UNITED STATES OF AMERICA
`BEFORE THE
`FEDERAL ENERGY REGULATORY COMMISSION
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`Rate Recovery, Reporting, and Accounting
`Treatment of Industry Association Dues and
`Certain Civic, Political, and Related Expenses
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`Docket No. RM22-5-000
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`COMMENTS OF THE OFFICE OF THE NEVADA ATTORNEY GENERAL,
`BUREAU OF CONSUMER PROTECTION
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`The Office of the Nevada Attorney General, Bureau of Consumer Protection (“BCP”)
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`hereby submits comments in response to the Federal Energy Regulatory Commission’s
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`(“Commission” or “FERC”) Notice of Inquiry (“NOI”) issued on December 16, 2021.1 The BCP
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`supports FERC’s NOI to examine rate recovery, reporting and accounting treatment of industry
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`association dues and certain civic, political and related expenses, as well as whether additional
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`transparency is needed with respect to defining donations for charitable, social or community
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`welfare purposes.
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`I.
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`DESCRIPTION OF COMMENTOR
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`The BCP operates within the Nevada Attorney General’s Office pursuant to NEV. REV.
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`STAT. § 228.310 and represents the interests of Nevada utility consumers before FERC pursuant
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`to NEV. REV. STAT. § 228.360. As the state-designated agency charged with protecting the interests
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`of Nevada’s electric and natural gas ratepayers, the BCP is interested in ensuring that utility costs
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`that are recovered from ratepayers are squarely within the interest of providing service to
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`customers. The dues collected by Nevada’s electric and natural gas customers to cover trade
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`association membership affect the rates passed through to Nevada utility ratepayers for natural gas
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`and electric service. Naturally, BCP is further interested in increasing the transparency of industry
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`1 Rate Recovery, Reporting, and Accounting Treatment of Industry Association Dues and Certain Civic, Political,
`and Related Expenses, 177 FERC ¶ 61,180, Fed. Reg. Vol. 86, No. 244, 72958 [hereinafter NOI].
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`association costs. Accordingly, the BCP represents consumer interests which may be directly
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`affected by this NOI.
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`II.
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`COMMUNICATIONS
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`BCP requests that all correspondence or communications regarding this proceeding be
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`addressed to the following individuals:
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`
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`Michelle C. Newman
`Senior Deputy Attorney General
`Bureau of Consumer Protection
`100 North Carson Street
`Carson City, Nevada 89701-4717
`T: (775) 684-1164
`MNewman@ag.nv.gov
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`Whitney F. Digesti
`Senior Deputy Attorney General
`Bureau of Consumer Protection
`Office of the Nevada Attorney General
`100 North Carson Street
`Carson City, Nevada 89701-4717
`T: (775) 684-1169
`WDigesti@ag.nv.gov
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`III. BACKGROUND
`On March 17, 2021, the Center for Biological Diversity (“CBD”), pursuant to 18 C.F.R. §
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`385.207 and the Administrative Procedure Act, 5 U.S.C. § 553, petitioned the Commission to
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`amend the Uniform System of Accounts (“USofA”) requirements for payments to industry
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`associations engaged in lobbying or other influence-related activities.
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`In its Petition, CBD describes the role and purpose of the USofA. According to the Petition,
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`fees and dues for membership in utility trade associations are recovered in Account 930.2, where
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`there is a presumption of recovery for costs included in that Account.2 Instead, CBD proposes that
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`2 Petition For Rulemaking To Amend The Uniform System of Accounts’ Treatment of Industry Dues, Docket No.
`Docket No. RM21-15-000, filed Mar. 17, 2021, at 2 (F.E.R.C.) [hereinafter Petition].
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`trade association dues should be recovered in Account 426, where costs in that Account are
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`presumed unrecoverable.3 CBD argues that, under Janus,4 allowing the recovery of trade
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`association dues is the equivalent of forced speech as trade associations, which utilities fund,
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`engage in political activities that ratepayers should not be forced to fund.5
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`On December 16, 2021, FERC issued an NOI in the instant proceeding to further discuss
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`issues raised in the CBD petition and seek comments from parties on the accounting treatment of
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`trade association dues and to increase the transparency of how those dues are collected and
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`presented. In particular, FERC seeks to “(i) [e]xamine the Commission’s current policies and
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`regulations governing the rate recovery, reporting, and accounting treatment of industry
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`association dues and certain civic, political, and related expenses; and (ii) identify potential
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`changes that may be necessary to ensure that such expenditures are appropriately accounted for
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`under the USofA and that recovery of these expenditures through Commission jurisdictional rates
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`is just and reasonable.”6 To support this examination, FERC seeks responses to 22 questions
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`related to how trade associations classify, record, and recover industry association costs, the nature
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`of costs incurred, and dues assigned by industry associations; how much transparency for such
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`costs exists and potential ways to improve this transparency; and to inform whether modifications
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`to Commission regulations or additional guidance are needed to ensure the proper classification of
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`utility and industry association costs.7
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`3 Id.
`4 Janus v. Am. Fed'n of State, County, & Mun. Employees, Council 31, 138 S. Ct. 2448 (2018).
`5 Petition at 26.
`6 NOI at 10.
`7 Id. at 13-22.
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`IV. COMMENTS
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`A. BCP Supports the NOI
`In its NOI, FERC describes the accounting treatment of trade association dues as those
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`recoverable through rates and those unrecoverable through rates as defined by the USofA. Costs
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`associated with “the purpose of influencing public opinion with respect to the election or
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`appointment of public officials, referenda, legislation, or ordinances or for the purpose of
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`influencing the decisions of public officials, is considered below the line (i.e., generally excluded
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`from rate recovery).”8 Other costs associated with the operation of the utility and not covered
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`elsewhere in the USofA, including trade association membership dues, are considered
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`recoverable.9
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`The Public Utilities Commission of Nevada (“PUCN”), through NEV. ADMIN. CODE §§
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`704.640 and 704.650, has adopted the USofA for natural gas companies and electric power
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`companies. NEV. REV. STAT. § 703.191 mandates that each public utility regulated by the PUCN
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`file annual reports to the PUCN and each affected governmental entity. For all natural gas
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`companies and electric power companies in Nevada, these reports are based on the accounting
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`principles outlined in the USofA. As such, the USofA plays an integral role in the regulation of
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`Nevada natural gas and electric utilities both in how the information is presented to the PUCN and
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`how it is presented to other governmental entities. By virtue of including trade association costs
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`and dues in Account 930.2 where those costs are presumed recoverable, the burden shifts from the
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`utility companies to other groups, including the BCP, to argue against including these costs in
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`rates. Instead, BCP agrees that trade association costs should be included in an account – Account
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`426 – where the utility has to justify inclusion of these costs rather than the other way around.
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`8 Id. at 4.
`9 Id.
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`Consumer advocates like the BCP do not have the same level of resources available to them as
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`private companies like utilities. By treating trade association costs as presumed non-recoverable,
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`customers are prevented from being required to pay for costs and dues that act against the interests
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`of the customers.
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`In a recent Nevada rate case, Nevada Power Company d/b/a/ NV Energy (“Nevada Power”)
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`identified over $340,000 in recoverable costs due to memberships associated with Edison Electric
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`Institute (“EEI”).10 EEI identified a percentage of those dues were for influencing legislation, and
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`that amount was removed from Nevada Power’s cost recovery. Even though Nevada Power
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`reduced the total amount sought for rate recovery by the percentage identified by EEI, that
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`reduction only applies to influencing legislation. As the original CBD Petition details, groups like
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`EEI engage in activities beyond lobbying and influencing legislation.11 Furthermore, it is the
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`utility’s duty to justify these expenses, not for the BCP to argue against recovery of these costs.
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`Account 930.2 allows for recovery of “the cost of labor and expenses incurred in
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`connection with the general management of the utility not provided for elsewhere.”12 This includes
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`“Industry association dues for company memberships.”13 However, Account 426.4 covers
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`influencing public opinion and public officials, and is not presumed recoverable.14 The BCP
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`supports FERC’s effort in this proceeding to provide additional clarity and transparency to what
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`should be recoverable and what should not. BCP is concerned that that the services offered by
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`trade associations like EEI are more than mere membership dues. Efforts by groups like EEI go
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`beyond the expectations in Account 930.2 and better fit the description of Account 426.4. Even
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`10 In the Matter of the Application of Nevada Power Company, d/b/a/ NV Energy, filed pursuant to NRS 704.110(3)
`and (4), addressing its annual revenue requirement for general rates charged to all classes and customers, Docket
`No. 20-06003, Volume 19 of 25, filed June 1, 2020, 86-92 (Nev. P.U.C.).
`11 Petition at 12-14.
`12 18 C.F.R. § 101 (2011).
`13 Id.
`14 Id.
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`though groups like EEI have identified a portion of their costs influence public officials, groups
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`like EEI provide their members with more information and strategy than “influencing,” and
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`provide support and tactics for their members to act against the wishes of states and customers.
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`The BCP believes that costs for trade associations, like EEI, should no longer be recoverable if the
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`utility is unable to clearly demonstrate in a rate proceeding that the costs provide a benefit to the
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`ratepayers of the utility rather than just the utility itself.
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`B. Response to FERC Questions
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`In the NOI, FERC asked for stakeholder responses to 22 questions. The first five questions
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`are directed to utilities and industry associations. BCP offers our responses to the remaining 17
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`FERC questions.
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`Q6) What mechanisms currently exist for stakeholders to examine the costs
`and activities of industry associations?
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`There are no mechanisms that currently exist for stakeholders to examine the costs and
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`activities of industry associations. This fact was highlighted in testimony provided by the
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`Regulatory Operations Staff (“Nevada Staff”) of the PUCN in Southwest Gas Corporation’s 2021
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`general rate case, Docket No. 21-09001.15 In its testimony, Nevada Staff states the following:
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`15 See In the Matter of the Application of Southwest Gas Corporation for Authority to Increase its Retail Natural
`Gas Utility Service Rates in its Southern and Northern Nevada Rate Jurisdictions, Docket 21-09001, Direct
`Testimony of Jason A. Martin, filed January 14, 2022, 7 (Nev. P.U.C.) [hereinafter Martin Testimony]. The link to
`the entire testimony is: https://pucweb1.state.nv.us/PDF/AxImages/DOCKETS_2020_THRU_PRESENT/2021-
`9/15275.pdf. For the record, PUCN Docket No. 21-09001 was resolved by a stipulated agreement filed on February
`7, 2022, with a “Black Box” revenue requirement and therefore the PUCN did not rule on Nevada Staff’s testimony.
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`Q7) Do industry associations disclose the nature of their costs and activities in
`any state regulatory proceedings? If yes, please provide citations.
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`BCP is not aware of any industry associations disclosing the nature of their costs and
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`activities in a Nevada general rate case.
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`Q8) Have any industry associations been the subject of audits by any
`regulatory bodies? If yes, please provide a summary of the purpose and
`findings of the audit(s).
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`BCP is not aware of any industry associations being the subject of an audit by the PUCN
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`or its predecessor, the Public Service Commission of Nevada.
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`Q9) What, if any, additional transparency is needed for stakeholders to
`evaluate the reasonableness of industry association costs that are
`recovered through rates?
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`As highlighted by Nevada Staff’s testimony in PUCN Docket No. 21-09001, there is no
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`transparency of industry association costs. BCP believes that Question 5 of this NOI is a good start
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`to providing some transparency to industry association costs.
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`Q10) If additional transparency is needed for stakeholders, should any
`transparency requirements for industry association costs be limited to
`certain rates, such as electric transmission and natural gas transportation
`rates, in light of the potentially larger costs involved, or should they apply
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`to all types of rates (e.g., power sales agreements, reactive power, and sale
`of electricity)?
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`BCP does not have a comment on this question at this time but may have a reply comment
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`on March 23, 2022, to this question depending on the responses of other commenters.
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`Q11) Specific to the electric industry, should any transparency requirements
`for industry association costs be limited to investor-owned utilities or
`should they also apply to municipal utilities and rural electric
`cooperatives who recover costs for Commission-jurisdictional service?
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` BCP does not have a comment on this question at this time but may have a reply comment
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`on March 23, 2022, to this question depending on the responses of other commenters.
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`Q12) Industry associations rely on certain cost categories to enable utilities to
`determine what portion of their industry association dues are properly
`recovered from ratepayers and what costs are borne by shareholders.
`Please describe any additional or alternative cost categories to those in
`Question 5, above, that industry associations or their members should
`disclose to provide sufficient transparency.
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`BCP believes that the costs categories identified by FERC in Question 5 of the NOI provide
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`a good starting point. However, BCP may support the inclusion of additional cost categories in
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`reply comments to be filed on March 23, 2022, after reviewing the comments of other interested
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`commentors.
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`Q13) What specific methods to enhance transparency of industry association
`costs should the Commission consider? For each of the following
`methods to enhance transparency, as well as others you may identify,
`please explain whether and how much would they (a) improve
`transparency; (b) impose burdens on industry associations and/or their
`members; (c) help ensure that utility rates are just and reasonable:
`utilities that seek to recover dues must possess detailed data that
`(a)
`sufficiently explains such costs within their books and records, and
`such amounts must be subject to Commission audits, similar to
`that requested in Question 5, above;
`limit a utility’s ability to seek and obtain recovery of industry
`association dues to industry associations that publicly disclose
`detailed cost data, similar to that requested in Question 5, above;
`and/or
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`(b)
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`(c)
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`utilities must include in their FPA section 205 stated rate filings
`and their supporting workpapers to their formula rate annual
`updates, information similar to that requested in Question 5,
`above?
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`BCP believes that all options would improve transparency and help ensure that rates are
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`just and reasonable. However, BCP believes that Option (B) would be the least burdensome on
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`industry associations and their members because it would allow the industry associations to
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`provide the detailed cost data in one location – presumably the industry associations’ websites –
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`without having to provide the detailed cost data to each member.
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`Q14) If the Commission imposed a requirement, such as one of those discussed
`in Question 13, above, should that requirement be limited to associations
`whose dues per utility exceed a certain minimum monetary threshold
`and, if so, what threshold?
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q15) What, if any, additional transparency is needed for stakeholders to
`evaluate whether donations for charitable, social, or community welfare
`purposes are treated appropriately for ratemaking purposes?
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q16) Do utilities currently base the amount of their costs recoverable through
`rates on (i) the USofA, specifically the definitions in Accounts 930.2 and
`426.4, (ii) the Internal Revenue Service (IRS) definition of lobbying, (iii)
`some other basis, or (iv) some combination thereof? What percentage of
`dues would be considered recoverable for each the four options for the
`most recent fiscal year?
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`According to the Nevada Staff’s testimony in Docket No. 21-09001, the American Gas
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`Association uses the IRS definition of lobbying.16 BCP does not know what percentage of dues
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`would be considered recoverable under the four options offered in the question above.
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`16 See Martin Testimony at 8.
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`Q17) What material differences, if any, are there between industry association
`costs considered nonoperating per the definition of Account 426.4 and
`industry association costs that may be deducted for tax purposes based on
`the Internal Revenue Code or IRS regulations? What are examples of
`such activities and expenditures?
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q18) For what, if any, industry association costs is the classification as
`operating or nonoperating through utility rates unclear and ambiguous?
`Please describe any such “gray areas.”
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q19) The Commission currently allows all costs related to regulatory
`interventions and litigation by both utilities and industry associations to
`be recorded to above the line accounts. Further, Account 426.4 provides
`as an exception to the political advocacy activities utilities are required to
`report in that below the line account, namely, “expenditures which are
`directly related to appearances before regulatory or other governmental
`bodies in connection with the reporting utility’s existing or proposed
`operations.” What is the appropriate scope of this exemption for utilities
`and, by extension, their industry associations? Are there types of
`appearances before regulatory or governmental bodies for which the
`related expenditures should be excluded from rates, and if so, on what
`basis?
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q20) Please provide examples as to what, if any, costs for
`information campaigns carried out by industry associations are
`(a)
`currently recoverable in utility member rates;
`information campaigns carried out by industry associations are
`currently recoverable in rates that the Commission should exclude
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`(b)
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`(c)
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`from recovery in rates either by clarifying or revising its existing
`regulations;
`gifts, grants, donations, payments, dues, or contributions to other
`organizations by either utilities or industry associations are
`currently recoverable and should not be recoverable in utility
`member rates; and
`conferences or trainings are carried out by industry associations
`for which the Commission should prohibit from recovery in rates,
`and on what basis.
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`BCP does not have a comment on this question at this time but may have a reply
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`(d)
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q21) Please describe any other guidance that the Commission should provide
`with respect to the rate recovery of industry association dues or utilities’
`civic, political, and related expenses.
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`Q22) Please indicate whether there are any above the line, operating accounts
`other than Account 930.2 in which expenses related to civic, political,
`public outreach, and similar activities may be recorded (e.g., accounts
`pertaining to advertising costs) and, if so, what issues the Commission
`should consider with respect to those accounts.
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`BCP does not have a comment on this question at this time but may have a reply
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`comment on March 23, 2022, to this question depending on the responses of other commenters.
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`V.
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`CONCLUSION
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`Based on the foregoing, the BCP provides comments in support of this NOI to amend the
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`USofA’s treatment of industry dues. The Commission should consider changes, consistent with
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`BCP’s comments, to the accounting treatment of utility trade association dues.
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`The BCP concludes that those dues should not be recovered through customer rates and
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`assigning those dues to a different account where those costs are non-recoverable through customer
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`rates is in the public interest.
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`Respectfully submitted,
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`STATE OF NEVADA
`OFFICE OF THE ATTORNEY GENERAL
`BUREAU OF CONSUMER PROTECTION
`
`ERNEST FIGUEROA
`Consumer Advocate
`
` By: /s/ Michelle C. Newman
`Michelle C. Newman
`Senior Deputy Attorney General
`Bureau of Consumer Protection
`100 North Carson Street
`Carson City, Nevada 89701-4717
`T: (775) 684-1164
`MNewman@ag.nv.gov
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