Income quality of allowances for funds used during construction

Journal Article · Thu Jun 09 04:00:00 EDT 1977 · Public Util. Fortn.; (United States)

OSTI ID:7300158

Johnson, J R

An important question in utility regulation is whether or not utilities should accrue the allowance for funds used during construction (AFUDC) on the previously accumulated AFUDC which is included in construction work in progress (CWIP). Generally, commissions have not allowed the AFUDC to be compounded, but rather they have required that the previously capitalized AFUDC be excluded from the CWIP base in computing the current year's AFUDC. In a recent article in Public Utilities Fortnightly (Nov. 4, 1976) Paul B. Coughlan argued for compounding the AFUDC. Specifically, he provided an example to illustrate that it is not fair to a utility company for a commission to require that the company exclude previously capitalized AFUDC from the CWIP base in computing the current year's AFUDC. In this article, the effect of not compounding the AFUDC on the quality of AFUDC income is examined. This article presents a theoretical discussion which is followed by empirical evidence that supports the theoretical hypothesis. Finally, the accounting and rate-making implications of the research are discussed.

• Research Organization: Univ. of Georgia, Athens
• OSTI ID: 7300158
• Journal Information: Public Util. Fortn.; (United States), Journal Name: Public Util. Fortn.; (United States) Vol. 99:12; ISSN PUFNA
• Country of Publication: United States
• Language: English

Related Subjects

29 ENERGY PLANNING, POLICY, AND ECONOMY
290200* -- Energy Planning & Policy-- Economics & Sociology
293000 -- Energy Planning & Policy-- Policy
Legislation
& Regulation
ACCOUNTING
CONSTRUCTION
ENERGY FACILITIES
FINANCING
INCOME
MANAGEMENT
POWER PLANTS
PUBLIC UTILITIES
QUALITY ASSURANCE
REGULATIONS