Fla. Admin. Code R. 25-7.045
Current through Reg. 50, No. 235-239, December 10, 2024
Section 25-7.045 - Depreciation(1) For the purpose of this rule, the following definitions shall apply:(a) Category or Category of Depreciable Plant - A grouping of plant for which a depreciation rate is prescribed. At a minimum it shall include each plant account prescribed in Rule 25-7.046, F.A.C.(b) Embedded Vintage - A vintage of plant in service as of the date of study or implementation of proposed rates.(c) Mortality Data - Historical data by study category showing plant balances, additions, adjustments and retirements, used in analyses for life indications or for calculations of realized life. This is aged data in accord with the following:1. The number of plant items or equivalent units (usually expressed in dollars) added each calendar year.2. The number of plant items retired (usually expressed in dollars) each year and the distribution by years of placing of such retirements.3. The net increase or decrease resulting from purchases, sales or adjustments and the distribution by years of placing of such amounts.4. The number that remains in service (usually expressed in dollars) at the end of each year and the distribution by years of placing of such amounts.(d) Net Book Value - The book cost of an asset or group of assets minus the accumulated depreciation or amortization reserve associated with those assets.(e) Remaining Life Techique - The method of calculating a depreciation rate based on the unrecovered plant balance, the average future net salvage and the average remaining life. The formula is: Remaining Life Rate = 100% - Reserve % - Average Future Net Salvage %
Average Remaining Life in Years
(f) Reserve (Accumulated Depreciation) - The amount of depreciation/amortization expense, salvage, cost of removal, adjustments, transfers, and reclassifications accumulated to date.(g) Reserve Data - Historical data by study category showing reserve balances, debits and credits, such as booked depreciation expense, salvage and cost of removal, and adjustments to the reserve utilized in monitoring reserve activity and position.(h) Reserve Deficiency - An inadequacy in the reserve of a category as evidenced by a comparison of that reserve indicated as necessary under current projections of life and salvage with that reserve historically accrued. The latter figure may be available from the utility's records or may require retrospective calculation.(i) Reserve Surplus - An excess in the reserve of a category as evidenced by a comparison of that reserve indicated as necessary under current projections of life and salvage with that reserve historically accrued. The latter figure may be available from the utility's records or may require retrospective calculation.(j) Salvage Data - Historical data by study category showing bookings of retirements, gross salvage and cost of removal used in analysis of trends in gross salvage and cost of removal or for calculations of realized salvage.(k) Theoretical Reserve or Prospective Theoretical Reserve - A calculated reserve based on components of the proposed rate using the formula: Theoretical Reserve = Book Investment - Future Accruals - Future Net Salvage.
(l) Vintage - The year of placement of a group of plant items or investment under study.(m) Whole Life Techique - The method of calculating a depreciation rate based on the whole life (average service life) and the average net salvage. Both life and salvage components are the estimated or calculated composite of realized experience and expected activity. The formula is: Whole Life Rate = 100% - Average Net Salvage %
Average Service Life in Years
(2)(a) No utility shall change any existing depreciation rate or initiate any new depreciation rate without prior Commission approval.(b) No utility shall reallocate accumulated depreciation reserves among any primary accounts and sub-accounts without prior Commission approval.(c) When plant investment is booked as a transfer from a regulated utility depreciable account to another or from a regulated company to an affiliate, its associated reserve amount shall also be booked as a transfer. When plant investment is sold from one regulated utility to an affiliate, the associated reserve amount shall also be determined to calculate the net book value of the utility investment being sold. Methods for determining the reserve amount associated with plant transferred or sold are as follows:1. Where vintage reserves are not maintained, synthesization using the currently prescribed curve shape shall be required. The same reserve percent associated with the original placement vintage of the related investment shall then be used in determining the amount of reserve to transfer.2. Where the original placement vintage of the investment being transferred is unknown, the reserve percent applicable to the account in which the investment being transferred resides shall be assumed for determining the reserve amount to transfer.3. Where the age of the investment being transferred is known and a history of the prescribed depreciation rates is known, a reserve can be determined by multiplying the age times the investment times the applicable depreciation rate(s).4. The Commission shall consider any additional methods submitted by the utilities for determining reserve amounts to transfer.(3)(a) Each utility shall maintain depreciation rates and accumulated depreciation reserves in accounts or subaccounts in accordance with the Uniform System of Accounts for Natural Gas Companies (USOA) as found in the Code of Federal Regulations, Title 18, Subchapter F, Part 201, as revised April 1, 2013, which is incorporated by reference in subsection 25-7.014(1), F.A.C. Utilities may maintain further sub-categorization.(b) Upon establishing a new account or subaccount classification, each utility shall request Commission approval of a depreciation rate for the new plant category.(4)(a) Each company shall file a study for each category of depreciable property for Commission review at least once every five years from the submission date of the previous study or pursuant to Commission order and within the time specified in the order. A utility filing a depreciation study, regardless if a change in rates is being requested or not, shall submit to the Office of Commission Clerk the information required by paragraphs (5)(a) through (g) of this rule in electronic format with formulas intact and unlocked.(b) A utility proposing an effective date of the beginning of its fiscal year shall submit its depreciation study no later than the mid-point of that fiscal year.(c) A utility proposing an effective date coinciding with the expected date of additional revenues initiated through a rate case proceeding shall submit its depreciation study no later than the filing date of its Minimum Filing Requirements.(d) The plant balances may include estimates. Submitted data including plant and reserve balances or company planning involving estimates shall be brought to the effective date of the proposed rates.(e) The possibility of corrective reserve transfers shall be investigated by the Commission prior to changing depreciation rates.(f) Upon Commission approval by final order establishing an effective date, the utility shall reflect on its books and records the implementation of the depreciation rates approved by the Commission.(5) A depreciation study shall include: (a) A comparison of current and proposed depreciation components for each category of depreciable plant. Components include average service life, age, curve shape, net salvage, and average remaining life.(b) A comparison of current and proposed annual depreciation rates and expenses. The comparison of current and proposed rates shall identify the proposed effective date for the proposed rates. The comparison of current and proposed annual expenses shall be calculated using current and proposed rates for each category of depreciable plant. Plant balances, reserve balances and percentages, remaining lives, and net salvage percentages shall be included in this comparison for each category of plant.(c) Each recovery and amortization schedule currently in effect shall be included with any new filing showing total amount amortized, effective date, length of schedule, annual amount amortized and reason for the schedule.(d) A comparison of the accumulated book reserve to the prospective theoretical reserve based on proposed rates and components for each category of depreciable plant to which depreciation rates are to be applied.(e) A general narrative describing the service environment of the applicant company and the factors, e.g., growth, technology, physical conditions, leading to the present application for a revision in rates.(f) An explanation and justification for each study category of depreciable plant defining the specific factors that justify the life and salvage components and rates being proposed. Each explanation and justification shall include substantiating factors utilized by the utility in the design of the depreciation rates for the specific category, e.g., company planning, growth, technology, physical conditions, trends. The explanation and justification shall discuss any proposed transfers of reserve between categories or accounts intended to correct deficient or surplus reserve balances. It shall also state any statistical or mathematical methods of analysis or calculation used in design of the category rate.(g) All calculations, analysis and numerical basic data used in the design of the depreciation rate for each category of depreciable plant. Numerical data shall include plant activity (gross additions, adjustments, retirements, and plant balance at end of year) as well as reserve activity (retirements, accruals for depreciation expense, salvage, cost of removal, adjustments, transfers and reclassifications and reserve balance at end of year) for each year of activity from the date of the last submitted study to the date of the present study. When available, retirement data shall be aged.(h) The mortality and salvage data used by the company in the depreciation rate design must agree with activity booked by the utility. Unusual transactions not included in life or salvage studies, e.g., sales or extraordinary retirements, must be specifically enumerated and explained.(i) Calculations of depreciation rates using both the whole life technique and the remaining life technique. The use of these techniques is required for all depreciable categories. Utilities may submit additional studies or methods for consideration by the Commission.(6) As part of the filing of the annual report under subsection 25-7.014(3), F.A.C., each utility shall include an annual depreciation status report. The annual depreciation status report shall be provided in electronic format. In the electronic format, the formulas must be intact and unlocked. The annual depreciation status report shall include booked plant activity (plant balance at the beginning of the year, additions, adjustments, transfers, reclassifications, retirements and plant balance at year end) and reserve activity (reserve balance at the beginning of the year, retirements, accruals, salvage, cost of removal, adjustments, transfers, reclassifications and reserve balance at end of year) for each category of investment for which a depreciation rate, amortization schedule, or capital recovery schedule has been approved. The report shall indicate for each category whether there has been a change of plans or utility experience since the filing of the last annual depreciation status report requiring a revision of the rates, amortization, or capital recovery schedules. For any category where current conditions indicate a need for revision of depreciation rates, amortization, or capital recovery schedules and no revision is sought, the report shall explain why no revision is requested.(7)(a) Prior to the date of retirement of major installations, the Commission may approve capital recovery schedules to correct associated calculated deficiencies where a utility demonstrates that (1) replacement of an installation or group of installations is prudent, and (2) the associated investment will not be recovered by the time of retirement through the normal depreciation process.(b) The Commission shall approve a special capital recovery schedule when an installation is designed for a specific purpose or for a limited duration.(c) Associated plant and reserve activity, balances and the annual capital recovery schedule expense must be maintained as subsidiary records.Fla. Admin. Code Ann. R. 25-7.045
Rulemaking Authority 350.127(2), 350.115, 366.05(1) FS. Law Implemented 350.115, 366.04(2(f), 366.06, 366.06(1) FS.
New 11-11-82, Amended 1-6-85, Formerly 25-7.45, Amended 4-27-88, 12-12-91, 5-29-08, Amended by Florida Register Volume 42, Number 071, April 12, 2016 effective 4/28/2016.New 11-11-82, Amended 1-6-85, Formerly 25-7.45, Amended 4-27-88, 12-12-91, 5-29-08, 4-28-16.