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Capitalization Policy and Units of Property Integration (case study)

Upon completing its merger with another utility, a large, multi-jurisdictional IOU needed to integrate its capitalization policies and unit of property (UoP) catalogues for its expanded generation fleet, transmission, distribution and general utility property. The existing UoPs were overly cumbersome and a perennial source of disputes in project capital/expense classification decisions. As one senior accounting manager at the company described, the UoP catalogues had grown “out of control.”

The merger presented an opportunity to align the capitalization practices of both companies, incorporate industry best practices, address key upcoming projects and resolve previous organizational disputes. Senior management also wanted to ensure any new levels of capitalization would be defensible to the public service commissions overseeing the company’s numerous jurisdictions. MCR had previously worked with the company on a UoP catalogue integration for its merger with a former utility and was asked to assist again.

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