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Debt component of AFUDC. The gross-up with respect to AFUDC's borrowed funds component is reported as an additional component of CW/P and plant in service.
This is more in line with nonregulated reporting as defined in SFAS 34, Capitalization of Interest Costs, which prohibits the inclusion of the equity component in AFUDC. In either case, when a cost of funds is capitalized, net income for the period is increased by a corresponding amount, appearing on the income statement as an item such as "Income From Interest Charged During Construction." Although such income is not currently realized in cash, it will be realized over the service lives of the related plant assets as the resulting higher depreciation expense (included in rate base) is recovered in the form of increased revenues.
Other assumptions incorporated into the guidance relate to higher O&M expense of about 5%; higher depreciation expense reflecting additional utility plant in service; Allowance for Funds Used During Construction (AFUDC) of about USD28m; modest improvement from equity method investments mostly due to normal weather in the markets served by SouthStar Energy; capital expenditures in the range of USD525m to USD575m; and a new equity issuance of approximately 4 million shares during fiscal year 2013.
The $260 million extension and expansion, the cost of which excludes allowance for funds used during construction (AFUDC), is projected to be in service in the fourth quarter.
For consistency, the cost per kw figures for the comparison group excluded AFUDC, since governmental utilities typically do not accrue it (although they do incur financing costs) and there is variability in the AFUDC rates and accrual policies applicable to investor-owned utilities.
As a partial offset, Georgia Power will have to absorb steeper step downs in ROE on the Nuclear Construction Cost Recovery (NCCR) tariff and AFUDC than currently in place as per the January 2017 Stipulation.
Due to the significant changes to the regulatory process introduced by the NEB and the request for a 30-day suspension of the applications, TransCanada will cease recording Allowance for Funds Used During Construction (AFUDC) on the projects effective August 23, 2017, being the date of the NEB's announcement altering the terms of their assessment.
The order specified the return on equity to be 9.5% for the purpose of Allowance for Funds Used During Construction (AFUDC) and riders with a return component.
The settlement allows IPL to include $700.8 million in rate base, which reflects the full cost of the plant plus allowance for funds used during construction (AFUDC).
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