The Federal Energy Regulatory Commission has issued accounting guidance on how jurisdictional natural gas pipeline and public utility affiliates should treat deposits and withdrawals from intra-corporate money pool arrangements. The clarification went into effect today (Aug. 1).

“We just feel that with everything going on out there [accounting irregularities]…this was an area where we needed to be more explicit on the kind of controls that they need to have,” said John Delaware, FERC’s deputy executive director and chief accountant. “Right now, there’s not a whole lot of guidance out there” on accounting treatment of money pools.

Money-pool arrangements, or “cash management programs,” enable parent companies to “sweep” all of the cash of their affiliates together and invest it in one lump sum, thus providing affiliates with a “better rate of return” than what they would receive if they invested the money individually, Delaware told NGI. The money-pool vehicles are commonly used by companies, including regulated pipelines and utilities.

The new accounting treatment requires public utilities and oil and gas pipelines to maintain written documents of all withdrawals from money pools; the security provided by the money pool for repayment deposits into the pool, and required by the money pool in support of borrowings; and daily balances of deposits with and borrowings from money pools for each individual deposit or withdrawal.

The FERC initiative also requires utilities and pipes to keep up-to-date documents identifying the duties and responsibilities of the money pool; restrictions on deposits or borrowings by pool members; the method used to determine interest-earning rates and interest-borrowing rates by pool members; and the method used to allocate interest income and expenses among pool members.

Specifically, the Commission will require amounts deposited to money pools to be recorded in Account 145 (Notes receivable from associated companies) or Account 146 (Accounts receivable from associated companies), unless the deposits “are evidenced by notes with maturities of more than one year from date of issue,” according to the new guidance. In the case of notes with maturities that are greater than a year, the deposits should be recorded in Account 123 (Investment in associated companies) or Account 123.1 (Investment in subsidiary companies).

Withdrawals from money pools should be credited to Account 233 (Notes payable to associated companies) or Account 234 (Accounts payable to associated companies) unless they have notes with maturities of more than one year from the date of issue, FERC said. If the maturities are greater than one year, the withdrawals should be recorded in Account 20 (Investments in affiliated companies), it noted.

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