amortization of gains for rate-making

Liabilities1

1. 405-980Regulated Operations405 Liabilities

   This Subtopic explains when a regulator's rate actions create liabilities (regulatory liabilities) for an entity with regulated operations. Three mechanisms create liabilities: required refunds to customers that meet the loss-contingency accrual criteria, current rates collected to recover costs expected to be incurred in the future for which the entity remains accountable, and gains or other reductions of net allowable costs that the regulator requires be amortized to customers over future periods. A regulator's actions can eliminate a liability only if the regulator's actions imposed it in the first place.