice of Inquiry

    12. On January 19, 2021, the Commission issued an NOI in the
instant docket seeking comment on the appropriate accounting treatment
for certain renewable generating assets.\21\ Specifically, the
Commission sought comment on: (1) whether to create new accounts within
the USofA for non-hydro renewable energy generating assets; \22\ (2)
what modifications to FERC Form No. 1 are needed to reflect these
changes; (3) whether to codify the proper accounting treatment of the
purchase, generation, and use of renewable energy credits (REC); and
(4) whether there are rate-setting implications for these accounting
and reporting changes.
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    \21\ Accounting & Reporting Treatment of Certain Renewable
Energy Assets, Notice of Inquiry, 86 FR 7086, 174 FERC ] 61,032
(2021) (NOI).
    \22\ The NOI defined non-hydro renewable generating assets as
production assets other than hydroelectric generators (such as
solar, wind energy, geothermal, biomass, etc.) that rely on the heat
or motion of the earth or the sun's radiation to produce energy.
These assets are denoted as renewable because the power production
is based on a fuel source that is not consumed or destroyed by the
generation process, such as buried hydrocarbons (coal, oil, natural
gas) or the decay of rare irradiated heavy metals (nuclear). Biomass
(trees, nut shells, grain husks and stalks, etc.) is considered
renewable, despite consumption of its hydrocarbon source, because
the carbon it releases is offset by regrowth of carbon capturing
equivalent biomass. Id. P 1.
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    13. The Commission explained that the USofA contains discrete
production accounts for Steam, Nuclear, Hydraulic, and Other
Production, but does not contain accounts specifically designated for
solar, wind, or other non-hydro renewable generating assets.\23\ The
Commission noted that companies record non-hydro renewable generating
assets in the USofA's Other Production accounts, but that parties have
disagreed which Other Production accounts are appropriate for these
assets.\24\ For example, the Commission noted that no plant account
definition clearly describes solar panels, PV inverters, wind
generation towers, or the computer hardware and software required to
operate wind and solar generators.\25\ Similarly, the Commission
explained that the related O&M accounts do not uniquely accommodate
costs to maintain wind and solar facilities.\26\
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    \23\ Id. P 2.
    \24\ Id. PP 2-3.
    \25\ Id. PP 6-9.
    \26\ Id. P 9.
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    14. The Commission also explained that USofA accounts do not
explicitly address the purchase, generation, or use of RECs.\27\ The
Commission found in Ameren Illinois Co. that RECs are analogous to
sulfur dioxide emission allowances, accounting treatment for which was
codified in Order No. 552.\28\ The Commission noted that Order No. 552
classified emission allowances as inventory and established new
inventory and expense accounts to record the allowances and associated
activities.\29\ In keeping with Order No. 552, the Commission has found
that RECs that are purchased or generated should be recorded in Account
158.1 (Allowance Inventory) and expensed to Account 509 (Allowances) as
they are utilized.\30\
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    \27\ Id. PP 4, 13.
    \28\ Ameren Illinois Co., 170 FERC ] 61,267, at P 52 (2020).
    \29\ NOI, 174 FERC ] 61,032 at P 13 (citing Order No. 552, FERC
Stats. & Regs. ] 30,967).
    \30\ Id. PP 4, 13-14 (citing Ameren Illinois Co., 170 FERC ]
61,267 at P 52).
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    15. The Commission also noted that any proposed additions and
modifications to its USofA would require corresponding changes to FERC
Form No. 1, and could have a significant and measurable impact on
rates.\31\
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    \31\ Id. PP 12, 16.
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D. Notice of Proposed Rulemaking

    16. On July 28, 2022, the Commission issued a NOPR in the same
proceeding.\32\ In the NOPR, the Commission proposed, as discussed in
greater detail below, to: (1) create new subfunctions and accounts for
wind, solar, and other non-hydro renewable generating assets; (2)
establish a new functional class and accounts for energy storage
accounts; (3) create new accounts and codify the accounting treatment
of RECs; and (4) create new accounts for computer hardware, software,
and communication equipment within existing functions that do not
already include them. The Commission received seven comments from a
diverse set of stakeholders.\33\
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    \32\ See Accounting & Reporting Treatment of Certain Renewable
Energy Assets, Notice of Proposed Rulemaking, 87 FR 59870 (Oct. 3,
2022), 180 FERC ] 61,050, at P 28 (2022) (NOPR).
    \33\ See American Clean Power Association (ACP) and Solar Energy
Industries Association (SEIA) (collectively Clean Energy
Associations) NOPR Comments; Carl Pechman NOPR Comments; Dominion
Energy, Inc. (Dominion) NOPR Comments; EEI and American Gas
Association (AGA) (collectively Utility Associations) NOPR Comments;
Liquid Energy Pipeline Association (LEPA) NOPR Comments; Pacific Gas
and Electric (PG&E) and San Diego Gas and Electric (SDG&E) NOPR
Comments; Retail Energy Supply Association (RESA) NOPR Comments.
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III. Need for Reform

    17. In the NOPR, the Commission noted that the USofA has not been
significantly modified since the Commission issued Order No. 784 in
2013 and does not provide clear accounting treatment for activities
related to many technological and economic developments in the U.S.
energy industry of recent decades, like the growth of investments into
renewable generating facilities, battery storage, and RECs, among
others.\34\ By adding functional detail to the USofA, these reforms
will provide uniformity, consistency, and transparency in

accounting and reporting for investments into these assets, and assist
the Commission in fulfilling its responsibilities under the FPA to
ensure that rates remain just and reasonable.
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    \34\ NOPR, 180 FERC ] 61,050 at P 27.
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    18. As discussed in the NOPR and NOI, the USofA contains discrete
production accounts for Steam, Nuclear, Hydraulic, and a catch-all
category for Other Production.\35\ However, the USofA does not have
production accounts designated specifically for solar, wind, or other
renewable generating assets; public utilities instead record non-hydro
renewable generating assets in the Other Production accounts. Given the
rapid expansion and development of wind, solar, and other renewable
generation technologies, and the record in Docket No. AC20-103 and the
instant rulemaking proceeding, we conclude that the USofA must be
modified to clarify how public utilities should account for non-hydro
renewable generating assets, to avoid inconsistencies in accounting and
reporting, and to facilitate the ratemaking process. NOI and NOPR
commenters also generally agreed that these accounts are needed given
non-hydro renewables' varied and distinct characteristics from existing
electric production subfunctions within the USofA.\36\
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    \35\ 18 CFR part 101.
    \36\ See ACP NOI Comments at 16; Alliant Energy NOI Comments at
3; Dominion NOPR Comments at 3; EEI NOI Comments at 4; Utility
Associations NOPR Comments at 7. But see Clean Energy Associations
NOPR Comments at 6 (contending that confusion and inconsistency in
recording renewable energy assets can be resolved at lesser cost by
clarifying that specific existing USofA accounts should be used).
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    19. Our reporting requirements for energy storage also need
revision. In Order No. 784, the Commission created accounts for energy
storage assets and related operations and maintenance expenses within
different functions, but underestimated the additional burden that
functional reporting, along with frequent reclassification of plant
assets and associated accumulated depreciation, imposes on
utilities.\37\ Since the issuance of Order No. 784, and based on
experience and industry input since the issuance of Order No. 784, the
Commission now recognizes the need for revisions to its USofA for
energy storage accounting. Today, it is clear that frequently changing
functionalization imposes significant recordkeeping and reporting
burden on utilities, which increases internal control risks for
reporting errors in our forms.\38\ Consequently, NOI commenters
requested the Commission to create, and NOPR commenters supported the
proposed creation of, a new energy storage function in this
proceeding.\39\ We are now persuaded that this new function is needed
to simplify and improve recording and reporting of energy storage
assets and related expenses.
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    \37\ See Order No. 784, 144 FERC ] 61,056 at P 133.
    \38\ EEI NOI Comments at 6-9.
    \39\ Clean Energy Associations NOPR Comments at 5; EEI NOI
Comments at 6-9; Energy Storage Association (ESA) NOI Comments at 1-
2; Utility Associations NOPR Comments at 11.
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    20. Similarly, the Commission has concluded that USofA revision is
needed to formalize accounting treatment for the purchase, generation,
and use of environmental credits. While the Commission explained in
2020 that RECs should be treated analogously to the accounting
treatment for sulfur dioxide emission allowances addressed in Order No.
552,\40\ not all utilities follow this approach.\41\ In addition,
utilities are increasingly using a variety of environmental crediting
items.\42\ As such, codifying environmental credit treatment will
promote consistent treatment of these items in Commission accounting
and reporting.
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    \40\ Ameren Illinois Co., 170 FERC ] 61,267 at P 52.
    \41\ EEI NOI Comments at 10.
    \42\ See Carl Pechman NOPR Comments at 4; Utility Associations
NOPR Comments at 19.
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    21. Lastly, designated computer hardware, software, and
communication equipment accounts for all functions and plant
subfunctions are needed to eliminate ambiguity and improve consistency
in accounting and reporting. Currently, the USofA includes designated
computer hardware, software, and computer equipment accounts in some
functions and subfunctions but not others. Specifically, the Regional
Transmission and Market Operation Plant function includes plant
accounts for computer hardware, software, and communication equipment,
and the Transmission and Regional Market functions contain maintenance
accounts for these assets, but no other plant or maintenance function
includes such specificity.\43\ USofA revisions are therefore needed to
provide for consistent treatment of these assets and costs.
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    \43\ See 18 CFR part 101.
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IV. Proposed Reforms

A. Creation of New Subfunctions and Accounts for Non-Hydro Renewables

1. NOPR
    22. The Commission proposed three new subfunctions within the
Production Plant function of the USofA: D. Solar Production, E. Wind
Production, and F. Other Non-Hydro Renewable Production.\44\ Consistent
with all other production subfunctions (e.g., Steam Production, Nuclear
Production, and Hydraulic Production), the Commission proposed the
following five accounts within each of these three new subfunctions:
(1) Accounts 338.1, 338.20, and 339.1 (Land and Land Rights); (2)
Accounts 338.2, 338.21, and 339.2 (Structures and Improvements); (3)
Accounts 338.8, 338.29, and 339.8 (Other Accessory Electrical
Equipment); (4) Accounts 338.12, 338.33, and 339.12 (Miscellaneous
Power Plant Equipment); and (5) Accounts 338.13, 338.34, and 339.13
(Asset Retirement Costs).\45\ These accounts are similar in description
and instruction to the existing accounts of the same title in each of
the other production subfunctions.
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    \44\ NOPR, 180 FERC ] 61,050 at P 33.
    \45\ Id. P 35. The three accounts under each number represent
the three new subfunctions: Solar, Wind, and Non-Hydro Renewable
Production, respectively.
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    23. The Commission also proposed to create three additional
accounts for the new Solar Production and Wind Production subfunctions:
(1) Accounts 338.5 and 338.26 (Collector System); (2) Accounts 338.6
and 338.27 (Generation Step-up Transformers (GSU)); and (3) Accounts
338.7 and 338.28 (Inverters).\46\ Similar to distribution system
accounts, the Collector System accounts list many of the same items
included in the accounts for Poles, Towers and Fixtures (Account 364)
and Overhead Conductors and Devices (Account 365).\47\ The GSU accounts
are intended to record transformers that are directly connected to
generator terminal tips and supporting equipment. The inverter accounts
are intended to record equipment that converts power from direct
current to alternating current.
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    \46\ Id. P 36.
    \47\ For example, Account 364 listed, among others, poles,
towers, anchors, and extension arms. Account 365 listed, among
others, circuit breakers, conductors, and lightning arrestors.
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    24. Additionally, the Commission proposed unique generating
accounts for all three subfunctions: (1) Account 338.4 (Solar Panels)
for Solar Production; (2) Account 338.23 (Wind Turbines) and Account
338.24 (Wind Towers and Fixtures) for Wind Production; and (3) Account
339.3 (Fuel Holders), Account 339.4 (Boilers), and Account 339.6
(Generators) for Other Non-Hydro Renewable Production.\48\ The solar
panels account is designated to record panels and support equipment
that change solar energy into electricity and related supporting
structures such as racks and gears. The wind turbines

account includes components that are located from the top of the tower
to the end of the turbine blades. The wind towers and fixtures account
includes the tower and the components contained within the tower that
are located from the top of the foundation to the base of the nacelle.
The three accounts to record fuel holders, boilers, and generators that
are included in Other Non-Hydro Renewable Production capture renewable
generation assets that use any fuel source or method (e.g., steam or
direct burning). These accounts allow for recording biofuels, hydrogen,
geothermal, and other types of generation in this subfunction. Many of
the items listed in these account descriptions are the same as those
accounts listed in the Steam and Other Production subfunctions.\49\
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    \48\ NOPR, 180 FERC ] 61,050 at P 37.
    \49\ See, e.g., Account 342 (Fuel Holders, Producers, and
Accessories); Account 312 (Boiler Plant Equipment); Account 344
(Generators).
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    25. Similar to the new plant accounts for non-hydro renewables, the
Commission proposed new O&M accounts for these subfunctions, titled F.
Solar Generation, G. Wind Generation, and H. Other Non-Hydro Renewable
Generation.\50\ All three subfunctions include the following seven
accounts consistent with the other subfunctions (e.g., Steam, Nuclear,
and Hydraulic): (1) Accounts 558.1, 558.20, and 559.1 (Operation
Supervision and Engineering); (2) Accounts 558.4, 558.23, and 559.4
(Rents); (3) Accounts 558.5, 558.24, and 559.5 (Operation Supplies and
Expenses (Nonmajor only)); (4) Accounts 558.6, 558.25, and 559.6
(Maintenance Supervision and Engineering (Major only)); (5) Accounts
558.7, 558.26, and 559.7 (Maintenance of Structures (Major only)); (6)
Accounts 558.16, 558.36, and 559.15 (Maintenance of Miscellaneous
(Solar, Wind, or Other Non-Hydro Renewable) Generation Plant (Major
only)); and (7) Accounts 558.17, 558.37, and 559.16 (Maintenance of
(Solar, Wind, or Other Non-Hydro Renewable) Generation Plant (Nonmajor
only)).\51\ These accounts have similar descriptions, items, and
instructions to existing accounts.
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    \50\ NOPR, 180 FERC ] 61,050 at P 38.
    \51\ Item 7 includes three accounts that are designated as
nonmajor only. Nonmajor entities would therefore record all
maintenance activities in these accounts without the added
granularity required for major entities (Items 1-6).
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    26. The Commission also proposed four additional maintenance
accounts for Solar and Wind Generation subfunctions, but not for the
Other Non-Hydro Renewable Production subfunction: \52\ (1) Accounts
558.9 and 558.29 (Maintenance of Collector Systems (Major only)); (2)
Accounts 558.10 and 558.30 (Maintenance of Generator Step-up
Transformers (Major only)); (3) Accounts 558.11 and 558.31 (Maintenance
of Inverter Expenses (Major only)); and (4) Accounts 558.12 and 558.32
(Maintenance of Other Accessory Electrical Equipment (Major only)).\53\
These accounts allow for recording maintenance expenses for the
associated plant accounts for Solar and Wind Production. The proposed
list of items for Accounts 558.9 and 558.29 (Maintenance of Collector
Systems (Major only)) are similar to the list of items for Account 593
(Maintenance of Overhead Lines (Major only)) in the Distribution
Expenses function.
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    \52\ While wind and solar are distributive in design (i.e., with
a collector system spread across a comparatively wide area), other
renewables are, as currently conceived, unlikely to be distributive
in design. These non-distributive renewable plants, similar to
existing coal, oil, nuclear, and gas plants, do not have collector
systems. In addition, their generator step-up transformers and
inverters are comparatively minor integrated parts.
    \53\ NOPR, 180 FERC ] 61,050 at P 39.
---------------------------------------------------------------------------

    27. The Commission also proposed new operating expense accounts for
the main operating costs of the new production subfunctions: for Solar
Generation, Account 558.2 (Solar Panel Generation and Other Plant
Operating Expenses (Major only)); for Wind Generation, Account 558.21
(Wind Turbine Generation and Other Plant Operating Expenses (Major
only)); and for Other Non-Hydro Renewable Generation, Account 559.2
(Other Miscellaneous Generation and Other Plant Operating Expenses
(Major only)), and Account 559.3 (Fuel).\54\
---------------------------------------------------------------------------

    \54\ Id. P 40.
---------------------------------------------------------------------------

    28. In addition, the Commission proposed new maintenance accounts
for specific generation assets: for Solar Generation, Account 558.8
(Maintenance of Solar Panels (Major only)); for Wind Generation,
Account 558.27 (Maintenance of Wind Turbines, Towers and Fixtures
(Major only)); and for Other Non-Hydro Renewable Generation, Account
559.9 (Maintenance of Boilers (Major only)), and Account 559.10
(Maintenance of Generating and Electric Equipment (Major only)).\55\
These new accounts have similar descriptions and instructions to
maintenance accounts for generation equipment in the other
subfunctions. The Commission proposed to designate an account for
maintenance of electrical equipment separate from the maintenance of
generation equipment for the new Solar and Wind Generation
subfunctions.
---------------------------------------------------------------------------

    \55\ Id. P 41.
---------------------------------------------------------------------------

    29. Further, the Commission proposed new accounts for the
Maintenance of Computer Hardware (Major only), the Maintenance of
Computer Software (Major only), and Maintenance of Communication
Equipment (Major only) for the three new plant subfunctions (Solar,
Wind, and Other Non-Hydro Renewable Generation) corresponding to the
plant accounts, as discussed further below.\56\
---------------------------------------------------------------------------

    \56\ Id. P 42.
---------------------------------------------------------------------------

    30. Lastly, the Commission sought comment on several topics.\57\
First, to avoid confusion with the existing ``Other Production''
generation subfunction, the Commission sought comment on whether to
retitle that subfunction to ``Prime Mover Production'' because the
current instructions to the ``Other Production'' subfunction only
describe prime mover-type generation assets.\58\ Second, noting that
the USofA does not currently address kinetic energy from the ocean to
generate electricity,\59\ the Commission sought comment on whether to
include both tidal and wave energy as part of the existing Hydraulic
Production function, rather than in the newly proposed other non-hydro
renewable asset accounts. Third, the Commission sought comment on
whether the Commission's Chief Accountant should issue accounting
guidance for hydrogen, and whether it would be helpful to propose
revisions to the USofA for natural gas pipelines to account for
hydrogen activities.
---------------------------------------------------------------------------

    \57\ Id. PP 34, 43, 68.
    \58\ A prime mover electric generator is one where the fuel
source directly moves the electric turbine rather than using a
boiler or other secondary energy transfer.
    \59\ See EEI NOI Comments at 4-5.
---------------------------------------------------------------------------

2. Comments
    31. Dominion and Utility Associations support the addition of new
accounts for non-hydro renewable generating assets.\60\ Clean Energy
Associations contend that confusion and inconsistency in recording
renewable energy assets could be resolved at lesser cost by clarifying
that specific existing USofA accounts should be used, but support the
Commission's proposed accounts for wind turbines (Account 338.23);
solar panels and related racking and trackers (Account 338.4);
inverters and converters (Account 338.28); individual, low-voltage
step-up transformers (Accounts 338.6 and 338.26); AC collector systems
(Accounts

338.5 and 338.26); and Static capacitors (Account 338.5).\61\
---------------------------------------------------------------------------

    \60\ Dominion NOPR Comments at 3; Utility Associations NOPR
Comments at 7.
    \61\ Clean Energy Associations NOPR Comments at 6.
---------------------------------------------------------------------------

    32. Commenters also suggest specific revisions to the NOPR
proposal. First, Clean Energy Associations raise concerns that the NOPR
proposed separate accounts for some equipment that is infrequently
itemized by manufacturers and typically retired together.\62\ For wind
facilities, Clean Energy Associations accordingly recommend that the
Commission consolidate proposed Account 338.23 (Wind Turbines) and
Account 338.24 (Wind Towers and Fixtures) into a single account for the
wind turbine generator, tower, pad-mounted or nacelle-mounted
transformer, and foundation. Further, they argue that reporting wind
towers and turbines together would be consistent with Electric Plant
Instruction No. 3, Item 8, Part B, which states ``[t]he cost of
specially provided foundations not intended to outlast the machinery or
apparatus for which provided, and the cost of angle irons, castings,
etc., installed at the base of an item of equipment, shall be charged
to the same account as the cost of the machinery, apparatus, or
equipment.'' \63\ For solar facilities, Clean Energy Associations
suggest that the Commission consolidate solar inverter and power
station transformer costs into the same account.\64\ In the
alternative, Clean Energy Associations request that the Commission
specify how costs should be recorded when manufacturers or contractors
do not itemize them separately.
---------------------------------------------------------------------------

    \62\ Id. at 13-14, 19.
    \63\ 18 CFR part 101, Electric Plant Instruction No. 3, Item 8,
Part B.
    \64\ Clean Energy Associations NOPR Comments at 13-14.
---------------------------------------------------------------------------

    33. Next, Clean Energy Associations make several comments related
to recording collector system costs.\65\ First, Clean Energy
Associations note inconsistencies in the collector system definitions
for Solar Production and Wind Production subfunction accounts, Account
338.5 and Account 338.26, respectively--both between the two and
compared with conventional generation accounts. Between the two new
Collector System account definitions, Clean Energy Associations suggest
revising the definition of the collector system for wind generation in
Account 338.26 to mirror the proposed definition for solar generation,
which reads: ``This account shall include all cost of cabling, junction
boxes, connection cabinets, and all facilities and devices (such as
static capacitors) that are used to transport and consolidate the power
fed from individual wind turbine generators, once it has been stepped-
up, to the substation prior to interconnection to the grid.''
---------------------------------------------------------------------------

    \65\ Id. at 11-12.
---------------------------------------------------------------------------

    34. Further, Clean Energy Associations request that the Commission
identify an account for collector system substation costs.\66\ Clean
Energy Associations recommend that the Commission adopt a separate
Production Plant account for the substation similar to the collector
system or clarify the definition of the collector system to include the
specific items that are part of the collector system substation.
---------------------------------------------------------------------------

    \66\ Id. at 7-8.
---------------------------------------------------------------------------

    35. Clean Energy Associations also suggest that the Commission
consolidate treatment of static capacitors and reactors in the same
account.\67\ While the NOPR proposed requiring solar system capacitor
reporting in Account 338.5 (Collector System) and reactor reporting in
Account 338.8 (Other Accessory Electrical Equipment), Clean Energy
Associations suggest that no distinction between the two technologies
is needed. Specifically, Clean Energy Associations suggest that if the
Commission intends to include all of the plant from the high side of
the individual, low-voltage step-up transformers located at the
inverter power stations and/or the wind turbines to the low side of the
Main Power Transformer (MPT) at the substation (for a transmission
interconnection) or interconnection with the grid (for a distribution
interconnection), it should include both capacitors and reactors
connected to the collector system in the definition for the Collector
System account. Further, Clean Energy Associations note the need for
the Commission to make the same determination for wind generation,
which also may use static capacitors and reactors, but is not included
in the proposed amendment to the USofA.
---------------------------------------------------------------------------

    \67\ Id. at 6-7.
---------------------------------------------------------------------------

    36. Clean Energy Associations next suggest that the Commission
clarify the end-point of the collector system and adopt definitions
that run from inverters or wind turbines up to but not including the
MPT, consistent with comparable equipment for conventional
generation.\68\ According to Clean Energy Associations, the NOPR's
solar and wind collector system definitions appear to go beyond the
MPT, while conventional generation connects generators to the MPT via
connection facilities that end at the low side of the MPT.
---------------------------------------------------------------------------

    \68\ Id. at 12.
---------------------------------------------------------------------------

    37. In addition, Clean Energy Associations request that the
Commission establish a separate Production Plant account to house the
installed cost of the DC collector system, or clarify that the cost
should be reported to Other Accessory Electric Equipment in proposed
Account 338.8.\69\ According to Clean Energy Associations, the DC
collector system does not fit within the NOPR's definitions for
proposed Account 338.4 (Solar Panels) nor Account 338.5 (Collector
System), which they understand to be limited to the AC collector system
connected to the high side of the inverter power station transformer.
---------------------------------------------------------------------------

    \69\ Id. at 8-9.
---------------------------------------------------------------------------

    38. Clean Energy Associations further request that the Commission
clarify the exact equipment that should be included in the Other
Accessory Equipment accounts for both solar and wind, especially given
overlap with the proposed Collector System accounts.\70\
---------------------------------------------------------------------------

    \70\ Id. at 17-18.
---------------------------------------------------------------------------

    39. The Commission also received comments on the NOPR's proposed
accounts for GSU. Utility Associations note a potential inconsistency
between the NOPR's proposed GSU definition and Kentucky Utilities
Company's instruction that ``GSU transformers are not used in the
generation of power and thus should not be booked to production plant
accounts'' (although their costs may be assigned to production through
the ratemaking process).\71\ The Commission proposed to include GSU
transformers on the low side of the collector system in new Solar
Production and Wind Production subfunction accounts.\72\ Utility
Associations ask the Commission to reconcile this proposal with
Kentucky Utilities Company's instruction.
---------------------------------------------------------------------------

    \71\ Utility Associations NOPR Comments at 7-8 (citing Kentucky
Utilities Co., 85 FERC ] 61,274, at 62,112 n.37 (1998) (Opinion No.
432)).
    \72\ NOPR, 180 FERC ] 61,050 at P 36; see also id., proposed
Accounts 338.6 and 338.27.
---------------------------------------------------------------------------

    40. Clean Energy Associations, for their part, suggest that the
Commission revise the proposed GSU account definitions to include all
transformer devices up to and including the MPT housed in the
substation--that is, GSUs on the high side of the of the collector
system in addition to those on the low side.\73\ Clean Energy
Associations also cite to Kentucky Utilities Company,\74\

the Commission's characterization of Kentucky Utilities Company in
Pacific Gas & Electric Co.,\75\ and Order No. 827,\76\ to argue that
the Commission should expand its GSU accounts to include the substation
MPT and equipment located beyond the high side of the substation MPT.
---------------------------------------------------------------------------

    \73\ Clean Energy Associations NOPR Comments at 9-10.
    \74\ Id. at 9 (citing Opinion No. 432, 85 FERC at 62,112 n.36
(``[T]he GSU serves no purpose without the generator, and the
generator cannot transform power to the transmission-level voltage
without the GSU.'')).
    \75\ Id. at 10 (citing Pacific Gas & Electric Co., 106 FERC ]
61,144, at P 19 (2004) (``GSU transformers . . . are located at
generation stations and [are] used solely to increase the voltage of
electric energy produced by generators to the higher voltages
necessary for bulk power transmission to load centers.'')).
    \76\ Id. (citing Reactive Power Requirements for Non-Synchronous
Generation, Order No. 827, 81 FR 40793 (June 23, 2016), 155 FERC ]
61,277, at P 13 n.31 (2016) (``[T]he generator substation would be
the substation for a wind [or solar] generator that separates the
low-voltage collector system from the higher voltage elements of the
Interconnection Customer Interconnection Facilities that bring the
generator's energy to the Point of Interconnection.'')).
---------------------------------------------------------------------------

    41. Clean Energy Associations also request clarification about
where and how the substation MPT and equipment located beyond the high
side of the substation MPT should be recorded.\77\ Clean Energy
Associations suggest that the proposed collector system definitions in
Accounts 338.5, 338.26, and 387.5 overlap with the description for
Station Equipment in existing Account 353.
---------------------------------------------------------------------------

    \77\ Id. at 10-11 (citing NOPR proposed Accounts 338.5, 338.26,
and 387.5 (``This account shall include all cost of cabling,
junction boxes, connection cabinets, and all facilities that are
installed beyond the high side of the GSU transformer and the
transmission or distribution point of interconnection.'') and 18 CFR
part 101, Account 353 (``This account shall include the cost
installed of transforming, conversion, and switching equipment used
for the purpose of changing the characteristics of electricity in
connection with its transmission or for controlling transmission
circuits.'')).
---------------------------------------------------------------------------

    42. Clean Energy Associations further request clarification related
to reporting different types of land and construction costs for non-
hydro renewable generation projects.\78\ Clean Energy Associations
suggest that the Commission define or affirm that it is appropriate to
allocate the clearing and grading, permitting, and site civil costs
across all direct costs (including both structures and equipment
accounts). Specifically, Clean Energy Associations suggest clarifying
that it is appropriate to report: (1) improvement and equipment costs
comparably to USofA Electric Plant Instruction Nos. 8(A) and 9(A)
across all direct costs; (2) permits and privileges in accordance with
the booking of the associated plant for which the permit is sought; and
(3) land option payments that permit site access, investigation, and
permit applications and/or land lease payments during the construction
period as privileges and permits under Electric Plant Instruction No.
3, Components of Construction Cost, Item 9, or expenses during
construction under Electric Plant Instruction No. 3.
---------------------------------------------------------------------------

    \78\ Id. at 15-17.
---------------------------------------------------------------------------

    43. In addition, several commenters comment on the NOPR's proposed
O&M accounts. Utility Associations suggest that wind and solar plants
are simpler to operate than other types of generating plant, with less
distinguishable labor, and therefore require fewer O&M accounts to
support them than traditional generation assets.\79\ They therefore
argue that the Commission should limit the creation of new O&M accounts
for non-hydro renewables to those listed in Appendix A to their
comments. Dominion argues that the Commission should create a robust
list of maintenance accounts sufficient to meaningfully segregate
costs.\80\ Relatedly, Dominion opposes elimination of the miscellaneous
expense account for each type of renewable energy in order to preserve
a place for expenses that do not clearly fall within other specified
accounts. Clean Energy Associations, for their part, agree with the
NOPR's proposed O&M accounts, but urge the Commission to clarify that
the operations and maintenance costs are related to Plant booked to
Production Accounts.\81\ Clean Energy Associations raise the need for
this clarification because, while the NOPR suggests that its four
proposed maintenance accounts ``would allow for the recording of
maintenance expense for the associated plant accounts for Solar and
Wind Production,'' it also suggests that maintenance of the collector
system ``would be similar to the list of items for Account 593
(Maintenance of Overhead Lines) (Major Only)) in the Distribution
Expense function'' and describes wind and solar collector systems as
``distributive in design. . . .'' \82\
---------------------------------------------------------------------------

    \79\ Utility Associations NOPR Comments at 7, app. A.
    \80\ Dominion NOPR Comments at 3.
    \81\ Clean Energy Associations NOPR Comments at 19-20.
    \82\ Id. (citing NOPR, 180 FERC ] 61,050 at P 39 n.78).
---------------------------------------------------------------------------

    44. Commenters also responded to the NOPR's request for comment on
renaming the Other Production account, how to account for tidal and
wave technologies, and hydrogen accounting guidance. Utility
Associations oppose the NOPR's proposal to retitle ``Other Production''
to ``Prime Mover Production.'' \83\ Utility Associations suggest that
retaining the ``Other Production'' account will preserve existing
flexibility for recording assets in the face of technological change to
record future production assets that do not meet the definition of
either prime movers or renewable generating assets.
---------------------------------------------------------------------------

    \83\ Utility Associations NOPR Comments at 7.
---------------------------------------------------------------------------

    45. Regarding the NOPR's request for comment on hydrogen
technologies, Utility Associations and Carl Pechman both request
guidance on accounting for hydrogen facilities.\84\ Utility
Associations suggest that hydrogen equipment costs should be recorded
to Account 339.12 (Miscellaneous Power Plant Equipment) while hydrogen
fuel costs should be recorded to Account 547 instead of Account
559.3.\85\ And, while Utility Associations believe that it is currently
premature to propose new public utility accounts specifically for
hydrogen use in the electricity industry, they suggest that new natural
gas pipeline accounts are needed to record the investments and
operating expenses incurred for hydrogen. They therefore recommend that
the Commission update the USofA for natural gas pipelines to include a
list of proposed accounts in Appendix B to their comments.\86\
---------------------------------------------------------------------------

    \84\ Carl Pechman NOPR Comments at 3-4; Utility Associations
NOPR Comments at 9-11.
    \85\ Utility Associations NOPR Comments at 9-11.
    \86\ Those accounts include: (1) Gas Plant Accounts as Section
D--Hydrogen and Other Renewables under Natural Gas Storage and
Processing Plant: (a) Land and land rights, (b) Structures and
improvements, (c) Hydrogen generation and conversion equipment, (d)
Hydrogen storage equipment, (e) Biogas cleaning and conditioning
equipment, (f) Other renewable equipment, (g) Compression and power
equipment, (h) Measuring and regulating equipment Pipelines, (i)
Other equipment Gas Expense; (2) Accounts as Section D--Hydrogen and
Other Renewables under Natural Gas Storage Terminaling and
Processing Expense: (a) Operation: (i) Operation supervision and
engineering, (ii) Hydrogen equipment and storage expense, (iii)
Biogas Equipment expense, (iv) Other renewable equipment expense,
(v) Compression and power equipment expense, (vi) Measuring and
regulating equipment expense, (vii) Pipelines expense, (viii) Other
hydrogen and renewables operating expense, and (b) Maintenance: (i)
Maintenance supervision and engineering, (ii) Maintenance of
structures and improvements, (iii) Maintenance of hydrogen equipment
and storage, (iv) Maintenance of biogas and other renewable
equipment, (v) Maintenance of compression and power equipment, (vi)
Maintenance of measuring and regulating equipment, and (vii)
Maintenance of pipelines Maintenance of other equipment. Id., at
app. B.
---------------------------------------------------------------------------

    46. Last, regarding the NOPR's request for comment on tidal and
wave technologies, Carl Pechman advocates for the Commission to adopt a
forward[hyphen]looking policy of developing accounting provisions for
new resources that treats tidal and wave energy activities as a type of
other renewable production rather than including it

within existing Hydraulic Production accounts.\87\
---------------------------------------------------------------------------

    \87\ Carl Pechman NOPR Comments at 4.
---------------------------------------------------------------------------

3. Commission Determination
    47. We adopt the NOPR's proposals to create new Production Plant
subfunctions and associated accounts, with minor revisions, as
discussed below. We disagree with Clean Energy Associations that
accounting treatment clarity and transparency can be adequately
provided at lesser administrative burden through issuance of accounting
guidance instead of creating new renewable subfunctions.\88\ The
existing Other Production subfunction no longer fully accommodates the
specificities of modern renewable generation systems. For instance, no
existing Other Production account describes the function that collector
systems provide to wind and solar farms--consolidating power from
individual turbines or panels before interconnection to the grid. The
Commission typically uses accounting guidance to clarify how best to
account for an item among several available accounts. Creating new Wind
Production, Solar Production, and Other Renewable Production
subfunctions is therefore necessary to provide uniformity, consistency,
and transparency to reduce risk of errors in accounting and reporting.
---------------------------------------------------------------------------

    \88\ See Clean Energy Associations NOPR Comments at 6.
---------------------------------------------------------------------------

    48. First, we adopt the NOPR's proposals to separate reporting of
wind towers, turbines, foundations, and transformers. Wind towers,
turbines, foundations, and transformers are different items with
separate purposes and potentially distinct service lives, and should
therefore be tracked in separate accounts. While Clean Energy
Associations note that these assets are often retired together,\89\ we
have assessed that these assets may feature distinct depreciation lives
supporting separate accounts. We also note that, while vendor invoices
are used for recording costs in construction work in progress that
becomes plant in service, these invoices do not determine the
unitization of plant in service by account under the USofA
instructions.\90\
---------------------------------------------------------------------------

    \89\ Id. at 13, 19.
    \90\ Costs included in capitalization are explained in 18 CFR
part 101, Electric Plant Instruction Nos. 1. Classification of
electric plant at effective date of system of accounts (Major
utilities), 2. Electric Plant to Be Recorded at Cost, 3. Components
of construction cost, and 4. Overhead Construction Costs.
---------------------------------------------------------------------------

    49. We also adopt the NOPR's proposal to create separate GSU and
inverter accounts within the Solar Production subfunction. Like the
wind turbine, tower, foundation, and transformer accounts, establishing
separate accounts is warranted because solar inverters are both
separate equipment from, and do not serve the same function as, power
station transformers. We note that we do not control how vendors
describe the work performed during construction on invoices, and the
company unitizes the costs (into retirement units) after the project is
closed and records the costs to the appropriate plant accounts. Again,
we reiterate that vendor invoices may inform about certain activities
performed during construction, but asset unitization is performed when
the project is complete and available to be placed in service.
    50. In addition, we adopt the NOPR's proposal to create Collector
System accounts within the new Solar Production and Wind Production
subfunctions. However, we also agree with Clean Energy Associations
that the definitions of the proposed collector systems in Account 338.5
and Account 338.26 require certain revisions for consistency.\91\ We
have revised the Wind Production subfunction Account 338.26 definition
(and the Energy Storage function Account 387.5 definition) to mirror
the Solar Production collector system definition in Account 338.5.
---------------------------------------------------------------------------

    \91\ See Clean Energy Associations NOPR Comments at 11-12.
---------------------------------------------------------------------------

    51. We decline to grant Clean Energy Associations' request that we
adopt a separate Production Plant account for the substation.\92\ This
equipment should be recorded either to Account 353 (Station Equipment)
for transmission, or Account 362 (Station Equipment) for distribution.
We note that transmission-level substations have historically been, and
will remain, considered transmission plant for accounting purposes.
While we recognize that this classification may be inconvenient for
utilities that otherwise own only Generation or General Plant function
assets, the true function of the substation--providing transmission-
level voltage to a wire system--governs its classification.
---------------------------------------------------------------------------

    \92\ See id. at 7-8.
---------------------------------------------------------------------------

    52. However, we grant several of Clean Energy Associations'
requests for clarification,\93\ and so clarify account text as
described herein. First, we have revised the Collector System account
definitions to include static capacitors and reactors in the same
account because they serve similar functions within collector systems.
We note, however, that reactors can serve multiple purposes and are
therefore listed in multiple accounts, and should be recorded to the
appropriate account based on their operational purpose. Second, we have
revised the new Collector System account definitions (Accounts 338.5
and 338.26, as well as Account 387.5 in the new energy storage
function) to indicate that: (1) the collector system end-point extends
up to, but does not include, the substation prior to interconnection to
the grid; and (2) to exclude the cost of transformers and other
equipment used to interconnect to transmission or distribution lines.
We agree with Clean Energy Associations that this revision is needed to
harmonize the solar and wind collector system definitions with our
existing accounts for conventional generation. Third, we clarify that
DC collector systems should be recorded in the Collector System
accounts and revise the Account 338.5 and 338.26 definitions to remove
``once it has been stepped up.'' This revision resolves confusion and
furthers the NOPR's intent to include DC collector systems within the
Collector System account definitions.
---------------------------------------------------------------------------

    \93\ See id. at 7 (suggesting inclusion of static capacitors and
reactors in the same account), 12 (requesting clarification on the
collector system end point), 8-9 (requesting clarification on DC
collector system recording).
---------------------------------------------------------------------------

    53. Next, we decline to provide an exhaustive list of the equipment
that should be recorded in the Other Accessory Electrical Equipment
accounts.\94\ We reiterate that operational purpose of equipment,
rather than equipment name, determines appropriate account
classification, and that account equipment lists are meant to be
illustrative, not prescriptive. Attempting to provide an exhaustive
list of equipment to be recorded to the Other Accessory Electrical
Equipment account risks over- and under-inclusion of equipment that
should be booked to that account based on functional purpose. To
further clarify the purposes of each account, we have revised their
definitions and instructions to emphasize that Collector System
accounts are for equipment used to transport and consolidate the power
fed from individual generation units (solar panels, wind turbines),
while the equipment recorded in the Other Accessory Electrical
Equipment account supports the generator in the action of generating
power.
---------------------------------------------------------------------------

    \94\ See id. at 17-18 (requesting specification of all equipment
that should be recorded in Other Accessory Equipment accounts).
---------------------------------------------------------------------------

    54. We also adopt the NOPR's proposal to create GSU accounts within
the new Wind Production and Solar Production subfunctions. We note
that,

despite commenters' suggestion to the contrary,\95\ this decision is
consistent with Commission precedent in Kentucky Utilities Company.\96\
There, the Commission considered whether the costs of GSU transformers
that step up voltage to the transmission system \97\ should be included
in transmission rates. It determined that, while the costs of such GSU
transformers should be assigned to generators for rate purposes,\98\
for accounting purposes ``GSU transformers are not used in the
generation of power, and thus should not be booked to production
accounts.'' \99\
---------------------------------------------------------------------------

    \95\ See Clean Energy Associations NOPR Comments at 9-10;
Utility Associations NOPR Comments at 7-8.
    \96\ See Opinion No. 432, 85 FERC ] 61,274.
    \97\ Id. at 62,109 n.33 (``A GSU transformer is an electrical
device that transforms power from a lower voltage to a higher
voltage. The GSU transformers in question in this proceeding are
those which step-up voltages at the generation level to higher
voltages at the [transmission level].'')
    \98\ Id. at 62,112.
    \99\ Id. at 62,112 n.37.
---------------------------------------------------------------------------

    55. Utility Associations misread Kentucky Utilities Company in
arguing that it conflicts with the NOPR's proposed GSU account
definitions.\100\ They question how the proposed Production Plant GSU
accounts are consistent with the Commission's statement in Kentucky
Utilities Company that ``GSU transformers are not used in the
generation of power, and thus should not be booked to production
accounts.'' \101\ This confusion appears to derive from the fact that,
unlike traditional generation sources that have a single GSU that
steps-up the generator voltage to transmission or distribution levels,
renewable plants have two step-up transformers: one GSU located on the
low voltage side of the collector system, and another step-up
transformer at the substation, that, as in conventional power plants,
steps up voltage to connect to the transmission or distribution system.
While these assets are both step-up transformers, they serve different
functional purposes--and therefore should be reported to different
accounts. The GSU transformers at issue in Kentucky Utilities Company
stepped up voltage to the transmission system.\102\ The GSU accounts
that we create here for the new Solar Production and Wind Production
subfunctions instead are designated for transformers that step up
voltage to support the collector systems. These GSUs do not directly
interconnect with transmission and distribution power grids. Therefore,
Kentucky Utilities Company is inapposite. To further clarify the GSU
assets that belong in the new Production subfunction accounts, however,
we revise Accounts 338.6 and 338.27 (and Energy Storage function
Account 387.6) to expressly exclude transformers and other equipment
that step up voltage or frequency for the purposes of transmission or
distribution. Those assets are more appropriately included in
transmission or distribution Account 353 (Station Equipment) or Account
362 (Station Equipment), respectively.
---------------------------------------------------------------------------

    \100\ Utility Associations NOPR Comments at 7-8.
    \101\ Opinion No. 432, 85 FERC at 62,112 n.37.
    \102\ Id. at 62,109 n.33 (specifying that ``[t]he GSU
transformers in question in this proceeding are those which step-up
voltages at the generation level to higher voltages at the
[transmission level].'').
---------------------------------------------------------------------------

    56. Clean Energy Associations also misread Kentucky Utilities
Company.\103\ They argue that Kentucky Utilities Company requires the
Commission to include the substation MPT and equipment located beyond
the high side of the substation MPT within the GSU accounts. In doing
so, Clean Energy Associations mistake Kentucky Utilities Company's
holding on rate treatment for one applying to accounting treatment. To
the contrary, Kentucky Utilities Company expressly forbade recording
the cost of GSU equipment beyond the high side of the substation MPT to
production plant accounts, even while noting that the GSUs serve
generators for rate allocation purposes.\104\ Clean Energy
Associations' references to Pacific Gas & Electric Co. and Order No.
827 are even less relevant.\105\ In Pacific Gas & Electric Co., the
Commission distinguished that rate case from Kentucky Utilities Company
in finding that the facilities in the two cases were different and held
that bulk transmission lines configured as loop facilities should be
allocated to transmission rates. The Commission's order in Pacific Gas
& Electric Co. said nothing about the accounting treatment for the
substation MPT and equipment located beyond the high side of the
substation MPT.\106\ The Commission's illustrative footnote in Order
No. 827, which required non-synchronous generators to provide dynamic
reactive power at the high-side of the generator substation,\107\
similarly did not disturb our precedent that transformers used to step
up voltage for the purpose of transmission or distribution should not
be recorded to Production Plant accounts.\108\ Therefore, our decision
to limit the equipment that is recorded in the new GSU accounts to
equipment that steps up voltage on the low side of the MPT is
consistent with Commission precedent.
---------------------------------------------------------------------------

    \103\ Clean Energy Associations NOPR Comments at 9-10.
    \104\ Compare Opinion No. 432, 85 FERC at 62,112 n.37 (``GSU
transformers are not used in the generation of power and thus should
not be booked to production plant accounts.'') with id. at 62,112
(``[I]t has become increasingly important to recognize the role that
GSUs perform in support of generation as it pertains to the
allocation of costs.'').
    \105\ See Clean Energy Associations NOPR Comments at 9-10
(citing Pacific Gas & Electric Co., 106 FERC ] 61,144 at P 19 (``GSU
transformers . . . are located at generation stations and [are] used
solely to increase the voltage of electric energy produced by
generators to the higher voltages necessary for bulk power
transmission to load centers.''); Order No. 827, 155 FERC ] 61,277
at P 13 n.31 (``[T]he generator substation would be the substation
for a wind [or solar] generator that separates the low-voltage
collector system from the higher voltage elements of the
Interconnection Customer Interconnection Facilities that bring the
generator's energy to the Point of Interconnection.'').
    \106\ Pacific Gas & Electric Co., 106 FERC ] 61,144 at PP 19-20.
    \107\ Order No. 827, 155 FERC ] 61,277 at P 13.
    \108\ See Opinion No. 432, 85 FERC at 62,112 n.37 (``GSU
transformers are not used in the generation of power and thus should
not be booked to production plant accounts.'').
---------------------------------------------------------------------------

    57. In response to Clean Energy Associations' concerns about where
to record the substation MPT given alleged conflict between proposed
collector system definitions in Accounts 338.5, 338.26, and 387.5 and
the Station Equipment in existing Account 353,\109\ we note first that
Clean Energy Associations misstate the NOPR's proposed collector system
definition in Account 338.5.\110\ The NOPR's Account 338.5 definition
does not overlap with the definition of Account 353. As explained
above, we have revised the definitions in Accounts 338.26 and 387.5 to
align with the definition in Account 338.5 at Clean Energy
Associations' request.\111\ This change resolves the overlap with
Account 353 that concerned Clean Energy Associations. Equipment at and
beyond the substation serve transmission and distribution
interconnection functions and should accordingly be recorded in the
transmission and distribution accounts.
---------------------------------------------------------------------------

    \109\ Clean Energy Associations NOPR Comments at 10-11 (citing
NOPR proposed Accounts 338.5, 338.26, and 387.5; 18 CFR part 101,
Account 353).
    \110\ Compare NOPR, proposed Account 338.5 (``This account shall
include all cost of cabling, junction boxes, connection cabinets,
and all facilities and devices (such as static capacitors) that are
used to transport and consolidate the power fed from individual
solar panels, once it has been stepped-up, to the substation prior
to interconnection to the grid.'') with Clean Energy Associations
NOPR Comments at 10-11 (quoting NOPR proposed Accounts 338.5,
338.26, and 387.5 text as: ``This account shall include all cost of
cabling, junction boxes, connection cabinets, and all facilities
that are installed beyond the high side of the GSU transformer and
the transmission or distribution point of interconnection.'').
    \111\ See supra P 50; see also Clean Energy Associations NOPR
Comments at 11-12.

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

    58. Regarding Clean Energy Associations' request for clarification
on allocation of clearing and grading, permitting, and site civil
costs,\112\ we note that Electric Plant Instruction Nos. 3, 8(A), and
9(A) apply to all plant in service and have for several decades. We do
not intend to change application of these instructions in this docket.
We find the text of these instructions to be sufficient and do not
require modification.
---------------------------------------------------------------------------

    \112\ See Clean Energy Associations NOPR Comments at 15-17.
---------------------------------------------------------------------------

    59. We also adopt the NOPR's proposal to create O&M accounts to
support the new production subfunctions, but we consolidate the
specific accounts proposed in response to comments. We are persuaded by
Utility Associations' argument that the new generation subfunctions are
simpler, and less labor intensive to operate and maintain than steam
and nuclear generation, and that therefore the limited rate-setting
benefits of separating some of these costs are likely outweighed by the
additional burden they create.\113\ We believe that the accounts that
Utility Associations propose appropriately streamline the O&M accounts
while still providing for sufficient detail to meaningfully segregate
costs, as requested by Dominion.\114\ However, we are also persuaded by
Dominion's request to retain the miscellaneous maintenance expense
accounts to house expenses that do not clearly fall within other
specified accounts, and so create a miscellaneous expense account
alongside the others proposed by Utility Associations.
---------------------------------------------------------------------------

    \113\ See Utility Associations NOPR Comments at 7, app. A.
    \114\ Dominion NOPR Comments at 3.
---------------------------------------------------------------------------

    60. As such, we create only those maintenance accounts recommended
by the Utility Associations,\115\ plus miscellaneous maintenance
expense accounts. We therefore also renumber the maintenance accounts.
For solar, these accounts will now be numbered as follows: Account
558.7 (Maintenance of Solar Panels, Structures, and Equipment (Major
only)), Account 558.8 (Maintenance of Computer Hardware (Major only)),
Account 558.9 (Maintenance of Computer Software (Major only)), Account
558.10 (Maintenance of Communication Equipment (Major only)), Account
558.11 (Maintenance of Miscellaneous Solar Generation Plant (Major
only)), and Account 558.12 (Maintenance of Solar Generation Plant
(Nonmajor only)). For wind, these accounts will now be numbered as
follows: Account 558.13 (Operation Supervision and Engineering),
Account 558.14 (Wind Turbine Generation and Other Plant Operating
Expenses (Major only)), Account 558.15 (Reserved), Account 558.16
(Rents), Account 558.17 (Operation Supplies and Expenses (Nonmajor
only)), Account 558.18 (Maintenance Supervision and Engineering (Major
only)), Account 558.19 (Maintenance of Wind Turbines, Structures, and
Equipment (Major only)), Account 558.20 (Maintenance of Computer
Hardware (Major only)), Account 558.21 (Maintenance of Computer
Software (Major only)), Account 558.22 (Maintenance of Communication
Equipment (Major only)), Account 558.23 (Maintenance of Miscellaneous
Wind Generation Plant (Major only)), and Account 558.24 (Maintenance of
Wind Generation Plant (Nonmajor only)).
---------------------------------------------------------------------------

    \115\ We correct the naming convention for the accounts for
maintenance of communication equipment to refer to ``communication
equipment'' rather than ``communications equipment,'' as proposed by
Utility Associations, consistent with references to communication
equipment accounts throughout this rule and the USofA.
---------------------------------------------------------------------------

    61. In addition, in response to Clean Energy Associations' comment
regarding the appropriate function for the new O&M accounts,\116\ we
clarify that operations and maintenance costs are related to Plant
recorded to Production Accounts. Our note that collector systems are
distributive in design was intended to be illustrative of how these
systems operate and not to indicate that collector systems are part of
the Distribution Plant function.
---------------------------------------------------------------------------

    \116\ See Clean Energy Associations NOPR Comments at 19.
---------------------------------------------------------------------------

    62. Next, we address the subjects on which the NOPR requested
comment. We are persuaded by Utility Associations' comment that
retaining the ``Other Production'' account will preserve existing
flexibility for recording assets in the face of technological
change.\117\ We therefore retain the ``Other Production'' title for
this generation subfunction.
---------------------------------------------------------------------------

    \117\ See Utility Associations NOPR Comments at 7.
---------------------------------------------------------------------------

    63. In response to comments regarding accounting treatment for
tidal and wave resources,\118\ we have determined that, because these
resources do not fit well within the existing Hydraulic Production
subfunction, they should be placed within the new Other Renewable
subfunction. Accordingly, in this final rule we create an Other
Renewable Production subfunction instead of the NOPR's proposed Other
Non-Hydro Renewable Production subfunction.
---------------------------------------------------------------------------

    \118\ Carl Pechman NOPR Comments at 3-4.
---------------------------------------------------------------------------

    64. Lastly, as for hydrogen, we agree with Utility Associations
that existing and proposed public utility accounts are sufficient for
current and anticipated uses of hydrogen as an electric fuel or energy
storage medium and that no new public utility accounts are therefore
needed.\119\ We reiterate that, for either electric generation or
energy storage, the recording and reporting of hydrogen specific fuel,
equipment, and operations and maintenance expenses should follow the
most appropriate account instructions for the function it is used to
fulfill.
---------------------------------------------------------------------------

    \119\ Utility Associations Comments at 9.
---------------------------------------------------------------------------

    65. Finally, we will not at this time propose additional guidance
for electric utility hydrogen reporting or new natural gas pipeline
hydrogen accounts. We will consider the need for such additional
guidance and natural gas pipeline USofA revisions in separate
proceedings, as necessary.

B. Creation of Energy Storage Function and Accounts

1. NOPR
    66. The Commission proposed a new USofA function for energy storage
in order to reduce recordkeeping, depreciation, and retirement burden
and opportunity for error deriving from energy storage reporting across
generation, transmission, and distribution functions.\120\ The
Commission proposed to structure the new Energy Storage Plant function
similar to those for other USofA functions, including the new wind,
solar, and other renewable subfunctions, as follows: (1) Account 387.1
(Land and Land Rights); (2) Account 387.2 (Structures and
Improvements); (3) Account 387.11 (Miscellaneous Energy Storage
Equipment); (4) Account 387.12 (Asset Retirement Costs for Energy
Storage); (5) Account 387.5 (Collector System); (6) Account 387.6
(Generator Step-up Transformers (GSU)); and (7) Account 387.7
(Inverters). The Commission also proposed to add a new Account 387.3
(Energy Storage Equipment), which would include the primary energy
storage equipment in this function as described in the proposed
instructions. In addition, the Commission proposed to create Energy
Storage function plant accounts for computer hardware, software, and
communication equipment, as described below.
---------------------------------------------------------------------------

    \120\ NOPR, 180 FERC ] 61,050 at PP 44, 48-49.
---------------------------------------------------------------------------

    67. The Commission further proposed to create an Energy Storage
Expense function within the Operation and Maintenance Expense Chart of

Accounts, including: (1) Account 577.1 (Operation Supervision and
Engineering); (2) Account 577.4 (Rents); (3) Account 577.5 (Operation
Supplies and Expenses (Nonmajor only)); (4) Account 578.1 (Maintenance
Supervision and Engineering (Major only)); (5) Account 578.2
(Maintenance of Structures (Major only)); (6) Account 578.4
(Maintenance of Collector Systems (Major only)); (7) Account 578.5
(Maintenance of Generator Step-up Transformers (Major only)); (8)
Account 578.6 (Maintenance of Inverter Expenses (Major only)); (9)
Account 578.10 (Maintenance of Miscellaneous Other Energy Storage Plant
(Major only)); (10) Account 578.11 (Maintenance of Other Energy Storage
Plant (Nonmajor only)); (11) Account 577.2 (Operation of Energy Storage
Equipment (Major only)); (12) Account 577.3 (Storage Fuel); and (13)
Account 578.3 (Maintenance of Energy Storage Equipment (Major only))
(as well as the computer hardware, software, and communication
equipment accounts described below).\121\ Lastly, the Commission
proposed reclassifying pumped storage to be recorded within the Energy
Storage function of the USofA rather than the Hydraulic Production
subfunction.
---------------------------------------------------------------------------

    \121\ Id. PP 50-51.
---------------------------------------------------------------------------

2. Comments
    68. Utility Associations and Clean Energy Associations support the
NOPR's proposal to establish a separate function for Energy
Storage.\122\ Utility Associations, however, propose three revisions
regarding Energy Storage related to functional reporting, O&M accounts,
and pumped storage.
---------------------------------------------------------------------------

    \122\ Clean Energy Associations NOPR Comments at 5; Utility
Associations NOPR Comments at 11.
---------------------------------------------------------------------------

    69. First, Utility Associations request removal of subpart c from
Account 387.3, which would require accounting records to show monthly
functional activity of storage assets, as well as the NOPR's proposed
functional MWh reporting on pages 414-16 of Form No. 1.\123\ Utility
Associations argue that these requirements conflict with the goal that
motivated moving energy storage to a separate function--removing
burdensome requirements to track and frequently reclassify storage
assets based on changes in function.\124\ Rather, Utility Associations
recommend following Order No. 784's approach of allowing the accounting
for energy storage assets that serve more than one function to follow
the allocation decisions made in the relevant rate proceedings.
---------------------------------------------------------------------------

    \123\ Utility Associations NOPR Comments at 11-12.
    \124\ Id. at 11 (citing NOPR, 180 FERC ] 61,050 at P 45
(explaining that ``[b]y creating one new dedicated storage function,
utilities would no longer be required to track and frequently
reclassify storage assets based on changes in function, and thus,
after the initial burden to implement the changes proposed to be
adopted here, the continuing compliance burden would be
significantly reduced.'')).
---------------------------------------------------------------------------

    70. Further, as for the renewables O&M accounts, Utility
Associations suggest that, given the relative simplicity of energy
storage operations and maintenance, the Commission should limit the
energy storage O&M accounts to those listed in Appendix A to their
comments.\125\
---------------------------------------------------------------------------

    \125\ Id. at 13, app. A.
---------------------------------------------------------------------------

    71. Lastly, Utility Associations recommend against reclassifying
pumped storage assets to the new Energy Storage function.\126\ Utility
Associations explain that pumped storage is not a new technology and
fits more naturally within existing hydroelectric generation accounts
given similarities in the lives of the facilities, permitting
processes, engineering, operation, and staffing.
---------------------------------------------------------------------------

    \126\ Id. at 13.
---------------------------------------------------------------------------

3. Commission Determination
    72. We adopt the NOPR's proposal to establish a separate function
for Energy Storage, with a few revisions, discussed below.
    73. We agree with Utility Associations that the proposed
instructions to subpart c of Account 387.3 and the associated reporting
on pages 414-16 of the FERC Form No. 1 are needlessly burdensome and
contrary to the purpose of this final rule, and thus remove them.\127\
---------------------------------------------------------------------------

    \127\ See id. at 11-12.
---------------------------------------------------------------------------

    74. We are also again persuaded by Utility Associations to
consolidate the list of O&M accounts that we create for energy storage
given the comparative operational simplicity of storage systems,\128\
similar to our consolidation of the renewable production O&M
accounts.\129\ However, we add a miscellaneous maintenance account to
the list proposed by Utility Associations. The new accounts will now be
as follows: Account 578.2 (Maintenance of Energy Storage Equipment and
Structures (Major only)), Account 578.3 (Maintenance of Computer
Hardware (Major only)), Account 578.4 (Maintenance of Computer Software
(Major only)), Account 578.5 (Maintenance of Communication Equipment
(Major only)), Account 578.6 (Maintenance of Miscellaneous Other Energy
Storage Plant (Major only)), and Account 578.7 (Maintenance of Other
Energy Storage Plant (Nonmajor only)).
---------------------------------------------------------------------------

    \128\ Again we correct the naming convention for the account for
maintenance of communication equipment to refer to ``communication
equipment'' rather than ``communications equipment,'' as proposed by
Utility Associations, consistent with references to communication
equipment accounts throughout this rule and the USofA.
    \129\ See Utility Associations NOPR Comments at 13.
---------------------------------------------------------------------------

    75. Last, we are persuaded by Utility Associations' request not to
reclassify pumped storage assets to the new Energy Storage
function.\130\ We agree with Utility Associations that pumped storage
assets better fit within existing hydroelectric production accounts
given the nature of these assets. This decision is particularly
reasonable given our prior decision to streamline the Energy Storage
function O&M accounts that we otherwise create in this final rule--the
hydroelectric O&M accounts are better tailored to the relative
complexity of operating and maintaining pumped storage assets.
---------------------------------------------------------------------------

    \130\ See id.
---------------------------------------------------------------------------

C. Accounting Treatment for Renewable Energy Credits

1. NOPR
    76. The Commission proposed a number of USofA revisions to codify
treatment of RECs.\131\ The Commission proposed to retitle General
Instruction No. 21 (Allowances) to Allowances and Renewable Energy
Credits (RECs), and to update the instruction to include REC reporting
and correct typos. These proposed revisions include: (1) proposing to
remove the reference to the Clean Air Act in Part A to make the
instruction less restrictive and adding reference to the proposed new
accounts described below; (2) moving the last sentence of Part A to the
beginning of Part B; (3) amending Parts A and C to refer to historical
cost to make the instruction consistent with other existing regulatory
text in the USofA; \132\ (4) correcting Part D to remove an erroneous
repeated reference to ``from inventory''; (5) updating the text in Part
E to include references to RECs in addition to allowances and in Part F
to clarify the inventory accounting for RECs; (6) replacing the
language included in existing Part G with language that would instead
provide guidance for cases in which allowances and RECs may be
considered as prepayments; (7) moving the existing language in Part G
addressing penalties to Part H, and removing the reference to the EPA
to make the instruction applicable to similar items created by

other regulatory bodies; (8) moving and updating the existing language
in Part H to a newly proposed Part I that would address gains and
losses on dispositions of allowances and RECs; and (9) adding a new
Part J that would address the revenues for RECs associated with the
sale of energy.
---------------------------------------------------------------------------

    \131\ NOPR, 180 FERC ] 61,050 at P 52.
    \132\ 18 CFR part 101, General Instruction No. 21 (Allowances).
---------------------------------------------------------------------------

    77. Similarly, the Commission proposed to revise the text to
Accounts 158.1 (Allowance Inventory) and 158.2 (Allowances Withheld) to
remove references to the Environmental Protection Agency, to reference
historical cost, and to include a new note to address prepayments in
accordance with the proposed text in General Instruction No. 21.\133\
The Commission also proposed to renumber Account 509 (Allowances) to
Account 509.1, delete the reference to sulfur dioxide in that account,
and create for RECs two new inventory accounts and, under the Steam
Power Generation subfunction, two new expense accounts: Account 158.3
(Bundled Renewable Energy Credits Inventory), Account 158.4 (Unbundled
Renewable Energy Credits Inventory), Account 509.2 (Bundled Renewable
Energy Credits), and Account 509.3 (Unbundled Renewable Energy
Credits).\134\ And, consistent with the newly proposed instructions in
Part I of General Instruction No. 21, the Commission proposed to add
Account 411.11 (Gains from the Disposition of RECs) and Account 411.12
(Losses from the Disposition of RECs). Last, the Commission clarified
that the Commission considered RECs to be inventory, and noted that
Commission accounting and reporting regulations trump conflicting
regulations by other accounting authorities.
---------------------------------------------------------------------------

    \133\ NOPR, 180 FERC ] 61,050 at PP 53-57.
    \134\ We use the term ``bundled'' to convey that the RECs are
sold with their associated energy, and the term ``unbundled'' to
convey that the RECs are sold separately from the energy.
---------------------------------------------------------------------------

2. Comments
    78. Five parties commented on the NOPR's proposal to codify
accounting treatment for RECs. These comments address: (1) the need for
revisions or additional accounts to capture information on a broader
range of credit mechanisms; (2) placement of REC expense accounts
within the USofA; (3) interaction with REC treatment by other governing
bodies; and (4) timing questions related to implementation, recovery,
and REC expiration. RESA notes the similarities between the NOPR's REC
proposals and those recommended by RESA in emphasizing its support for
the NOPR overall.\135\ PG&E and SDG&E, Utility Associations, and
Dominion, however, suggest that the Commission host a technical
conference on REC accounting treatment to ensure workability in light
of the diversity of REC instruments.\136\
---------------------------------------------------------------------------

    \135\ RESA NOPR Comments at 5.
    \136\ Dominion NOPR Comments at 4-5; PG&E and SDG&E NOPR
Comments at 1, 2, 5; Utility Associations NOPR Comments at 18.
---------------------------------------------------------------------------

    79. Utility Associations and Carl Pechman request revisions to the
NOPR's proposals to capture data on utilities' investments in a broader
range of environmental credit mechanisms. Utility Associations argue
that the proposed retitling of General Instruction No. 21 to Allowances
and Renewable Energy Credits and corresponding changes to the text of
the instruction and related accounts do not fully reflect the scope of
developments in the industry.\137\ Rather, Utility Associations
recommend that the Commission extend the provisions of the USofA to
consider a broader variety of environmental credits that are either
used to: (1) avoid or reduce greenhouse gas emissions to the
atmosphere; or (2) convey environmental attributes of renewable
electricity generation. Utility Associations also suggest that the
Commission could use a proposed technical conference to further
identify underlying characteristics of these types of instruments that,
if met, would qualify for accounting in the same manner as allowances
and RECs. Carl Pechman echoes this request, suggesting broadening new
account definitions to incorporate Zero Emissions Credits (ZEC) and
carbon offsets.\138\
---------------------------------------------------------------------------

    \137\ Utility Associations NOPR Comments at 19-20.
    \138\ Carl Pechman NOPR Comments at 1, 4.
---------------------------------------------------------------------------

    80. Carl Pechman further questions the NOPR's proposal to create a
single category for ``allowances'' without more detail.\139\ Carl
Pechman suggests accounting for such allowances together without
distinction misses an opportunity to make valuable data about utility
investments in diverse environmental credits available to Public
Utility Commissions and other interested stakeholders.
---------------------------------------------------------------------------

    \139\ Id. at 6-9.
---------------------------------------------------------------------------

    81. Utility Associations also question the placement of the new
Allowance expense accounts within the USofA.\140\ They recommend that
the Commission place the new Allowances account within the Other Power
Supply expense subfunction rather than within the Steam Power
Generation subfunction. Utility Associations explain that, because
RECs, unlike sulfur dioxide allowances, typically do not derive from
steam power generation, the Steam Power Generation subfunction is not
an appropriate place for those costs to be reported.
---------------------------------------------------------------------------

    \140\ Utility Associations NOPR Comments at 20-21.
---------------------------------------------------------------------------

    82. In addition, some commenters voice concerns about alignment
between the NOPR's REC accounting treatment and that of other
regulatory bodies. First, several commenters urge the Commission to
consider the Financial Accounting Standards Board's ongoing work to
address the underlying economic and accounting issues associated with
RECs (and other similar instruments) before issuing any final rule or
guidance.\141\ Utility Associations further advocate for the Commission
to strive to align the final rule's requirements and Generally Accepted
Accounting Principles (GAAP), to the extent possible, to avoid costs of
dual recordkeeping.\142\
---------------------------------------------------------------------------

    \141\ Carl Pechman NOPR Comments at 9; PG&E and SDG&E NOPR
Comments at 1; Utility Associations NOPR Comments at 18-19.
    \142\ Utility Associations NOPR Comments at 19.
---------------------------------------------------------------------------

    83. These commenters also made several suggestions with respect to
state ratemaking processes. First, PG&E and SDG&E request that the
Commission's general instructions concerning REC reporting under the
USofA explicitly clarify that RECs recorded to any FERC account are not
intended to impact the retail rates of public utilities.\143\ In
addition, PG&E and SDG&E request the Commission to explicitly consider
instances where regulatory recovery occurs at the time of renewable
electric energy production, and reconsider its decision in Order No.
552 precluding the use of inventory methods in Commission filings that
reflect the effects of the ratemaking treatment granted by state
commissions.\144\ PG&E and SDG&E and Utility Associations argue that,
where the cost of the REC is bundled with electric energy and recovery
from retail customers at the time of renewable electricity energy
generation, the Commission should allow the entity to charge the full
cost of the bundled product to Account 555 (Purchased Power) at the
time of energy usage.\145\ Commenters argue that doing so is necessary
to ensure that accounting reflects the economic effects of the state
ratemaking treatment and that the revenue and expense associated with
the RECs match.
---------------------------------------------------------------------------

    \143\ PG&E and SDG&E NOPR Comments at 2-5.
    \144\ Id. at 5.
    \145\ Id.; Utility Associations NOPR Comments at 22-23.
---------------------------------------------------------------------------

    84. Further, Utility Associations and Dominion comment on the
treatment of expired RECs. Utility Associations request specific
guidance on how to report expired RECs that are no longer

eligible to be used to comply with the applicable renewable energy
standard for which they were initially created.\146\ They recommend
that expired RECs be recorded in Account 411.12, Losses from
Disposition of RECs. Dominion emphasizes that RECs may be created or
purchased for reasons unrelated to compliance with a specific renewable
energy standard, and therefore requests that the Commission adopt an
expired RECs definition flexible enough to account for potential REC
benefits aside from renewable energy standard application.\147\
---------------------------------------------------------------------------

    \146\ Utility Associations NOPR Comments at 21-22.
    \147\ Dominion NOPR Comments at 4.
---------------------------------------------------------------------------

    85. Utility Associations are also concerned about the flexibility
of the NOPR's proposed REC accounting treatment as applied to REC
valuation methodologies. Utility Associations worry that the NOPR's
proposal to account for RECs as inventory and the issuance of RECs from
inventory on a vintage basis using a monthly weighted average of
historical cost determination risks mismatch with the variety of REC
markets and treatment.\148\ Therefore, Utility Associations advocate
for the Commission to allow for more flexibility in valuation method to
align the Commission's accounting requirements with compliance
requirements, business practices, and retail ratemaking treatments.
---------------------------------------------------------------------------

    \148\ Utility Associations NOPR Comments at 21.
---------------------------------------------------------------------------

    86. Lastly, noting the diversity in current accounting practices
and ratemaking treatment for RECs and other similar instruments across
the utility industry, Utility Associations recommend prospective
adoption of any final rule or accounting guidance related to RECs in
order to allow for an adequate transition period for utilities.\149\
Such prospective adoption would, according to Utility Associations,
ensure utilities' existing accounting and reporting treatment continues
to align with their current ratemaking treatment, while also providing
utilities time to transition operational and accounting practices for
future impacts on ratemaking and avoiding unnecessary additional cost
and complexity.
---------------------------------------------------------------------------

    \149\ Id. at 20.
---------------------------------------------------------------------------

3. Commission Determination
    87. We adopt the NOPR's proposal to codify accounting and reporting
treatment for RECs, with a few revisions, discussed below.
    88. Despite several commenters' requests,\150\ we decline to host a
technical conference on REC treatment implementation. We note that the
majority of REC comments received on the NOPR do not conflict with the
NOPR's proposed REC accounting treatment but rather relate to
practicalities of rule implementation and matters outside the area of
accounting and reporting. This rule addresses those comments that
require deviation from the NOPR's proposals, specifically by broadening
relevant instructions in the USofA and creating accounts to accommodate
all types of environmental credits. Any accounting and reporting
questions that public utilities may have after the issuance of this
final rule can be directed to the Commission's Chief Accountant seeking
informal or formal accounting guidance in a separate docket.
---------------------------------------------------------------------------

    \150\ See Dominion NOPR Comments at 4-5; PG&E and SDG&E NOPR
Comments at 1, 2, 5; Utility Associations NOPR Comments at 18.
---------------------------------------------------------------------------

    89. As noted above, we make a few amendments to the NOPR's proposed
accounting treatment for RECs. First, in response to Utility
Associations' and Carl Pechman's concerns about inclusion of other non-
REC environmental items,\151\ we have decided to update the name of the
proposed Renewable Energy Credit accounts to ``Environmental Credits.''
This retitling will clarify that these accounts are for all types of
environmental credits, including ZECs and other allowances, and not
just those classified as RECs. These accounts will provide for the
recording of any type of environmental credit and allow companies to
maintain granularity as needed (e.g., by designating subaccounts or
other codes for different types of environmental credits unique to
their operations).
---------------------------------------------------------------------------

    \151\ Carl Pechman NOPR Comments at 1, 4; Utility Associations
NOPR Comments at 19-20.
---------------------------------------------------------------------------

    90. However, we decline to make additional granular accounting
mandatory, as Carl Pechman requests.\152\ Such additional granularity
is not necessary. The USofA is a standard framework on which a
utility's accounting system is to be based in order to support the
Commission's statutory responsibilities. However, utilities are not
precluded from tailoring their accounting systems to their own needs,
which is a standard practice, by using subaccounts or other codes to
track more granular detail for managerial or additional regulatory
purposes. Therefore, we adopt the NOPR's proposed changes to General
Instruction No. 21.
---------------------------------------------------------------------------

    \152\ Carl Pechman NOPR Comments at 6-9.
---------------------------------------------------------------------------

    91. Next, we are persuaded by Utility Associations' request to
place the expense accounts for Environmental Credits in the Other Power
Supply expenses sub-function rather than the Steam Generation
subfunction.\153\ We agree that, because environmental credits are not
generally the product of steam generation, their expenses do not belong
in the Steam Generation subfunction. We have accordingly renamed and
renumbered these accounts to Account 555.2 (Bundled Environmental
Credits) and Account 555.3 (Unbundled Environmental Credits).
---------------------------------------------------------------------------

    \153\ See Utility Associations NOPR Comments at 20-21.
---------------------------------------------------------------------------

    92. The other concerns raised by commenters relate to
implementation practicalities rather than the NOPR's proposed
accounting treatment itself. We believe that this final rule provides
sufficient clarification to address these concerns. However, if any
concerns remain, they can be addressed through subsequent informal or
formal accounting guidance issued by the Commission's Chief Accountant.
    93. The first set of these implementation concerns relates to the
potential for inconsistency between Commission accounting treatment and
that employed by other regulatory bodies.\154\ These concerns seem to
derive primarily from the NOPR's proposal to treat RECs as inventory.
---------------------------------------------------------------------------

    \154\ See id. at 18-19; Carl Pechman NOPR Comments at 9; PG&E
and SDG&E NOPR Comments at 1.
---------------------------------------------------------------------------

    94. Our decision to treat environmental credits as inventory is
consistent with the Commission's long-standing policy, first stated in
Order No. 552, of treating emission allowances as inventory, which the
Commission has since extended to other environmental credits. Moreover,
the primary purpose of our accounting rules is to facilitate ratemaking
processes, not necessarily to align with other regulators' accounting
practices, which may be designed to serve different objectives.
Environmental credits, like allowances, are government-created
tradeable property rights designed to promote environmental objectives
that store value and are often utilized in a period other than that in
which they are acquired. In this sense, environmental credits operate
for utilities as an inventoriable asset similar to the value of assets
recorded in Account 151 (Fuel Stock (Major Only)), or Account 154
(Plant Materials and Operating Supplies). Generally, if another

accounting authority's treatment conflicts with the accounting and
financial reporting needed by the Commission to fulfill its statutory
responsibilities, then the Commission's accounting and reporting
regulations prevail.\155\ Finally, while this rule directs utilities to
treat environmental credits as inventory, we recognize that there may
be situations in which utilities have different accounting or rate
treatment as required by their state or other regulatory bodies.
Utilities can record regulatory assets or liabilities to record any
differences between accounting and ratemaking treatment, or maintain
separate records to accommodate the accounting treatment required by
the different regulatory bodies (though, as for any tariff-driven
deviation from standard accounting and FERC Form instructions,
utilities must disclose such alternative accounting in their FERC Form
reports). We also clarify, in response to PG&E and SDG&E's
request,\156\ the accounting in this rulemaking is not intended to
impact retail rates, as indicated above.
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    \155\ See Order No. 552, FERC Stats. & Regs. ] 30,967 at 30,801
(``If GAAP conflicts with the accounting and financial reporting
needed by the Commission to fulfill its statutory responsibilities,
then GAAP must yield. GAAP cannot control when it would prevent the
Commission from carrying out its duty to provide jurisdictional
companies with the opportunity to earn a fair return on their
investment and to protect ratepayers from excessive charges and
discriminatory treatment.'').
    \156\ PG&E and SDG&E NOPR Comments at 2-5.
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    95. Next, we turn to commenters' various timing concerns. We are
unpersuaded by Utility Associations' and PG&E and SDG&E's concerns
about how to report bundled REC costs that are recovered from retail
customers at the time of renewable electricity energy generation.\157\
Existing regulatory accounts are readily available when costs incurred
in one ratemaking period need to be recovered or expensed in
another.\158\ Changes to the NOPR's accounting proposal are therefore
not needed to address these concerns.
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    \157\ Id. at 5; Utility Associations NOPR Comments at 22-23.
    \158\ See, e.g., Account 182.3 (Other Regulatory Assets) and
Account 254 (Other Regulatory Liabilities). These regulatory
accounts are designated for amounts that are probable to be included
in a different period for purposes of developing the rates.
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    96. As for Utility Associations' concerns about where to record
expired RECs,\159\ we agree that expired RECs should be recorded in new
Account 411.12 (Losses from Disposition of Environmental Credits). This
treatment is consistent with the new General Instruction No. 21
Allowances and Environmental Credits, Part I. Similarly, in response to
Dominion's concerns about the non-statutory use of expired RECs,\160\
we note that General Instruction No. 21, Part I, indicates that losses
on speculative trading should be recorded in Account 426.5 (Other
Deductions). As such, no further revision to the accounting treatment
for environmental credits is warranted to address recording of expired
RECs.
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    \159\ See Utility Associations NOPR Comments at 21-22.
    \160\ Dominion NOPR Comments at 4
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    97. Regarding Utility Associations' inventory valuation
concerns,\161\ we note that our preference for weighted average cost
has been in place for Allowances since Order No. 552, which the
Commission has consistently applied to environmental credits in the
decades since. However, we emphasize again that if specific state law
or tariff provisions require utilities to use a different inventory
method, the economic reality of the transaction governs, with
divergence from standard practice noted and explained in the FERC Form
Nos. 1 and 3-Q disclosures.
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    \161\ Utility Associations NOPR Comments at 21.
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    98. Lastly, we clarify for Utility Associations that, as for all
final rules, this final rule will apply only prospectively and will
allow utilities an adequate transition period, as discussed further
below.\162\
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    \162\ See id. at 20.
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D. Creation of Computer Hardware, Software, and Communication Equipment
Accounts

1. NOPR
    99. The Commission proposed new accounts in each function and
subfunction for computer hardware, software, and communication
equipment.\163\ The USofA was updated in 2005 to include accounts for
recording computer hardware, software, and communication equipment
owned by regional transmission organizations (RTO), but did not create
comparable accounts for non-RTO public utilities and licensees to
report these types of assets.\164\ Consequently, non-RTO public
utilities do not record computer hardware, software, and communication
equipment uniformly, with many utilities recording these assets in
general accounts (e.g., Account 303 (Miscellaneous Intangible Plant)
and Account 391 (Office Furniture and Equipment)). To eliminate
ambiguity and ensure greater consistency and transparency in accounting
and reporting, the Commission proposed including computer hardware,
software, and communication equipment accounts in each different
functional area, including the general function.
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    \163\ NOPR, 180 FERC ] 61,050 at P 58.
    \164\ Accounting & Financial Reporting for Public Utilities
Including RTOs, Order No. 668, 70 FR 77627 (Dec. 30, 2005), FERC
Stats. & Regs ] 31,199 (2005) (cross-referenced at 113 FERC ]
61,276), rehearing denied, Order No. 668-A, 71 FR 28513 (May 16,
2006), 115 FERC ] 61,080 (2006).
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    100. The Commission proposed to add three plant accounts and three
maintenance accounts to all functions and subfunctions that currently
lack them, including the new Renewable Generation subfunctions and the
new Energy Storage function.\165\ These accounts are: Accounts 315.1,
324.1, 334.1, 338.9, 338.30, 339.9, 345.1, 351.1, 363.1, 387.8, and
397.1 (Computer Hardware); Accounts 315.2, 324.2, 334.2, 338.10,
338.31, 339.10, 345.2, 351.2, 363.2, 387.9, and 397.2 (Computer
Software); Accounts 315.3, 324.3, 334.3, 338.11, 338.32, 339.11, 345.3,
351.3, 363.3, 387.10, and 397.3 (Communication Equipment); Accounts
513.1, 531.1, 544.1, 553.1, 558.13, 558.33, 559.12, 578.7, 592.2, and
935.1 (Maintenance of Computer Hardware (Major only)); Accounts 513.2,
531.2, 544.2, 553.2, 558.14, 558.34, 559.13, 578.8, 592.3, 935.2
(Maintenance of Computer Software (Major only)); and Accounts 513.3,
531.3, 544.3, 553.3, 558.15, 558.35, 559.14, 578.9, 592.4, 935.3
(Maintenance of Communication Equipment (Major only)). The Commission
added (Major only) to the account names for existing Transmission
Expenses Maintenance Accounts 569.1, 569.2, 569.3, consistent with the
proposed accounts. Because the RTO function only exists for RTOs and
independent system operators, the Commission did not propose this
designation on its accounts (i.e., Accounts 576.2, 576.3, and 576.4).
These accounts have the same descriptions, instructions, and items as
the existing RTO and Transmission function accounts of the same title.
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    \165\ NOPR, 180 FERC ] 61,050 at P 59.
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    101. The Commission also proposed adding a new Electric Plant
Instruction No. 17, Integrated computer hardware, software, and
communication equipment.\166\ The instruction explained that where
computer hardware, software, and communication equipment is integrated
as part of a larger retirement unit, it shall be recorded in the
property account of the retirement unit purchased. It further clarified
that, if this computer hardware, software, or communication equipment
is not integrated, Plant Instruction No. 10 should be followed.
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    \166\ Id. P 60.
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    102. Lastly, the Commission sought comment on whether the
Commission should also create computer hardware,

software, and communication accounts for natural gas pipelines, oil
pipelines, and centralized service companies.\167\
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    \167\ Id. P 61.
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2. Comments
    103. Dominion, Clean Energy Associations, and Utility Associations
commented on the NOPR's proposal to create new accounts within existing
functions for computer hardware, software, and communication equipment.
Dominion and Utility Associations appear to conditionally support the
NOPR's proposals, with some requested revisions, while Clean Energy
Associations oppose them.\168\
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    \168\ See Clean Energy Associations NOPR Comments at 14-15;
Dominion NOPR Comments at 3; Utility Associations NOPR Comments at
14.
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    104. Clean Energy Associations question whether the proposed
accounts are warranted, alleging that they will add administrative
burden with few expected benefits.\169\ Clean Energy Associations
suggest that these costs could better be recorded to Other Accessory
Electric Equipment. In the alternative, Clean Energy Associations
suggest that the Commission should confirm through accounting guidance
that the scheduled retirements approach that most utilities use for
non-structures and improvements related to General Plant may be used
for computer hardware, software, and communication equipment Production
accounts.
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    \169\ Clean Energy Associations NOPR Comments at 14-15.
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    105. Dominion, in contrast, supports the proposed changes regarding
computer hardware and communication equipment, but raises three
concerns regarding software accounting treatment.\170\ First, Dominion
believes that software should remain in Account 303 despite the
potential for some inconsistency in accounting and reporting of
computer software between functions. Second, because software is an
intangible asset and does not have a depreciable service life similar
to production plant, Dominion argues that it is more appropriate to
recognize the amortization of software in Account 404 (Limited Term
Plant Amortization) than Account 403 (Depreciation Expense). Third,
Dominion asserts that the NOPR's proposed accounting guidance conflicts
with recent guidance issued by the Commission's Chief Accountant
regarding cloud computing, and Dominion states that it agrees with the
guidance in that order.\171\ Last, Dominion argues that one function
having different instructions on how to handle software does not
warrant a change to all other functions and subfunctions.\172\ If
software is to be recorded to different functions, Dominion believes
that the Commission should issue guidance on how to account for
software that supports more than one function--specifically, whether to
use the General function or whether allocations to the functions are
required.
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    \170\ Dominion NOPR Comments at 3-4.
    \171\ Id. at 4 (citing Guidance on Accounting for Implementation
Costs Incurred in a Cloud Computing Arrangement that is a Service
Contract, Docket No. AI20-1-000 (Dec. 20, 2019)).
    \172\ Dominion NOPR Comments at 4.
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    106. Utility Associations also support creation of these new plant
accounts, and recommend that balance amounts for computer hardware,
software, and communication equipment that can be readily identified as
dedicated to a particular function be transferred to the new
accounts.\173\ However, Utility Associations note that these assets may
by nature share functionality, and even if not, it may be difficult to
determine that equipment supports a sole functional area. Where
computer hardware, software, or communication equipment is not clearly
dedicated to a sole function, Utility Associations suggest that it
should be recorded in General Plant.
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    \173\ Utility Associations NOPR Comments at 14.
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    107. In addition, Utility Associations make a number of comments on
specific proposed accounts. First, they suggest that the Commission
remove item 1 ``Personal Computers'' entirely or rename it ``Computers
and Similar Items'' to avoid implying that all personal computers must
be tracked functionally.\174\ Utility Associations explain that
personal computers are generally not tracked functionally due to their
short lives, low cost, and frequent transfer among personnel supporting
different functional operations. Eliminating or broadening the item
would mitigate the large, disproportionate burden that functional
tracking of personal computers would require. Next, Utility
Associations recommend allowing utilities to use Accounts 356, 358,
365, and 367 to record fiber optic cable used for transmission and
distribution purposes. Utility Associations explain that fiber optic
cable provides protective capabilities (shield and grounding, vibration
and cable failure detection) and, when used for transmission and
distribution, has a longer life than other communication devices more
consistent with traditional overhead and underground conductors and
devices. Therefore, Utility Associations argue that retaining the
ability to continue to record fiber optic cable to plant Accounts 356,
358, 365 and 367 better aligns depreciation to its appropriate life
span. Last, Utility Associations recommend that the Commission's Chief
Accountant amend Accounting Release No. 15, Vintage Year Accounting for
General Plant Accounts (AR-15), to allow public utilities currently
applying the principles of AR-15 to vintaged General Plant accounts for
computer hardware and communication equipment to continue that practice
for assets that will now be accounted for in the new functional
accounts. Utility Associations explain that this amendment will allow
utilities to continue to record ``auto-retirements'' of assets that are
fully amortized and eliminate the need to track small individual items
of property.
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    \174\ Id. at 14-17.
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    108. Utility Associations and Dominion also responded to the NOPR's
request for comment on the need to create computer hardware, software,
and communication equipment accounts in the USofA for centralized
service companies. Utility Associations recommend adding computer
hardware, software, and communication accounts to the USofA and FERC
Form No. 60 for centralized service companies to better align their
reporting with associated operating companies.\175\ Dominion also
requests that if software is to be recorded to the different functions,
the Commission should issue guidance on how centralized service
companies should account for software that supports more than one