Fuel Cost Adjustment - Under-Collection Regulatory Asset (Fuel Costs Exceeded Forecast)
Recording a regulatory asset when actual fuel costs exceed the amounts collected from customers through the Fuel Cost Adjustment rider, creating a deferred cost to be recovered through future rate increases.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Regulatory Asset - FCA Under-Collection (Deferred Fuel Costs) | Asset (+) | 48,500,000.00 | - |
| Fuel Expense (Deferred from P&L — To Be Recovered) | Expense (-) | - | 48,500,000.00 |
💡 Accountant's Note
The mirror image of over-collection: when natural gas prices spike, fuel costs exceed the forecast embedded in current FCA rates. The difference is deferred as a regulatory asset (the utility is owed this from customers through future rate increases). Classic example: the February 2021 Texas winter storm caused catastrophic natural gas price spikes — utilities that operated through this event had massive FCA under-collections (billions in some cases). These are recoverable from customers through rate adjustments, but the recovery period can be extended over years to avoid rate shock.
Practitioner & Systems Framework
💻 ERP Architecture
Large, sudden FCA under-collections (like storm events) may require emergency rate applications to accelerate recovery. The carrying costs (interest) on the unrecovered FCA balance may also be recoverable through a carrying charge included in the FCA tariff. Track carrying charge accruals as additional regulatory assets.
⚠️ Audit Flags
During periods of extreme fuel price spikes, auditors assess whether the FCA under-collection is fully recoverable — particularly if the utility was subject to force majeure events that might limit customer obligations. The interest/carrying charge rate on the FCA balance must be within the tariff-authorized rate.
📄 Required Documentation
FCA tariff with authorized carrying charge rate, monthly fuel cost tracking vs. FCA collections, FCA balance with carrying charge accrual, PUC emergency rate application (if filed), customer notification of FCA balance and recovery plan.
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