INHOUSE SEMINAR AT YOUR UTILITY

Dr. Joel Berk of the Financial Accounting Institute will customize and teach a seminar for your company at a location which you provide. The seminar will address topics in the public seminars and will incorporate your financial statements, rate case documents and other unique company data. A two day version of either seminar can be created by eliminating some topics.

Dr. Berk has designed and presented these seminars at over 140 Utilities, Public Utility Commissions and Law Firms. For a list of these Inhouse Seminars Dr. Berk’s Vita.

We will prepare a detailed set of seminar notes to be handed out the first day of class to each attendee. This is the primary vehicle for the seminar for the lecture, discussions, group projects and attendee presentations.
The fee for a three day seminar is $35,000 for the first 30 participants and $800 per person for those attending over the first 30. The fee for a two day seminar is $28,000 for the first 30 participants and $650 per person for those attending over the first 30. The travel, food and lodging expenses of the instructor are additional.

For preparing and presenting a customized seminar for your utility we have an information request about each topic in the seminar outline. This will give you more insight into what we will be covering in each topic. The information request for the two seminars are below. We could also create a seminar having a combination of topics from our two public seminars.

UTILITY FINANCE & ACCOUNTING FOR NON-FINANCIAL PROFESSIONALS SEMINAR

Version 7/12/18
Financial Accounting Institute
P.O. Box 118
Tenafly, NJ 07670
www.financialaccounting.com
201-568-0249

Information to be supplied by Client — For each topic in the seminar FAI is asking your utility to supply information and/or documents in order to make this topic most relevant to the students. Although some of this information may be on the web we would appreciate links to the material or pdf’s of the material. If this information is not supplied, FAI will use examples from public documents from your company or from relevant utility companies. Under each topic the Info Request section outlines the information FAI would like to have and is an indication of the degree of customization on this topic.Sources of this information at your company would be Rate or Revenue Requirements Group, Comptroller’s Office, Chief Financial Officer’s Group, and Investor Relations. If some information is unavailable or proprietary you can so indicate.

A. Basic Accounting Concepts
1. Two hard copies plus pdf (or web link) of the latest Annual Report of the utility or of each utility if more than one utility subsidiary and of the parent company if the utility has a parent. The pdf copy should have the same page numbers as the hard copy of the report. (This report will be supplied by you to each person taking the class.)
Remaining items in this data request should be in electronic version only – pdf, web link, docx, etc.
2. A statistical summary of the company, parent and/or subs that are normally sent to financial analysts on Wall Street.
3. Copies of the last detailed analysis by S&P and Moody’s resulting in the current bond rating. These should be documents between 8 and 25 pages long.
4. Several pages from a detailed Budgeting and Control Report. This should be the kind of report which the attendees at the seminar would see either because they or their supervisor gets this report each month. This report should have both actual versus budget figures on it.

B. Financial Statement Analysis
1. An example of the calculation of the earned regulatory return on equity for one or more of regulated entities and utility services and a reconciliation to the financial ROE for that business if available.
2. A page from a presentation to financial analysts or others showing some or all of the financial measures for the utility or the parent company. These financial measures should include shareholder return, ROE and book values.
C. The Utility’s Four “Sets of Books”
If your company has multiple utility subsidiaries or operates in multiple states you may want to select one or more regulated utility companies and states as the examples rather than provide information for all rate cases. If your organization is a Public Utility Commission choose one or two utilities that you feel would be good examples for the seminar and try to get the information for these companies. This should be done for all of the Info Requests below.
1. The most recent litigated rate order. This should be an order which shows disallowances and the development of the revenue requirement (not a case which was settled).
2. Two or three examples of expenses disallowed in a rate case with relevant sections from the testimony of various parties and the commission’s decision.
3, One or two examples of rate base items disallowed in a rate case with relevant sections from the testimony of various parties and the commission’s decision.
4. A description of any kind of adjustment to rates other than the rate case. For example, fuel or gas adjustment clauses, weather normalization. Include information on which jurisdictions, frequency, lag in changing the rate and whether this change is separately shown on the customer’s bill
5, An executive summary of the issues and outcome in the rate case.
6. If the last rate case was settled, the order from that settlement and a summary of that case.
7. A chart similar to the one shown here for the each jurisdiction and utility service with reference to the last rate order
Jurisdictions/Services                                 FERC             STATE 1              STATE 2
% of Parent Company Revenue
Date Filed
Date of Last Rate Order
Allowed Return on ST Debt
Allowed Return on LT Debt
Allowed Return on Preferred
Allowed Return on Equity
Overall Allowed Return
Test Year Ended
Type of year used is generally used (historic, projected)
Is the year used called the test year or rate year?
Does the commission reduce the rate base by the deferred?
taxes due to the normalization method or include these
deferred taxes at a zero rate in the allowed return on rate base?
Comparison of the State Commissions. Please provide this report if available.
If known, what test year will be used for the next rate case?
When will the next rate case be filed? Label this as
to whether it is a known date or guess.
Why will the next rate case be needed?
What were the major issues in the last case?
What will be the major issues in the next rate case?

D. Role Playing Exercise — Rate Case
1. What kind of advertising is allowed above-the-line in rates in each jurisdiction? Why?
2. Please provide details of any advertising disallowance in a recent rate case including relevant sections from the testimony of various parties and the commission’s decision.
3. Did the company have any disallowance of contract costs in recent rate cases? Please provide details including relevant sections from the testimony of various parties and the commission’s decision.

E. Modifications to Rate of Return Regulation
1. Does the company have any adjustments to their rates which occur without a general or overall rate case (i.e., one which addresses all of the utility’s revenue requirement). If so please include a description of how this works.
2. Does the company operate under any of the items listed above? If so please provide details.
3. Steps the company has taken to address the problem of Regulatory Lag.

F. Present Value Analysis and Exercise
1. Information on the 401-K plan, including choices of investment, matching by the company and last year’s performance of each of the funds available including a report which 401-K plan participants got in the first quarter of the year showing the returns on each of the choices in the 401-K for the prior year.
2 Do all employees have the same matching provisions? If not explain.
3. Which employees covered by a defined benefit plan?

G. Shareholder Value Maximization
1. Does the company use the term Balanced Scorecard?
2. Does the company use the term Stakeholders? What is the company goal with respect to stakeholders?
3. Is EBITDA used in any internal reports? Who receives these reports?
4. Does the company use the term Free Cash Flow? How is it defined?

H. Accounting for Utility Plant
1. A description of the capitalization policy of the utility.
2. A few pages from the units of property list.
3. Under what conditions would a desktop computer be capitalized?

I. Accounting for Income Taxes
1. Are there any examples in the past where there was a timing difference larger than the depreciation timing difference?
2. A chart similar to the one shown here for the each jurisdiction and utility service.
States                                                            STATE 1             STATE 2                 STATE 3 …
Is any flow through used
Examples of largest flow through items
Overall tax rate Federal + State (net of Federal deduction)

J. Cost of Capital
1. Analysis of the company’s cost of capital (i.e., discount rate in the engineering economics’ analysis).
2. What is the hurdle rate used for capital budgeting decisions? Is it the same for all projects?
3. A copy of the cost of capital testimony from a current rate case or the last rate case. This should include all the exhibits especially the DCF methodology.
4. What is the Bond Rating on the senior secured debt from S&P and Moody’s?

K. Capital Project Analysis Review Case
1. Does the company have a standard computer program or excel template for making major capital expenditure decisions? If so provide a sample analysis including a summary page or two showing the present value of the cash flows analysis. Please send a copy of any manual or documentation on how the company’s computerized project analysis system works.

UTILITY FINANCE & ACCOUNTING FOR FINANCIAL PROFESSIONALS

A. Calculation of ROE for the Utility and Parent Company
1. Two hard copies plus pdf (or web link) of the latest Annual Report of the utility or of each utility if more than one utility subsidiary and of the parent company if the utility has a parent. The pdf copy should have the same page numbers as the hard copy of the report. (This report will be supplied by you to each person taking the class.)
Remaining items in this data request should be in electronic version only – pdf, web link, docx, etc.
2. A statistical summary of the company, parent and/or subs that are normally sent to financial analysts on Wall Street
3. An example of the calculation of the earned regulatory return on equity for one or more of regulated entities and utility services and a reconciliation to the financial ROE for that business if available.
4. Copies of the last detailed analysis by S&P and Moody’s resulting in the current credit rating. These should be documents between 8 and 25 pages long.

B. Rate of Return Regulation
If your company has multiple utility subsidiaries or operates in multiple states you may want to select one or more regulated utility companies and states as the examples rather than provide information for all rate cases. If your organization is a Public Utility Commission or a Law Firm please choose one or two utilities that you feel would be good examples for the seminar and try to get the information for these companies. This should be done for all of the Info Requests below.
1. The most recent litigated rate order. This should be an order which shows disallowances and the development of the revenue requirement (not a rate case which was settled).
2. Two or three examples of expenses disallowed in a rate case with relevant sections from the testimony of various parties and the commission’s decision.
3, One or two examples of rate base items disallowed in a rate case with relevant sections from the testimony of various parties and the commission’s decision.
5, An executive summary of the issues and outcome in the rate case.
6. If the last rate case was settled, the rate order from that settlement and an executive summary.
7. A chart similar to the one shown here for the each jurisdiction and utility service with reference to the last rate order
Jurisdictions/Services                                     FERC            STATE 1            STATE 2
% of Parent Company Revenue
Date Filed
Date of Last Rate Order
Allowed Return on ST Debt
Allowed Return on LT Debt
Allowed Return on Preferred
Allowed Return on Equity
Overall Allowed Return

C. Modifications to Rate of Return Regulation
1. Does the company have any adjustments to their rates which occur without a general or overall rate case (i.e., one which addresses all of the utility’s revenue requirement). If so please include a description of how this works.
2. Does the company operate under any of the items listed above. If so please provide details.
3. Steps the company has taken to address the problem of Regulatory Lag.

D. Energy Adjustment Clause
1. A sample bill sent to a customer and a written description of how to read this bill (if one exists).

E. Capitalization Versus Expense
1. A description of the capitalization policy of the utility.
2. A few pages from the list of retirement units of property and the dollar amount above which items which are not part of retirement units nor retirement units themselves are capitalized.
3. Under what conditions would a desktop computer be capitalized?

F. Plant Issues
1. A copy of the last depreciation study.