Title
A Resolution to increase the amount of the regulatory asset associated with Martin Drake power plant's decommissioning costs
Presenter:
Tristan Gearhart, Chief Financial Officer, Colorado Springs Utilities
Body
Summary:
A Resolution to increase the amount of the regulatory asset associated with Martin Drake power plant's decommissioning costs. Colorado Springs Utilities seeks approval from City Council to increase the amount of the Martin Drake Power Plant regulatory asset that was established under Resolution 137-23 due to additional estimated costs for pollution remediation. These additional costs will be expensed over a 10-year period as they are incurred to help smooth the rate impact. With City Council approval, the proposed increase to the regulatory asset is $3,000,000, for costs incurred in 2024 and continuing through 2025.
Background:
Typically, expenses are recorded in the period incurred. However, due to Utilities' regulatory operations, there is additional accounting guidance that allows regulatory accounting and the creation of a regulatory asset pursuant to Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 FASB and AICPA Pronouncements (incorporating ASC 980/FAS 71 - Accounting for the Effects of Certain Types of Regulation.) Accounting Standards Codification (ASC 980) is the accounting guidance used by public utilities to recover costs through rates charged to their ratepayers, make their operating benchmarks comparable to their investor-owned peer utilities, and also match their accounting to utility industry standards.
Recognition of a regulatory asset is allowed by Colorado Springs Utilities so long as:
- our rates for regulated services are established by, or are subject to approval by its own governing board empowered by statute to establish rates
-regulated rates are designed to recover the specific regulated business-type activity's
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