Section 407-720-3 - Compliance Required for Regulatory Accounting PurposesA. SFAS 106 Accounting Compliance Required. All public utilities that are required to do so for financial reporting purposes shall adopt the requirements set forth in SFAS 106 for regulatory accounting and reporting purposes.B. Accounting Requirements. Each public utility shall record the effects of SFAS 106 in the appropriate accounts as defined in the Uniform System of Accounts applicable to the utility. Each public utility shall maintain sufficient detail to allow identification of the components of the SFAS 106 expenses that are recorded in the accounting books. Each public utility shall maintain sufficient detail to allow specific identification of any related amounts that are recorded as deferred tax assets or liabilities. Should the regulatory body whose Uniform System of Accounts has been approved for use in this State designate or establish specific accounts or subaccounts to be used for recording the effects of SFAS 106, those accounts shall also be used for state regulatory accounting purposes.C. Transition obligation. Utilities shall have the option of either: 1) immediately expensing the transition obligation; or 2) amortizing the transition obligation ratably over the greater of: (a) the average remaining service period of active employees; or (b) twenty years, whichever is longer. The ratemaking treatment of the transition obligation approach selected by the utility is subject to the approval by the Commission in the first rate case proceeding following the implementation of this rule by the utility.D. Deferral Period. Upon initial implementation of the requirements of this rule, OPEB expenses may be deferred only if a specific waiver is granted by the Commission. In requesting a waiver the utility shall specify one of the two alternatives listed below. OPEB expenses as calculated in accordance with SFAS 106 which exceed the amount of expenses as calculated under the pay-as-you-go (cash basis) methodology may be:i Deferred for a period of up to two years from the date of adoption of SFAS 106, or until the completion of the first rate case proceeding involving the utility following adoption, whichever occurs first. A waiver for up to two years will be granted if the utility demonstrates that it is not overearning for Maine-jurisdictional purposes; or,ii Deferred for a longer period, not to exceed five years, from the date of adoption of SFAS 106, if it is a part of a plan to gradually phase-in for ratemaking purposes SFAS 106-related costs. Waivers for two to five years will be granted only if: a) the utility demonstrates that it is not overearning for Maine-jurisdictional purposes; and b) the utility develops a plan, which would take effect as part of a rate case proceeding, to gradually phase-in the SFAS 106 costs for ratemaking purposes.E. Ratemaking Policies and Practices.i General. Costs of OPEB obligations calculated according to SFAS 106 shall be eligible, on a case-by-case basis, for inclusion in the utility's revenue requirement for ratemaking purposes, subject to the same level of review for prudence and reasonableness as are all other utility expenses.ii Funding Option. In any proceeding before this Commission in which the amount of OPEB expense that can be included in rates is an issue, it shall be the responsibility of the utility to demonstrate that its chosen course of action with respect to funding was appropriate.iii Rate Base Treatment. In any proceeding in which the amount of OPEB expense to be included in rates is an issue, the net-of-tax amount of the net OPEB liability shall be included in the computation of the utility's rate base. The net OPEB liability to be included in rate base should be net of plan assets as so defined by SFAS 106. Within the context of a rate case proceeding, the net OPEB liability should be only that liability which has been created through OPEB expense included in cost of service and recovered through customer revenue.65- 407 C.M.R. ch. 720, § 3