Regulatory Accounting | ASC 980 | GASB 62 | Storm Damage
Accounting for Electric Storm Damage: Best Practices with ASC 980 and GASB 62
When Storm Season Hits, the Financial Accounting Comes Next
When hurricane, tornado, fire, or ice storm season comes, the first order of business is getting everyone to safety — then restoration begins. It is not callous to think about the financial impacts. With any storm restoration, there are many moving parts. If your system has a mutual aid electric crew assisting in cleanup, there are additional complications. Eventually, these cleanup costs will need to be assessed for their rate impacts on your customers.
The core principle: Use accounting standards ASC 980 or GASB 62 — Regulated Operations — to defer storm costs for recognition as the costs are collected in customer rates. Don't let your utility's financial statements take a hit for costs that are recoverable from ratepayers over time.
Step-by-Step Storm Damage Accounting Process
Open Storm Cleanup Work Orders Immediately
Open a series of storm cleanup work orders to capture labor, materials, equipment charges, and retirements. Charge all appropriate costs to these work orders. The analysis will come later — and it will be messy. In the heat of the moment, mistakes may occur, so capture everything and sort it out during the analysis phase.
Open Separate Work Orders for Each Mutual Aid Crew
If possible, open a separate series of work orders for each mutual aid utility or co-op assisting with cleanup. This significantly simplifies the billing and payment process with those organizations. Keep these work orders open until the cleanup is fully complete — the process may be lengthy.
Allocate Overhead Costs to Work Orders
Once the work is done, allocate overhead costs to the work orders for labor, stores (materials management), cost of capital (AFUDC if applicable), and other support functions. Follow the same overhead allocation methodology used for capital construction projects.
Claim Insurance and FEMA Reimbursement
Analyze the cleanup costs and use the work order detail to claim insurance and FEMA for reimbursement. Detailed work order records are essential for substantiating reimbursement claims. Separate insured from uninsured costs clearly during this analysis.
Analyze Work Orders for Assets, Retirements, and Maintenance
Analyze work orders to define: assets added to the system (capital), assets retired from service, and maintenance charges (operating expense). This classification is critical — it determines how costs flow to the income statement and rate base.
Determine Rate Recovery and Recovery Period
Work with management, your oversight Board, or as part of a subsequent rate filing with the state regulatory body to determine: what costs can be recovered in customer rates, and the length of time over which they will be recovered. A specific date certain for rate recovery is required under ASC 980 and GASB 62.
Defer Unrecovered Costs Using ASC 980 or GASB 62
Use accounting standards ASC 980 (for cooperatives and IOUs) or GASB 62 (for municipal utilities) to defer costs for recognition as they are collected in customer rates. This prevents your financial statements from absorbing a large one-time loss for costs that will be recovered over time.
Important: Those of you who have been through a major storm restoration before know the amount of work involved. The process is well established, but executing it correctly under pressure requires discipline. Starting the work order process immediately — even imperfectly — is far better than trying to reconstruct costs weeks later.
Learn the Full Storm Damage Accounting Approach
Our on-demand course on ASC 980 and GASB 62 covers storm damage accounting in detail — with journal entries, FEMA coordination, financial statement presentation, and NASBA CPE credit.
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Open storm work orders. Track all costs carefully. Allocate overhead. Claim insurance and FEMA. Classify assets vs. maintenance. Get Board approval for a rate recovery period. Defer unrecovered costs using ASC 980 or GASB 62 so your income statement doesn't take a hit for costs that customers will pay over time. Check out the full publication in the UARS Resource Library for many more examples and the detailed journal entry treatment.
About the Author
Russ Hissom, CPA is a principal of UtilityEducation.com , providing on-demand professional education classes in FERC, RUS, FASB, and GASB accounting, finance, ratemaking, artificial intelligence, and management for electric, gas, wastewater, and water utilities and electric cooperatives.
Contact Russ at [email protected]
The material in this article is for informational purposes only and should not be taken as legal or accounting advice provided b