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Enron Mail |
EEI has been participating in discussion with FASB concerning the application
of SFAS 133 and 138 to utility power purchase agreements where power is obtained to serve load obligations, as opposed to power marketing. EEI's position is that such contracts should be treated under the normal purchase and normal sale contracts exception under SFAS 138, for which derivatives accounting treatment would not apply. Occaisonally a utility may agree to bookout certain transactions. EEI's position is that a bookout is not a net settlement of the underlying purchase and sale contract because every party must fulfill each and every contractual transaction. EEI also has maintains that even if there is a bookout title passes under the terms of the underlying contract. See attached letter to FASB. FASB has asked for additional information on the bookout issue. In particular, it wants more information on the passing of title between entities in a bookout chain; what are the legal requirements for title to pass to another entity in a bookout chain? FASB also wants to know whether under bookouts are cash payments always settled gross with each company paying the total contract price for the purchase involved and receiving the total contract price for its sale or are there exceptions in normal practice? I assume settlment in gross does not occur in the case of a buyer and seller in the chain whose underlying contract(s) provide for payment and/or transaction netting. The close of the comment period is on Friday, so we are trying to get a letter back to FASB asap. I would appreciate it if anyone in our group could comment on the questions FASB asks and/or the letter we previously sent to FASB. Thanks in advance. Andrew S. Katz, Director Industry Legal Affairs Edison Electric Institute 701 Pennsylvania Avenue, N.W. Washington, D.C. 20004 Voice: 202-508-5616 Fax: 202-508-5673 e-mail: akatz@eei.org - TEXT.htm - FASB 133 Bookouts.pdf - Andy Katz.vcf
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