rate spike

Assets1

1. 340-980Regulated Operations340 Other Assets and Deferred Costs

   This subtopic governs when a rate-regulated entity may capitalize incurred costs as regulatory assets (deferred costs) and, in particular, how to account for phase-in plans — rate-making arrangements that defer part of the rate increase caused by placing a newly completed plant in service in order to avoid a "rate spike." A cost is capitalized only if it is probable that future revenue at least equal to the cost will result from including it in allowable costs and that revenue is intended to recover the previously incurred cost rather than fund similar future costs (980-340-25-1). Amounts deferred under a phase-in plan may be capitalized only for plants completed or substantially constructed before January 1, 1988, and only if the plan meets four strict criteria (980-340-25-3).