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Operating and Administering an Electric Power Exchange
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    Question: In recent years, new jurisdictional entities have come into existence that operate and administer an electric power exchange. The direct functions of a power exchange include, among other things, aggregating supply bids from generators and demand bids from utilities and power marketers, determining market clearing prices and notifying bidders of market results. These new entities also monitor their energy markets for identification of market design flaws and improvements, manipulation and abuses by participants and the need for initiation of mitigation actions.

    What is the proper accounting treatment for revenues received from operating and administering an electric power exchange? Additionally, how should entities account for operation and maintenance expenses incurred in operating and administering the power exchange and related market monitoring activity expenses?

    Answer: Revenues received from operating and administering an electric power exchange are to be recorded in a separate subaccount of Account, 456, Other Electric Revenues. These revenues are properly includible in Account 456 since they are derived from an electric operating activity and not properly included in any other accounts.

    Operation and maintenance expenses incurred in operating and administering the exchange and monitoring the market are to be recorded in separate subaccounts of Account 557, Other Expenses. These expenses are properly includible in Account 557 since they are incurred directly in connection with the purchase of electricity and not properly included in any other accounts.

    John Delaware
    Deputy Executive Director and
    Chief Accountant


    Effective: October 1, 2001



Updated: June 28, 2010