Part 2: Capital Expenditures and the FERC Module

Continuing our look at the FERC module, let's walk through a hypothetical example of the process it uses to settle capital expenditures.

Suppose we have only one capital order for the month. It has $1M of cost in the order prior to settlement. The trace will see the $1M in the order, check that the regulatory indicator is 'CAPT', and use the rule in the trace translation table to convert the $1M to the Holding Account. And there it will sit waiting for a credit. Since the FERC module cannot capitalize costs, it must park this amount somewhere until the CO module (the only SAP module that can capitalize orders) settles the $1M and sends a credit (via the direct post) to the Holding Account. The Holding Account will have a zero balance if the following occurs for this one order:

1. The order has an order type designed for capitalizing costs.


2. The order has the regulatory indicator 'CAPT'.


3. The order has a settlement rule sending 100% of the order costs to CIP or PIS on the balance sheet.


4. The order settles in the same month the charges were originally posted to the order.


5. No back-dated charges to the order occurred after the initial settlement (this can be assured by closing the prior period).

If these five conditions above are met, the Holding Account will be zero for the month in our example. But what if it's not? Stay tuned for Part 3.