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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
NOTE B – RATE AND REGULATORY ISSUES
The Company’s regulated subsidiaries generally use the same accounting policies and practices
for financial reporting purposes as non-regulated companies under US GAAP. However, actions by
the FERC and the state utility commissions can result in accounting treatment that is different from
that used by non-regulated companies. The Company applies the provisions of the SFAS No. 71,
“Accounting for Certain Types of Regulation.” In accordance with SFAS No. 71, the Company’s
regulated subsidiaries record regulatory assets (expenses deferred for future recovery from cus-
tomers) and regulatory liabilities (amounts provided in current rates to cover costs to be incurred
in the future) on their balance sheets. This permits the regulated subsidiaries to defer certain costs
(because they are expected to be recovered through customer billings) and revenues (because
they are expected to be refunded to customers), which would otherwise be charged to expense
or revenue, when authorized to do so by the regulator.
The following table details the various categories of regulatory assets and liabilities:
41
National Grid USA / Annual Report
2006 2005
Regulatory assets:
Stranded costs 2,478,018$ 2,997,281$
Purchased power 114,829 382,955
Derivative instruments 506,328 415,394
Regulatory tax asset 148,678 120,521
Deferred environmental restoration costs 563,871 594,283
Pension and post-retirement benefit plans costs 550,179 531,366
Additional minimum pension liability (see Note F) 79,923 252,218
Yankee nuclear decommissioning costs 140,832 168,426
Loss on reacquired debt 78,966 87,645
Long-term portion of standard offer under-recovery of fuel costs 46,803 42,420
Other 556,362 388,663
Total non-current regulatory assets 5,264,789 5,981,172
Current potion of regulatory assets:
Derivatives and swap contracts 324,858 203,558
Purchase power buyout costs 13,559 104,486
Yankee nuclear decommissioning costs 54,796 53,114
Total current portion of regulatory assets 393,213 361,158
Total regulatory assets 5,658,002$ 6,342,330$
Regulatory liabilities:
Cost of removal reserve (see Note K) (537,526)$ (504,819)$
Stranded costs and CTC related (123,105) (209,291)
Pension and post-retirement plans fair value deferred gain (234,754)
(228,138)
Interest savings deferral (92,534) (92,534)
Environmental response fund and insurance recoveries (81,673) (82,012)
Storm costs reserve (39,391) (33,681)
Other (246,612) (277,038)
Total regulatory liabilities (1,355,595)$ (1,427,513)$
($'s in 000's)
At March 31,