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FERC intends to operationalize the accounting and reporting requirements for renewable energy resources

Federal Energy Regulatory Commission (“FERC“) sent an inquiry notice to propose recording accounts for renewable energy resources costs. The commission wants public opinion on whether it should pursue the following measures. First, the commission seeks to establish new accounts in the Uniform System of Accounts (“UsoA”), which will record the costs emerging from solar, wind, and biomass.

Next, the FERC Form No. 1 must indicate the accounts developed and finally refresh the accounts to include the new costs concerning renewable energy credits. The commission wants the costs to be classified in reference to the UsoA to subdivide the costs into retrievable accounts using the cost-based indexes. Many instances requiring cost retrieval have been possible because the accounts were developed and postings made on the assets’ fluctuations or expenses.

When the cost of an asset or expense lies in one of the recoverable accounts, then the cost is retrievable in rates. Since renewable assets do not have such accounts to post the changes in costs, there arise problems in the recovery of costs, which the renewable energy developer may fail to account for, forcing the system into litigation. Currently, the UsoA categorizes power production utilities into steam, nuclear, hydro, and the catch-all. These categories have massively left two major renewable energy developers which are wind and solar energy. The classification of these renewables makes it difficult to trace these two costs in their activities.  

Nevertheless, the category is not as involving as the other three, which must design the accounts for each asset and operation they bring into their power production plants. The other category requires the developers to exercise reasonable judgment when planning on the books in which they should post their assets. For instance, the UsoA accounts mix the costs from solar panels, wind turbine blades, photovoltaic inverters, computer hardware and software, wind generation towers, and the wind and solar power collection systems. This procedure creates inconsistent figures which cannot be pursued to determine the cause of the problem.

FERC thinks it would be best if these assets and the expenses were accounted for by creating accounts in which every transaction is posted to maintain the figures and determine the sources of losses and profits. Moreover, this move can help the utilities be transparent for reviews and accountability if they want to involve investors in their business. The public has the opportunity to make comments and suggestions in 60 days concerning the institution of these regulations.

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