FERC Filings
COMMENTS OF THE ELECTRIC POWER SUPPLY ASSOCIATION ON ACCOUNTING AND REPORTING OF FINANCIAL INSTRUMENTS, COMPREHENSIVE INCOME, DERIVATIVE AND HEDGING ACTIVITIES
SUMMARY OF COMMENTS
EPSA supports accurate accounting and the use of financial risk management instruments by the competitive wholesale electric industry. UtiliCorp United Inc. Chairman Richard C. Green, testifying recently on behalf of EPSA before the House Sub-Committee on Energy and Air Quality, said, “It is imperative that companies’ reports provide accurate and transparent information concerning their actions and their financial health of companies.” The Securities and Exchange Commission (SEC) has a specific statutory mandate for financial accounting and recently published new standards for reporting financial instruments. The Commission’s core statutory mandate is ensuring that rates, terms and conditions for interstate sales and transportation of electricity are just and reasonable, and are not unduly discriminatory. The focus on costs inherent in the Uniform System of Accounts and the Form No. 1 is not applicable to entities with authority to charge prices based not on their costs, but on value in the marketplace, as determined by the interactions of buyers and sellers. Accordingly, the Commission has routinely granted waivers of such accounting and reporting requirements to marketers and independent generators. The same rationale exists today for granting waivers of its accounting and reporting regulations for marketers and generators with market-based rate authority, and EPSA recommends that the Commission continue to do so.
The NOPR does not articulate reasons for considering rescinding past waivers or imposing new accounting or reporting requirements on entities with market-based rates. Moreover, the NOPR does not address the fact that, if required to file all the information in Form No. 1, the disclosure of confidential cost information will harm the competitive positions of market participants, a point that EPSA has previously made. Finally, such disclosure could cause major changes to the accounting systems of jurisdictional entities with market-based rates.
The Commission should not duplicate the efforts of the SEC by including entities with market-based rates in the final rule. If the Commission believes it should continue to consider applying new accounting and reporting requirements to entities with market-based rates, despite the comments contained herein, EPSA recommends that the Commission convene a technical conference to gain a better understanding of the impact of financial instruments and accounting on the rates charged in a competitive market by jurisdictional entities with market-based rates. Only then should the Commission move forward with a final rule.