Section 407-730-3 - Compliance Required for Regulatory AccountingA. SFAS 109 Compliance Required. All public utilities that are required to do so for external financial reporting purposes shall comply with the requirements of SFAS 109 for regulatory accounting and reporting purposes to the Commission. Each utility shall begin compliance with the requirements of the standard at the time required by the standard. Any public utility that is not required by GAAP to comply with the standard may do so, but must notify the Commission of its intent at least thirty (30) days in advance of its adoption of the standard. Prior notification is not required for any public utility which chooses to voluntarily adopt the requirements of the standard for fiscal years beginning on January 1, 1993. For good cause a utility may seek a waiver of the notification requirement.
B. Accounts to be Used. Each public utility shall record any debit amount required by SFAS 109 in the appropriate miscellaneous asset account as defined in the Uniform System of Accounts applicable to the utility. Each public utility shall maintain sufficient detail to allow specific identification of the amounts recorded as deferred tax assets or liabilities. Should the regulatory body (e.g., the Federal Energy Regulatory Commission or the Federal Communications Commission) whose Uniform System of Accounts has been approved for use by the respective utilities in this State designate or establish a specific account or subaccount to be used for recording the deferred tax asset, that account shall be used for state regulatory accounting purposes.C. Flow-Through Tax Accounting. Each public utility shall use the flow-through method when calculating regulatory income tax expense unless: 1. The flow-through method is not allowed under the then applicable requirements of the Internal Revenue Code; or2. A waiver of this requirement has been granted by the Commission.D. Accounting Treatment. 1. Items which are flowed through in the calculation of regulatory income tax expense shall have deferred taxes established on the utility's books of account, as required by SFAS 109.2. The deferred tax liability so created shall be offset by a regulatory asset (deferred taxes receivable) which recognizes that the amount of future taxes payable when the timing differences reverse themselves shall be recoverable from ratepayers when approved by the Commission in a base rate proceeding. As required by SFAS 109, the regulatory asset so established is itself a timing difference for which a deferred tax liability must also be recorded.3. The Commission retains the ability to examine the prudence of the recovery of such assets, but shall not deny recovery on grounds of retroactivity or claims that a utility failed to follow proper accounting procedures.4. Amounts which were subject to flow-through accounting prior to the adoption of SFAS 109, and for which a deferred tax liability must be established according to SFAS 109, shall have a deferred tax asset recorded in order to recognize that such amounts are recoverable from ratepayers when the timing differences that created such amounts reverse themselves and the utility seeks recovery in a base rate proceeding.65- 407 C.M.R. ch. 730, § 3