Expand
SAB Topic 10.D, Long-Term Contracts for Purchase of Electric Power, provides presentation and disclosure requirements for a specific type of long-term power purchase arrangement.

Excerpt from SAB Topic 10.D (codified in ASC 980-10-S99-1)

Under long-term contracts with public utility districts, cooperatives or other organizations, a utility company receives a portion of the output of a production plant constructed and financed by the district or cooperative. The utility has only a nominal or no investment at all in the plant but pays a proportionate part of the plant’s costs, including debt service. The contract may be in the form of a sale of a generating plant and its immediate lease back. The utility is obligated to pay certain minimum amounts which cover debt service requirements whether or not the plant is operating.

In evaluating these types of arrangements, reporting entities should consider whether the requirement to make debt service payments is a guarantee within the scope of ASC 460, Guarantees (see FG 2.3). Reporting entities should also assess whether the arrangement is within the scope of:
  • lease accounting,
  • derivative accounting, and
  • consolidation.

ASC 980-10-S99-1 also specifies the presentation and disclosure requirements for these type of power contracts, as summarized in Figure UP 15-3.
Figure UP 15-3
SEC presentation and disclosure requirements for certain long-term power contracts
Scope
Requirements
Presentation — all contracts
Cost of power obtained should be included in operating expenses (includes payments made when the plant is not operating)
Disclosure — all contracts
Disclosure should include information about the contract terms and significance:
  • Date the contract expires
  • The share of plant output being purchased
  • The estimated annual cost and annual minimum debt service payment required
  • The amount of related long-term debt or lease obligations outstanding
  • The allocable portion of interest included in expense under such contracts
Presentation and disclosure — contracts that provide or are expected to provide more than 5% of current or estimated future system capability
Significant contracts require additional disclosure in the form of either:
  • separate financial statements of the vendor entity or
  • recording the amount of the contract obligation as a liability on the balance sheet with a corresponding asset representing the right to purchase power.
Expand Expand
Resize
Tools
Rcl

Welcome to Viewpoint, the new platform that replaces Inform. Once you have viewed this piece of content, to ensure you can access the content most relevant to you, please confirm your territory.

signin option menu option suggested option contentmouse option displaycontent option contentpage option relatedlink option prevandafter option trending option searchicon option search option feedback option end slide