1. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 Implementing the Chart of Accounts and Reporting Requirements by the Companies Svetla Todorova, Commissioner State Energy and Water Regulatory Commission, Bulgaria stodorova@dker.bg www.dker.bg

2. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 2 Company Financial Accounting Accountancy Law Accountancy Standards Role of Accounting System = Information Regulator Internalpurposes Externalpurposes GovernmentInvestorsClientsSociety….. ManagementAccounting Management Accounting RegulatoryAccounting Regulatory Accounting

3. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 3 Why Regulatory Accounting? Accountancy Law entitles companies to use Individual Chart of Accounts Accountancy Law entitles companies to use Individual Chart of Accounts EU Directive oblige regulated undertakings to keep separate accounts with a view to avoid discrimination, cross subsidization and distortion of competition. EU Directive oblige regulated undertakings to keep separate accounts with a view to avoid discrimination, cross subsidization and distortion of competition. National legislation usually requires some kind of separate accounting National legislation usually requires some kind of separate accounting Formal reasons

4. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 4 In the Bulgarian case: In the Bulgarian case: Energy companies must keep separate accounts for: Energy companies must keep separate accounts for: Each regulated activity Each regulated activity Regulated and non-regulated activities Regulated and non-regulated activities Each branch or company Each branch or company Activities with regulated and non-regulated prices. Activities with regulated and non-regulated prices. The rules for keeping separate accounts are set with a decision of the Commission The rules for keeping separate accounts are set with a decision of the Commission. Why Regulatory Accounting? cont. Formal reasons

5. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 5 Why Regulatory Accounting? A tool for performing regulatory obligations, such as: MonitoringBenchmarking Price setting through mandatory reporting Informal reasons Financial position Economic criteria Comparable data Cost allocation Need of standardized accounting approach = Uniformity

6. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 6 Two Options for the Regulator ManagementAccounting Management Accounting RegulatoryAccounting Regulatory Accounting Financial Accounting

7. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 7 Requirements and Present Stage Uniform System of Accounts (USoA) for regulatory purposes for all electricity sectors is required by the Law. Uniform System of Accounts (USoA) for regulatory purposes for all electricity sectors is required by the Law. USoA currently adopted by the Commission and implemented only for EDCs. USoA currently adopted by the Commission and implemented only for EDCs. USoA for the generators - ? about the necessity USoA for the generators - ? about the necessity USoA for transmission – drafted and submitted for approval. USoA for transmission – drafted and submitted for approval. Bulgarian Case

8. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 8 Uniform Chart of Accounts Uniform Chart of Accounts Directions to Uniform Chart of Accounts Directions to Uniform Chart of Accounts Balance Sheet for regulatory purposes Balance Sheet for regulatory purposes Profit and loss statement for regulatory purposes Profit and loss statement for regulatory purposes Appendixes (e.g. T-schemes) Appendixes (e.g. T-schemes) “АВС” model (Activity Based Calculation) for prime costs calculations of commodity and services “АВС” model (Activity Based Calculation) for prime costs calculations of commodity and services Uniform System of Accounts Elements Bulgarian Case

9. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 9 Principles Completeness - To provide consistent information to the Regulator, including a possibility for automatic data transfer from USoA to the Reporting Forms for pricing purposes Completeness - To provide consistent information to the Regulator, including a possibility for automatic data transfer from USoA to the Reporting Forms for pricing purposes Flexibility - Applicable for other main company needs (taxation, management, etc.) Flexibility - Applicable for other main company needs (taxation, management, etc.) Continuity - In accordance with the existing practice in EDCs Continuity - In accordance with the existing practice in EDCs Legitimate - In accordance with the Sample National Chart of Accounts and International Accounting Standards Legitimate - In accordance with the Sample National Chart of Accounts and International Accounting Standards Cost Allocation Uniformity - Unified cost allocation factors Cost Allocation Uniformity - Unified cost allocation factors Transparency - Developed jointly by the Regulator, companies and consultants Transparency - Developed jointly by the Regulator, companies and consultants Bulgarian Case

10. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 10 Reporting Requirements All regulated utilities are required to file annually: All regulated utilities are required to file annually: Company financial report (pursuant to the Accountancy Law) and audit report Company financial report (pursuant to the Accountancy Law) and audit report Reported information broken down in activities Reported information broken down in activities Industry specific forms Industry specific forms Economic Analyses Division revises and writes a report Economic Analyses Division revises and writes a report Bulgarian Case

11. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 11 Reporting Information from USoA Bulgarian Case Operating Results Total Operating Revenues General Business Revenues Other Operating Income Transfers between services Operation and Maintenance Total Operating Expenses Depreciation Purchased Power Transmission Distribution Supply Administrative and General Return on Rate Base Return on Equity

12. ERRA Workshop on Regulatory Monitoring of Electricity Sector Almaty, Kazakhstan, January 31 – February 2, 2006 12 Reporting Information from USoA Assets Revaluation Investment Plan (Forecast versus Actual) Decommissioning Plan Bulgarian Case Regulatory Assets Purchases Losses Retail Sales