"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."²² 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."²³

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.²⁴