Through a Notice of Inquiry (“Notice”)[1] approved at its January 19, 2021 open meeting, the Federal Energy Regulatory Commission (“FERC”) asked whether its Uniform System of Accounts (individually, an “Account,” and for more than one, “Accounts”) should be modified to better reflect the circumstances of non-hydro renewable assets that rely on heat, or motion, of the earth or sun, such as facilities that rely on solar, wind, biomass and geothermal sources.  The Notice describes how various Account categories currently do not readily correspond to renewable equipment. The Notice observes that certain types of renewable equipment (e.g., solar panels and photovoltaic (“PV”) inverters), and related maintenance expenditures (e.g., for solar panels, wind towers or their blades) do not fit well within existing descriptions of the Accounts.[2]

While the Notice seeks public comment on whether to create new Accounts or perhaps better define existing Accounts, it does not explore important distinctions within energy sources. For instance, offshore wind resources utilize different equipment and present different circumstances than onshore wind generation; PV solar is very different from thermal solar; and geothermal sources are likely to require different equipment and maintenance schedules from each other, depending on whether dry steam, flash steam, or binary cycle processes are involved. The disparate types of equipment for the subcategories under a broad energy source heading also suggest that there may be differing depreciable lives for the equipment within such a category. For instance, offshore wind towers may have different expected service lives than onshore wind towers. These differences may be explored in comments. The Notice also inquires whether FERC Form 1 should be modified based upon the addition of new Accounts, and if utilities should be given the opportunity to modify the terms of their formula rates to include references to any new Accounts that would be established.

The Notice also questions whether, and if so how, accumulated reserves for depreciation and deferred taxes, as well as O&M expenses, would be re-assigned if new Accounts are created.[3] The Notice does not explore whether renewable assets that were previously covered by an Account using a composite rate of depreciation (i.e., reflecting both non-renewable and renewable generation) would require adjustment to accrued depreciation because the rate of depreciation used for the existing Account meant that the balance assigned to a new Account was based on a depreciable life that was too long, or too short, for the renewable equipment standing on its own. An accurate depreciation balance going forward might require some adjustments to both the existing and the new Account balances, rather than the presumption that the prior composite rate of depreciation heretofore accrued for renewable equipment correctly mirrors the remaining economic and service lives of that equipment.

The Notice further inquired whether FERC should update specified Accounts’ instructions to explicitly include activities related to renewable energy credits.[4]  This question, while receiving only brief mention in the Notice, could be significant to project sponsors and purchasing utilities.

One impact not explicitly flagged by the Notice but which will be important is the downstream consequence of any FERC rulemaking, on state regulatory accounting and ratemaking. Those areas tend to follow federal regulatory accounting initiatives. The impact of the changes to the Accounts is diminished because some merchants in the electricity industry (e.g., owners of “Qualifying Facilities”), are not obligated to record expenses, revenue and income in Accounts prescribed under the Federal Power Act.

The Notice contemplates a period of 60 days after its publication in the Federal Register in which interested parties may file their input, with reply comments due 30 days thereafter.


[1] Accounting and Reporting Treatment of Certain Renewable Energy Assets, 174 FERC ¶ 61,032 (Jan. 19, 2021).

[2] Notice at PP 5-11.

[3] Notice at P 11.

[4] Notice at PP 12-13.