Order determining actual legitimate original cost and prescribing accounting therefor

Puget Sound Power and Light Company

(Project No. 943)

Upon consideration of the matters of record with respect to the actual legitimate original cost of project No. 943, Puget Sound Power and Light Company, licensee, as of May 31, 1933, and having on this date made and entered its opinion in this matter, which is hereby referred to and made a part hereof by reference; and

It appearing to the Commission that:

The licensee, in its initial cost statement, filed with the Commission on March 30, 1934, claimed $15,904,514.57 as the actual legitimate original cost of this project as of May 31, 1933;

The Commission finds and determines that:

(1) The actual legitimate original cost as of May 31, 1933, of this project is $14,769,685.29 which is the total of the amounts listed in column (4) under the heading "Allowed" in the tabulation attached hereto as Exhibit "A"; and said amount is allowed;

(2) The amounts, totaling $1,134,829.28 listed in column (5) under the heading "Disallowed" in said tabulation, do not constitute part of the actual legitimate original cost of this project as of May 31, 1933; and said amounts are disallowed;

(3) The corrective accounting hereinafter ordered is necessary and appropriate under the Federal Power Act to reflect on licensee's books of account the Commission's determination of the actual legitimate original cost of this project;

The Commission orders that:

(A) The licensee establish and maintain control accounts with reference to this project showing a total debit balance in its fixed capital accounts beginning with an entry of $14,769,685.29 (being the total of the amounts listed in column (4) under the heading "Allowed" in said tabulation) as the actual legitimate original cost of this project as of May 31, 1933;

(B) The licensee establish and maintain subsidiary accounts showing and substantiating all entries in such control accounts and classifying the total for fixed capital in appropriate detail and in accordance with the provisions of the Commission's Uniform System of Accounts Prescribed for Public Utilities and Licensees revised to December 31, 1936;

(C) The licensee remove from this project's accounts and transfer to Account 142, preliminary survey and investigation charges, for disposition in accordance with the Commission's opinion in this matter,

the amount of $30,538.06, listed in column (6) under the heading, "Preliminary survey and investigation charges" in said tabulation;

(D) The licensee charge the project electric plant accounts and concurrently credit the appropriate nonproject electric plant account with the amount of $801.60, listed in column (7) under the heading "Nonproject electric plant" in said tabulation; and representing the cost of a project easement erroneously charged to a nonproject account;

(E) The licensee remove from this project's accounts and transfer to Account 271, earned surplus, the amounts, totalling $1,105,092.82, listed in column (8) under the heading "Earned surplus" in said tabulation;

(F) All amounts now carried in licensee's asset accounts as part of the original charges to the cost of this project up to and including May 31, 1933, and not otherwise disposed of by this order, and which do not represent the cost of some physical property other than this project, shall be transferred from such accounts, both control and subsidiary, in which included, and the net amount thereof charged to Account 271, earned surplus, pursuant to and in accordance with the applicable provisions of said Uniform System of Accounts;

(G) Within 60 days of service of this order, licensee comply with this order and execute and submit to the Commission FPC Form No. 76 showing such compliance.

IN THE MATTER OF

THE NIAGARA FALLS POWER COMPANY, LICENSEE

On Order to Show Cause Why Accounting Instructions Contained in Previous Order of June 9, 1942, Determining Actual Legitimate Original Cost Should Not Be Made Effective and Proposals for Disposition of Items Disallowed Be Submitted by Licensee

EP-16

(Decided September 1, 1942)

Syllabus

1. While any deficit created in licensee's earned surplus by charging disallowed items of actual legitimate original cost to that account, will preclude the declaration of dividends until the deficit is wiped out, objection would be substantially eliminated by the creation of a capital surplus for the absorption of such deficit. P. 250.

2. Licensee will not be permitted to retain disallowed amounts in its fixed accounts or to accumulate a reserve out of future earnings sufficient in amount to equal at the expiration of the license the amount previously ordered charged to earned surplus. P. 250.

3. Contention that determination of actual legitimate original cost of a licensed project "is no more than preservation of evidence useful only when the license has expired" has been consistently rejected by the Courts. P. 251.

4. The determination of actual legitimate original cost has a direct and immediate importance under sec. 10 (d) of the Federal Power Act which requires that excessive earnings, after the first 20 years of operation under the license, shall be accumulated in an amortization reserve for use in reduction of the net investment in the project. P. 251. 5. Licensee's contention also ignores sec. 16 of the Act under which the United States may take immediate possession of the project when "the safety of the U. S. demands it" in connection with which the cost determination is material. P. 251.

6. Licensee held to have failed to show cause why accounting requirements previously prescribed should not be made effective and enforced. P. 252.

BY THE COMMISSION:

OPINION

This matter is before us upon the response filed by the above-named licensee of project No. 16, to our order to show cause (1) why the accounting instructions and requirements contained in paragraphs (A) to (F), inclusive, of our order of June 9, 1942, in the above matter