199—20.9(476) Electric energy automatic adjustment. The electric energy cost adjustment of the unit charge shall be an energy adjustment clause.
	20.9(1) Applicability.  A utility’s electric energy adjustment shall recover from consumers only those costs which:
	a. 	Are incurred in supplying energy;
	b. 	Are beyond direct control of management;
	c. 	Are subject to sudden important change in level;
	d. 	Are an important factor in determining the total cost to serve; and
	e. 	Are readily, precisely, and continuously segregated in the accounts of the utility.
	20.9(2) Energy adjustment clause. Prior to any period in which a utility proposes to change the adjustment amount for each energy unit delivered to the customer, the utility shall determine and file for board approval the adjustment amount to be charged for each energy unit delivered under rates set by the board. The energy adjustment clause factors shall be printed on the customer’s bill. The filing shall include all invoices (except invoices for fuel, freight, and transportation), worksheets, and detailed supporting data used to determine the amount of the adjustment. Spreadsheets, workbooks, and databases included in filings shall include all cell formulae and cell references. Utilities that participate in a wholesale energy market and use a forecasted energy adjustment clause shall provide information about key inputs and assumptions and explain the differences between the forecast and actual fuel costs. The estimated amount of fossil fuel should be detailed to reflect the amount of fuel, transportation, emission allowances, and other costs.
	a. 	The utility shall keep and maintain journal entries to reflect a breakdown for each type of fuel: actual cost of fuel, transportation costs, and other costs. Items identified as other costs should be described and their inclusion as fuel costs shall be approved by the board. The board may direct that journal entries be filed. The utility shall also file detailed supporting data:
	(1)	To show the actual amount of sales of energy by month for which an adjustment was utilized, and
	(2)	To support the energy cost adjustment balance utilized in the monthly energy adjustment clause filings.
	b. 	The energy adjustment shall provide for change of the price per kilowatt-hour delivered under rates set by the board based upon the formulas provided in the utility’s tariff. The energy adjustment factor shall be rounded on a consistent basis to either the nearest 0.01¢/kWh or 0.001¢/kWh. The tariff shall define the components of the formula(s) and shall include reference to the specific accounts of the Uniform System of Accounts for each component.
	(1)	For each period as specified in the tariff, the calculation shall include but not be limited to:
	1.	The estimated energy cost and revenues;
	2.	The estimated electric energy to be delivered and entered in accounts 440, 442, and 444-7, excluding energy from distinct interchange deliveries entered into account 447, and including intrautility energy service as included in accounts 448 and 929 of the Uniform System of Accounts during the month in which the energy adjustment charge will be used; and
	3.	The energy cost adjustment account balance.
	(2)	The base formula for the energy adjustment factor shall be:
Energy adjustment factor = (energy cost adjustment account balance + estimated energy costs and revenues) / estimated energy delivered
	c. 	The estimated energy cost and revenues shall be the estimated cost and revenues associated with:
	(1)	Fossil and nuclear fuel consumed in the utility’s own plants and the utility’s share of fossil and nuclear fuel consumed in jointly owned or leased plants. Fossil fuel shall include natural gas used for electric generation and the cost of fossil fuel transferred from account 151 to account 501 or 547 of the Uniform System of Accounts for Electric Utilities. Nuclear fuel shall be that shown in account 518 of the Uniform System of Accounts except that if account 518 contains any expense for fossil fuel which has already been included in the cost of fossil fuel, it shall be deducted from the account. (Paragraph C of account 518 includes the cost of other fuels used for ancillary steam facilities.)
	(2)	The cost of steam purchased, or transferred from another department of the utility or from others under a joint facility operating agreement, for use in prime movers producing electric energy (accounts 503 and 521).
	(3)	A deduction shall be made of the expenses of producing steam chargeable to others, to other utility departments under a joint operating agreement, or to other electric accounts outside the steam generation group of accounts (accounts 504 and 522).
	(4)	The cost of water used for hydraulic power generation. Water cost shall be limited to items of account 536 of the Uniform System of Accounts. For pumped storage projects, the energy cost of pumping is included. Pumping energy cost shall be determined from the applicable costs of subparagraphs of paragraph 20.9(2)“c.”
	(5)	The energy costs paid for energy purchased under arrangements or contracts, as entered into account 555 of the Uniform System of Accounts, less the energy revenues to be recovered from corresponding sales, as entered in account 447 of the Uniform System of Accounts.
	(6)	Purchases from alternative energy production facilities under rule 199—15.11(476).
	(7)	The weighted average costs of inventoried allowances used in generating electricity.
	(8)	The gains and losses, as described in subrule 20.17(9), from allowance transactions occurring during the month. Allowance transactions shall include vintage trades and emission for emission trades.
	(9)	Eligible costs or credits associated with the utility’s annual reconciliation of its alternate energy purchase program under 199—paragraph 15.17(4)“b.”
	(10)	Federal production tax credits unless the board approves different ratemaking treatment.
	(11)	Other costs and revenues as specified in the utility’s tariff and approved by the board. For all other costs and revenues, the utility shall provide the type of cost, the dollar amount, and reference to the board order approving the cost to be included in the energy adjustment clause (EAC).
	d. 	The energy cost adjustment account balance shall be the cumulative balance of any excess or deficiency which arises out of the difference between board recognized energy cost recovery and the amount recovered through application of energy charges to consumption under rates set by the board. The calculation for the energy cost adjustment account balances shall include but is not limited to:
	(1)	The actual energy expense for the prior period and recorded in accounts 440, 442 and 444-6 of the Uniform System of Accounts;
	(2)	The actual electric energy delivered for the prior period and recorded in accounts 440, 442, and 444-7, excluding energy from distinct interchange deliveries entered into account 447, and including intrautility energy service as included in accounts 448 and 929 of the Uniform System of Accounts; and
	(3)	The beginning energy cost adjustment account balance (overrecovered or underrecovered amount) for the current period.
	e. 	Reserve account for nuclear generation. A rate-regulated utility owning nuclear generation or purchasing energy under a participation power agreement on nuclear generation may establish a reserve account. The reserve account will spread the higher cost of energy used to replace the energy normally received from nuclear sources. A surcharge would be added to each kilowatt-hour from the nuclear source. The surcharges collected are credited to the reserve account. During an outage or reduced level of operation, replacement energy cost would be offset through debit to the reserve account. The debit would be based upon the cost differential between replacement energy cost and the average cost (including the surcharge) of energy from the nuclear capacity. A reserve account shall have credit and debit limitations equal in dollar amounts to the total cost differential for replacement energy during a normal refueling outage.
	f. 	A rate-regulated utility desiring to collect expensed allowance costs and the gains and losses from allowance transactions through the energy adjustment must file with the board monthly reports including:
	(1)	The number and weighted average unit cost of allowances used during the month to offset emissions from the utility’s affected units;
	(2)	The number and unit price of allowances purchased during the month;
	(3)	The number and unit price of allowances sold during the month;
	(4)	The weighted average unit cost of allowances remaining in inventory;
	(5)	The dollar amount of any gain from an allowance sale occurring during the month;
	(6)	The dollar amount of any loss from an allowance sale occurring during the month; and
	(7)	Documentation of any gain or loss from an allowance sale occurring during the month.
	g. 	The energy adjustment clause factor may include other automatic adjustment mechanisms as approved by the board.
	20.9(3)  Utilities not making monthly changes to the adjustment amount.  Utilities that do not file monthly adjustments shall:
	a. 	File the information pursuant to subrule 20.9(2) on a quarterly basis.
	b. 	File an annual reconciliation of the EAC factor and an update to the EAC factor. The date of the annual reconciliation and update shall be specified in the utility’s tariff. The reconciliation shall follow the requirements of subrule 20.9(2).
	c. 	Include a semiannual adjustment if the absolute value of the cumulative over recovery or under recovery amount is greater than 20 percent of the forecasted net recoverable energy costs for the EAC year. The semiannual adjustment filing shall be filed six months after the annual reconciliation and update filing and shall follow the requirements of subrule 20.9(2), but will be limited to the remaining months of the year. The semiannual factor updates may utilize updated forecasts for the costs and sales for the remainder of the year.
	20.9(4)  Review of energy adjustment clause. At least biennially, but no more than annually, the board shall require each utility that owns generation and utilizes an energy adjustment clause to provide fuel, freight, and transportation invoices from two months of the previous calendar year. The utility shall include an explanation of and demonstrate how these invoices correspond to the energy adjustment clause calculations. The explanation shall include inventory accounting information and average cost of fuel and transportation included in the energy adjustment clause calculations. The board will notify each utility by May 1 as to which two months’ invoices will be required. These invoices shall be filed with the board no later than the subsequent November 1.
	20.9(5) Annual reports. With the first filing of the utility’s EAC year, each utility participating in a wholesale market shall file a report explaining how participation results in reduced customer rates or reduces increases in customer rates, identifying current and evolving market issues that are expected to impact rates, and describing the utility’s efforts to influence market issues for the benefit of customers.
[ARC 4171C, IAB 12/5/18, effective 1/9/19; ARC 6021C, IAB 11/3/21, effective 12/8/21]