WHY are you hearing this now?
The recent FERC ruling outlined the specific requirements for obtaining CapEx treatment when revitalizing towers.
FERC (Federal Energy Regulatory Commission) Update Enables Capitalization of T&D Coatings Initiatives
Formerly, utility companies could include replacement costs for transmission towers and poles in their capitalization, but corrosion control for these assets was excluded. A groundbreaking shift introduced by the Federal Energy Regulatory Commission now allows utility providers to categorize corrosion control programs (coating programs) for transmission structures as a “significant addition,” thereby enabling them to capitalize these expenses for accounting purposes. This alteration is poised to significantly impact the condition of the nation’s aging electric utility infrastructure.
On February 22, 2022, the Federal Energy Regulatory Commission (FERC) approved a utility company’s proposal to classify their tower coating programs as “substantial additions.” The order (1) clarifies, “The Commission has previously permitted utilities to consider the addition of minor property items that were previously absent as substantial additions and to capitalize the related costs when such costs extend the useful life, operational capacity, or efficiency of the associated retirement units.” Utility companies are now authorized to capitalize on the costs linked with corrosion control. This change aligns with generally accepted accounting principles (GAAP) and offers various financial advantages, including a more balanced assets-to-liabilities ratio and reduced income fluctuations.
In numerous instances, corrosion control solutions such as coatings have been repeatedly applied to structures, demonstrating anticipated performance and proven outcomes. Corrosion control coating programs, such as Induraguard 9200, possess the capacity to effectively prolong the service life of structures indefinitely.
As discussed in my previous blog, Canada faces many challenges in the protective coatings sector that directly affect many different companies. For example, Potash Corp is headquartered in the province of Saskatchewan. Potash mining is a serious venue in Saskatchewan and a lot of equipment is used in the extraction and processing of Potash. Corrosion along with erosion is prevalent in this industry, and the damage that can be done is extensive and expensive. Likewise, in the community of Trail, British Columbia, Teck Cominco smelters lead and zinc. This is another very corrosive environment that can see a concrete floor destroyed in a short period of time due to the acids used in processes. Continue reading Protective Coatings in Canada, Eh? (Part Two)