25-7.0461. Capitalization Versus Expensing

(1) Except as provided in subsections (2)-(11) of this rule, the rules and definitions set forth below are intended to establish capitalization versus expensing guidelines and uniform retirement units for natural gas utilities and do not relieve any utility from maintaining its accounts and records in conformity with the Uniform System of Accounts prescribed by the Code of Federal Regulations, Title 18, Subchapter F, Part 201 (2013), which is incorporated by reference in Rule 25-7.014, F.A.C.

(2) For the purposes of this part, the following definitions shall apply:

(a) “Book Cost” means the amount at which a retirement unit is included in a plant account, including all components of labor and installation costs without deduction of related provisions for accrued depreciation. This cost should be determined from the utility’s records and if this cannot be done, it should be estimated.

(b) “Cost” means the original purchased cost plus associated labor and installation costs.

(c) “Cost of Removal” means the cost of demolishing, removing, tearing down or otherwise disposing of a retirement unit, including the cost of transportation and handling.

(d) “Cradle-To-Grave Accounting” means an accounting method which treats a unit of plant as being in service from the time it is first purchased until it is finally junked or is otherwise finally disposed of. The period in shop for refurbishing, and in stock/inventory awaiting reinstallation are treated as being in service.

(e) “Gross Salvage” means the amount received from selling or trading-in a retirement unit; or, if retained, the original (estimated if not known) material cost of the unit. (Original Material Cost = Book Cost Less Labor and Installation Cost)

(f) “Item” means a single identifiable unit of plant. Where a dollar amount (viz., $500 minimum for capitalization) is imposed, this amount limit shall apply to the single item and not to a block or group of such items purchased on one order.

(g) “Minor Item” means any part or element of plant which is not designated as a retirement unit, but is a component part of the retirement unit.

(h) “Retirement” means a retirement unit or unreplaced minor item which has been removed, sold, abandoned, destroyed, or otherwise removed from service. (Exception see “Cradle-to-Grave”)

(i) “Retirement Unit” means an item of utility plant which, when placed into service, is capitalized and when removed from service, with or without replacement, is always retired. The “List of Retirement Units Gas Utilities Effective August 21, 1986” (“List of Retirement Units”) (10/14), is hereby incorporated by reference into this rule and may be accessed at http://www.flrules.org/Gateway/reference.asp?No=Ref-04833.

(3) All depreciable property is considered as consisting of (a) retirement units and (b) minor items of property. This list can be expanded by any utility without other authorization from this Commission as long as the cost of the additional item is more than $500. In the case of such expansion, the utility should notify the Division of Economics within thirty days as to the nature and justification of the expansion.

(4) The addition and retirement of retirement units should be accounted for as follows:

(a) When a retirement unit is added for the first time at a location, the cost should be added to the appropriate plant account along with associated labor and installation costs.

(b) When a retirement unit is replaced, the cost of the replacing item should be accounted for in the same manner as in paragraph (a) if the item is in the “List of Retirement Units”. Otherwise, the charge should be made to the appropriate expense account.

(c) When a retirement unit is retired, with a replacement that meets the criteria set forth in the “List of Retirement Units,” or without a replacement, the book cost of the retiring unit should be credited to the plant account in which it is included and likewise debited to the associated account reserve. Any cost of removal and gross salvage associated with the retirement should likewise be debited and credited, respectively, to the account reserve. Costs of the retiring unit, removal and salvage should be recorded within one month of the retirement date and may be estimated with corrective adjustment entries made when the transactions are finalized.

(5) The addition and retirement of minor items of depreciable property should be accounted for as follows:

(a) When a minor item which did not previously exist as a part of a retirement unit at a given location is added, the cost should be accounted for in the same manner as for the addition of a retirement unit if the cost is more than $500. Otherwise, the charge should be made to the appropriate maintenance expense account.

(b) When a minor item having a book cost more than $500 is retired and not replaced, the book cost along with any associated cost of removal and gross salvage should be accounted for in the same manner as for the retirement of a retirement unit. If, however, the book cost of the minor item retired and not replaced has been accounted for by its inclusion in the retirement unit of which it is a part, no separate credit to the property account or debit to the associated account is required.

(c) When a minor item is replaced independently of the retirement unit of which it is a part, the cost of replacement should be charged to the maintenance account appropriate for the item, except that if the replacement effects a substantial betterment (the primary aim of which is to make the property affected more useful, more efficient, of greater durability, or of greater capacity), the excess cost of the replacement over the estimated cost at current prices of replacing without betterment should be charged to the appropriate plant account.

(6) The addition and retirement of meters and regulators should be accounted for as cradle-to-grave. Costs for refurbishing these items should be charged to the appropriate expense accounts.

(7) Overhead construction costs such as engineering, supervision, general office salaries and expenses, construction engineering, insurance, taxes, relief and pensions, injuries and damages should be capitalized only if they are directly associated with the construction project.

(8) All maintenance costs, whether the work is done by the utility or under contract, should be expensed. Unusual or extraordinary expenses can be amortized over a reasonable period of time as determined by the Commission.

(9) Engineering unclassified time should be expensed.

(10) The testing on initial installations of mains and services, meters and regulators should be capitalized. Subsequent testing should be expensed. The testing on uprating to higher pressure should be capitalized.

(11) The initial purchase and installation of valves and testing thereof should be capitalized. Labor costs associated with locating existing valves, moving existing valves, maintenance and monitoring should be expensed.

Rulemaking Authority 350.127(2), 366.05(1) FS. Law Implemented 350.115 FS. History–New 8-21-86, Amended 2-2-15.