Assignment of "Gain-on-Sale" Proceeds
The only significant contested question in the proceeding is whether PG&E's shareholders or ratepayers should benefit from the estimated $20,342 in "gain-on-sale" proceeds. In cases of transmission-related property, a threshold issue is whether we have jurisdiction to make this allocation or assignment of proceeds. If we do have jurisdiction, we then must decide whether we apply federal or state law to make this allocation and determine what the applicable federal or state decision rule requires in terms of allocating "gain-on-sale" proceeds. Because we anticipate commencing a rulemaking proceeding to address this issue, we defer and do not decide these jurisdictional and allocation issues today. Since these issues have been well briefed in this proceeding, we do continue to discuss them here in order to inform participants in the anticipated rulemaking proceeding.
Property in FERC-Jurisdictional Rate Base
PG&E argues that the property is not within PG&E's rate base for any ratemaking purpose over which we have jurisdiction. As the parties have stipulated, the property has been classified as a transmission asset and included in PG&E's transmission rate base since the land was acquired in 1921. The property's maintenance and operating costs have been recovered through FERC's ratemaking proceedings (tariff filings and rate cases) involving PG&E's transmission services. PG&E argues that, under the Federal Power Act, FERC has plenary authority, including ratemaking authority, over the transmission of electric energy in interstate commerce.13
Uniform System of Accounts (USOA)
FERC also has regulatory authority to promulgate rules for the accounting and reporting of proceeds from the disposition of transmission-related and other jurisdictional assets, including those transactions that do not exceed Section 203's $50,000 approval threshold.14 These accounting rules are set forth in the comprehensive USOA, initially developed by the Federal Power Commission (FERC's predecessor) in the 1930s in order to provide a consistent, rational accounting system to assist regulating agencies and to prevent accounting abuses that preceded the adoption of the uniform system.15
This system of accounts for public utilities and licensees subject to the Federal Power Act is set forth at 18 C.F.R. Part 101 (2003). Almost 1,000 specific accounts are systematically organized in the major subdivisions of the USOA: balance sheet chart of accounts, electric plant chart of accounts, income chart of accounts, and operation and maintenance expense chart of accounts. The USOA also provides detailed explanatory information and FERC's occasional orders adopting or modifying portions of the accounts often include interpretative provisions.
FERC's chief accountant ensures compliance with the Commission's accounting regulations, and accounting pursuant to the USOA does have ratemaking implications. The uniform accounting system, however, does not dictate even FERC's own ratemaking policies; and the courts have recognized this distinction.16
Pursuant to Public Utilities Code Section 793, we adopted FERC's USOA in 1970 to provide consistency with FERC accounting practices. We indicated at the time "that the Commission does not commit itself to approve or accept any item set out in any account for the purpose of fixing rates or determining other matters which may come before it."17 As FERC has changed its accounting requirements, we also have adopted those changes.18 We have consistently maintained, however, "that the accounting provisions contained [in the Uniform System of Accounts] are not controlling as to the ratemaking policies which this Commission may determine to be reasonable and necessary."19
"Gain-on-Sale" Proceeds Assigned to "Below-the-Line" Account
In this particular case, PG&E argues that the USOA requires that the "gain-on-sale" proceeds be assigned to shareholders. PG&E indicates that the proceeds from the sale of the property, a nondepreciable transmission-related asset, will be credited to FERC Account 421.1, "Other Income and Deductions." PG&E argues that because Account 421.1 is part of the "Other Income and Deductions" portion of the USOA, it is a "below-the-line" account assignable to shareholders rather than ratepayers.
While FERC and the courts have repeatedly indicated that accounting should not slavishly dictate rate treatment, FERC likely would agree with PG&E that the proceeds from this sale should be assigned to shareholders. In prior decisions, FERC has determined that "any gain on the disposition of utility property is recorded below the line by the seller and inures to the benefit of utility shareholders."20 While noting that results may differ in individual cases, FERC has also indicated that "[c]osts included in `above-the-line' accounts are generally presumed to be recoverable in rates, while costs included in `below-the-line' accounts are generally presumed not to be recoverable in rates."21
We would likely disagree with this assignment of gain-on-sale proceeds if the decision were ours to render. When property has been in the rate base for extended period of time, as here, we have often assigned the gain-on-sale proceeds to the ratepayers. In such cases, ratepayers, through their rate payments, have supported the operational and maintenance expenses of the property and borne the risk of the investment.22
FERC Primacy Over Transmission-Related Ratemaking
What is distinctive about this case is that the USOA is being applied to transmission-related property that may be subject to FERC's jurisdiction-not to local utility property over which we unquestionably have jurisdiction. As this property is transmission-related, determinations we might make as to the allocation of proceeds from the sale of the assets might potentially interfere with FERC's transmission ratemaking authority and procedures. The converse is also true: FERC, through its adoption of the USOA, cannot prescribe accounting determinations that bind us in rate proceedings involving local utility operations.
If FERC does have jurisdiction over the "gain-on-sale" proceeds from transmission-related assets, ORA and other PG&E ratepayers would appear to have some remedies before that agency to address these allocation issues. FERC requires that PG&E report the accounting treatment of such "gain-on-sale" proceeds, at least in gross numbers, in Form 1 (p. 117), Annual Report of Major Electric Utilities, Licensees and Others.23 The FERC Chief Accountant may challenge PG&E's accounting treatment or the accounting may be taken up in a rate proceeding involving PG&E's transmission rates. A ratepayer or any third party may file a complaint against PG&E with FERC under Section 306 of the Federal Power Act.24 In such FERC proceedings, ratepayers might argue that the "gain on sale" proceeds should be divided and assigned based on the time the property was within the rate base subject to our jurisdiction as compared to the time the property has been within the FERC-administered transmission rate base. The stipulated facts here, however, do not address this issue; and, as we have previously mentioned, we do not decide these jurisdictional and "gain-on-sale" allocation issues here. We do, however, encourage the reopening of this proceeding to apply the results of our anticipated rulemaking on Section 851 issues to the questions deferred in this proceeding.
13 16 U.S.C. § 824 (LEXIS through May 29, 2003); see also Federal Power Comm'n v. Florida Power & Light Co., 404 U.S. 453 (1972) (utility engaged in interstate commerce when its local transmission lines connected with other lines distributing electricity out-of-state). 14 16 U.S.C. § 824(b) (LEXIS through May 29, 2003). 15 See 16 U.S.C. § 825(a) (LEXIS through May 29, 2003) (FERC authorized to "determine by order the accounts in which particular outlays and receipts shall be entered, charged, or credited."). 16 Public Service Comm'n of the State of New York v. FERC, 813 F.2d 448, 456 n.12 (D.C. Cir. 1987) ("We are unpersuaded by petitioner's argument that the inclusion of a category for institutional advertising within the Commission's System of Accounts requires allowance for such expenses here. . . . In any event, the Commission's accounting system alone cannot be said to dictate the Commission's ratemaking policies.); Alabama-Tennessee Natural Gas Co. v. Federal Power Comm'n, 359 F.2d 318, 336 (5th Cir. 1966) (distinction between tax accounting and ratemaking; "The short answer is that accounting for tax purposes and even the Commission's present Uniform System of Accounts may be valuable tools, but they cannot dictate ratemaking policies."); cf. Town of Norwood v. FERC, 53 F.3d 377, 379 (D.C. Cir. 1995) ("the accounting approach does not necessarily dictate the ratemaking approach, and the Commission did not hold itself to be bound by FAS [Financial Accounting Standards] 106 for ratemaking purposes."); Interstate Commerce Comm'n v. Goodrich Transit Co., 224 U.S. 194, 211 (1912) ( "The object of requiring such accounts to be kept in a uniform way and to be open to the inspection of the Commission is not to enable it to regulate the affairs of the corporations not within its jurisdiction, but to be informed concerning the business methods of the corporations subject to the act that it may properly regulate such matters as are really within its jurisdiction."). 17 D.42068, 48 CPUC 253, 257 (1948). 18 See, e.g., D.87-07-067, 25 CPUC2d 7 (1987). 19 D.87-07-067, 25 CPUC2d at 8. See also D.89-12-057 at 129, 1989 Cal. LEXIS 687 (1989). 20 46 Fed. Energy Reg. Comm'n Report (CCH) ¶ 61,006, 61,031 (1989) (emphasis in original). 21 84 Fed. Energy Reg. Comm'n Report (CCH) ¶ 61,156, 61,855 n.26 (1998). 22 See, e.g., D.85-11-018, 19 CPUC2d 161 (1985). 23 See 18 C.F.R. §§ 141.1, 385.2011 (2003). 24 16 U.S.C. § 825e (LEXIS through May 29, 2003).
