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DEPARTMENT OF ENERGY

Transportation Department

CFR Citation: 18 CFR Part 101

Docket ID: [Docket No. RM04-12-000; Order No. 668]

NOTICE: Part IV

DOCUMENT ACTION: Final rule.

SUBJECT CATEGORY: Accounting and Financial Reporting for Public Utilities Including RTOs

DATES: Effective Date: The amended regulations will become effective January 1, 2006.

DOCUMENT SUMMARY: The Federal Energy Regulatory Commission (Commission) is amending its regulations to update the accounting requirements for public utilities and licensees, including independent system operators and regional transmission organizations (collectively referred to as RTOs). The Commission is also amending its financial reporting requirements for the quarterly and annual financial reporting forms for these entities. These updates to the Commission's Uniform System of Accounts and the financial reporting requirements will allow for better comparability between public utilities and will result in improved transparency of financial information and will facilitate better understanding of RTO costs.

SUMMARY: Energy Department, Federal Energy Regulatory Commission,

DOCUMENT BODY 2: Issued December 16, 2005.

SUPPLEMENTAL INFORMATION

I. Introduction
II. Background
III. Discussion

A. General

B. Regional Transmission and Market Operation Asset Function

C. RTO Revenue Accounts

D. Regional Market Expense Function

E. Accounting by Public Utilities for Computer Hardware, Software and Communication Equipment

F. Accounting and Financial Reporting by Public Utilities, Including RTOs

1. Accounts for Load Dispatching, Scheduling and System Control Expenses

2. Accounts for System Planning and Standards Development

3. Accounts for Study Costs

4. Accounts for RTO Billings

5. Account for Revenue From Transmission of Electricity

6. Accounting for Settlement Amounts

7. Ministerial Filings

8. Cost Oversight

9. Other Matters
IV. Effective Date
V. Changes to the FERC Quarterly and Annual Report Forms
VI. Information Collection Statement
VII. Environmental Analysis
VIII. Regulatory Flexibility Act

IX. Document Availabilty

Before Commissioners: Joseph T. Kelliher, Chairman; Nora Mead Brownell, and Suedeen G. Kelly.

I. Introduction

1. In this Final Rule, the Commission is revising its Uniform System of Accounts (USofA) \1\ to accommodate the restructuring changes that are occurring in the electric industry due to the availability of openaccess transmission service and increasing competition in wholesale bulk power markets. Corresponding changes are being made to the FERC Form No. 1, Annual Report for Major Electric Utilities, Licensees and Others (Form 1); FERC Form No. 1F, Annual Report for Nonmajor Public Utilities and Licensees (Form 1F); and FERC Form No. 3Q, Quarterly Financial Report of Electric Utilities, Licensees, and Natural Gas Companies (Form 3Q).
\1\ 18 CFR Part 101.

II. Background

2. In April 1996, in Order No. 888,\2\ the Commission established the foundation necessary to develop competitive bulk power markets in the United States: nondiscriminatory open access transmission services by public utilities and standard cost recovery rules to provide a fair transition to competitive markets. Public utilities were also required to functionally unbundle, and to provide transmission service separately from generation services.
\2\ 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 21,540 (May 10, 1996), FERC Stats. & Regs. ] 31,036 (1996), order on reh'g, Order No. 888A, 62 FR 12,274 (March 14, 1977), FERC Stats. & Regs. ] 31,048 (1997), order on reh'g, Order No. 888B, 81 FERC ] 61,248 (1997), order on reh'g, Order No. 888C, 82 FERC ] 61,046 (1998), aff'd in relevant part sub nom. Transmission Access Policy Study Group, v. FERC, 225 F.3d 667 (D.C. Cir. 2000), aff'd sub nom. New York v. FERC, 535 U.S. 1 (2002).

3. Despite the changes brought about by Order No. 888, reports of discriminatory practices by vertically integrated public utilities persisted. In Order No. 2000,\3\ the Commission encouraged the formation of independent and regional organizations, to remedy undue discrimination and to foster regional efficiencies and efficient pricing. As a result, a number of independent system operators and regional transmission organizations (collectively referred to as RTOs) have formed and are in operation.\4\ These RTOs perform many of the same activities previously performed by the transmission owners whose transmission systems they now operationally control. In addition, RTOs perform some unique functions, not traditionally performed by other public utilities, they oversee markets and they conduct longterm system planning on a regional basis.
\3\ See Regional Transmission Organizations, Order No. 2000, 65 FR 809 (January 6, 2000), FERC Stats. & Regs. ] 31,089 (1999), order on reh'g, Order No. 2000A, 65 FR 12,088 (March 8, 2000), FERC Stats. & Regs. ] 31,092 (2000), affirmed sub nom. Public Utility District No. 1 of Snohomish County, Washington, v. FERC, 272 F.3d 607 (D.C. Cir. 2001).
\4\ See, e.g., the California Independent System Operator Corporation (CAISO), the Midwest Independent Transmission System Operator, Inc. (Midwest ISO), the ISO New England, Inc. (ISONE), the New York Independent System Operator, Inc. (NYISO), PJM Interconnection, L.L.C. (PJM), and the Southwest Power Pool, Inc. (SPP).

4. On September 26, 2004, the Commission issued a Notice of Inquiry (NOI) in this proceeding.\5\ The NOI invited comments on various matters including the Commission's accounting and financial reporting requirements for RTOs. The Commission received comments from RTOs, public utilities that are RTO members, state regulatory commissions, and others. Generally, commenters agreed that the existing accounting regulations and related financial reporting requirements do not provide sufficient detailed information about RTOrelated costs, including the costs incurred by RTOs and other relevant information concerning the types of services RTOs provide to their members. On June 3, 2005, the Commission issued a Notice of Proposed Rulemaking (NOPR) in response.\6\ The Commission received
[[Page 77627]]
comments from RTOs, public utilities that are RTO members, and others.\7\
\5\ See Financial Reporting and Cost Accounting and Recovery Practices for Regional Transmission Organizations and Independent System Operators, 69 FR 58,112 (September 29, 2004), FERC Stats. & Regs. ] 35,546 (2004).
\6\ Accounting and Financial Reporting for Public Utilities Including RTOs, 70 FR 36865 (June 27, 2005); FERC Stats. and Regs. ] 32,585.

\7\ See Appendix A for list of commenters.

5. Today, the Commission is issuing this Final Rule to address the accounting and financial reporting issues raised in the NOPR and the comments to the NOPR. The changes to the Commission's accounting and financial reporting requirements adopted here will provide uniformity and transparency in accounting for and reporting of transactions and events affecting public utilities, including RTOs. The Commission expects that these changes in accounting and financial reporting will also lead to improvements in cost recovery practices by providing details concerning the cost of RTO functions, and increased assurance that the costs are both legitimate and reasonable costs of providing service and assigned to the correct period for recovery in rates. III. Discussion

A. General

6. The Commission received 22 comments on the proposed accounting and reporting requirements which ranged from favorable to falling short of the proposal's intended goal of providing greater transparency for transactions and business functions. Most commenters, however, generally commend and support the Commission's proposed initiative to amend its regulations to update the accounting requirements for public utilities, including RTOs.\8\ After careful consideration of the comments received, the Commission is adopting the changes and revisions as proposed with certain modifications and clarifications as discussed below.
\8\ See generally National Grid, NRECA, Indicated NYTOs, and TANC.
B. Regional Transmission And Market Operation Asset Function 1. Accounting NOPR

7. In the NOPR, the Commission proposed to create a new asset function entitled Regional Transmission and Market Operation Plant to record RTO investments in computer hardware, software and communication equipment.\9\ The proposed new accounts in this function are Account 380, Land and Land Rights; Account 381, Structures and Improvements; Account 382, Computer Hardware; Account 383, Computer Software; Account 384, Communication Equipment; Account 385, Miscellaneous Regional Transmission and Market Operation Plant; Account 386, Asset Retirement Costs for Regional Transmission and Market Operation Plant; and reserves Account 387 for future accounts.
\9\ NOPR at P 2032.

2. Commenters

8. Commenters were generally supportive and did not oppose the creation of the Regional Transmission and Market Operation Asset Function. One commenter recommended breaking down each new asset account into subaccounts for general purpose activities, market design development, and market operation.\10\
\10\ City of Santa Clara at 23.

3. Commission Conclusion

9. The Commission will adopt the Regional Transmission and Market Operation Asset Function as proposed in the NOPR: Account 380, Land and Land Rights; Account 381, Structures and Improvements; Account 382, Computer Hardware; Account 383, Computer Software; Account 384, Communication Equipment; Account 385, Miscellaneous Regional Transmission and Market Operation Plant; Account 386, Asset Retirement Costs for Regional Transmission and Market Operation Plant; and reserves Account 387 for future accounts. The Commission notes that in order to perform many of their primary functions, RTOs must make significant investments in computer hardware, software and communication equipment. The cost of these assets is not explicitly addressed in the existing primary plant accounts, resulting in inconsistent accounting and reporting for these assets. In order to provide more financial transparency and consistent accounting and reporting for the costs of hardware, software and communication equipment, the Commission believes a new utility plant function is needed to record the cost of assets owned and used by RTOs.

10. The Commission does not believe sufficient justification has been advanced to expand the proposed new accounts further as suggested by commenters. The new accounts adopted herein will provide the Commission and others with additional, more detailed information than is currently available about the major types of assets needed to perform regionwide transmission and market operations. These assets perform joint functions and at this point the Commission believes it may be unduly burdensome to allocate the costs of these assets in greater detail.
C. RTO Revenue Accounts

1. Accounting NOPR

11. Revenues RTOs receive for the reimbursement of their operational costs are not addressed in the current USofA because the existing revenue accounts were designed principally to record revenues from electricity sales on a bundled basis. Therefore, the Commission proposed the creation of two new revenue accounts to record amounts billed by RTOs to their members.\11\ The first, Account 457.1, Regional Transmission Service Revenues, would include revenues received by RTOs for services provided and amounts billed under each Commissionapproved tariff. The second, Account 457.2, Miscellaneous Revenues, would include revenues received from incidental transactions and events, such as profits or losses on sales of miscellaneous materials.

\11\ NOPR at P 3335.

12. The Commission also proposes to include a new Form 1 Schedule to report the revenue collected by RTOs for services performed pursuant to Commissionapproved tariffs.

2. Commenters

13. Commenters are generally supportive of the proposed accounting for RTO revenue accounts.\12\ However, one commenter suggests that the Commission should create a mechanism and account for all revenues and costs arising from managed market services and operations.\13\ \12\ See, e.g., APPA at 19, ISO/RTO Council at 2.

\13\ See TANC at 12.

14. Another commenter asserts that RTO constituents have the right to know how much of their RTO's revenues derive from penalties assessed by the RTO.\14\ The commenter thus asserts that a new series of accounts should be created to record RTO's revenue from penalties assessed against market participants. According to the commenter, these accounts should be further augmented by another, separate new sub account for neutrality charges assessed by the RTO.
\14\ See SVP at 20.

3. Commission Conclusion

15. We will adopt Account 457.1, Regional Transmission Service Revenues, Account 457.2, Miscellaneous Revenues, and the RTO Revenue Schedule as proposed in the NOPR. The Commission declines to adopt the recommendation to amend the USofA to require RTOs to record revenues on their books and records for energy products, services and
[[Page 77628]]
commodities associated with services that RTOs manage for market participants. In these instances, an RTO acts as an agent in providing these services; it does not realize or earn revenue on these transactions. The RTO merely collects monies from one member or participant and remits it to another member or participant. For example, when a member or participant purchases energy through an RTO managed centralized energy market, the RTO merely collects monies from the purchaser of the energy and remits it or passes it through to the appropriate energy supplier, who then records it as revenue.

16. We also decline to adopt the recommendation to amend the USofA to create separate subaccounts of Account 457 to record penalty and neutrality revenues. According to the instructions of the new RTO revenue accounts, RTOs are to maintain records showing revenues received from customers by type of charge. RTOs then must report any penalty and neutrality revenues received on the newlycreated RTO Revenue Schedule adopted herein, providing adequate disclosure of these revenues.
D. Regional Market Expense Function

1. Accounting NOPR

17. In the NOPR, the Commission explained that the current USofA does not provide sufficient financial transparency concerning the types of costs incurred by RTOs in facilitating and monitoring energy markets. In order to address this deficiency the Commission proposed creating a separate new expense function within the USofA to capture these types of costs in greater detail.\15\ As part of this new function, the Commission proposed the creation of certain operating expense accounts to capture the costs of managing the various RTO markets and reviewing market data to determine compliance with market rules. These accounts are Account 575.1, Operation Supervision; Account 575.2, DayAhead and RealTime Market Facilitation; Account 573.3, Transmission Rights Market Facilitation; Account 575.4, Capacity Market Facilitation; Account 575.5, Ancillary Services Market Facilitation and Account 575.6, Market Monitoring and Compliance.

\15\ NOPR at P 3651.

18. Additionally, new accounts were proposed to capture and provide greater detail as to the amount of maintenance expense incurred on computer hardware, software, communication equipment and other assets owned and used by RTOs. These accounts are Account 576.1, Maintenance of Structures and Improvements; Account 576.2, Maintenance of Computer Hardware; Account 576.3, Maintenance of Computer Software; Account 576.4, Maintenance of Communication Equipment and Account 576.5, Maintenance of Miscellaneous and Market Operation Plant.

19. Finally, the Commission proposed that RTOs report in Form 1 the data required by the Transmission of Electricity for Others schedule \16\ to provide more complete information concerning the use of the transmission system under the control of the RTO.
\16\ See FERC Form 1 at 328330.

2. Commenters

20. Most commenters did not object to the Commission's proposal to create a new regional market expense function.\17\ However, some commenters suggest that the Commission clarify that the regional market expense function accounts apply solely to RTOs, as the proposed new regulatory text contained in the NOPR does not make this clear.\18\ Additionally, one commenter suggests that the Commission change the descriptive caption of this function from ``regional market operations expense'' to ``market operations expense.'' \19\ This commenter submits that these accounts should not be limited to RTOs, as other public utilities in the future may use market oriented approaches to provide these services.
\17\ See, e.g., ISO/RTO Council at 2.
\18\ See, e.g., EEI at 2.

\19\ See APPA at 18.

21. One commenter also suggests that the word ``facilitation'' in the title of Accounts 575.2, 575.3, 575.4 and 575.5, be changed to ``administer'' as RTOs administer or operate organized markets while ``facilitation'' describes a more passive role than is the case.\20\ \20\ APPA at 19.

22. Additionally, one commenter suggests that the Commission require RTOs to record and report revenues and expenses related to the cost of energy, energy products, services and commodities that RTOs manage or provide to market participants.\21\ Another commenter suggests that RTO customer service costs be recorded separately in a newlycreated account; \22\ customer service costs are a significant component of RTO expense identified by public utilities and it is important for RTO/nonRTO customer services expenses to be segregated. \21\ TANC at 2 and SVP at 27.

\22\ NRECA at 8.

23. Finally, most commenters did not object to the proposal to require RTOs to report the data required by the Form 1 Transmission of Electricity for Others schedule. However, one commenter asserts that RTOs do not currently organize transaction data in a way that would allow them to report the information called for by the schedule.\23\ This commenter notes that RTOs treat most service in their footprint as network service and as such can only report aggregate flows without transaction specific source and sink information. The commenter contends that absent extremely expensive software and design changes RTOs will not be able to fully report the information called for on the schedule. The commenter recommends that the Commission not include this requirement in the Final Rule or in the alternative clarify that aggregate flow data will be acceptable.
\23\ See ISO/RTO Council at 5.

3. Commission Conclusion

24. The Commission will adopt the regional market expense function and accounts proposed, as modified and clarified below. Upon additional consideration, the Commission clarifies that any jurisdictional entity, whether an RTO or a nonRTO public utility, must use the regional market expense accounts if a regional market expense is incurred. The key for recording costs in these accounts is not whether an entity is an RTO or not, but whether an entity is performing market services on a regionwide basis. The accounts are intended to capture costs incurred in performing regionwide services related to market administration, market monitoring and market compliance activities whether performed by an RTO or another nonRTO public utility. These accounts are not limited to RTOs, as other nonRTO jurisdictional entities may provide these market services, and the costs incurred by these other nonRTO jurisdictional entities in performing these services must be captured in these accounts. The Commission will add a definition of regional market to the USofA to make clear which type of entities are to use the regional market expense function accounts. The Commission clarifies that regional market expense accounts are to be used not only by RTO/ ISO public utilities but by any public utility that operates an organized energy market, whether directly or through a contractual relationship with another entity.

25. The Commission will modify the account titles and instructions to replace the word ``facilitation'' with ``administer'', as we agree with the
[[Page 77629]]
commenter that it is more descriptive of the role RTOs play (and others may play) in market operations.

26. The Commission declines to adopt commenter recommendations to amend the USofA to require the RTOs to record expenses on their books and records for energy products, services and commodities associated with services that RTOs manage for market participants. As previously discussed, an RTO acts as an agent and does not take title to energy products, services and commodities associated with services in the performance of these managed services. The RTO merely collects monies from one member or participant and remits it to another member or participant.

27. The Commission also declines to adopt one commenter's suggestion to create new accounts to separately record RTO customer service costs. Our existing accounting rules contain customer service expense accounts for recording costs of this nature, Accounts 901910 (Customer Accounts and Customer Service Accounts). RTOs are required to record their customer service expenses in the appropriate existing customer service accounts. Therefore, it is not necessary to create new accounts for this purpose.

28. One commenter asserts that RTOs cannot provide all of the information required on the Form 1 Transmission of Electricity for Others schedule absent costly software changes to their systems; most of the transmission service in their footprint is network service and as such RTOs do not currently maintain transaction specific source and sink information in a format needed to complete the schedule. However, RTOs can provide aggregate power flow information for the transmission facilities under their control.

29. We will, therefore, require RTOs to report aggregate transmission usage information for imports into the RTO from other systems, exports from the RTO, through and out service, network service and pointtopoint service. We will also require RTOs to report related financial information by type of service, such as network and pointto point service. These changes we adopt herein will give the Commission more complete information concerning the use of the transmission system under the control of RTOs, without requiring RTOs to make costly software changes. We will require the transmission usage information to be reported on a new Form 1 and Form 3Q schedule entitled Monthly ISO/ RTO Transmission System Peak Load and the related financial information on a newly created schedule entitled Transmission of Electricity by RTOs, rather than have RTOs report the information on the Form 1 Transmission of Electricity for Others schedule which is not a good fit for reporting this aggregate information.

30. In examining the new regional market expense function, we recognize a rent account is needed to capture the expenses associated with renting assets to perform regional market functions to be consistent with our other function classifications. Therefore, we will also add a new account entitled Account 575.8, Rents, to capture rent costs in the regional market expense function.
E. Accounting by Public Utilities for Computer Hardware, Software and Communication Equipment

1. Accounting NOPR

31. In the NOPR, the Commission proposed to add three new sub accounts to the existing transmission asset function for public utilities and licensees, other than RTOs, to record the cost of computer hardware, software and communication equipment owned and used for transmission related activities.\24\ The Commission proposed to create Account 351.1, Computer Hardware, Account 351.2, Computer Software, and Account 351.3, Communication Equipment, so as to provide uniform and consistent accounting and reporting for these types of assets by nonRTO public utilities and licensees.
\24\ NOPR at P 5253.

2. Commenters

32. Commenters generally argue that the proposed changes would impose a significant burden on companies; \25\ companies will face a complex undertaking in identifying what portions of their computer hardware, software and communications equipment and operation and maintenance costs belong in the new transmission accounts because most companies rely on such hardware, software, and equipment for multiple purposes.\26\ One commenter suggests that the Commission appears to have overlooked the fact that public utilities perform many more functions than simply transmission functions.\27\
\25\ See EEI at 4, SCE at 2, FirstEnergy at 8.
\26\ EEI at 9.

\27\ SCE at 2.

33. Commenters assert that the new accounts for computer equipment and computer use will require judgments as to disaggregation and assignment of these costs among different accounts \28\costs that are not necessarily severable and directly assignable. Commenters also assert that these allocations will be unnecessarily arbitrary and the Commission's desire for comparability will never be achieved.\29\ \28\ International Transmission at 5.

\29\ FirstEnergy at 17.

34. Commenters recommend that, due to the extreme burden the proposed changes would place on public utilities, these changes should be applied only to RTOs, whose sole business is related to performing transmission functions.\30\ Commenters note that the RTOs' primary function is the administration of transmission systems and the use of their hardware, software and communication equipment is more easily identifiable as transmission related.\31\
\30\ SCE at 3.

\31\ FirstEnergy at 16.

35. Commenters also suggest that, if the Commission retains the proposed new computer and communication equipment accounts for use by licensees and public utilities other than RTOs, that it provide companies the flexibility to make reasonable allocations to the new accounts and other accounts in the USofA, including the general plant accounts.\32\ Commenters also suggest that companies should be able to adopt the new accounts in a way that makes sense given their circumstances, with as little extra effort as possible, without having to perform complex allocations, and without having to modify prior accounting records and reports.

\32\ EEI at 9.

36. Another commenter suggests that new subaccounts should be set up to record the additional computer hardware, software and communications equipment required to interface with the RTO.\33\ This commenter suggests that these subaccounts should record and disclose the amount of information and technology and communications spending that relates specifically to the public utility's RTO interface. \33\ SVP at 35.

37. Finally, one commenter also notes that the Commission proposes to add new subaccounts to Account 569, Maintenance of Structures, namely Account 569.1, Maintenance of Computer Hardware, Account 569.2, Maintenance of Computer Software, and Account 569.3, Maintenance of Communication Equipment. The commenter suggests that the more appropriate account for these subaccounts would be Account 573, Maintenance of Miscellaneous Transmission Plant (Major only), [[Page 77630]]
making them subaccounts Account 573.1 though Account 573.3.\34\ \34\ EEI at 9.

3. Commission Conclusion

38. The great majority of commenters disagree with the NOPR's proposed accounting for computer hardware, software and communication equipment by public utilities and licensees other than RTOs. These commenters argue that these assets are not necessarily severable and directly assignable. They point out that the equipment and software in question perform many different functions and that it would be extremely difficult to determine what portion of the equipment and software perform a transmission function. These commenters also argue that individual utilities may use different allocation methods to determine the portion of these items used in transmission, which will reduce comparability among utilities and therefore the usefulness of the reported accounting information. Finally, these commenters contend that it will be burdensome and costly to implement the proposed changes and that minimal reporting benefits will be derived from the change.

39. The Commission acknowledges that some or perhaps most computer hardware, software and communication assets are joint use assets that may not be severable or directly assignable to the transmission function. We agree with commenters that requiring entities to record that portion of their investments in these assets used for transmission purposes within the transmission function on an allocated basis is problematic in that functional reclassification of the investment, as well as the related depreciation reserve, would be required each accounting period as the allocation factor changes. Therefore, we have decided not to adopt proposed Accounts 351.1, 351.2 and 351.3 for public utilities and licensees other than RTOs and will continue to allow nonRTO public utilities to account for these items as joint use assets as they have historically done. However, we will require both RTOs and nonRTO public utilities to record the costs of maintaining these assets that are related to providing transmission services in Accounts 569.1, 569.2 and 569.3 as proposed. NonRTO public utilities already allocate these joint use costs for ratemaking purposes in determining open access transmission rates. We will now also require that public utilities allocate these costs for accounting purposes.

40. Allocation approaches used by public utilities must ensure that a reasonable portion of the cost of maintaining these joint use assets are used in the transmission of electricity are allocated to the transmission function. Additionally, public utilities are also expected to allocate these costs to the transmission function on a consistent basis from year to year. Public utilities will be required to footnote their allocation method used to calculate these maintenance expenses as reported in the Form 1 Electric Operation and Maintenance Expenses Schedule (pages 320323).

41. Finally, we decline to adopt one commenter's suggestion that instead of adding subaccounts to Account 569, Maintenance of Structures, that we add subaccounts to Account 573, maintenance of Miscellaneous Transmission Plant, for the maintenance costs related to computer hardware, software and communication equipment. The commenter provides no explanation for the proposed change and we see no benefit in deviating from the account structure originally proposed. F. Accounting and Financial Reporting by Public Utilities, Including RTOs
1. Accounts for Load Dispatching, Scheduling and System Control Expenses

i. Accounting NOPR

42. In the NOPR, the Commission proposed to replace Account 561, Load Dispatching, with a series of detailed expense accounts to record expenses for providing transmission services related to load dispatching, scheduling and system control.\35\ The proposed accounts are Account 561.1, Load DispatchReliability, to include the costs incurred to manage the regionwide reliability coordination function; Account 561.2, Load DispatchMonitor and Operate Transmission System, to include the costs incurred to monitor, assess and operate the transmission system and ensure the system's reliability and Account 561.3, Load DispatchTransmission Service and Scheduling, to include the costs incurred to process hourly, daily, weekly and monthly transmission service requests using an automated system such as an Open Access, SameTime Information System (OASIS).
\35\ NOPR at P 54, 5659.

ii. Commenters

43. One commenter asserts that the Commission should not apply the proposed USofA changes to transmission owners that are members of an RTO or ISO, as doing so will increase the cost to consumers for the implementation of these systems, while providing little additional information to the Commission.\36\ This commenter also asserts that it may be difficult to disaggregate expenses among the proposed new Load Dispatch subaccounts (561.1, 561.2, and 561.3), because the same staff members may perform functions included under more than one of these subaccounts, tasks undertaken to accomplish functions relevant to one subaccount may also contribute to completion of another, and the descriptions of the subaccounts are insufficiently detailed.\37\ This commenter further asserts that if the Commission does decide to apply the proposed USofA changes to utilities that are members of RTOs and ISOs, it should allow those utilities to apply for a waiver to allow consolidated reporting of load dispatch expenses if they fall below a de minimus threshold.\38\
\36\ NYTOs at 2.
\37\ Id. at 7.

\38\ Id. at 10.

44. Another commenter asserts that the lines of demarcation between costs in these subaccounts are not clear and that the Commission should provide additional guidance on its intention as to information to be captured in these subaccounts.\39\ Yet another commenter notes that, while it supports the Commission's goal of greater cost transparency, it similarly recommends that the Commission provide further guidance so that the useful cost comparisons that the Commission is seeking to facilitate can be made across RTOs and public utilities.\40\ This commenter asserts that the addition of accounts to reporting forms will be of little use if users are not populating those accounts with comparable costs and information. This commenter recommends that the Commission provide additional guidance regarding the specific information it would like captured in these subaccounts. \39\ EEI at 8.

\40\ International Transmission at 3.

45. One commenter supports the specific account structure the Commission proposes, as well as its applicability to both RTOs and non RTO public utilities. However, that commenter suggests the Commission realign the grouping of the new accounts under two new functions (system control and transmission services) that it proposes should be created.\41\

\41\ APPA at 19.

46. Finally, a commenter notes that, in the text of the NOPR's discussion of Accounts 561.1, 561.2 and 561.3, the
[[Page 77631]]
NOPR states that these proposed accounts are for use by both nonRTO public utilities and RTOs.\42\ However, in the proposed text of the USofA for Accounts 561.1, 561.2 and 561.3, the proposed language specifically states that the accounts are to include expenses incurred by the regional transmission service provider, with no mention in the proposed text of nonRTO public utilities. The commenter suggests that the Commission revise the proposed text of the USofA for proposed Accounts 561.1, 561.2 and 561.3 to specifically state that the accounts may be used by RTOs, other public utilities and licensees, consistent with the NOPR's language.
\42\ See SCE at 3.

iii. Commission Conclusion

47. The proposed accounts for recording load dispatch, scheduling and system control expenses provide greater transparency concerning the types of costs incurred by both RTOs and nonRTO public utilities in providing transmission services. Therefore, we will adopt the proposed accounting for load dispatch, scheduling and system control expenses. However, based upon the comments received, we will adopt the proposed accounting with certain clarifications and modifications as discussed below.

48. The instructions to Accounts 561.1, 561.2 and 561.3 are revised to make clear that the accounts are to be used by both RTOs and nonRTO public utilities. Additionally, the items list of Account 561.2 has been revised to include certain items included in replaced Account 561, Load Dispatching, which were inadvertently not included on the list. These modifications add clarity as to which entities are to use the accounts and what types of costs are to be recorded in the load dispatch, scheduling and system control expense accounts.

49. We will not adopt one commenter's suggestion to realign the newly created accounts under its suggested new functions: system control and transmission service. The expanded expense accounts contained in the transmission function provide the requisite transparency concerning the activities and related costs incurred by public utilities, including RTOs, in providing transmission service for ratemaking and other Commission purposes. Moreover, the account structure appropriately herein adequately separates market service and transmission service activities.

50. Finally, we clarify that, to the extent that RTOs and nonRTO public utilities perform the same activities for load dispatch, scheduling and system control, then the costs of those activities should be accounted for in the same manner and recorded in the same accounts. For example, if an RTO incurs costs to manage the regionwide reliability coordination function it would record those costs in Account 561.1. Likewise, if a nonRTO public utility happens to incur costs to manage the reliability coordination function for third parties, it would also record those costs in Account 561.1. 2. Accounts for System Planning and Standards Development

i. Accounting NOPR

51. In the NOPR, the Commission proposed to add a new Account 561.5, LongTerm Reliability Planning and Standards Development, to record the costs incurred by RTOs for performing longterm system planning and standards development.\43\
\43\ NOPR at P 6062.

ii. Commenters

52. Some commenters request clarification of the Commission's proposed changes.\44\ These commenters suggest that the definition provided in the NOPR does not provide a definitive basis to identify the costs to be recorded in this account because planning can be interpreted to have several meanings. National Grid requests that the Commission recognize that the scope of costs covered by Account 561.5 is likely to vary from region to region and clarity should be provided about the meaning of ``longterm system planning.'' They explain that transmission planning occurs over several different timescales such as shortterm planning to intermediate planning to long term planning.\45\ Indicated NYTOs request a waiver for transmission owners that are RTO members to allow consolidated reporting of de minimus amounts or alternatively guidance on the specific expenses to be recorded in the account.\46\
\44\ See, e.g., National Grid at 910.
\45\ National Grid at 910.

\46\ See Indicated NYTO at 910.

53. Other commenters support the proposed changes but believe the Commission should require additional accounts to offer more transparency and comparability. Specifically one commenter believes that Account 561.5 should be augmented by additional accounts for the portion of system planning, development and maintenance expenses that relate to market design initiatives and activities of RTOs, as opposed to control area operation.\47\

\47\ See City of Santa Clara, California at 2122.

54. Finally, one commenter believes that the structure of this new account allows for inclusion of generationrelated costs such as resource planning.

iii. Commission Conclusion

55. As the Commission explained in the NOPR, the existing USofA does not provide a specific expense account to record expenses for system planning and development activities. The Commission will adopt Account 561.5 as proposed as modified and discussed below. Commenters raise questions about the scope of planning costs that are to be recorded in Account 561.5 and how to record costs incurred relative to the different transmission planning timescales, such as shortterm, intermediateterm, and longterm. We will modify the instructions to Account 561.5 to allow inclusion of all transmission system planning timescale planning costs, not just longterm planning. We will therefore modify the title of the account to Account 561.5, Reliability, Planning and Standards Development, to reflect the fact that planning costs other than longterm are to be recorded in Account 561.5.

56. RTOs are directed to report costs of system planning, development, and maintenance expenses in Account 561.5. We clarify to the extent that public utilities and licensees that are not RTOs perform similar activities; they should also include the costs that they incur for system planning and standards development in Account 561.5. We also clarify that all system planning and standards development costs recorded in this account are to be transmission related.

57. The Commission declines at this time to augment Account 561.5 with additional accounts for the portion of system planning, development and maintenance expenses that relate to market design initiatives and activities of RTOs, as opposed to control area operation. We have created a new regional market expense function and all market planning and development costs shall be recorded in the appropriate market expense account based on the nature of the planning and development costs incurred.
3. Proposed Accounts for Study Costs

i. Accounting NOPR

58. The USofA does not specially provide accounts for recording costs incurred to perform generation interconnect and transmission service studies. Therefore, the Commission
[[Page 77632]]
proposed to create Account 561.6, Transmission Service Studies, to record the costs incurred by public utilities and licensees, including RTOs, to conduct studies for transmission service requests. The Commission also proposed to add a new Account 561.7, Generation Interconnection Studies, to record the costs incurred by public utilities and licensees, including RTOs to conduct studies for generator service requests.\48\

\48\ NOPR at P 63.

59. Additionally, in order to provide more disclosure concerning the costs of interconnect study activities being performed by public utilities and licensees, including RTOs, the Commission proposed to add a new schedule to the quarterly and annual financial reports that will provide more specifics concerning the costs of these activities.\49\ \49\ Id. at P 64.

ii. Commenters

60. Commenters were of divergent views regarding the Commission's proposal to record costs to perform generation interconnect and transmission service studies in Account 561.6 and Account 561.7. Commenters state that it is not clear whether the proposed shift in accounting treatment of study costs could affect the billable or capital treatment of the underlying study costs. Commenters state that the costs of transmission service studies and generator interconnection studies are largely reimbursed by customers or folded into the capital accounting for transmission projects or upgrades, and would only be expensed in rare circumstances.\50\ One commenter requests that the Commission clarify that the new expense accounts for study costs are not intended to cover all study costs, but only those costs that are neither reimbursed by customers nor capitalized. Alternatively, this commenter requests clarification that utilities may still charge out or capitalize such study costs as they have in the past.\51\ Another commenter requests that the Commission exempt RTO member utilities from the proposed USofA changes for study costs because it provides little additional information. Alternatively, this commenter requests a waiver to eliminate reporting study costs in Account 561.6 and Account 561.7 because the costs are largely reimbursed by the RTO and will appear in the RTO financial reports. Additionally, this commenter requests that the cost of transmission service and generator interconnect studies be treated as capital expenditures.\52\
\50\ National Grid at 1012, Indicated NYTOs at 610.
\51\ National Grid at 1012.
\52\ Indicated NYTOs at 610.

iii. Commission Conclusion

61. The Commission will adopt the proposed accounts for recording generation interconnection and transmission service study costs as clarified below. We clarify that Accounts 561.6 and 561.7 are only to be used to record the costs incurred by public utilities, including RTOs, to conduct studies for transmission service requests and generator service requests, respectively, when the costs are not directly reimbursable by a specific customer and the costs are otherwise charged to expense under the USofA.

62. Additionally, we clarify that the Commission did not propose any change and does not do so now related to the recording of the costs of conducting transmission and generation interconnect studies in Account 186, Miscellaneous Debits, by public utilities, including RTOs, pending reimbursement by the entity requiring the service. We further clarify that the Commission did not intend to change any capitalization requirements related to study costs. Public utilities are to continue to follow the Commission's existing rules and regulations for cost capitalization.
4. Accounts for RTO Billings

i. Accounting NOPR

63. In the NOPR, the Commission proposed to create three new sub accounts in order to provide greater transparency for the payments made by public utilities and licensees to RTOs. The three new proposed sub accounts are Account 561.4, Scheduling, System Control and Dispatching Services; Account 561.8, Reliability Planning and Standards Development Services; Account 575.7, Market Facilitation, Monitoring and Compliance Services.\53\ The proposed new subaccounts will be used by public utilities and licensees to record their share of costs billed to them by an RTO. Additionally, the Commission proposed that each RTO include in its monthly settlement statements a breakdown of the allocation of that RTO's operational costs within each of the three subaccounts discussed below.
\53\ NOPR at P 6568.

ii. Commenters

64. Commenters generally agree that nonRTO public utilities should record in separate subaccounts the charges paid to RTOs and suggest that the Commission add more subaccounts to separately disclose additional costs incurred by nonRTO public utilities.\54\
\54\ See City of Santa Clara, California at 2526, EEI at 78.

65. One commenter seeks clarification of the Commission's intent with respect to proposed Account 575.7 Market Facilitation, Monitoring and Compliance Services.\55\ This commenter questions if the Commission intends that only costs billed to utilities by the RTOs be included in this account, not including costs by utilities performing functions that meet the description of the account. The commenter explains that decisions made regarding rate recovery of Balancing Authority costs by transmission owners are likely to depend heavily on how relevant costs are recorded and requests that the Commission clarify that Account 575.7 is only applicable to costs billed to utilities by RTOs. \55\ First Energy at 17.

66. Finally, one commenter requests that the Commission not adopt an absolute rule that information on the three new cost subaccounts be part of the settlement statements.\56\ This commenter believes it will be expensive to include such cost breakdowns in monthly customer settlement statements. This commenter states that RTOs have sophisticated billing software that is not easy to modify and that a number of RTOs would have to make expensive and timeconsuming changes to their billing systems in order to incorporate the required cost information directly into monthly settlement statements. This commenter suggests that a more flexible approach would recognize the reality that different RTOs have different software capabilities and allow each entity to comply with the Commission's requirement in their own efficient way.
\56\ See ISO/RTO Council at 34.

iii. Commission Conclusion

67. The Commission will adopt the new accounts for RTO billings proposed in the NOPR with the modification discussed below. As the Commission explained in the NOPR, these new accounts will allow each RTO member to record its share of the RTO's total monthly operating costs in these new subaccounts. The Commission will also require each RTO provide a breakdown of the allocation of that RTO's operational costs within each of the three subaccounts. However, the Commission will not require RTOs to include this information in its monthly settlement statements because of software costs to implement changes to [[Page 77633]]
the RTO billing systems. Instead, the Commission will permit RTOs to use another format to provide the information to its members. However, RTOs are nevertheless directed to provide a breakdown of the cost allocation to the three new subaccounts on the date the billings are issued.

68. The Commission also clarifies that Account 575.7 is to be used only for costs billed to utilities by RTOs for market administration, monitoring and compliance services.
5. Account for Revenue From Transmission of Electricity

i. Accounting NOPR

69. In the NOPR, the Commission proposed to add a new subaccount to Account 456, Other Electric Revenues, in order to provide greater transparency by transmission owners for the revenues received for use of their transmission facilities.\57\
\57\ NOPR at P 7374.

ii. Commenters

70. Commenters were generally supportive, but request that the Commission provide additional clarification.\58\ One commenter requests that the Commission provide even more transparency regarding the particular sources of those revenues and how they relate to common ratemaking categories. This commenter suggests the Commission implement accounting for transmission revenues that would enable customers and the Commission to monitor whether previously accepted rates generate more than an appropriate level of revenues. This commenter requests that the Commission remedy its accounting and reporting, in this proceeding, to keep pace with standard ratemaking practice so that Form 1 information provides accounting data for direct ratemaking use.\59\ Another commenter requests the Commission clarify that nonRTO public utilities should use the new Account 456.1 for transmission service revenues and existing Account 456 for miscellaneous revenues. \58\ TAPS at 68, International Transmission at 7.
\59\ TAPS at 68.

iii. Commission Conclusion

71. The Commission will adopt the new subaccount as proposed in the NOPR. The new Account 456.1, Revenues From Transmission of Electricity of Others, will include revenues the transmission owner receives for the transmission of electricity over its transmission facilities. This new account will provide greater transparency with respect to the revenues received by transmission owners for use of their transmission facilities. We also clarify that revised Account 456 is to be used for recording nontransmission miscellaneous operating revenues.
6. Accounting for Settlement Amounts

i. Accounting NOPR

72. In the NOPR, the Commission proposed that public utilities or licensees that conduct energy transactions through an RTO that requires participants to bid their generation into the market and buy generation to supply their native load report these transactions on a net basis in Account 555, Purchased Power.\60\ The Commission also invited comment as to what circumstances would be appropriate for a public utility or licensee to reflect these types of transactions on a net basis, and under what circumstances would it be appropriate for a public utility or licensee to reflect these types of transactions as distinct purchases and sales.
\60\ NOPR at P 7579.

ii. Commenters

73. Two commenters do not support the netting of transactions that flow through RTO energy markets.\61\ One of these commenters argues that for accounting and tax purposes, purchased power should, on financial statements, represent only purchased power. This commenter also asserts that its members that are subject to Rural Utilities Service (RUS) oversight need to be able to report gross amounts of energy sales to RUS. This commenter further asserts that it will be difficult for cooperatives to determine income for income tax purposes if only net transactions are reported.\62\ The other commenter argues that showing only the net position of a market participant may understate the use of RTO energy markets and mask situations where a utility is a net seller during one period but a net buyer in another period. This commenter also notes that netting would not reveal the effects of time and locationspecific variation in energy prices, yielding only incomplete results that are unlikely to be
meaningful.\63\
\61\ See APPA at 2, NRECA at 4.
\62\ NRECA at 5.

\63\ APPA at 2.

74. Most other commenters, however, generally agree that these transactions should be reported on a net basis.\64\ One commenter submits that reporting these types of transactions on a gross basis might give an inaccurate picture of an entity's size and its actual revenuegenerating activities.\65\ This commenter suggests that accounting for transactions settled through RTO markets on a net basis more accurately reflects what similarly situated utilities would be doing in the absence of RTO markets. This commenter also suggests that accounting on a gross basis would cause it to incur an artificially large gross receipts tax liability which would act as a deterrent to participation in RTO markets. This commenter further suggests that accounting for these transactions on a net basis is in accord with traditional accounting principles regarding whether to record transactions on a gross or net basis.
\64\ See First Energy at 15, MGE at 2, Wisconsin Electric at 3, EEI at 6, APS at 3, Cinergy at 4, NYTOs at 12, SCE at 1.

\65\ See MGE at 3.

75. Some commenters support netting, but believe that it is inappropriate to report net sales in Account 555.\66\ These commenters assert that net sellers of generation should report the transactions in Account 447, Sales for Resale, and that net purchasers should report the transactions in Account 555, Purchase Power. One commenter notes that consistent with the reporting methodology of its RTO it reports sales and purchases of power on an hourly net position basis. For each hour that the company is a net seller of power, the commenter states that it reports the net amount in Account 447; conversely, if it is net buyer of power, it reports the net amount in Account 555. In each monthly reporting period, the commenter notes that the hourly Account 447 and/or Account 555 net amounts are aggregated and separately reported in Account 447 and 555, respectively.
\66\ EEI at 6, First Energy at 16, Wisconsin Electric at 4.

76. Some commenters also recommend that the Commission allow companies flexibility in determining net sales and/or purchases during the relevant reporting period and for using the appropriate account or accounts to display its net sales and/or purchases.\67\ One of these commenters suggests that some companies may choose to net their purchases and sales for the entire reporting period, while others may reflect separately net purchases when the company was a net buyer and net sales when it was a net seller.

\67\ EEI at 7, First Energy at 16.

77. On the other hand, one commenter suggests that the Commission define a uniform method for the calculation of the gross amount of sales versus purchases, whether it be
[[Page 77634]]
by the hour, day, week or month.\68\ This commenter argues that, without such a standard, a wide range of interpretation and reporting is likely to result.

\68\ NRECA at 3.

78. Another commenter asserts that netting should be allowed for transactions in all RTO markets.\69\ This commenter suggests that the Commission clarify that netting of purchases from and sales into an RTO market is appropriate and allowed not only for transactions in an RTO that requires participants to offer all resources to and buy all power from the RTO, but for transactions in any RTO that offers an energy market in which participants may choose to offer all generation to and buy all power from the energy market. This commenter also suggests that the Commission clarify that purchases from and sales to one or more RTO markets may be netted against one another.

\69\ MGE at 3.

79. Finally, one commenter recommends that the Commission's Electronic Quarterly Reports (EQR) and annual reports be revised to match the accounting methodology using the Commission's USofA with the required reporting format.\70\ While another commenter notes that there is a disconnect between the reporting of transactional data in the EQRs and reporting of the data in the FERC Form 1, stemming from how the data are defined in those two contexts. This commenter recommends that when the Commission next entertains revisions to one or the other of the forms, the Commission should discuss this issue with reporting entities to determine if some clarification aimed at conformity would be appropriate.\71\
\70\ Wisconsin Electric at 4.
\71\ EEI at 7.

iii. Commission Conclusion

80. Recording RTO energy market transactions on a net basis is appropriate as purchase and sale transactions taking place in the same reporting period to serve native load are done in contemplation of each other and should be combined. Netting accurately reflects what participants would be recording on their books and records in the absence of the use of an RTO market to serve their native load. Recording these transactions on a gross basis, in contrast, would give an inaccurate picture of a participant's size and revenue producing potential. The Commission will, therefore, adopt the proposed accounting for RTO energy market transactions with certain modifications and clarifications as discussed below. The Commission does expect public utilities, however, to maintain detailed records for auditing purposes of the gross sale and purchase transactions that support the net energy market amounts recorded on their books.

81. Additionally, we clarify that transactions are to be netted based on the RTO market reporting period in which the transaction takes place. For example, if the RTO market in which the transaction takes place uses an hourly period for determining energy market charges and credits, then nonRTO public utilities purchasing and selling energy in the market must net transactions on an hourly basis. Requiring participants to net transactions over the RTO market's reporting period leads to consistent and comparable energy market information for decision making purposes by the Commission and others.

82. Further, we clarify that the netting of purchases and sales in an RTO energy market is appropriate not only for transactions where participants are required to bid their generation into the market and buy generation from the market to supply their native load, but also in cases where an RTO offers an energy market in which participants may choose to offer all generation to and buy all power from the energy market.

83. We also clarify that if a participant is a net seller, rather than a net buyer, during a given market reporting period it must credit such net sales to Account 447, Sales for Resale, instead of Account 555, Purchased Power.

84. Finally, one purpose of this rule is to establish uniform accounting requirements for the purchase and sale of energy in RTO markets. The purpose of reporting of gross information in EQRs, in contrast, is to provide the Commission and the public with a more complete picture of wholesale market activities which affect jurisdictional services and rates, thereby helping to monitor for any market power and to ensure that customers are protected from improper conduct. These are not necessarily the same criteria and principles that should be used in establishing uniform accounting requirements. In any event, the reporting of wholesale market activity in EQRs falls outside the scope of this rule.

7. Ministerial Filings

85. Some commenters argue that certain revisions to the USofA will adversely affect the Attachment O formula rate which is used by the vast majority of the transmission owners in the Midwest ISO and other formula rates that rely on the USofA and Form 1 data for the rate inputs.\72\ Specifically, for the Midwest ISO, new accounts or renumbered accounts may cause disruptions in the operation of the Attachment O formula rate, especially if there is no parallel revision to Attachment O to reflect these changes. Some commenters therefore request that the Commission clarify that it will accept ``ministerial'' filings in order to conform these formula rates to the final revisions of the USofA.\73\
\72\ See FirstEnergy at 13, International Transmission at 4, EEI at 10.
\73\ See FirstEnergy at 12, 1315, International Transmission at 34.

86. In particular, FirstEnergy, among others, has expressed concern that the Commission ensure that the revisions to its accounting and financial reporting requirements will not provide an opportunity for challenges to Commissionapproved formula rates nor shall the Commission entertain such challenges to these previouslyaccepted rates.\74\ Therefore, the Commission should state that it will accept ``ministerial'' filings necessary to conform to the Final Rule all Commission accepted formula rates that rely on Form 1 inputs. FirstEnergy further argues that the Commission should provide a specific timeline to allow such filings but coordinate the respective effective dates of the rate filings and reporting changes to ensure that there is no gap in cost recovery.\75\ International Transmission requests that the Final Rule establish a compliance filing process, rather than allow a Federal Power Act section 205 filing,\76\ so that there will be no challenges to ministerial filings in order for public utilities to revise the formula rate templates.\77\
\74\ International Transmission at 34, FirstEnergy at 14. \75\ FirstEnergy at 14.
\76\ 16 U.S.C. 824d (2000).
\77\ International Transmission at 4.

Commission Conclusion

87. We will allow revisions to tariffs to conform to the changes adopted here, but pursuant to section 205. We will, however, consider only comments that address the specific revisions necessary to comply with these accounting and reporting revisions. By narrowly focusing the scope of the filings and of the comments to only those changes necessary to conform to this Final Rule, public utilities can be assured that commenters cannot otherwise and inappropriately challenge the reasonableness of their Commissionapproved and accepted formula rates.

88. We also find that any necessary revisions to formula rates in order to
[[Page 77635]]
conform to the Final Rule should not increase rates. The requisite changes to Attachment O, for example, would be the result of the new accounts and would solely reflect accounting changes adopted in this Final Rule. Such changes also should not involve substantive changes to the way the formula rates operate or the way the charges are calculated.

8. Cost Oversight

89. The Commission received multiple comments regarding cost oversight in response to the accounting and financial reporting NOPR. Commenters assert that the restructuring of the electric industry will only benefit consumers if transmission organizations are subject to greater efficiency and accountability.\78\ As the National Rural Electric Cooperative Association (NRECA) states, ``[t]he absence of common standards and rules currently hampers meaningful examination of the costeffectiveness of the products and services that RTOs/ISOs offer.'' \79\
\78\ See, e.g., ELCON at 1, IESO at 2.

\79\ See NRECA at 2.

90. Commenters have also included general suggestions to the Commission, which they argue, would not only enhance and facilitate transparency and comparability of RTO finances, but could also be an integral first step towards controlling RTO operational costs. Among other things, commenters have suggested that the Commission require RTOs to include a detailed analysis of their business risks and opportunities as part of their periodic financial reporting.\80\ \80\ Indicated NYTOs at 2, 56.

91. A few commenters also urge the Commission to continue its efforts in reviewing the cost oversight and accountability in the budgeting and expenditure process that RTOs utilize.\81\ Revision of the USofA represents only a partial solution in providing adequate transparency and accountability in RTO financial reporting. \81\ See, e.g., NEPOOL Participants Committee at 15.

92. Commenters have expressed concern that the Commission's proposed revisions fall short in meeting the goal of ensuring that the costs of the RTOs are legitimate and reasonable.\82\ Cinergy has therefore, for example, proposed that RTOs annually file with the Commission a formula cost assignment template which supports the projected RTO costs by billing schedule for a twelve month period. This report, Cinergy explains, would include detailed projected direct costs and a proposed assignment/allocation of overhead costs to the specific schedule. This would provide parties with an opportunity to comment and prior Commission approval would be required before the RTO could proceed with the expenditure.
\82\ See, e.g., Cinergy and Midwest ISO Transmission Owners.

93. Midwest ISO Transmission Owners argue that the proposed revisions to the USofA lack beforeth

FOR FURTHER INFORMATION CONTACT John Okrak (Technical Information), Office of Markets, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 5028280.
Julie Kuhns (Technical Information), Office of Markets, Tariffs and Rates, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 5026287.
Lodie White (Legal Information), Office of the General Council, Federal Energy Regulatory Commission, 888 First Street, NE., Washington, DC 20426, (202) 5026193.