[Federal Register Volume 84, Number 229 (Wednesday, November 27, 2019)]
[Rules and Regulations]
[Pages 65281-65298]
[FR Doc No: 2019-25724]

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DEPARTMENT OF ENERGY

Federal Energy Regulatory Commission

18 CFR Part 35

[Docket No. RM19-5-000; Order No. 864]

Public Utility Transmission Rate Changes To Address Accumulated
Deferred Income Taxes

AGENCY: Federal Energy Regulatory Commission.

ACTION: Final rule.

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SUMMARY: In this final rule, the Federal Energy Regulatory Commission
(Commission) is requiring public utility transmission providers with
transmission formula rates under an Open Access Transmission Tariff, a
transmission owner tariff, or a rate schedule to revise those
transmission formula rates to account for changes caused by the Tax
Cuts and Jobs Act of 2017. The Commission is requiring public utilities
with transmission formula rates to include a mechanism in those
transmission formula rates to deduct any excess accumulated deferred
income taxes (ADIT) from or add any deficient ADIT to their rate bases.
Public utilities with transmission formula rates are also required to
incorporate a mechanism to decrease or increase their income tax
allowances by any amortized excess or deficient ADIT, respectively.
Finally, the Commission is requiring public utilities with transmission
formula rates to incorporate a new permanent worksheet into their
transmission formula rates that will annually track information related
to excess or deficient ADIT. The Commission does not adopt the
proposals in the notice of proposed rulemaking that were applicable to
public utilities with transmission stated rates.

DATES: This rule is effective January 27, 2020.

FOR FURTHER INFORMATION CONTACT:
Noah Lichtenstein (Technical Information), Office of Energy Market
Regulation, Federal Energy Regulatory Commission, 888 First Street NE,
Washington, DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>Joshua Walters (Legal Information), Office of the General Counsel,
Federal Energy Regulatory Commission, 888 First Street NE, Washington,
DC 20426,<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

Table of Contents

                                                         Paragraph Nos.

I. Introduction......................................                  1
II. Background.......................................                  7
    A. Overview of Public Utility Transmission Rates.                  9
    B. Order No. 144 and 18 CFR 35.24................                 12
    C. Notice of Inquiry.............................                 14
    D. Notice of Proposed Rulemaking.................                 15
III. Discussion......................................                 20
    A. Formula Rates.................................                 20
        1. Ensuring Rate Base Neutrality.............                 20
        2. Return or Recovery of Excess or Deficient                  32
         ADIT........................................

        3. Support for Excess and Deficient ADIT                      52
         Calculation and Amortization................
    B. Stated Rates..................................                 75
        1. NOPR......................................                 75
        2. Comments..................................                 76
        3. Commission Determination..................                 86
    C. Compliance Filings............................                 96
        1. NOPR......................................                 96
        2. Comments..................................                 98
        3. Commission Determination..................                100
    D. Other Comments Relating to Issues Not                         105
     Addressed in the NOPR...........................
        1. Comments..................................                105
        2. Commission Determination..................                112
IV. Information Collection Statement.................                116
V. Environmental Analysis............................                122
VI. Regulatory Flexibility Act.......................                123
VII. Document Availability...........................                127
VIII. Effective Date and Congressional Notification..                130

I. Introduction

    1. In this final rule, we require, pursuant to section 206 of the
Federal Power Act \1\ (FPA), all public utility transmission providers
with transmission formula rates under an Open Access Transmission
Tariff (OATT), a transmission owner tariff, or a rate schedule to
revise those transmission formula rates to account for changes caused
by the Tax Cuts and Jobs Act of 2017.\2\ The requirements set forth in
this final rule are designed to address the effects of the Tax Cuts and
Jobs Act on the accumulated deferred income taxes (ADIT) reflected in
transmission formula rates under an OATT, a transmission owner tariff,
or a rate schedule of public utilities.
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    \1\ See 16 U.S.C. 824e (2018).
    \2\ An Act to provide for reconciliation pursuant to titles II
and V of the concurrent resolution on the budget for fiscal year
2018, Public Law 115-97, 131 Stat. 2054 (2017) (Tax Cuts and Jobs
Act).
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    2. The requirements adopted in this final rule for public utilities
with transmission formula rates track the proposals set forth in the
notice of proposed rulemaking (NOPR) issued in this proceeding on
November 15, 2018,\3\ with certain modifications. However, as discussed
below, we decline to adopt the requirements proposed in the NOPR that
were applicable to public utilities with transmission stated rates. For
transmission stated rates, we instead find that a public utility's next
rate proceeding is the most appropriate place to address excess or
deficient ADIT resulting from the Tax Cuts and Jobs Act.
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    \3\ Public Utility Transmission Rate Changes to Address
Accumulated Deferred Income Taxes, 83 FR 59331 (Nov. 23, 2018), 165
FERC ] 61,117 (2018).
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    3. We are adopting the requirements in the NOPR for all public
utilities with transmission formula rates to include a mechanism in
their formula rates to deduct any excess ADIT from or add any deficient
ADIT to their rate bases (Rate Base Adjustment Mechanism). This
requirement will ensure that a public utility's rate base continues to
be treated in a manner similar to that prior to the Tax Cuts and Jobs
Act (i.e., that rate base neutrality is preserved).
    4. We also adopt the NOPR proposal to require all public utilities
with transmission formula rates to include a mechanism in their formula
rates that decreases or increases their income tax allowances by any
amortized excess or deficient ADIT, respectively (Income Tax Allowance
Adjustment Mechanism). This requirement will ensure that public
utilities with transmission formula rates return excess ADIT to or
recover deficient ADIT from ratepayers.
    5. Finally, we adopt the NOPR proposal to require all public
utilities with transmission formula rates to incorporate a new
permanent worksheet into their transmission formula rates that will
annually track information related to excess or deficient ADIT (ADIT
Worksheet). This requirement will increase the transparency surrounding
the adjustment of rate bases and income tax allowances to account for
excess or deficient ADIT by public utilities with transmission formula
rates. However, we modify the NOPR proposal that public utilities with
transmission formula rates submit an unpopulated worksheet in their
compliance filings and instead require the worksheet to be populated.
The populated worksheet will assist the Commission in analyzing the
worksheet's function and help the Commission to assess whether the
worksheet provides adequate transparency.
    6. We require each public utility with transmission formula rates
to submit a filing to demonstrate compliance with the final rule,
including revisions to its transmission formula rates, as necessary,
within the later of (1) 30 days of the effective date of this final
rule or (2) the public utility's next annual informational filing
following the issuance of this final rule.

II. Background

    7. On December 22, 2017, the President signed into law the Tax Cuts
and Jobs Act. The Tax Cuts and Jobs Act, among other things, reduced
the federal corporate income tax rate from 35 percent to 21 percent,
effective January 1, 2018. This means that, beginning January 1, 2018,
companies subject to the Commission's jurisdiction compute income taxes
owed to the IRS based on a 21 percent tax rate. The tax rate reduction
will result in less federal corporate income tax expense going
forward.\4\
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    \4\ See Tax Cuts and Jobs Act, Sec. 13001, 131 Stat. at 2096.
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    8. Importantly, the tax rate reduction will also result in a
reduction in ADIT liabilities and ADIT assets on the books of public
utilities. ADIT balances are accumulated on the regulated books and
records of public utilities based on the requirements of the Uniform
System of Accounts (USofA). ADIT arises from timing differences between
the method of computing taxable income for reporting to the IRS and the
method of computing income for regulatory accounting and ratemaking
purposes.\5\ As a result of the Tax Cuts and Jobs Act reducing the
federal corporate income tax rate from 35 percent to 21 percent, a
portion of an ADIT liability that was

collected from customers will no longer be due from public utilities to
the IRS and is considered excess ADIT, which must be returned to
customers in a cost of service ratemaking context.\6\ Public utilities
are required to adjust their ADIT assets and ADIT liabilities to
reflect the effect of the change in tax rates in the period that the
change is enacted.\7\
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    \5\ See 18 CFR 35.24(d)(2) (2019) (``Timing differences means
differences between the amounts of expenses or revenues recognized
for income tax purposes and amounts of expenses or revenues
recognized for ratemaking purposes, which differences arise in one
time period and reverse in one or more other time periods so that
the total amounts of expenses or revenues recognized for income tax
purposes and for ratemaking purposes are equal.'').
    \6\ The converse is true for public utilities that have ADIT
assets.
    \7\ See 18 CFR 35.24 and 18 CFR 154.305 (2019); see also
Regulations Implementing Tax Normalization for Certain Items
Reflecting Timing Differences in the Recognition of Expenses or
Revenues for Ratemaking and Income Tax Purposes, Order No. 144, FERC
Stats. & Regs. ] 30,254 (1981) (cross-referenced at 18 FERC ]
61,163), order on reh'g, Order No. 144-A, FERC Stats. & Regs. ]
30,340 (1982)) (cross-referenced at 15 FERC ] 61,142).
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A. Overview of Public Utility Transmission Rates

    9. The Commission is responsible for ensuring that the rates,
terms, and conditions of service for wholesale sales and transmission
of electric energy in interstate commerce are just, reasonable, and not
unduly discriminatory or preferential. With respect to the transmission
of electric energy in interstate commerce, most jurisdictional entities
are subject to cost of service regulation. Cost of service regulation
seeks to allow public utilities the opportunity to (1) recover
operating costs, including income taxes, (2) recover the cost of
capital investments, and (3) earn a just and reasonable return on
investments.\8\ Public utilities calculate their cost of service-based
transmission rates predominately by using formula rates or stated
rates. These transmission rates are contained in numerous agreements,
including a public utility's OATT, a regional transmission operator's
or independent system operator's OATT, coordination agreements, and
wholesale distribution agreements.
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    \8\ See Pub. Sys. v. FERC, 709 F.2d 73, 75 (D.C. Cir. 1983).
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    10. When a public utility seeks to change its transmission stated
rate, it files a rate case at the Commission to establish the cost of
service revenue requirement, allocate costs to various customer groups,
and set its rates. As an alternative, the Commission permits a public
utility to establish its rates through a formula, in which the
Commission accepts the public utility's cost of service calculation
methodologies and input sources and allows the public utility to update
those inputs every year.
    11. Public utilities must seek changes to their transmission stated
rates or formula rates through filings with the Commission under
section 205 of the FPA,\9\ while the Commission and third parties can
challenge a rate in a proceeding initiated under section 206 of the
FPA.
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    \9\ See 16 U.S.C. 824d.
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B. Order No. 144 and 18 CFR 35.24

    12. The purpose of tax normalization is to match the tax effects of
costs and revenues with the recovery in rates of those same costs and
revenues.\10\ As noted above, timing differences may exist between the
method of computing taxable income for reporting to the IRS and the
method of computing income for regulatory accounting and ratemaking
purposes. The tax effects of these differences are placed in a deferred
tax account to be used in later periods when the differences
reverse.\11\
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    \10\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,522,
31,530.
    \11\ Id. at 31,554.
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    13. The Commission established its policy of tax normalization in
Order No. 144, where it required use of ``the provision for deferred
taxes [(i.e., ADIT)] as a mechanism for setting the tax allowance at
the level of current tax cost.'' \12\ In keeping with this
normalization policy, and as relevant to the Tax Cuts and Jobs Act's
reduction of the federal corporate income tax rate, the Commission in
Order No. 144 also required adjustments in the ADIT of public
utilities' cost of service when excessive or deficient ADIT has been
created as a result of changes in tax rates.\13\ Furthermore, the
Commission required ``a rate applicant to compute the income tax
component in its cost of service by making provision for any excess or
deficiency in its deferred tax reserves resulting . . . from tax rate
changes.'' \14\ The Commission required that such mechanism be
consistent with a Commission-approved ratemaking method made
specifically applicable to the rate applicant.\15\ Where no ratemaking
method has been made specifically applicable, the Commission required
the rate applicant to advance some method in its next rate case.\16\
The Commission stated that it would determine the appropriateness of
any proposed method on a case-by-case basis, but as the Commission
resolved the issue in a number of cases, a method with wide
applicability may be adopted.\17\ The Commission codified the
requirements of Order No. 144 in its regulations in 18 CFR 35.24.\18\
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    \12\ Id. at 31,530.
    \13\ Id. at 31,519.
    \14\ Id. at 31,560. See also 18 CFR 35.24(c)(1)(ii); 18 CFR
35.24(c)(2).
    \15\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560. See
also 18 CFR 35.24(c)(3).
    \16\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560.
    \17\ Id. See also 18 CFR 35.24(c)(3).
    \18\ Originally promulgated as part of Order No. 144, the
regulatory text was redesignated as 18 CFR 35.25 in Order No. 144-A.
See Order No. 144-A, FERC Stats. & Regs. ] 30,340 at 30,140. In
Order No. 545, the Commission again redesignated the regulatory text
to its present designation as 18 CFR 35.24. See Streamlining
Electric Power Regulation, Order No. 545, FERC Stats. & Regs. ]
30,955, at 30,713 (1992) (cross-referenced at 61 FERC ] 61,207).
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C. Notice of Inquiry

    14. Following the enactment of the Tax Cuts and Jobs Act, the
Commission issued a Notice of Inquiry seeking comments on, among other
things, whether, and if so, how, the Commission should address the
effects of the Tax Cuts and Jobs Act on ADIT. The Commission noted that
the Tax Cuts and Jobs Act's reduction of the federal corporate income
tax rate would potentially create excess or deficient ADIT on the books
of public utilities and sought comment on the appropriate treatment of
excess and deficient ADIT in the transmission rates of public
utilities.\19\
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    \19\ Inquiry Regarding the Effect of the Tax Cuts and Jobs Act
on Commission-Jurisdictional Rates, 162 FERC ] 61,223 (2018) (NOI).
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D. Notice of Proposed Rulemaking

    15. In response to the Tax Cuts and Jobs Act, on November 15, 2018,
the Commission issued the NOPR to address the fact that many, if not
most, transmission formula rates of public utilities do not fully
reflect any excess or deficient ADIT following a change in tax rates,
as required by Order No. 144 and the Commission's regulations in 18 CFR
35.24. The Commission explained that, because the vast majority of
public utilities have transitioned from stated rates to formula rates,
a rate case no longer remains the appropriate vehicle for formula rates
to reflect excess or deficient ADIT in a public utility's cost of
transmission service, as contemplated by Order No. 144. The Commission
further explained that a public utility's transmission formula rate
should include mechanisms that accurately reflect excess or deficient
ADIT in a public utility's cost of transmission service during the
annual updates of the rest of the revenue requirement.\20\
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    \20\ NOPR, 165 FERC ] 61,117 at PP 15-16.
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    16. As a result, the Commission proposed two requirements for
public utilities with transmission formula rates to maintain an
accurate cost of service following a change in income tax rates, such
as that caused by the Tax Cuts and Jobs Act: (1) The Rate Base
Adjustment

Mechanism, which preserves rate base neutrality through the removal of
excess ADIT from or addition of deficient ADIT to rate base; and (2)
the Income Tax Allowance Adjustment Mechanism, which returns excess
ADIT to or recovery of deficient ADIT from ratepayers. Additionally, to
provide greater transparency, the Commission proposed to require all
public utilities with transmission formula rates to incorporate into
their transmission formula rates the ADIT Worksheet, which is a new
permanent worksheet that will annually track information related to
excess or deficient ADIT. The Commission also proposed that the changes
to transmission formula rates made in response to these requirements
must be applicable to any future changes to tax rates that give rise to
excess or deficient ADIT.\21\
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    \21\ Id. PP 17, 26.
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    17. Regarding public utilities with transmission stated rates, the
Commission proposed maintaining Order No. 144's requirement that such
public utilities reflect any adjustments made to their ADIT balances as
a result of the Tax Cuts and Jobs Act (and any future tax changes) in
their next rate case. However, to increase the likelihood that those
customers who contributed to the related ADIT accounts receive the
benefit of the Tax Cuts and Jobs Act, the Commission proposed to
require public utilities with transmission stated rates to (1)
determine any excess or deficient ADIT caused by the Tax Cuts and Jobs
Act and (2) return or recover this amount to or from customers.\22\
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    \22\ Id. P 18.
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    18. Finally, the Commission proposed that, similar to the
Commission's actions following the Tax Cuts and Jobs Act,\23\
compliance filings made in response to this final rule's requirements
may be considered on a single-issue basis given the limited scope of
the proposed requirements.\24\
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    \23\ See AEP Appalachian Transmission Co., Inc., 162 FERC ]
61,225 (2018); Alcoa Power Generating Inc.--Long Sault Division, 162
FERC ] 61,224 (2018) (Tax Rate Related Orders to Show Cause).
    \24\ See generally Indicated RTO Transmission Owners, 161 FERC ]
61,018, at PP 13-14 (2017); see also Rates Changes Relating to the
Federal Corporate Income Tax Rate for Public Utilities, Order No.
475, FERC Stats. & Regs. ] 30,752 (cross-referenced at 39 FERC ]
61,357), order on reh'g, 41 FERC ] 61,029 (1987) (cross-referenced
at 41 FERC ] 61,029) (allowing public utilities to use a voluntary,
abbreviated rate filing procedure to reduce their rates to reflect a
reduction in the federal corporate income tax rate on a single-issue
basis).
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    19. The Commission received comments from 14 entities in response
to the NOPR.\25\ In general, commenters supported the proposals in the
NOPR relating to public utilities with transmission formula rates.
However, commenters generally disagreed with the NOPR proposals
relating to public utilities with transmission stated rates.
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    \25\ A list of commenters to the NOPR and the abbreviated names
used in this final rule appears in Appendix A.
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III. Discussion

A. Formula Rates

1. Ensuring Rate Base Neutrality
a. NOPR
    20. In the NOPR, the Commission proposed to require all public
utilities with transmission formula rates to include the Rate Base
Adjustment Mechanism, which is a mechanism in their formula rates that
deducts any excess ADIT from or adds any deficient ADIT to their rate
bases, in order to preserve rate base neutrality. The Commission did
not propose to prescribe a specific adjustment mechanism that would
apply to all public utilities with transmission formula rates; rather,
the Commission proposed to adopt a case-by-case approach that would
allow public utilities to propose any necessary changes to their
formula rates on an individual basis. The proposed case-by-case
approach also included the ability for a public utility with
transmission formula rates to demonstrate that its formula rate already
meets the Rate Base Adjustment Mechanism requirements described in the
NOPR.\26\
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    \26\ NOPR, 165 FERC ] 61,117 at PP 15-16.
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    21. Additionally, the Commission did not propose new accounts for
recording excess or deficient ADIT. Instead, the Commission noted that
it had previously issued guidance on this accounting topic, finding
that public utilities are required to record a regulatory asset
(Account 182.3) associated with deficient ADIT or a regulatory
liability (Account 254) associated with excess ADIT.\27\
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    \27\ See Accounting For Income Taxes, Docket No. AI93-5-000
(April 23, 1993), http://www.ferc.gov/enforcement/acct-matts/docs/AI93-5-000.asp (Accounting for Income Taxes Guidance).
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b. Comments
    22. Commenters generally supported the NOPR requirement to include
mechanisms in the transmission formula rates of public utilities that
adjust ADIT balances for any excess or deficient ADIT amounts in order
to preserve rate base neutrality.\28\ Similarly, commenters generally
support the NOPR requirement that the Commission review the adjustments
on a case-by-case basis and allow public utilities to demonstrate that
their existing formula rates maintain rate base neutrality.\29\
Industrial Customers assert that the underlying principle of tax
normalization continues to be fully applicable and, given the
insufficient mechanisms to reflect excess ADIT, provides ample support
for the NOPR.\30\ NRECA notes that its support is not intended to imply
that additional Commission actions will not be needed for some public
utilities in compliance filings and subsequent rate proceedings because
the final rule may not address all details required to ensure just and
reasonable rates.\31\
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    \28\ See Eversource Comments at 7; AMP Comments at 2-3; EEI
Comments at 4; Industrial Customers Comments at 4-5; NRECA Comments
at 3-4.
    \29\ AMP Comments at 2-3; EEI Comments at 4; Eversource Comments
at 9; MISO Transmission Owners Comments at 6-7.
    \30\ Industrial Customers Comments at 5.
    \31\ NRECA Comments at 3-4.
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    23. AMP states that the Commission should provide further guidance
in, or use caution in reviewing compliance filings to, the final rule
regarding transparency in excess and deficient ADIT adjustment
mechanisms. AMP argues that the Commission-accepted method proposed by
ITC Companies and Ameren Services Company erodes transparency because
it requires manipulation of excess and deficient ADIT inputs prior to
their inclusion in the formula rate.\32\ AMP argues this also creates
risk of error. AMP asserts that accounting for excess and deficient
ADIT within the same ADIT accounts where the ADIT would have been
recorded but for the change in tax rate, as described in its comments
to the NOI, provides greater transparency.\33\
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    \32\ AMP Comments at 3 (citing Midcontinent Indep. Sys.
Operator, Inc., 153 FERC ] 61,374 (2015); Midcontinent Indep. Sys.
Operator, Inc., 163 FERC ] 61,163 (2018)).
    \33\ AMP Comments at 2-4.
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    24. In contrast, MISO Transmission Owners contend that the
Commission should rely on existing formula rate mechanisms to preserve
rate base neutrality, such as the ones found in the formula rates of
the MISO Transmission Owners that exclude excess ADIT from inputs to
the formula rates and require that rate base be adjusted as excess and
deficient ADIT are amortized.\34\
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    \34\ MISO Transmission Owners Comments at 6-7.
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    25. Eversource asserts that, where possible, any adjustments to
preserve rate base neutrality should be done through existing
mechanisms so long as they allow for the inclusion of Financial
Accounting Standards Board Accounting Standards Codification (ASC) No.
740 (ASC 740) income tax

regulatory deferral in rate base. To this end, Eversource agrees with
the Commission that public utilities should record excess ADIT in
Account 254 (Other Regulatory Liabilities) and deficient ADIT in
Account 182.3 (Other Regulatory Assets) and notes that this requirement
is consistent with USofA instructions.\35\
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    \35\ Eversource Comments at 8-9.
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    26. DEMEC requests that the Commission clarify that this final rule
is intended to be consistent with the USofA, which only permits booking
of regulatory assets and liabilities to Accounts 182.3 and 254 when
those amounts cannot be booked to other accounts. DEMEC asserts that
this will ensure that public utilities do not recover assets booked to
Account 182.3 that are unrelated to excess or deficient ADIT that have
been authorized for recovery by the Commission. DEMEC asserts that
sufficient transparency could also be achieved by booking excess and
deficient ADIT to new accounts, subaccounts of 182.3 and 254, or as
subaccounts of Accounts 190, 281, and 283.\36\
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    \36\ DEMEC Comments at 7-10.
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    27. DEMEC asserts that the final rule should incorporate the proper
method for calculating any excess or deficient amounts of ADIT, which
is to multiply ADIT balances as of December 31, 2017 by the ratio of
the new tax rate, 21 percent, to the tax rate used to calculate the
ADIT balance.\37\
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    \37\ Id. at 10.
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c. Commission Determination
    28. We adopt the proposal to require all public utilities with
transmission formula rates to include the Rate Base Adjustment
Mechanism in their transmission formula rates. The Rate Base Adjustment
Mechanism is a mechanism by which public utilities deduct any excess
ADIT from or add any deficient ADIT to their rate bases. Without such a
mechanism, public utilities with transmission formula rates would
violate the Commission's normalization requirements by overstating or
understating their rate bases by the amount of any excess or deficient
ADIT, respectively, generated as a result of a change to tax rates.
Adopting this requirement will ensure that all public utilities with
transmission formula rates offset their rate bases by any unamortized
excess and deficient ADIT, thus maintaining rate base neutrality.
    29. We affirm our statement in the NOPR that any Rate Base
Adjustment Mechanism proposed in compliance with this rule must apply
to any future changes to tax rates that give rise to excess or
deficient ADIT.\38\ We also find that any such mechanism should apply
to state and local tax rate changes that give rise to excess and
deficient ADIT. This general applicability will reduce the burden on
public utilities with transmission formula rates in the long-term by
avoiding the need for such public utilities to propose a new mechanism
after every income tax rate change.
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    \38\ NOPR, 165 FERC ] 61,117 at P 26.
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    30. As proposed in the NOPR, we do not require that public
utilities with transmission formula rates adopt a specific mechanism.
Rather, we will allow public utilities to propose changes to their
formula rates on a case-by-case basis. Similarly, public utilities may
also demonstrate that their formula rates already meet the Rate Base
Adjustment Mechanism requirements described in this final rule. Thus,
because compliance filings will be evaluated on a case-by-case basis,
we will not pre-approve or reject any specific adjustment method at
this time as certain commenters suggest. However, in response to AMP's
concern regarding transparency, we clarify that public utilities must
clearly demonstrate in their compliance filings how their proposed
mechanisms adjust rate base for excess and deficient ADIT through their
transmission formula rates.\39\
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    \39\ We note that the ADIT Worksheet required in this final rule
will also address transparency concerns regarding how public
utilities with transmission formula rates adjust their rate bases
for excess and deficient ADIT.
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    31. We also find that, as noted in the NOPR, the Commission's
previous accounting guidance interpreting the USofA regarding
accounting for excess and deficient ADIT remains applicable.\40\ In
that guidance, the Commission stated that public utilities are required
to record a regulatory asset (Account 182.3) associated with deficient
ADIT or regulatory liability (Account 254) associated with excess
ADIT.\41\ As a result, we do not propose any changes to that accounting
guidance.
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    \40\ NOPR, 165 FERC ] 61,117 at P 28.
    \41\ Accounting for Income Taxes Guidance at 3, 8.
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2. Return or Recovery of Excess or Deficient ADIT
a. NOPR
    32. The Commission proposed to require all public utilities with
transmission formula rates to include the Income Tax Allowance
Adjustment Mechanism in their formula rates. The Income Tax Allowance
Adjustment Mechanism is a mechanism by which public utilities decrease
or increase the income tax components of their formula rates by any
amortized excess or deficient ADIT, respectively. Consistent with other
aspects of the NOPR, the Commission proposed to review any such
mechanisms on a case-by-case basis rather than proposing a single
method for public utilities with transmission formula rates to adjust
their income tax allowances for any amortized excess or deficient
ADIT.\42\
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    \42\ NOPR, 165 FERC ] 61,117 at PP 36-37.
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    33. Regarding the period over which the amortization of excess or
deficient ADIT must occur, the Commission stated that public utilities
should follow the guidance provided in the Tax Cuts and Jobs Act, where
available. For certain excess and deficient ADIT, the Commission noted
that the Tax Cuts and Jobs Act provides a method of general
applicability and requires public utilities to return this excess ADIT
no more rapidly than over the life of the underlying asset using the
Average Rate Assumption Method, or, where a public utility's books and
underlying records do not contain the vintage account data necessary,
it must use an alternative method.\43\ This excess and deficient ADIT
is considered ``protected.'' In contrast, the Tax Cuts and Jobs Act
does not specify what method public utilities must use for excess or
deficient ADIT without such normalization requirements (i.e.,
``unprotected''), and therefore, the Commission proposed that it
evaluate amortization periods for unprotected excess or deficient ADIT
on a case-by-case basis.\44\
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    \43\ Tax Cuts and Jobs Act, Sec. 13001(b)(6)(A), 131 Stat. at
2099. If a public utility must use an alternative method, Commission
precedent provides that the public utility should use the Reverse
South Georgia Method for excess ADIT or the South Georgia Method for
deficient ADIT. See Memphis Light, Gas & Water Div. v. FERC, 707
F.2d 565, 569 (D.C. Cir. 1983).
    \44\ NOPR, 165 FERC ] 61,117 at P 38.
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    34. The Commission did not propose any specific requirements for
transmission formula rates to ensure that customers receive the entire
balance of excess ADIT caused by the Tax Cuts and Jobs Act (including
the excess ADIT for the period beginning January 1, 2018 until the date
a tariff revision to include the excess ADIT in the transmission
formula rate becomes effective). Rather, the Commission explained that
public utilities should not amortize an excess ADIT regulatory
liability for accounting purposes until the Commission approves the
ADIT regulatory liability for the public utility's transmission formula
rate.\45\ Accordingly, the Commission stated that excess ADIT scheduled
to be

returned to customers prior to the effective date of any tariff
revisions made in compliance with the final rule should still be
returned to customers. In other words, the full regulatory liability
for excess ADIT should be captured in rates, beginning on the effective
date of any proposed tariff provision.\46\
---------------------------------------------------------------------------

    \45\ Id. P 39.
    \46\ Id.
---------------------------------------------------------------------------

b. Comments
    35. Most commenters agree with the Commission's proposal to require
a mechanism in transmission formula rates that increases or decreases
income tax allowances for any excess or deficient ADIT, respectively,
and that such a mechanism should be evaluated on a case-by-case
basis.\47\ While agreeing with the basis for such a mechanism, AMP
argues that the Commission should narrow the parameters of acceptable
approaches by requiring the amortization of excess or deficient ADIT to
occur within existing income tax expense and tax gross up calculations.
Provided that such mechanisms are incorporated in existing income tax
calculations, AMP also asserts that these mechanisms could be used for
excess and deficient ADIT caused by state and local tax rate changes
and that this will avoid redundant revisions that will be necessary if
the Commission accepts mechanisms narrowly tailored to federal tax rate
changes.\48\
---------------------------------------------------------------------------

    \47\ AMP Comments at 2-3; Eversource Comments at 10-11; NRECA
Comments at 4; APPA Comments at 2; Industrial Customers Comments at
4-5.
    \48\ AMP Comments at 4-8.
---------------------------------------------------------------------------

    36. Regarding the amortization of any excess or deficient ADIT,
commenters also generally agree with the Commission that public
utilities should rely on the guidance in the Tax Cuts and Jobs Act for
protected excess ADIT.\49\ Concerning unprotected excess ADIT, most
commenters agree with the Commission that any amortization periods
should be evaluated on a case-by-case basis.\50\ DEMEC agrees with the
Commission ``that those customers who contributed to the related ADIT
accounts [should] receive the benefit of the Tax Cuts and Jobs Act.''
\51\ As such, DEMEC argues that the Commission must reject any attempt
to unduly delay return of unprotected excess ADIT to avoid any cross-
generational cost allocation issues.\52\
---------------------------------------------------------------------------

    \49\ EEI Comments at 4-5; Eversource Comments at 12; MISO
Transmission Owners Comments at 10-12.
    \50\ EEI Comments at 5-6; Eversource Comments at 12-13; MISO
Transmission Owners Comments at 12-13; APPA Comments at 8; TAPS
Comments at 6; Xcel Comments at 11-13.
    \51\ DEMEC Comments at 10.
    \52\ Id. at 10-11.
---------------------------------------------------------------------------

    37. However, certain commenters disagree with the Commission's
statement that ``in applying a tax normalization method (e.g., the
Average Rate Assumption Method), public utilities are required to
develop a schedule removing ADIT from rate base and returning it to
customers, effective January 1, 2018, using the fastest allowable
method to return the excess ADIT under the IRS' normalization
requirements,'' to the extent the Commission is limiting its proposed
case-by-case approach and shortening the range of acceptable
amortization periods for unprotected excess and deficient ADIT to the
``fastest allowable method.'' \53\ Accordingly, EEI and MISO
Transmission Owners seek clarification that the final rule will not
require public utilities to use a shortened amortization period for
unprotected excess or deficient ADIT and that the Commission will
evaluate amortization periods on a case-by-case basis.\54\ EEI asserts
that the diversity of assets giving rise to unprotected ADIT supports a
case-by-case approach, as well as many other factors, including the
desire to avoid different return or recovery periods at the state
level.\55\ MISO Transmission Owners also argue that a shortened
amortization period could cause cash flow issues.\56\ Xcel argues that
excess and deficient ADIT should be amortized consistently across a
public utility's various rate jurisdictions if possible.\57\
---------------------------------------------------------------------------

    \53\ EEI Comments at 4-6; MISO Transmission Owners Comments at
15-16; Xcel Comments at 12-13.
    \54\ EEI Comments at 4-6; MISO Transmission Owners Comments at
15-16.
    \55\ EEI Comments at 5.
    \56\ MISO Transmission Owners Comments at 14.
    \57\ Xcel Comments at 12.
---------------------------------------------------------------------------

    38. Furthermore, EEI and MISO Transmission Owners request that the
Commission find that an amortization period matching the life of the
asset that gave rise to the unprotected excess or deficient ADIT is per
se just and reasonable.\58\ MISO Transmission Owners assert that such a
finding would not prevent public utilities from using shorter
amortization periods, would increase administrative efficiency by
minimizing future disputes, and is consistent with Commission precedent
and the amortization approach established in Order Nos. 144 and 144-
A.\59\ Similarly, Eversource and Xcel argue that the amortization
period for unprotected excess and deficient ADIT should be based on the
approximate average life of the assets that gave rise to that excess or
deficiency. Eversource argues that this is appropriate because the
average remaining lives of assets are unique and distinct to each
utility.\60\ Xcel notes that the Commission accepted its operating
company's, Southwestern Public Service Company (SPS), proposed five-
year amortization period for unprotected excess and deficient ADIT and
asserts that SPS's proposal takes into account the varying lives of its
assets and intergenerational equity issues.\61\
---------------------------------------------------------------------------

    \58\ EEI Comments at 5-6.
    \59\ MISO Transmission Owners Comments at 13-14.
    \60\ Eversource Comments at 12.
    \61\ Xcel Comments at 12.
---------------------------------------------------------------------------

    39. Several commenters argue that the Commission should clarify
that any such mechanism for transmission formula rates does not relieve
a public utility of its obligation to submit an FPA section 205 filing
to obtain Commission approval prior to reflecting regulatory assets or
liabilities in rates. These commenters assert that Commission precedent
supports a requirement for pre-approval.\62\ DEMEC adds that such a
requirement would be consistent with limits the Commission has placed
on recovery of excess or deficient ADIT incurred prior to the Tax Cuts
and Jobs Act.\63\
---------------------------------------------------------------------------

    \62\ AMP Comments at 8; APPA Comments at 8-9; DEMEC Comments at
5-6; TAPS Comments at 4-5.
    \63\ DEMEC Comments at 6.
---------------------------------------------------------------------------

    40. TAPS contends that, without a requirement for pre-approval, the
NOPR could be read as providing public utilities unrestricted
discretion to amortize a regulatory asset or liability over a period of
their discretion.\64\ Furthermore, TAPS argues, pre-approval of assets
or liabilities holding excess or deficient ADIT will ensure rates are
just and reasonable to accommodate the case-specific considerations of
excess and deficient ADIT. TAPS additionally argues that a pre-approval
requirement is similar to requirements for changes in depreciation
rates.\65\ TAPS contends that unlike other formula rate inputs that are
verifiable and updated annually, the appropriate amortization period
for excess and deficient ADIT is subjective. TAPS contends that the
absence of a pre-approval requirement would violate the FPA by moving
the burden to show the amortization of excess or deficient ADIT is just
and reasonable from the public utility to the Commission or a customer
to show that the proposed amortization is unjust and unreasonable.\66\
APPA asserts that the Commission should require a footnote or other
provision in transmission formula rates stating this obligation
consistent with prior Commission

precedent.\67\ APPA also recommends that the Commission clarify that
the final rule does not allow recovery of past period deficient ADIT
and does not modify or supersede the guidance the Commission provided
in Commonwealth Edison regarding Order No. 144.\68\
---------------------------------------------------------------------------

    \64\ TAPS Comments at 4.
    \65\ Id. at 7.
    \66\ Id.
    \67\ APPA Comments at 8-9 (citing So. Cal. Edison Co., 166 FERC
] 61,006, at P 24 (2019); PJM Interconnection, L.L.C., 165 FERC ]
61,275, at P 28 (2018) (PJM)).
    \68\ APPA Comments at 7 (citing Commonwealth Edison Co., et al.,
164 FERC ] 61,172 (2018) (Commonwealth Edison)). In Commonwealth
Edison, the Commission announced a limited, one-year compliance
period in which public utilities could file to recover past ADIT if
the public utility did not file a rate case subsequent to the
Commission's issuance of Order No. 144 or if the public utility
properly preserved its right to recover past ADIT through settlement
terms. Commonwealth Edison, 164 FERC ] 61,172 at P 132.
---------------------------------------------------------------------------

    41. In contrast, Eversource urges the Commission to allow public
utilities to propose a return or recovery mechanism that adjusts the
income tax allowance for any excess or deficient ADIT stemming from not
only the Tax Cuts and Jobs Act but also future changes in federal and
state income taxes without the need for future FPA section 205
filings.\69\
---------------------------------------------------------------------------

    \69\ Eversource Comments at 8, 11.
---------------------------------------------------------------------------

c. Commission Determination
    42. We adopt the NOPR proposal to require all public utilities with
transmission formula rates to include the Income Tax Allowance
Adjustment Mechanism in their formula rates. Under this mechanism,
public utilities decrease or increase the income tax components of
their formula rates by any amortized excess or deficient ADIT,
respectively. This mechanism will enable a public utility with
transmission formula rates to ``compute the income tax component in its
cost of service by making provision for any excess or deficiency in
deferred taxes'' following changes in income tax rates, in compliance
with Commission regulations and Order No. 144.\70\
---------------------------------------------------------------------------

    \70\ 18 CFR 35.24(c)(2); Order No. 144, FERC Stats. & Regs. ]
30,254 at 31,560.
---------------------------------------------------------------------------

    43. While the Commission has accepted revisions to certain public
utilities' transmission formula rates that adjust their income tax
allowances as proposed by AMP (i.e., within the existing income tax
allowance calculation), we decline to narrow the range of possible
approaches here. Consistent with other requirements in this final rule,
we adopt the NOPR proposal to evaluate all such mechanisms on a case-
by-case basis. Public utilities may also demonstrate that their formula
rates already meet the Income Tax Allowance Adjustment Mechanism
requirements described in this final rule. Additionally, any proposed
mechanism must remain applicable to any future changes to tax rates
that give rise to excess or deficient ADIT, including changes to state
and local tax rates. We agree with AMP that the general applicability
of a mechanism will avoid redundant revisions to transmission formula
rates that might otherwise follow every tax rate change.
    44. Regarding the period over which excess and deficient ADIT are
amortized, we affirm our statement in the NOPR that public utilities
should follow the guidance provided in the Tax Cuts and Jobs Act for
protected excess ADIT. The Tax Cuts and Jobs Act provides a method of
general applicability and requires public utilities to return protected
excess ADIT \71\ no more rapidly than over the life of the underlying
asset using the Average Rate Assumption Method, or, where a public
utility's books and underlying records do not contain the vintage
account data necessary, it must use an alternative method.\72\ We also
adopt our proposal in the NOPR to evaluate any amortization periods for
unprotected excess and deficient ADIT on a case-by-case basis. As noted
in the NOPR, the Tax Cuts and Jobs Act does not specify a method to
calculate amortization schedules for unprotected excess and deficient
ADIT. Furthermore, a case-by-case evaluation will allow public
utilities to propose amortization periods that better suit their and
their customers' specific circumstances.
---------------------------------------------------------------------------

    \71\ While the Tax Cuts and Jobs Act does not mention protected
deficient ADIT specifically, we expect that public utilities will
recover such protected deficient ADIT in the same manner prescribed
for protected excess ADIT.
    \72\ See supra n.43.
---------------------------------------------------------------------------

    45. For both excess protected and unprotected ADIT, we affirm our
statement in the NOPR that the full regulatory liability for excess
ADIT should be captured in transmission formula rates, beginning on the
effective date of any proposed tariff provision. In other words, the
full amount of excess ADIT resulting from the Tax Cuts and Jobs Act
must be returned to transmission formula rate customers.
    46. We clarify that our statement that ``public utilities are
required to develop a schedule removing ADIT from rate base and
returning it to customers, effective January 1, 2018, using the fastest
allowable method to return the excess ADIT under the IRS' normalization
requirements'' was only in reference to the Tax Cuts and Jobs Act's
requirement that protected excess ADIT may not be returned more rapidly
than the life of the underlying asset. The Tax Cuts and Jobs Act places
no restrictions on unprotected excess and deficient ADIT amortization
schedules, and public utilities may propose amortization schedules that
appropriately balance the respective circumstances of those public
utilities and their customers, provided the full amount of excess ADIT
resulting from the Tax Cuts and Jobs Act is returned to customers.
    47. Additionally, we deny EEI's and MISO Transmission Owners'
requests to find that an amortization period matching the life of the
underlying asset for unprotected excess and deficient ADIT is per se
just and reasonable. While certain public utilities have demonstrated
that amortization periods matching the lives of their assets are just
and reasonable, we find that a generally applicable determination that
such amortization periods are per se just and reasonable runs counter
to the case-by-case approach that the Commission will use to evaluate
proposed amortization periods for excess and deficient ADIT. Moreover,
the diverse sources of unprotected excess and deficient ADIT do not
lend themselves to a general finding on an appropriate amortization
period. We also note that, contrary to MISO Transmission Owners'
assertion, Order No. 144 did not establish a generally applicable
amortization method for excess and deficient ADIT.\73\ Similarly, we
will evaluate requests by public utilities to amortize excess and
deficient ADIT using an amortization period approved in a state
proceeding on a case-by-case basis.
---------------------------------------------------------------------------

    \73\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,560
(``Since the appropriateness of any method to accomplish the
objective of full normalization at current tax rates has not been
analyzed by the Commission on a generic basis, the Commission is, at
this time, requiring resolution of this problem on a case-by-case
basis.'').
---------------------------------------------------------------------------

    48. Because of the requirements adopted in this final rule, we will
not require that public utilities make a filing pursuant to FPA section
205 to obtain Commission approval prior to including excess and
deficient ADIT in their transmission formula rates following future
changes to tax rates, as some commenters have requested. While those
commenters are correct that the Commission has previously required that
public utilities obtain such Commission approval, we find that with the
ADIT Worksheet adopted as part of this final rule and discussed below,
it is no longer necessary to require an FPA section 205 filing prior to
including excess and deficient ADIT in transmission formula rates.
Specifically, the ADIT Worksheet will provide

transparency and allow for Commission and customer review of the public
utility's calculation of excess and deficient ADIT, as well as the
associated amortization schedule for returning or recovering excess and
deficient ADIT, respectively.
    49. We disagree with TAPS' assertion that not requiring public
utilities with transmission formula rates to seek Commission approval
prior to including excess and deficient ADIT in their transmission
formula rates following future changes to tax rates will shift the
burden of proof from the public utility to the Commission or customer.
To be considered just and reasonable, the Commission-approved
implementation protocols of public utilities with transmission formula
rates must require that public utilities provide underlying data and
calculations supporting all inputs that are not supported in the FERC
Form No. 1 or in other tariff schedules in formula rate annual updates
and, where applicable, true-ups.\74\ As such, as with any other
transmission formula rate input, customers can request information
about and challenge the amortization period for excess or deficient
ADIT.\75\ Further, when a customer challenges the data that is flowed
into the formula rate from worksheets like the ADIT Worksheet, the
public utility continues to bear the burden to show ``the justness and
reasonableness of the rate resulting from its application of the
formula.'' \76\
---------------------------------------------------------------------------

    \74\ See Midwest Indep. Transmission Sys. Operator, Inc., 143
FERC ] 61,149, at P 86 (2013) (MISO). See also The Empire Dist.
Elec. Co., 148 FERC ] 61,030 (2014); Black Hills Power, Inc., 148
FERC ] 61,035 (2014); Kan. City Power & Light Co. and KCP&L Greater
Mo. Operations Co., 148 FERC ] 61,034 (2014); UNS Elec., Inc., 148
FERC ] 61,032 (2014); PJM Interconnection, LLC, 152 FERC ] 61,180
(2015).
    \75\ Id. PP 91, 118-120.
    \76\ Id. P 120 (quoting Va. Elec. & Power Co., 123 FERC ]
61,098, at P 47 (2008)).
---------------------------------------------------------------------------

    50. We also disagree with TAPS' assertion that public utilities
could have unrestricted discretion to amortize a regulatory asset or
liability over a period of their choice. First, a public utility must
support its chosen amortization period for excess or deficient ADIT in
its annual update following a change in tax rates as just and
reasonable, as discussed above. Second, our determination here applies
only to excess or deficient ADIT, which are types of regulatory
liabilities and assets, respectively; it does not relieve public
utilities of their obligation to obtain Commission approval prior to
including other regulatory assets and liabilities in their transmission
formula rates.
    51. Regarding APPA's comment, we clarify that the requirements
adopted here apply only to excess and deficient ADIT caused by the Tax
Cuts and Jobs Act and any future tax rate changes, not past period
deficient ADIT, and, therefore, do not conflict with the Commission's
determination in Commonwealth Edison.
3. Support for Excess and Deficient ADIT Calculation and Amortization
a. NOPR
    52. The Commission proposed to require all public utilities with
transmission formula rates to incorporate the ADIT Worksheet, which is
a new permanent worksheet that will annually track information related
to excess or deficient ADIT, into their transmission formula rates. The
Commission did not propose to require this worksheet to be populated
when submitted to the Commission on compliance with the final rule.
Further, the Commission did not propose a pro forma worksheet and
instead proposed broad categories of information that each worksheet
should contain at a minimum, including: (1) How any ADIT accounts were
re-measured and the excess or deficient ADIT contained therein; (2) the
accounting for any excess or deficient amounts in Accounts 182.3 (Other
Regulatory Assets) and 254 (Other Regulatory Liabilities); (3) whether
the excess or deficient ADIT is protected or unprotected; (4) the
accounts to which the excess or deficient ADIT are amortized; and (5)
the amortization period of the excess or deficient ADIT being returned
or recovered through the rates. The Commission specifically requested
comments on whether it should consider additional guiding
principles.\77\
---------------------------------------------------------------------------

    \77\ NOPR, 165 FERC ] 61,117 at PP 46-47.
---------------------------------------------------------------------------

b. Comments
    53. In general, comments from transmission customers supported the
proposal for the ADIT Worksheet,\78\ while comments from transmission
owners and groups representing transmission owners did not.\79\
---------------------------------------------------------------------------

    \78\ AMP Comments at 9-11; NRECA Comments at 4-5; APPA Comments
at 10; DEMEC Comments at 11; Industrial Customers Comments at 5.
    \79\ EEI Comments at 6-7; Eversource Comments at 14-15; MISO
Transmission Owners Comments at 21-22; PSEG Comments at 2.
---------------------------------------------------------------------------

    54. Certain transmission customers supporting the Commission's
proposal believe that additional requirements are necessary to ensure
just and reasonable rates. AMP and Six Cities argue that the Commission
should also require a standard template or pro forma worksheet. AMP
asserts that, while a one-size-fits-all approach may not be appropriate
for the other requirements proposed in the NOPR, a standard template
could be provided akin to a FERC Form No. 1. AMP further asserts that
such standardization will promote development of technical expertise
and ratemaking efficiency, while benefiting customers by providing a
better opportunity for meaningful review. AMP states that if the
Commission does not adopt a standard template, it should, at a minimum,
require public utilities to file an annual worksheet containing the
minimum reporting requirements discussed by AMP.\80\ Six Cities argue
that a pro forma worksheet will reduce the need for information
exchange and allow interested parties to better assess what was and was
not included.\81\
---------------------------------------------------------------------------

    \80\ APPA Comments at 10-11.
    \81\ Six Cities Comments at 7-8.
---------------------------------------------------------------------------

    55. AMP and Six Cities argue that the Commission should require
public utilities to provide specific information in the proposed
worksheet. AMP asserts that the Commission should require public
utilities to provide item-by-item accounting to verify public
utilities' classification of excess or deficient ADIT as protected or
unprotected because the rate impact associated with this classification
is generally significant and material. Six Cities argue that the
worksheet should contain a breakdown of ADIT detailed enough to discern
whether a public utility is seeking to recover ADIT items in
contravention of USofA. AMP argues that public utilities should also
provide line-by-line accounting for any excess or deficient ADIT or
ADIT associated with other comprehensive income or that has been moved
outside of regulated rate base or cost of service entirely. AMP argues
that line-by-line accounting will enable customers to verify that they
are made whole for all ADIT charged previously.\82\
---------------------------------------------------------------------------

    \82\ AMP Comments at 6-11; Six Cities Comments at 7-10.
---------------------------------------------------------------------------

    56. AMP argues that the proposed worksheet should also include a
public utility's proposed amortization period for protected and
unprotected excess and deficient ADIT and all supporting
documentation.\83\ Six Cities contend that the proposed worksheet
should also itemize protected and unprotected excess and deficient ADIT
into more granular categories. In addition, Six Cities assert that
public utilities should be required to specify items that are either
below the line or inapplicable to customers to ensure deficient ADIT
related to these items is not collected.\84\ AMP and Six Cities argue
that their

proposed additions to the worksheet should be included regardless of
whether the Commission adopts its suggestion to require a pro forma
worksheet.\85\
---------------------------------------------------------------------------

    \83\ AMP Comments at 8-10.
    \84\ Six Cities Comments at 8-10.
    \85\ AMP Comments at 11; Six Cities Comments at 10.
---------------------------------------------------------------------------

    57. APPA argues that the Commission should require public utilities
with transmission formula rates to submit a populated version of the
proposed worksheet, including actual ADIT cost or accounting
information relating to the ADIT effects of the Tax Cuts and Jobs Act.
APPA states that, without this information, interested parties would
not have an opportunity to review a public utility's ADIT accounting
information until the first annual update following when the revised
formula rate provisions become effective. APPA argues that this
information will assist the Commission in evaluating whether the
proposed mechanism and amortization periods are just and reasonable and
consistent with Commission precedent.\86\ APPA recommends that a public
utility's transmission formula rate protocols must allow interested
parties to request information concerning the information in the annual
worksheet and the ADIT effects of the Tax Cuts and Jobs Act. To the
extent that a given transmission formula rate protocol does not allow
for this, APPA argues that public utilities should be required to make
the necessary tariff revisions in their compliance filings.\87\
---------------------------------------------------------------------------

    \86\ APPA Comments at 9-10.
    \87\ Id. at 10.
---------------------------------------------------------------------------

    58. Conversely, many transmission owners or affiliated groups argue
that the Commission's proposed worksheet is burdensome and not
necessary. Certain commenters assert that the information provided
annually in the FERC Form No. 1 and documentation under the existing
requirements of transmission formula rate protocols provide sufficient
transparency.\88\ EEI and PSEG note that, under the Commission's 2014
Staff Guidance, inputs to formula rates must be fully supported, and,
to the extent an input is not a specific line item in the FERC Form No.
1, public utilities must provide detailed workpapers showing the origin
of the input in relation to the FERC Form No. 1 data.\89\ PSEG argues
that requiring additional information regarding ADIT calculations when
the current requirements provide sufficient transparency is unnecessary
and burdensome.\90\ MISO Transmission Owners note that they committed
in comments to the NOI to providing a workpaper in each annual update
with excess and deficient ADIT information. MISO Transmission Owners
argue that this workpaper, in combination with the required information
exchange procedures that are part of the annual update filing, provides
a just and reasonable process.\91\ MISO Transmission Owners state that,
to the extent any information required by the proposed worksheet is not
provided in their FERC Forms No. 1, they could provide the additional
information in footnotes.\92\
---------------------------------------------------------------------------

    \88\ EEI Comments at 6-7; MISO Transmission Owner Comments at
20-22; PSEG Comments at 2-3.
    \89\ EEI Comments at 6-7; PSEG Comments at 2-3.
    \90\ PSEG Comments at 3.
    \91\ MISO Transmission Owners Comments at 19-20.
    \92\ Id. at 22.
---------------------------------------------------------------------------

    59. Certain transmission owners and associated groups also argue
that the proposed worksheet is redundant because it seeks essentially
identical information as the Commission's disclosure requirements in
the Commission's ADIT Treatment Following Asset Sales and Retirements
Policy Statement on the Accounting and Ratemaking Treatment of
Accumulated Deferred Income Taxes and Treatment Following the Sale or
Retirement of an Asset (ADIT Treatment Following Asset Sales and
Retirements Policy Statement).\93\ Eversource argues that the language
in the ADIT Treatment Following Asset Sales and Retirements Policy
Statement suggests that the disclosure requirements are intended to
apply generally beyond the sale or retirement of an asset and, thus, it
would be duplicative and confusing to also require public utilities to
submit this information in their formula rates.\94\ While not taking a
position on whether the ADIT Worksheet would be duplicative, MISO
Transmission Owners argue that no consensus or Commission guidance
exists as to how public utilities should amortize excess and deficient
ADIT following the ADIT Treatment Following Asset Sales and Retirements
Policy Statement's guidance that public utilities should continue to
amortize excess ADIT in rates even after the sale or retirement of an
asset. MISO Transmission Owners contend that it is therefore unclear
how public utilities would address this issue in the proposed
worksheet.\95\
---------------------------------------------------------------------------

    \93\ Accounting and Ratemaking Treatment of Accumulated Deferred
Income Taxes and Treatment Following the Sale or Retirement of an
Asset, 83 FR 59,295 (Nov. 23, 2018), 165 FERC ] 61,115 (2018). See
Eversource Comments at 13-15; EEI Comments at 6; PSEG Comments at 2.
    \94\ Eversource Comments at 13-15.
    \95\ MISO Transmission Owners Comments at 19.
---------------------------------------------------------------------------

    60. MISO Transmission Owners agree with the Commission that
adequate transparency is necessary but contend that the calculations of
excess and deficient ADIT balances will only occur once (i.e., as of
December 31, 2017) and the vast majority of information in the proposed
worksheet will remain unchanged going forward. MISO Transmission Owners
argue that creating an appropriate worksheet will be a time-consuming
and tedious process because of the Commission's assertion that the
proposed worksheet should be tailored to each public utility's unique
circumstances. MISO Transmission Owners contend that requiring a
worksheet may also be burdensome for the Midcontinent Independent
System Operator, Inc. (MISO) to implement because MISO is responsible
for administering its tariff and MISO's staff would need to familiarize
themselves with many versions of the worksheets that are housed within
MISO's tariff.\96\ MISO Transmission Owners assert that public
utilities could also provide ADIT workpapers to customers outside of a
tariff-based procedure, such as an Open Access Same-Time Information
System (OASIS) or website posting. MISO Transmission Owners argue that
the Commission did not address in the NOPR why these alternatives are
not just and reasonable.\97\
---------------------------------------------------------------------------

    \96\ Id. at 18-19.
    \97\ Id. at 22.
---------------------------------------------------------------------------

    61. Xcel requests that, to the extent the final rule imposes
administrative requirements such as a worksheet, the Commission should
not require public utilities to revise settlements related to the
specific contents for documenting the flow-back of excess and deficient
ADIT.\98\
---------------------------------------------------------------------------

    \98\ Xcel Comments at 11.
---------------------------------------------------------------------------

c. Commission Determination
    62. We adopt the NOPR proposal to require all public utilities with
transmission formula rates to include the ADIT Worksheet, which is a
new permanent worksheet that will annually track information related to
excess and deficient ADIT, in their transmission formula rates. We find
that such a worksheet is necessary to provide interested parties and
the Commission adequate transparency regarding how public utilities
with transmission formula rates adjust their rate bases and income tax
allowances to account for excess or deficient ADIT. We also find that
making the worksheet a permanent part of transmission formula rates, as
opposed to a one-time filing after the Tax Cuts and Jobs Act, will
ensure that

excess or deficient ADIT can be tracked as it is included in the annual
revenue requirement. Additionally, the ADIT Worksheet will provide
sufficient transparency for excess and deficient ADIT included in rates
following future local, state, and federal tax rate changes. Finally,
we find that the NOPR proposal to require five categories of
information in the worksheet strikes an appropriate balance between
transparency for interested parties and burden to the industry.
    63. We agree with APPA's comments to require public utilities with
transmission formula rates to submit worksheets populated with excess
and deficient ADIT resulting from the Tax Cuts and Jobs Act. This
represents a departure from the NOPR proposal that required the
function of the worksheet to be clear when filed on compliance, but did
not require the worksheet to be populated. We find that a populated
worksheet will facilitate the review of the proposed worksheet's
function by interested parties and the Commission prior to the first
annual update. In addition, we believe that a populated worksheet will
assist the Commission in determining whether the worksheet adequately
addresses the transparency concerns that led the Commission in the NOPR
to propose requiring the worksheet.
    64. We also affirm the NOPR proposal to not require a pro forma or
standard template worksheet despite comments requesting the adoption of
such. We do not believe that the worksheet lends itself to a pro forma
or standard template.\99\ We find that any benefits flowing from
adopting such a template are outweighed by the difficulty in developing
such a template because excess and deficient ADIT depends on the
circumstances of each public utility. This is especially true because
of the diverse sources of unprotected excess and deficient ADIT.
---------------------------------------------------------------------------

    \99\ See, e.g., Ariz. Pub. Serv. Co., Docket No. ER18-975-001
(May 22, 2018) (delegated order); Pub. Serv. Co. of Colo., Docket
Nos. ER19-2077-000 & ER19-2077-001 (Sep. 11, 2019) (delegated
order).
---------------------------------------------------------------------------

    65. We agree in part with AMP's and Six Cities' requests for public
utilities to provide specific information in the proposed worksheet. We
specifically find that the Commission's requirement for public
utilities to include five categories of information in the proposed
worksheet overlaps with AMP's and Six Cities' requests. For example,
AMP's request for the worksheet to include the proposed amortization
period for excess and deficient ADIT is covered by category five--the
amortization period of the excess or deficient ADIT being returned or
recovered through rates. Similarly, AMP's and Six Cities' request for
an item-by-item accounting or itemization of excess or deficient ADIT
in the worksheet is covered by category two--the accounting for any
excess or deficient amounts in Accounts 182.3 and 254. We expect public
utilities to identify each specific source of the excess or deficient
ADIT, classify the excess or deficient ADIT as protected or
unprotected, and list the proposed amortization period associated with
each classification or source in their proposed worksheets, which will
provide sufficient detail to verify excess and deficient ADIT resulting
from the Tax Cuts and Jobs Act and future tax rate changes. Because we
will also review the compliance filings to determine whether the
proposed amortization periods for any excess and deficient ADIT
resulting from the Tax Cuts and Jobs Act are just and reasonable,\100\
we also expect public utilities to provide supporting documentation
necessary to justify those proposed amortization periods. In addition,
for future tax rate changes where excess and deficient ADIT will
automatically be included in a public utility's formula rate without
the need for an FPA section 205 filing, we expect public utilities to
provide supporting documentation for the excess and deficient ADIT
inputs to the ADIT Worksheet to customers as part of their annual
update process. Further, public utilities should include the supporting
documentation in their annual informational filings to the Commission
following a tax rate change.
---------------------------------------------------------------------------

    \100\ See infra P 104.
---------------------------------------------------------------------------

    66. We acknowledge that, given the diverse sources of excess or
deficient ADIT, a public utility or its transmission formula rate may
have some unique attribute that requires additional categories of
information to provide interested parties and the Commission with a
complete understanding of that public utility's treatment of excess and
deficient ADIT. As described elsewhere in this final rule, the
Commission will consider public utilities' proposals to implement the
ADIT Worksheet on a case-by-case basis.\101\ We note that the five
categories of information required to be included in the ADIT Worksheet
represent the minimum information that the worksheet should contain.
---------------------------------------------------------------------------

    \101\ We note that the public utility would need to demonstrate
that its proposal is consistent with or superior to the requirements
of the final rule. See Promoting Wholesale Competition Through Open
Access Non-Discriminatory Transmission Services by Public Utilities;
Recovery of Stranded Costs by Public Utilities and Transmitting
Utilities, Order No. 888, 61 FR 21540, at 21619 (May 10, 1996), FERC
Stats. & Regs. ] 31,036 (1996) (cross-referenced at 75 FERC ]
61,080), order on reh'g, Order No. 888-A, 62 FR 12274 (Mar. 14,
1997), FERC Stats. & Regs. ] 31,048 (cross-referenced at 78 FERC ]
61,220), order on reh'g, Order No. 888-B, 81 FERC ] 61,248 (1997),
order on reh'g, Order No. 888-C, 82 FERC ] 61,046 (1998), aff'd in
relevant part sub nom. Transmission Access Policy Study Grp. v.
FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. N.Y. v. FERC,
535 U.S. 1 (2002). An interested party could also protest a public
utility's proposed worksheet and argue that additional categories of
information are necessary given that public utility's unique
attributes.
---------------------------------------------------------------------------

    67. We find that Commission precedent already requires a public
utility's transmission formula rate protocols to allow interested
parties to request the type of information contained in the ADIT
Worksheet.\102\ We therefore disagree with APPA's request and will not
require revisions to a public utility's transmission formula rate
protocols for purposes of this rulemaking proceeding.
---------------------------------------------------------------------------

    \102\ See MISO, 143 FERC ] 61,149 at P 86 (finding that public
utilities must provide ``sufficient detail and with sufficient
explanation to demonstrate that each input to the formula rate is
consistent with the requirements of the formula rate, without
forcing interested parties to make extensive information requests to
understand the transmission owner's implementation of the formula
rate and to verify its correctness'').
---------------------------------------------------------------------------

    68. We disagree with arguments that the worksheet is unnecessary or
overly burdensome to administer, or will otherwise be overly time
consuming to create. First, arguments that information in the ADIT
Worksheet may overlap with information provided in FERC Form No. 1 are
misplaced. The ADIT Worksheet will provide more detailed information
than what is included in a public utility's FERC Form No. 1. Moreover,
the level of detail and manner in which regulatory liabilities are
disclosed in the FERC Form No. 1 vary across public utilities and may
not uniformly support amounts used as inputs to the formula rate.
Second, we affirm our position in the NOPR that public utilities
already gathered the information required for the worksheet when they
re-measured their ADIT balances as a result of the Tax Cuts and Jobs
Act.
    69. Third, while MISO Transmission Owners are correct that the
calculation of excess and deficient ADIT will be performed once for the
Tax Cuts and Jobs Act, the ADIT Worksheet will also reflect any excess
or deficient ADIT resulting from future tax rate changes, including
state and local tax changes. Furthermore, the worksheet will enable
interested parties and the Commission to track the amortization of
excess or deficient ADIT over time. Fourth, as discussed above, with
the information provided in the ADIT Worksheet, we

will no longer require public utilities to make an FPA section 205
filing to include excess and deficient ADIT in rates after tax rate
changes that result in excess and deficient ADIT. Instead, we will rely
on the worksheet to provide the requisite transparency for excess and
deficient ADIT. We find that relying on the worksheet instead of
requiring a public utility to make an FPA section 205 filing after
every tax change will result in an overall reduction in the burden of a
public utility with a transmission formula rate over the long run.
    70. Additionally, some commenters argue against the worksheet
because their transmission formula rate protocols already require them
to provide information on excess and deficient ADIT. To the extent that
a public utility already provides information on excess and deficient
ADIT due to existing requirements in its transmission formula rate
protocols, we find that the ADIT Worksheet should not create an undue
ongoing burden for the public utility. The Commission has also required
public utilities to revise their transmission formula rates to include
greater detail where the Commission deemed that certain inputs to the
transmission formula rate are complex enough to warrant prior
understanding of their effect.\103\
---------------------------------------------------------------------------

    \103\ See NOPR, 165 FERC ] 61,117 at P 49 (citing Midcontinent
Indep. Sys. Operator, Inc., 153 FERC ] 61,374 at P 14 (directing
certain transmission companies to revise their transmission formula
rates to include worksheets to ensure appropriate transparency));
Xcel Energy Sw. Transmission Co., LLC, 149 FERC ] 61,182 (2014);
Xcel Energy Transmission Dev. Co., LLC, 149 FERC ] 61,181 (2014);
Transource Wisconsin, LLC, 149 FERC ] 61,180 (2014); Transource
Kansas, LLC, 151 FERC ] 61,010 (2015) (requiring revisions to new
formula rates to provide greater transparency)).
---------------------------------------------------------------------------

    71. Similarly, we also disagree with comments that the worksheet is
redundant because it seeks the same information that public utilities
must disclose following the Commission's issuance of the ADIT Treatment
Following Asset Sales and Retirements Policy Statement. The FERC Form
No. 1 disclosures required under the ADIT Treatment Following Asset
Sales and Retirements Policy Statement are not specific enough to
identify the effect of excess and deficient ADIT for a particular
transmission formula rate on file with the Commission. Therefore, we
find that the worksheet will provide additional transparency to the
Commission and interested parties on excess and deficient ADIT.
    72. We disagree with MISO Transmission Owners' comments that it is
unclear how public utilities should address the amortization of excess
and deficient ADIT following the sale or retirement of an asset. The
ADIT Treatment Following Asset Sales and Retirements Policy Statement
states that, in cases for which the excess and deficient ADIT do not
transfer to the purchaser of the plant asset, public utilities'
balances of excess and deficient ADIT recorded in Account 254 and
Account 182.3 continue to exist as regulatory liabilities and assets
after an asset sale or an extraordinary retirement.\104\ The ADIT
Treatment Following Asset Sales and Retirements Policy Statement
further states that public utilities should therefore continue to
amortize excess or deficient ADIT balances upon such sales and
retirements.\105\ Because the Commission's guidance provides that
public utilities should continue to record and amortize such
liabilities and assets as any other excess ADIT liability or deficient
ADIT asset, we reiterate that public utilities should treat these
liabilities and assets as any other excess or deficient ADIT in their
worksheets.
---------------------------------------------------------------------------

    \104\ ADIT Treatment Following Asset Sales and Retirements
Policy Statement, 165 FERC ] 61,115 at P 37, n.79.
    \105\ Id. P 36; see also id. PP 40-43.
---------------------------------------------------------------------------

    73. We decline to adopt MISO Transmission Owners' suggestion that
public utilities could provide ADIT workpapers to customers through
their OASIS or the Transmission Owner Rate Data section of the MISO
website instead of including the worksheet as part of their
transmission formula rates. We find that it is appropriate to require
public utilities to include the worksheet as part of their transmission
formula rates because these rates already provide a Commission-approved
process that allows interested parties to request information about
excess and deficient ADIT and provides a well understood framework to
challenge information or data contained in the worksheet. Rather than
creating an entirely new process, which could create additional burdens
on industry, we believe that utilizing existing processes will help to
ensure a fair and efficient process whenever tax rates change in the
future.
    74. We do not agree with Xcel that the Commission should exempt
public utilities from revising settlement agreements to account for
certain ``administrative requirements,'' such as the worksheet that
documents the amortization of excess and deficient ADIT. Instead, in
keeping with the Commission's decision to evaluate any revisions made
in compliance with this final rule on a case-by-case basis, a public
utility may show that its existing ADIT-related mechanisms, including
those established by a Commission-approved settlement, meet the
requirements of this final rule.

B. Stated Rates

1. NOPR
    75. The Commission proposed to require all public utilities with
transmission stated rates to (1) determine the excess and deficient
ADIT created as a result of the Tax Cuts and Jobs Act and (2) return
this amount to or recover this amount from customers under 18 CFR
35.24. The Commission further proposed to require these public
utilities to calculate their excess or deficient ADIT using the ADIT
approved in their last rate cases.\106\ The Commission did not propose
a specific mechanism for public utilities with transmission stated
rates to return or recover the excess or deficient ADIT to or from
ratepayers. In keeping with the proposal for public utilities with
transmission formula rates, the Commission proposed to require public
utilities with transmission stated rates to follow guidance in the Tax
Cuts and Jobs Act for the appropriate amortization period for protected
excess or deficient ADIT, while allowing amortization periods for
unprotected excess or deficient ADIT to be determined on a case-by-case
basis.\107\
---------------------------------------------------------------------------

    \106\ NOPR, 165 FERC ] 61,117 at P 40.
    \107\ Id. P 42.
---------------------------------------------------------------------------

2. Comments
    76. EEI and Avista argue that any issues related to ADIT should be
addressed in the rate cases of public utilities with transmission
stated rates.\108\ EEI and Avista assert that such a finding would be
consistent with the Commission's decision in Order No. 144, issued at a
time when all public utilities' transmission rates were stated.\109\
EEI argues that the proposal in the NOPR would effectively order
through the return of excess ADIT a reduction in existing transmission
stated rates without claiming to act under FPA section 206 authority or
first meeting the Commission's burden to demonstrate that those
transmission stated rates are unjust and unreasonable. EEI contends
that this stands in contrast to the Commission's actions in the Tax
Rate-Related Orders to Show Cause. EEI agrees with the Commission's
statement in the NOPR that, while ADIT balances may have changed as a
result of the Tax Cuts and Jobs Act, many aspects other than ADIT
balances that underlie a transmission stated rate may have

changed.\110\ EEI and Avista argue that addressing the ADIT-related
effects of the Tax Cuts and Jobs Act in the next rate case is more
reasonable, efficient, and accurate than the Commission's
proposal.\111\ Similarly, FirstEnergy supports the assertions and
conclusions in EEI's comments.\112\
---------------------------------------------------------------------------

    \108\ EEI Comments at 8-11.
    \109\ Id.; Avista Comments at 2-3.
    \110\ EEI Comments at 8-11 (citing NOPR, 165 FERC ] 61,117 at P
29).
    \111\ Id.; Avista Comments at 2-3.
    \112\ FirstEnergy Comments at 2.
---------------------------------------------------------------------------

    77. Furthermore, EEI contends, it may be infeasible for public
utilities with transmission stated rates resulting from a black box
settlement to identify ADIT balances because they were not individually
negotiated. EEI requests that, if the Commission adopts the proposed
requirements for public utilities with transmission stated rates, the
Commission should clarify how such public utilities with black box
settlements should perform the necessary calculations or allow them to
address ADIT in their next rate cases.\113\
---------------------------------------------------------------------------

    \113\ EEI Comments at 8-11.
---------------------------------------------------------------------------

    78. EEI argues, and Avista agrees, that the Commission should
clarify that, where it has found that a public utility with a
transmission stated rate does not need to revise such rate to reflect
the reduced federal income tax rate following the Tax Rate-Related
Orders to Show Cause, those public utilities are not required to make a
filing in compliance with the final rule.\114\
---------------------------------------------------------------------------

    \114\ Id. at 11-12; Avista Comments at 3-4.
---------------------------------------------------------------------------

    79. EEI argues that, if the Commission does require public
utilities with transmission stated rates to make compliance filings, it
should establish a threshold such that the final rule only applies to
agreements with annual revenues/charges per agreement above $100,000 to
$500,000 per year. EEI asserts that, below that threshold, the cost of
preparing a compliance filing would exceed the amount returned to
customers.\115\
---------------------------------------------------------------------------

    \115\ EEI Comments at 13.
---------------------------------------------------------------------------

    80. EEI asserts that, its arguments regarding compliance filings
and public utilities with transmission stated rates notwithstanding,
addressing compliance with the final rule on a single-issue basis is
appropriate and efficient. Industrial Customers agree that such a
single-issue ratemaking approach is warranted.\116\ EEI notes that the
Commission has historically demonstrated a willingness to allow single-
issue filings to address tax-related changes to rates.\117\
---------------------------------------------------------------------------

    \116\ Industrial Customers Comments at 6.
    \117\ EEI Comments at 14-15.
---------------------------------------------------------------------------

    81. Separately, EEI argues that the five categories of information
the NOPR proposes as necessary to support the compliance filings of
public utilities with transmission stated rates are duplicative of the
additional disclosures required in their FERC Form No. 1 filings
following issuance of the ADIT Treatment Following Asset Sales and
Retirements Policy Statement. EEI asserts that the Commission should
clarify that the ADIT Treatment Following Asset Sales and Retirements
Policy Statement's required disclosures obviate the need for this
information to be presented in compliance filings to the final rule.
Alternatively, EEI requests that the Commission should confirm that a
compliance filing is not necessary for public utilities with
transmission stated rates that included the ADIT Treatment Following
Asset Sales and Retirements Policy Statement's required information in
their FERC Form No. 1s.\118\
---------------------------------------------------------------------------

    \118\ Id. at 12-13.
---------------------------------------------------------------------------

    82. On the other hand, AMP argues that the Commission should
require public utilities with transmission stated rates to file the
same worksheet proposed for public utilities with transmission formula
rates. AMP states that such a worksheet, which would be filed annually,
would be used to track and defer, for future return or recovery,
changes in the annual amortization of excess and deficient ADIT. AMP
states that, alternatively, transmission stated rates could be adjusted
each year to reflect required changes to annual excess and deficient
ADIT amortization.\119\
---------------------------------------------------------------------------

    \119\ AMP Comments at 13.
---------------------------------------------------------------------------

    83. APPA requests that the Commission clarify that the full amount
of any excess or deficient ADIT be returned to or collected from
customers based on the actual level of excess or deficient ADIT on that
public utility's books.\120\ APPA asserts, and Six Cities agree, that
the mechanism to return excess ADIT to or recover deficient ADIT from
customers proposed in the NOPR should not prevent customers from
receiving the full benefit of the Tax Cuts and Jobs Act and that the
Commission should specify that any difference between the actual
amounts on a public utility's books and the amount determined by ADIT
values used in the last rate case must be reconciled in the next rate
case.\121\
---------------------------------------------------------------------------

    \120\ APPA Comments at 5-6.
    \121\ Id. at 6; Six Cities Comments at 2.
---------------------------------------------------------------------------

    84. APPA contends, and Six Cities agree, that to the extent the
Commission intends for a public utility to provide information on
excess or deficient ADIT relative to the ADIT balance in its last rate
case rather than its current ADIT balance, the final rule should
require public utilities with transmission stated rates to provide the
latter.\122\
---------------------------------------------------------------------------

    \122\ APPA Comments at 6; Six Cities Comments at 2.
---------------------------------------------------------------------------

    85. Six Cities request that the Commission direct public utilities
with transmission stated rates subject to a moratorium to delay
amortization of excess or deficient ADIT until their next rate cases
(i.e., the end of the moratorium period). Six Cities contend that
customers may otherwise lose the benefits of the Tax Cuts and Jobs Act
because the required amortization schedule might begin or occur during
the moratorium period.\123\ Six Cities argue that this delay would be
consistent with the Commission's statement that ``public utilities
should not amortize an excess ADIT regulatory liability for accounting
purposes until it is included in ratemaking.'' \124\ Six Cities contend
that this requirement would not upset any moratorium as public
utilities would only be placing excess ADIT in a deferred account. Six
Cities request that, in conjunction with this deferral requirement, the
Commission require that any affected public utilities submit a single-
issue compliance filing coinciding with the end of the moratorium
period.\125\
---------------------------------------------------------------------------

    \123\ Six Cities Comments at 3-5.
    \124\ Id. at 5 (citing NOPR, 165 FERC ] 61,117 at P 39).
    \125\ Id. at 5-6.
---------------------------------------------------------------------------

3. Commission Determination
    86. We do not adopt the NOPR proposal to require public utilities
with transmission stated rates to (1) determine the excess and
deficient income tax caused by the Tax Cuts and Jobs Act's reduction to
the federal corporate income tax rate and (2) return this amount to or
recover this amount from customers. Instead, we maintain the status quo
under Order No. 144, Order No. 475 and 18 CFR 35.24, under which public
utilities with transmission stated rates should address any excess or
deficient ADIT caused by the Tax Cuts and Jobs Act in their next rate
case.\126\ We also do not adopt any of the other proposals in the NOPR
related to public utilities with transmission stated rates.\127\
---------------------------------------------------------------------------

    \126\ See Order No. 144, FERC Stats. & Regs. ] 30,254, at
31,519, 31,560.
    \127\ NOPR, 165 FERC ] 61,117 at P 40.
---------------------------------------------------------------------------

    87. In Order No. 144, the Commission stated that the cost of
service adjustments for excess and deficient ADIT are required to be
made in a public utility's next rate case.\128\ Thus, Order No. 144
stands for the proposition that it is appropriate for a public utility

with transmission stated rates to address excess and deficient ADIT in
its next rate case, as opposed to on a generic basis. Order No. 475,
which the Commission issued following the last reduction in the federal
corporate income tax rate, also supports our decision to not adopt the
requirements in the NOPR for public utilities with transmission stated
rates. In Order No. 475, the Commission declined to act on excess and
deficient ADIT for public utilities with transmission stated rates on a
generic basis and instead stated that determination would be made in a
public utility's next rate case. The Commission reasoned that the
potentially complex questions involving the return of excess ADIT were
best dealt with in individual FPA section 205 or 206 proceedings where
all interested parties could weigh in.\129\ We find that this rationale
still applies. The question of how to properly handle excess and
deficient ADIT for public utilities with transmission stated rates
following a tax rate change continues to raise complex questions that
are more properly addressed in a rate case.
---------------------------------------------------------------------------

    \128\ Order No. 144, FERC Stats. & Regs. ] 30,254 at 31,519.
    \129\ Order No. 475, FERC Stats. & Regs. ] 30,752 at 30,736.
---------------------------------------------------------------------------

    88. We agree with EEI's comments that addressing excess and
deficient ADIT in the next rate case for a public utility with
transmission stated rates is more reasonable, efficient, and accurate
than the proposal in the NOPR. Although APPA supported requiring public
utilities with transmission stated rates to address excess or deficient
ADIT on a single-issue basis at a general level, it noted that the
approach proposed in the NOPR to accomplish this goal would still
require a reconciliation in a public utility's next rate
proceeding.\130\ APPA's comments highlight the inefficiency and
inaccuracy of addressing excess and deficient ADIT on a single-issue
basis because such an approach would offer only a temporary, imperfect
solution that would need to be revisited in the public utility's next
rate proceeding.
---------------------------------------------------------------------------

    \130\ APPA Comments at 6.
---------------------------------------------------------------------------

    89. We therefore find that it is inappropriate to address excess
and deficient ADIT resulting from the Tax Cuts and Jobs Act on a
single-issue basis for public utilities with transmission stated rates.
Like the Commission's finding in Order No. 475 following the tax rate
changes in 1986, we determine that for the Tax Cuts and Jobs Act, a
public utility's next rate proceeding is the appropriate time to
address excess and deficient ADIT in the context of transmission stated
rates.
    90. We decline to adopt Six Cities' proposal for the Commission to
direct public utilities with transmission stated rates subject to a
moratorium to delay amortization of excess or deficient ADIT until the
next rate case. As explained above, excess or deficient ADIT resulting
from the Tax Cuts and Jobs Act for a public utility with transmission
stated rates will be addressed in that public utility's next rate case.
This outcome is consistent with Order No. 144, 18 CFR 35.24, and the
approach adopted by the Commission in Order No. 475.\131\
---------------------------------------------------------------------------

    \131\ Order No. 475, FERC Stats. & Regs. ] 30,752, at 30,736.
---------------------------------------------------------------------------

    91. Although we plan to address excess and deficient ADIT issues
for public utilities with transmission stated rates to their future
rate cases, we clarify our intentions. First, we emphasize that to the
extent public utilities with transmission stated rates have a
Commission-approved ratemaking method made specifically applicable to
them for returning excess ADIT, they should have begun reducing excess
ADIT pursuant to that previously approved method.\132\
---------------------------------------------------------------------------

    \132\ 18 CFR 35.24(c)(3). The same regulations apply to
interstate natural gas pipelines under 18 CFR 154.305.
---------------------------------------------------------------------------

    92. In the absence of a prior Commission-approved methodology, the
Commission's regulations require that public utilities ``use some
ratemaking method'' for making a provision for returning excess ADIT.
The regulations further state that ``the appropriateness of such method
will be subject to a case-by-case determination'' by the
Commission.\133\
---------------------------------------------------------------------------

    \133\ Id.
---------------------------------------------------------------------------

    93. In applying this ``case-by-case'' analysis, we recognize there
are differences between formula rates (as discussed elsewhere in this
order) and stated rates. For stated rates, we will generally apply a
policy that public utilities begin reducing excess ADIT immediately
upon a tax rate change and not at a later date, such as at the time of
a future rate case.\134\ This guidance addresses when the amortization
of excess ADIT should begin, rather than other issues related to the
reasonableness of a public utility's amortization methodology (e.g.,
ARAM or South Georgia). Moreover, this discussion regarding when
amortization of excess ADIT begins for public utilities with stated
transmission rates is merely intended to provide guidance regarding the
general course of action the Commission intends to follow in future
adjudications. The Commission will address issues related to a
utility's method for amortizing excess ADIT in stated rates (including
timing) based on the specific facts and circumstances in each
proceeding. For example, nothing here precludes a public utility with
transmission stated rates from proposing to delay amortization of
excess ADIT to its next rate case.
---------------------------------------------------------------------------

    \134\ See, e.g., Interstate and Intrastate Natural Gas
Pipelines; Rate Changes Relating to Federal Income Tax Rate, Order
No. 849, 164 FERC ] 61,031, at PP 136-150 (2018) (providing guidance
that natural gas pipelines should begin amortizing excess ADIT
resulting from the Tax Cuts and Jobs Act immediately for purposes of
the FERC Form No. 501-G informational filing, consistent with
section 154.305 of the Commission's regulations).
---------------------------------------------------------------------------

    94. We believe it is reasonable to treat transmission formula rates
differently than transmission stated rates given the unique
circumstances surrounding formula rates at the time the Tax Cuts and
Jobs Act became law. First as discussed above and in the NOPR, most
electric transmission formula rates lack a mechanism to make provision
for excess ADIT in computing the income tax component of the cost of
service.\135\ It is inappropriate to treat excess ADIT as reducing
immediately as of the Tax Cuts and Jobs Act when the formula itself
lacks a mechanism to accomplish this task. We further emphasize that,
upon enactment of the Tax Cuts and Jobs Act, the rates of public
utilities with transmission formula rates (unlike those with stated
rates) actually increased because the formula rates lacked an input for
excess ADIT. Thus, the excess ADIT no longer served as a reduction from
rate base as it did prior to the tax rate change when it was part of
ADIT.\136\ Because the transmission formula rate excluded excess ADIT
from the calculation of the rate, it is appropriate to treat excess
ADIT as being wholly preserved in Account 254 until it can be addressed
and reinserted into the transmission formula rate as required by this
final rule.\137\
---------------------------------------------------------------------------

    \135\ ADIT NOPR, 165 FERC ] 61,117 at P 16.
    \136\ Previously, the excess ADIT had been included in regular
ADIT (Accounts 190, 281, 282 and 283) and served as a reduction to
rate base. While the excess ADIT in Account 254 should have also
served as a reduction to rate base, the formula rates did not
include the appropriate mechanism for this to occur.
    \137\ Further distinguishing transmission formula rates from
stated rates, even where a public utility's formula rate included
provisions for excess ADIT, the Commission's policy prior to this
final rule required the public utility to seek Commission approval
prior to returning excess ADIT. See PJM, 165 FERC ] 61,275 at P 28.
Accordingly, public utilities with formula rates could not return
excess ADIT under this prior policy. This provides another way to
distinguish transmission formula rates from stated rates.
---------------------------------------------------------------------------

    95. For these reasons, we believe the policy discussed above
regarding transmission stated rates and their treatment of excess ADIT
is reasonable. Therefore, we reject Six Cities' proposal for public
utilities with transmission

stated rates to delay amortization of excess or deficient ADIT until
the next rate case.

C. Compliance Filings

1. NOPR
    96. The Commission proposed to require each public utility with
transmission stated or formula rates to submit a compliance filing
within 90 days of the effective date of this final rule to revise its
transmission stated or formula rates, as necessary, to demonstrate that
it meets the requirements set forth in this final rule.\138\
---------------------------------------------------------------------------

    \138\ NOPR, 165 FERC ] 61,117 at P 51.
---------------------------------------------------------------------------

    97. The Commission noted that some public utilities with
transmission formula rates already had mechanisms in place in their
rates that address the requirements discussed in this final rule. Where
existing mechanisms would be modified by this final rule, the
Commission proposed that the public utility must either comply with the
requirements of this final rule or demonstrate that these previously
approved mechanisms continue to be consistent with or superior to the
requirements of this final rule.\139\
---------------------------------------------------------------------------

    \139\ Id. P 52.
---------------------------------------------------------------------------

2. Comments
    98. Some commenters support the Commission's 90-day compliance
filing proposal.\140\ EEI requests that the Commission modify the
compliance timeline for public utilities with transmission formula
rates so that those utilities must submit compliance filings within the
later of (1) 90 days of issuance of a final rule or (2) the public
utility's next informational or true-up filing. EEI contends that the
complexity and time-consuming nature of the annual update and true-up
processes support such flexibility.\141\ Conversely, Industrial
Customers argue that the compliance period should be shortened for the
final rule.\142\
---------------------------------------------------------------------------

    \140\ See Eversource Comments at 15; AMP Comments at 13-14.
    \141\ EEI Comments at 7-8.
    \142\ Industrial Customers Comments at 5-6.
---------------------------------------------------------------------------

    99. EEI also requests that the Commission provide guidance in the
final rule as to the timing of compliance filings for public utilities
transitioning from transmission stated to transmission formula rates.
EEI argues that these public utilities should be allowed to address
compliance with the final rule in the proceeding addressing this
transition. EEI asserts this would reduce burden and increase
efficiency for the Commission and all interested parties. EEI contends
that, so long as these public utilities are not amortizing ADIT
balances prior to the proceeding addressing this transition, customers
will see the benefits in reduction of the federal income tax rate.\143\
---------------------------------------------------------------------------

    \143\ EEI Comments at 15-16.
---------------------------------------------------------------------------

3. Commission Determination
    100. We adopt a modified version of EEI's proposal in its comments
to the NOPR and require each public utility with transmission formula
rates to submit a filing to demonstrate compliance with the final rule
including revisions to its transmission formula rates, as necessary,
within the later of (1) 30 days of the effective date of this final
rule \144\ or (2) the public utility's next annual informational filing
following the issuance of this final rule. We find that this schedule
for compliance filings will reduce the burden on public utilities by
allowing them flexibility to align the compliance requirement with
their annual informational filing deadlines. However, we note that this
compliance filing schedule represents the deadline to submit a
compliance filing and that public utilities may choose to make their
compliance filings earlier. Additionally, on compliance, we expect
public utilities with transmission formula rates to make their proposed
tariff sheets effective on the effective date of this final rule.
---------------------------------------------------------------------------

    \144\ The final rule becomes effective 60 days after publication
in the Federal Register. With the first set of compliance filings
due 30 days after the effective date of the final rule, public
utilities will have a minimum of 90 days from the date of
publication in the Federal Register to make compliance filings.
---------------------------------------------------------------------------

    101. We adopt the proposal that, if a public utility believes that
its existing transmission formula rate already meets the requirements
of this final rule, the public utility must demonstrate that these
previously approved mechanisms are consistent with or superior to the
requirements of this final rule; otherwise, such a public utility must
modify their transmission formula rate to comply with the requirements
of this final rule.
    102. Regarding Industrial Customers' request for a shortened
compliance period, we find that the compliance period adopted by this
final rule appropriately balances the time necessary for public
utilities to develop and implement the changes required by this final
rule, including the ADIT Worksheet, while still ensuring that
compliance occurs in a timely manner.
    103. As for a public utility transitioning from transmission stated
rates to transmission formula rates, because we decline to adopt the
NOPR requirements for public utilities with transmission stated rates,
a public utility transitioning from stated rates to formula rates will
not need to make a compliance filing. Accordingly, when the public
utility makes a filing under section 205 to adopt transmission formula
rates, the Commission at that time will consider whether the utility's
proposal appropriately reflects the excess or deficient ADIT resulting
from the Tax Cuts and Jobs Act.
    104. As discussed above, this final rule requires that each public
utility with a transmission formula rate populate the ADIT Worksheet
submitted in compliance with the requirements of this final rule with
excess and deficient ADIT resulting from the Tax Cuts and Jobs Act and
any interested party will have an opportunity to comment on this
information. Consistent with past practice, we will also determine
whether the proposed amortization periods for any excess and deficient
ADIT are just and reasonable.\145\ To aid in our review and provide
greater clarity to customers, we also require that public utilities
clearly indicate the date such inputs were populated with excess and
deficient ADIT data.
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    \145\ See, e.g., Emera Me., 165 FERC ] 61,086, at PP 44-45
(2018); So. Cal. Edison Co., 166 FERC ] 61,006 at PP 23-24.
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D. Other Comments Relating to Issues Not Addressed in the NOPR

1. Comments
    105. EEI argues that the Commission should affirm in the final rule
that the proposed requirements apply only to jurisdictional
transmission rates and that ADIT-related issues in all other rates,
particularly negotiated rates, will be addressed on a case-by-case
basis.\146\ EEI proposes that the Commission clarify that a
``transmission rate'' is a rate for transmission delivery service, and
therefore does not include ancillary services that are provided under
OATTs or other tariffs. MISO Transmission Owners request a similar
clarification and state that they do not support the proposal to the
extent it would apply to non-transmission rates in the Commission-
jurisdictional OATTs of public utilities with transmission formula
rates.\147\ EEI requests that the Commission reiterate that customers
who choose to challenge rates other than transmission rates continue to
bear the burden of demonstrating that the Tax Cuts and Jobs Act has
rendered

such rates unjust, unreasonable, unduly discriminatory, or
preferential.\148\
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    \146\ EEI Comments at 16-17.
    \147\ MISO Transmission Owners Comments at 16-17.
    \148\ EEI Comments at 17.
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    106. APPA argues that the Commission should reconsider its position
and act affirmatively to ensure non-transmission, cost-based rates are
adjusted to reflect the effects of the Tax Cuts and Jobs Act. APPA
points to its previous comments submitted in response to the NOI,
noting over-collection in revenues from the non-transmission rates.
APPA argues that the ability to file a complaint under FPA section 206
does not provide adequate protections as customers are unlikely to have
sufficient information to judge whether the Tax Cuts and Jobs Act has
rendered an existing non-transmission rate unjust and unreasonable.
APPA contends that the Commission should direct jurisdictional public
utilities to file adjustments to their non-transmission cost-based
rates to reflect Tax Cuts and Jobs Act-related changes or show cause
why they should not be required to do so. APPA asserts that, at
minimum, any public utilities with non-transmission cost-based rates
not addressed in the NOPR or the Tax Rate-Related Orders to Show Cause
should be required to file an informational filing describing the
effect of the Tax Cuts and Jobs Act on their income tax costs and
ADIT.\149\
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    \149\ APPA Comments at 11-13.
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    107. NRECA supports the Commission's proposal to not address the
rates of non-public utilities.\150\
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    \150\ NRECA Comments at 5.
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    108. DEMEC and Industrial Customers argue that refunds of excess
ADIT resulting from the Tax Cuts and Jobs Act should include
interest.\151\ Industrial Customers argue that interest would
compensate ratepayers for the loss of benefit of the partial rate base
reduction for the period until the adjustment is implemented.\152\
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    \151\ DEMEC Comments at 11; Industrial Customers Comments at 5.
    \152\ Industrial Customers Comments at 6.
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    109. EEI states that the Commission should consider accepting
comments about the ADIT Treatment Following Asset Sales and Retirements
Policy Statement in the context of this NOPR to allow for
clarification. EEI contends that the Commission should clarify whether
the ADIT Treatment Following Asset Sales and Retirements Policy
Statement applies in the case of all ordinary retirements or excludes
all ordinary retirements. EEI also argues that the Commission should
clarify that the ADIT Treatment Following Asset Sales and Retirements
Policy Statement does not apply to retirements and sales that are
closed after November 23, 2018, the ADIT Treatment Following Asset
Sales and Retirements Policy Statement's effective date, where
transmission stated rate cases have addressed accounting and ratemaking
treatment prior to the effective date as evidenced by a final state
commission order.\153\
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    \153\ EEI Comments at 17-18.
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    110. DEMEC notes that the ADIT Treatment Following Asset Sales and
Retirements Policy Statement did not address transmission facilities
transferred to other functions (e.g., from transmission to
distribution). DEMEC argues that the Commission should ensure the
refund of excess ADIT associated with retired, sold, and transferred
facilities to customers.\154\
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    \154\ DEMEC Comments at 16.
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    111. AMP argues that the Commission should take immediate action to
stop further charges based on pre-Tax Cuts and Jobs Act federal income
tax rates by initiating ``show cause'' proceedings for each public
utility that has transmission stated rates not yet reflecting post-Tax
Cuts and Jobs Act income tax rates.\155\ Similarly, AMP and Industrial
Customers request that the Commission act immediately to issue the
final rule to prevent those public utilities that still have
transmission rates based on a 35 percent federal income tax rate from
collecting excessive federal income tax revenue allowances until their
next rate cases.\156\ AMP further argues that the final rule should be
expanded to require the return of any incremental charges collected
after December 31, 2017 that relate to utilizing the pre-Tax Cuts and
Jobs Act tax rate in jurisdictional ratemaking. AMP contends that these
incremental charges will not necessarily be returned as a component of
excess ADIT under the NOPR because the re-measurement of excess and
deficient ADIT took place on December 31, 2017 and accounts only for
incremental tax charges occurring until the date of re-measurement. AMP
asserts that, absent Commission action, public utilities will have no
obligation to return these charges collected after re-measurement.\157\
AMP argues that the Commission should issue a directive requiring
refunds for rates charged after December 31, 2017, to the extent those
rates were based on the 35 percent federal income tax rate.\158\
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    \155\ AMP Comments at 13.
    \156\ Id. at 13-14; Industrial Comments at 5-6.
    \157\ AMP Comments at 13.
    \158\ Id. at 14.
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2. Commission Determination
    112. We affirm that this final rule applies only to public
utilities with transmission formula rates that are contained in an
OATT, a transmission owner tariff, or a rate schedule. This final rule
does not address ancillary services or non-transmission rates for
services provided under an OATT or other tariff. We find the arguments
requesting that the Commission address non-transmission rates to be
beyond the scope of this proceeding.
    113. Additionally, we find that AMP's requests for the Commission
to initiate ``show cause'' orders for public utilities not yet
reflecting the Tax Cuts and Jobs Act's change in tax rates \159\ and to
issue a directive requiring refunds for rates charged after December
31, 2017, to the extent those rates were based on the 35 percent
federal income tax rate, are beyond the scope of this proceeding. In
this final rule, we focus only on ensuring that transmission formula
rates properly address excess and deficient ADIT resulting from the Tax
Cuts and Jobs Act and any future tax rate changes in a transparent
manner and consistent with Order No. 144 and 18 CFR 35.24.
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    \159\ See supra n.23.
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    114. We are unpersuaded by DEMEC's and Industrial Customers'
request for public utilities to include interest when returning excess
ADIT. The Commission has chosen not to require interest in prior
proceedings involving the return of excess ADIT, including proceedings
addressing the return of excess ADIT following the Tax Cuts and Jobs
Act.\160\ Furthermore, the requirements in this final rule will ensure
that the full regulatory liability for excess ADIT is returned to
transmission formula rate customers and that rate base neutrality is
preserved going forward. Accordingly, we find that transmission formula
rate customers will receive the full benefit of the Tax Cuts and Jobs
Act, and therefore, we do not find it appropriate to require public
utilities to include interest when returning excess ADIT as a result of
the Tax Cuts and Jobs Act to customers.
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    \160\ See, e.g., Order No. 475, FERC Stats. & Regs. ] 30,752, at
30,737; Emera Me., 165 FERC ] 61,086; So. Cal. Edison Co., 166 FERC
] 61,006.
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    115. We find requests to clarify the ADIT Treatment Following Asset
Sales and Retirements Policy Statement to be beyond the scope of this
proceeding.

IV. Information Collection Statement

    116. The Paperwork Reduction Act (PRA) \161\ requires each federal
agency to seek and obtain the Office of Management and Budget's (OMB)
approval before undertaking a collection of information (including
reporting, record keeping, and public disclosure requirements) directed
to ten or more persons or contained in a rule of general applicability.
OMB regulations require approval of certain information collection
requirements imposed by rules (including deletion, revision, or
implementation of new requirements).\162\ Upon approval of a collection
of information, OMB will assign an OMB control number and an expiration
date. Respondents subject to the filing requirements of a rule will not
be penalized for failing to respond to the collection of information
unless the collection of information displays a valid OMB control
number.
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    \161\ 44 U.S.C. 3501-21.
    \162\ 5 CFR 1320.11.
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    117. The Commission is submitting these reporting and recordkeeping
requirements to OMB for its review and approval under section 3507(d)
of the PRA. Comments are solicited on the Commission's need for this
information, whether the information will have practical utility, the
accuracy of the provided burden estimate, ways to enhance the quality,
utility, and clarity of the information to be collected, and any
suggested methods for minimizing the respondent's burden, including the
use of automated information techniques.
    118. Public Reporting Burden: The Commission initially identified
106 public utilities with transmission formula rates that will each be
required to revise its rate so that any excess or deficient ADIT is
properly reflected in its revenue requirement following a change in tax
rates, such as those established by the Tax Cuts and Jobs Act.
Additionally, each public utility with a transmission formula rate will
be required to incorporate the ADIT Worksheet into its transmission
formula rate to increase transparency. Public utilities will be
required to populate this worksheet in their compliance filings. We
also note the Commission's reliance on the ADIT Worksheet in lieu of an
FPA section 205 filing each time a local, state, or federal tax rate
changes will result in an overall reduction in burden in the long run
to public utilities with transmission formula rates.
    119. The Commission also initially identified 31 public utilities
with transmission stated rates that it proposed to require to calculate
the excess and deficient ADIT caused by the Tax Cuts and Jobs Act and
to return to or recover from customers those amounts. However, the
Commission decided not to adopt the proposed requirements for public
utilities with transmission stated rates in this proceeding, and
therefore public utilities with transmission stated rates will have no
future burden or cost associated with this final rule.
    120. Based on these assumptions, we estimate the burden and cost
\163\ for the information collection requirements as follows.
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    \163\ The loaded hourly wage figure (including benefits) is
based on the average of the occupational categories for 2018 found
on the Bureau of Labor Statistics website (http://www.bls.gov/oes/current/naics2_22.htm and http://www.bls.gov/news.release/ecec.nr0.htm):
    --Accountant and Auditor (Occupation Code: 13-2011): $56.09.
    --Management (Occupation Code: 11-0000): $95.24.
    --Legal (Occupation Code: 23-0000): $142.86.
    --Office and Administrative Support (Occupation Code: 43-0000):
$42.11.
    These various occupational categories' wage (and benefits)
figures are averaged and weighted equally, giving an average of