CHAPTER 33
NONUTILITY ACTIVITIES—RECORD KEEPING
AND COST ALLOCATIONS
199—33.1(476) Applicability. This chapter applies to all rate-regulated gas or electric public utilities.
199—33.2(476) Definitions. All terms used in this chapter shall be defined as the terms are defined in Iowa Code section 476.72 unless further defined in this chapter.
“Exception time reporting” is when an employee works predominantly in either utility or nonutility operations and only reports time worked in the less predominant area.
“Filing threshold” means that the summation of a utility’s revenues recorded in FERC accounts 415 and 417 equals 3 percent of a utility’s operating revenues recorded in FERC account 400. The revenues in these accounts will be as recorded in the annual FERC Form 1 for electric and combination utilities and FERC Form 2 for gas utilities.
“Fully distributed cost” is a costing approach that fully allocates all current and embedded costs to determine the revenue contribution of utility and nonutility services.
“Incidental activities” are activities that are so closely related to the provision of utility services and limited in scale that it is impracticable to identify separately the costs of such activities.
“Net book value” means the original purchase price net of depreciation.
“Nonproductive work time” is time for which an employee is paid but which is not specifically attributable either to utility or to nonutility operations.
“Positive time reporting” is when productive work time is accounted for and allocated to utility operations or nonutility operations.
“Study time reporting” is when periodic studies are done to determine the amount of productive work time being spent on utility versus nonutility operations.
“Utility operating revenues” are the dollar amounts recorded in FERC account 400.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
199—33.3(476) Availability of records.
	33.3(1) Separate records. A rate-regulated gas or electric public utility receiving revenues for providing nonutility service shall keep and render to the board separate records on the nonutility service.
	33.3(2) Records to be maintained. The records maintained for each nonutility service and made available for inspection shall include the following: documents depicting accounts payable and vouchers; purchase orders; time sheets; journal entries; source and supporting documents for all transactions; a description of methods used to allocate revenues, expenses, and investments between utility and nonutility operations, including supporting detail; and copies of all filings required by other state and federal agencies.
	33.3(3) Method of inspection. The records for each nonutility service shall be made available to the board at the principal place of business of the public utility. Notwithstanding rule 199—18.3(476), upon receipt of a formal request in writing from the board for information, the public utility shall produce the requested information within seven days. Upon a showing of good cause, the board may approve additional time for response.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
199—33.4(476) Costing methodology. Costs shall be allocated between utility and nonutility operations using fully distributed cost.
	33.4(1) Cost causation for utility assets. Each utility shall identify for each asset utilized directly or indirectly, in whole or in part, in the provision of nonutility services: (a) the type of asset; (b) the use of the asset; (c) the proportional utilization of the asset between utility operations and nonutility operations; and (d) the characteristics of the asset that allow proper allocation.
	33.4(2) Cost causation for utility expenses. Each utility shall identify for each expense account wherein any expense related, directly or indirectly, to the provision of nonutility services is recorded: (a) the function causing the expense to be incurred; (b) the procedure used in performing the function; (c) the proportional utilization of the function between utility operations and nonutility operations; and (d) the characteristics of the cost that allow proper allocation.
	33.4(3) Time reporting. Positive time reporting shall be used whenever possible. In situations where positive time reporting cannot be used, exception time reporting or study time reporting may be used. Nonproductive work time shall be allocated between utility and nonutility operations in proportion to the allocation of productive work time.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
199—33.5(476) Cost allocation manuals. Every rate-regulated gas or electric public utility equaling or exceeding the filing threshold in any calendar year shall file with the board a cost allocation manual on or before September 1 of the following year. If the utility has not changed its cost allocation manual since the last filing on September 1, the utility shall file a letter with the board to that effect. In the event the utility has made only minor changes to its manual to reflect new accounts or new affiliates or has modified language, the utility may file only the pages affected together with a cover letter explaining the pages being filed. A utility excused from filing a cost allocation manual for any of the foregoing reasons shall comply with the other requirements of this rule.
	33.5(1) Contents of manuals. Each cost allocation manual must contain the following information:
	a. 	Nonutility activities. A list, the location, and description of all nonutility activities as defined in Iowa Code section 476.72(3).
	b. 	Incidental activities. A summary of incidental activities conducted by the utility.
	c. 	Resource identification. An identification of the assets and expenses involved directly or indirectly, in whole or in part, in the provision of nonutility services as identified in subrules 33.4(1) and 33.4(2).
	d. 	Allocation methodology. A description of the cost allocation methodology, including an overview, explanation, and justification of the details provided in response to paragraphs “e” through “h” below.
	e. 	 Allocation rationale.  A statement identifying, for each asset and expense account and subaccount identified in compliance with subrules 33.4(1) and 33.4(2), the basis for allocating costs in the account or subaccount to utility and nonutility operations, including any allocation factor used by the utility for this purpose.
	f. 	Accounts and records. A description of each account and record used by the utility for financial record keeping for nonutility services, including all subaccounts.
	g. 	 Allocation factors.  A paragraph containing, for each allocation factor identified in compliance with paragraph “e,” an explanation of how the allocation factor is calculated, a description of each study and analysis used in developing the allocation factor, and the frequency with which each allocation factor is recalculated.
	h. 	Time reporting methods.  A paragraph indicating the type of time reporting (positive, exception, or study) used for each reporting organization (e.g., executive, residential sales, and external affairs) and providing a description of how the identified type of time reporting is performed in that reporting organization.
	i. 	Training. A description of the training programs used by the utility to implement and maintain its cost allocation process.
	j. 	Update process. A description of the procedures used by the utility to: (1) determine when an update is needed; (2) develop the update; and (3) provide the update to the board.
	33.5(2)  Annual filing and approval of manuals. The following procedure shall be used for the annual filing and approval of manuals.
	a. 	Filing. A utility meeting the filing threshold shall file a manual on or before September 1 of each year following a year during which the utility met the threshold.
	b. 	Notice. At the time of the initial filing and whenever a manual is updated, each utility shall mail or deliver a written notice to consumer advocate, local trade associations, and customers who have notified the utility in writing of their interest in the cost allocation manual. The notice shall state that an objection may be filed with the board within 60 days of the filing of the manual with the board. The utility shall promptly provide copies of the manual upon request.
	c. 	Objections. Any interested person may file with the board an objection to a cost allocation manual within 60 days of the filing date.
	d. 	Docketing. If the board finds that reasonable grounds exist to investigate the manual, the board will docket the filing as an investigation within 90 days of the date of filing. At the time of docketing, the board will set a procedural schedule which includes a date for an oral presentation and an opportunity to file comments. If the board finds that there is no reason to investigate, the board shall issue an order stating the reasons for the board’s decision within 90 days of the date of filing.
	e. 	Acceptance of manuals. The board may accept, reject, or modify a utility’s manual. However, any board decision is for accounting purposes only and is not binding in any other proceeding.
	33.5(3) Updating of manuals. All affected sections and pages of a utility’s manual shall be updated and filed with the board within 60 days of any of the following conditions:
	a. 	A new nonutility business is commenced or acquired, or an existing nonutility business is eliminated or divested;
	b. 	An affiliate relationship changes;
	c. 	Operations affecting nonutility businesses change sufficiently to warrant a new allocation method; or
	d. 	Accounting practices change.
	33.5(4) Reporting requirements—accounting tables. Companies required to file cost allocation manuals shall include in their annual reports tables showing for each account identified in compliance with subrules 33.4(1) and 33.4(2) the following: (a) the account total; (b) the amount allocated to nonutility services; (c) the amount allocated to utility services; and (d) the value of the allocation factors used to allocate costs to utility and nonutility services. Such tables shall be accompanied by a signed statement by an officer of the utility and an independent auditor certifying that, for the year covered by the report, the utility has complied with its cost allocation manual and that the data reported fairly reflect the actual operations of the utility.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
199—33.6(476) Standards for costing service transfers within a regulated subsidiary or utility.
	33.6(1) Nonutility service provided to regulated subsidiary or utility. The utility or its regulated subsidiary shall pay for a nonutility service provided to it by an affiliate at the price actually charged to nonaffiliates. If no such price is available, the service shall be priced at the lower of fully distributed cost, the price actually charged to affiliates, or the market price for comparable services.
	33.6(2) Service provided by the utility to nonutility operations. A utility that provides utility service to a nonutility affiliate shall charge such affiliate the tariffed price or, if a tariffed price is not available, shall charge the fully distributed cost of the service.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
199—33.7(476) Standards for costing asset transfers within a regulated subsidiary or utility.
	33.7(1) If an asset that is a direct cost of nonutility operations becomes a cost of utility operations, the asset shall be transferred or allocated to utility operations at the lesser of net book value, the price actually charged to affiliates or nonaffiliates, or the market price of comparable assets.
	33.7(2) If an asset that is a direct cost of utility operations becomes a cost of nonutility operations, the asset shall be transferred or allocated to the nonutility operations at the greater of net book value, the price actually charged to affiliates or nonaffiliates, or the market price of comparable assets.
[ARC 3646C, IAB 2/14/18, effective 3/21/18]
[Filed 11/10/93, Notice 8/4/93—published 12/8/93, effective 1/12/94]
[Filed 6/6/03, Notice 12/25/02—published 6/25/03, effective 7/30/03]
[Filed ARC 3646C (Notice ARC 3456C, IAB 11/22/17), IAB 2/14/18, effective 3/21/18]