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Brown, Williams, Moorhead & Quinn, Inc.

Parts 101, 201, and 352 of the Commission’s regulations prescribe a Uniform System of Accounts for electric utilities, natural gas companies, and oil pipelines respectively. Title 18 of the United States Code of Federal Regulations contains the rules and requirements that the Commission may impose on regulated entities regarding maintaining accounts, filing tariffs, proposing rate changes, and abandoning service. Threading the needle of regulatory standards is often confusing and fraught with countervailing instructions. Brown Williams’ staff of experts guides clients across the broad scope of regulations and requirements.

FERC Accounting

Regulatory jurisdictions require a utility’s financial transactions to be recorded in compliance with a standard chart of accounts, according to the requirements in statutes and instructions in regulations. The requirements of the ratemaking process may dictate differences between the financial treatment of transactions in a utility’s books as compared to the methods used to determine rate base and cost of service. Brown Williams advises clients on applicable precedents as well as the import and impact of these differences and regulatory requirements on clients’ interests. Brown Williams assists clients to develop successful financial strategies in the context of these regulatory accounting requirements, such as by providing advice on regulatory assets and liabilities, how to establish a reasonable capital structure under prevailing regulatory and financial standards or how to defend or evaluate employee benefit costs.

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FERC vs. GAAP Accounting for Natural Gas Pipelines

Brown, Williams, Moorhead & Quinn, Inc. has prepared a report comparing the Federal Energy Regulatory Commission's (FERC) financial accounting and related regulations for natural gas companies with Generally Accepted Accounting Principles (GAAP) for such entities.

The FERC's accounting requirements for natural gas companies are contained primarily in the Uniform System of Accounts (USoA) prescribed for Natural Gas Companies under the Natural Gas Act (NGA). The USoA can be found at 18 CFR Part 201.  The USoA is a comprehensive basis of accounting other than GAAP that is promulgated by the FERC under authorities granted to it by the NGA.  The objective of the USoA and FERC's related financial reporting requirements, is to make financial accounting information about Natural Gas Companies available to it and others that will assist the FERC in carrying out its broad responsibilities under the NGA.

Generally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards and procedures used to prepare financial statements and handle specific accounting situations.  In the United States, authoritative accounting standards are established by the Financial Accounting Standards Board under authorities granted to it by the United States Securities and Exchange Commission (SEC).  Other sources of GAAP include pronouncements of the SEC, accounting textbooks/literature and generally accepted industry practice for recognizing and reporting the economic effect of transactions events and circumstances.  All of the various sources of GAAP are relied upon by the accounting profession based upon a hierarchy established by the FASB in its Statement of Financial Accounting Standards No. 168.  A focal point of GAAP is general purpose financial reporting.  The objective of general purpose financial reporting is to provide current and potential investors and creditors with useful information that can guide them in making decisions on investments, lending and other resource allocation matters.

Differences exists between USoA and GAAP because FERC information needs, and the information needs of potential investors and creditors may not be the same in some instances.  This report attempts to identify the majority of those key differences, while acknowledging that given the comprehensive nature of the USoA and GAAP, additional differences beyond those identified in this report may exist.  Furthermore, many of the differences identified in this report involve areas in which FERC requirements are simply more prescriptive than GAAP or vice versa.  These differences therefore should not be construed as conflicts between FERC requirements and GAAP.

If you would like to obtain a copy of this comprehensive report, please contact:

Barry E. Sullivan, President or Alan Lovinger, Vice President of BWMQ at 202-775-8994.

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Forensic Accounting

Forensic accounting, or financial forensics, is a specialized practice area in accounting that describes engagements that result from actual or anticipated disputes or litigation. When key policy changes or financial difficulties such as industry restructuring rise up leaving uneconomic contracts and litigation over prices, Brown Williams helps clients sort out the ramifications and guide clients to successful outcomes. Brown Williams’ understanding of business information and financial reporting systems, accounting and auditing standards and procedures, evidence gathering and investigative techniques make Brown Williams a leader in providing expert evidence in the form of testimony at the eventual trial.

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Utility Tax Accounting

Income, property and other taxes give rise to a variety of regulatory and financial issues that are important to helping clients’ business succeed. Accumulated deferred income tax accounting issues are particularly complex and important due to their impact on rate base and cost of service. Brown Williams has the knowledge and experience with regulatory tax issues to guide clients to address regulatory policies concerning tax recovery and rate base computations under particular business structures. Brown Williams assists clients with corporate and partnership tax reorganizations and the related income tax implications. Brown Williams also advises clients on and provides testimony in property tax proceedings on the impact of regulation on the tax valuation of property.

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