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FERC Initiates Industry-Wide Audit of Annual Reports Between 1998-2001
The Federal Energy Regulatory Commission’s Division of Regulatory Audits has begun an industry-wide audit of annual financial reports to determine why such a high number of jurisdictional natural gas and electricity companies reported negative balances in their asset (cash) accounts pertaining to subsidiary investments for 2001.
The Commission has asked the companies to submit a “detailed explanation and any supporting documentation for the negative balance” in their Account 123.1, which relates to “Investment in Subsidiary Companies,” for the 2001 reporting year. John M. Delaware, FERC deputy executive director and chief accountant, said the agency initiated the audit after an initial review revealed that an inordinate number of regulated companies had negative balances in this account.
“You wouldn’t expect them to have a negative number there,” he told NGI. “They gave no explanation in their footnotes [of their annual financial statements] for this.” As part of the audit, FERC said it plans to review company annual financial statements from 1998 through 2001.
The Commission has sent letters to a number of companies, including Algonquin Gas Transmission, East Tennessee Natural Gas, Public Service Company of Colorado, Southwestern Public Service Co., PPL Electric Utilities Corp., Carolina Power & Light Co., Cleco Power LLC, Union Electric Co., Deseret Generation & Transmission Cooperative and Pioneer Power and Light Co. They have been directed to submit information about the negative balances to FERC by Sept. 30.
Account 123.1 “should include the cost of investments in securities issued or assumed by subsidiary companies and investment advances to such companies, including interest accrued…plus the equity in undistributed earnings or losses of such subsidiary companies since acquisition,” FERC said in the letters. “Generally, [these] asset accounts should carry a positive balance.”
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