tion accounting entries for internal purposes the effect thereof shall be fully disclosed and explained. Any amounts not currently payable, except depreciation charged through clearing accounts, included in operation and maintenance expenses shall be fully explained.

Schedule H(1)-2, in respect of those companies having production plant or which are conducting exploration activities showing for the 12 months of actual experience, by month, and except for (e) below, for each of the previous four calendar or fiscal years the annual cost of:

(a) Delay rentals.

(b) Nonproductive well drilling. (c) Abandoned leases.

(d) Other exploration expenses.

(e) For the test year, overriding royalties, showing separately the annual amount and payee, only where payments are based on cents per Mcf as distinguished from a percentage of the value of the gas and only where payments exceed 3 cents per Mcf with total annual payments to a payee exceeding $50,000.

(f) Describe fully payments made under profit-sharing agreements relating to produced gas where the company is operator and net profits exceed $100,000 annually.

Schedule H(1)-3, showing the total annual cost of gas purchased for the 12 months of actual experience, the adjustments thereto, and the total adjusted cost for test period, with the data grouped by States and producing areas and detailed by contract or rate scheduled designation, field, volumes in Mcf at a common pressure base and price in total for the contracts or rate schedules under which actual or adjusted volumes exceed 1,000,000 Mcf annually. Field purchases under rate schedules where the actual or adjusted volumes are less than 1,000,000 Mcf annually may be grouped by field or producing area. Purchases from pipelines in any volume shall be shown in full detail by rate schedule including splits between demand and commodity charges.

In the event adjustments are made to the volumes of gas taken from any source during the 12 months of actual experience, a detailed explanation and data in support of the adjusted volumes shall be furnished. No adjustments are to be made to reflect the attachment of new gas supplies unless both the filing company and the supplier have each obtained the required permanent or temporary certificates of public convenience and necessity and the necessary facilities by both are or will have been in operation during the test period.

In the event the adjustments to volume aggregate more than 10 percent of the total volume of gas purchased during the 12 months of actual experience, and are due to change in gas purchase pattern or addition

al gas supply, the minimum take-or-pay-for quantities for each source of supply, applicable at the end of the test year period, and the reasons for making such adjustments shall be submitted.

If the company purchases and sells gas under exchange agreements, the method of recording on books, total gross volumes exchanged, net dollar amounts involved and details of each major exchange shall be submitted.

Schedule H(1)-4, to be a part of the working papers with respect to the following listed expense accounts, there shall be furnished in supporting schedules as designated, for the 12 months of actual experience and claimed adjustments, analytical details which will clearly disclose for each account: A classification of principal charges and credits (all minor items may be grouped); particulars of supporting computations and accounting bases; a description of services and related dollar amounts for which liability is incurred or accrued and name of the firm or individual rendering such services:

Schedule H(1)-4a. Account 913-Advertising expenses (analysis need only disclose principal types of advertising such as TV, newspaper, etc.).

Schedule H(1)-4b. Account 922-Administrative expenses transferred Credit.

Schedule H(1)-4c. Account 923-Outside services employed.

Schedule H(1)-4d. Account 926-Employee pensions and benefits (insofar as this account included items other than pensions).

Schedule H(1)-4e. Account 928-Regulatory commission expenses.

Schedule H(1)-4f. Account 929-Duplicate charges-Credit.

Schedule H(1)-4g. Account 930.2-Miscellaneous general expenses.

Schedule H(1)-4h. Intercompany and interdepartmental transactions. If the expense accounts contain charges of credits from associated companies or nonutility departments of the company submit a schedule, or schedules, as to each such associated company or nonutility department showing:

(a) The amount of the charges, or credits, during each month and in total for the test year.

(b) The FPC account classification or classifications charged (or credited).

(c) Descriptions of the specific services performed for, or by, the associated company or nonutility department.

(d) Complete particulars as to the bases used in determining the amounts of the charges (credits).

Statement H(2)-Depreciation, depletion, and amortization expense. This statement shall show separately the gas plant depreciation, depletion, and amortization expense by functional classifications. These expenses shall be shown in separate columns

as follows: (a) Expenses for the 12 months of actual experience, (b) adjustments, if any, to such expense, and (c) the total adjusted expense claimed. The bases, methods, essential computations and derivation of unit rates for the calculation of depreciation, depletion and amortization expense for the 12 months of actual experience and for the adjustments thereto, if any, shall be fully and clearly explained. The amounts of depreciable plant shall be shown by the functions specified in Paragraph C of Account 108, Accumulated Provisions for Depreciation of Gas Utility Plant of the Commission's Uniform System of Accounts for Natural Gas Companies, and, if available, for each detailed plant account (300 Series) together with the rates used in computing such expenses. Any deviation from the rates used in disposing of the applicant's last previous rate filing or determination by the Commission shall be explained, showing the rate or rates previously used together with supporting data for the new rate or rates used for this filing.

The following schedule and additional material shall be submitted as a part of Statement H(2):

Schedule H(2)-1. There shall be included in support of Statement H(2) a reconciliation of the depreciable plant shown therein with the aggregate investment in gas plant shown in Statement C, and the expense thereon charged in the first instance to other than prescribed depreciation, depletion and amortization expense accounts.

Statement H(3)—Income taxes. This statement shall show the computation of allowances for federal and state income taxes for the test period based on the claimed return applied to the overall gas utility rate base. To indicate the accounting classification applicable to the amount claimed, the computation of the federal income tax allowance shall show separately the amounts designated as current tax and deferred tax.

The following schedules and additional material shall be submitted as a part of Statement H(3):

Schedule H(3)-1, to be part of the working papers, in support of federal income taxes the company shall submit a complete reconciliation of the book net income with taxable net income as reported to the Federal Internal Revenue Service for the most recent year for which a tax return was filed and the three previous years. A complete explanation of all items in the reconciliations shall be submitted. In the event the tax allowances claimed give effect to omission of items appearing in the reconciliation for the most recent tax return or inclusion of items not appearing therein, the reasons for such omissions or inclusions shall be submitted.

Schedule H(3)-2, to be a part of the working papers, where tax depreciation differs from book depreciation, the company shall file a schedule showing the computation of the tax depreciation which will indicate (a) differences between book and tax depreciation on a straight-line basis; and (b) the excess of liberalized depreciation and amortization of emergency facilities over straight-line depreciation for tax purposes for the taxable year or years.

Schedule H(3)-3, to be a part of the working papers, if the company joins in the filing of a consolidated federal income tax return there shall be submitted a schedule showing the net taxable income or loss for each company in the consolidation, including an adjustment to effect the exclusion of the excess of liberalized depreciation and amortization of emergency facilities over straight-line depreciation for each company involved. There shall also be submitted with the statement of taxable net income or tax loss of each individual company participating in the consolidated returns, the details of consolidating adjustments, and a computation of the system tax liability based on the consolidated net income for the last tax year ending within the test period, or immediately prior thereto, for which a tax return was filed. In addition, there shall be included a computation showing the percentage of tax savings arising from consolidation for the taxable year or years covered by the test period.

Schedule H(3)-4, to be a part of the working papers, if the company claims an allowance for current tax in its cost of service which would be greater than the federal income tax which would actually be payable on the basis of the return allowed in cost of service, full disclosure thereof shall be made, including the allocation among utility and nonutility departments of the tax payable.

Schedule H(3)-5, to be a part of the working papers, in support of the claimed allowances for income taxes paid State governments, the company shall submit a schedule showing the income tax paid each State in the current or previous year covered by the test period including the effect of liberalized depreciation on such taxes paid.

Schedule H(3)-6—Accumulated deferred income taxes. This statement shall show monthly book balances of accumulated deferred income taxes for each of the 12 months during the base period. In adjoining columns there shall be shown additions and reductions for the nine months subsequent to the base period balance and the total adjusted balance.

Schedule H(4)-Other taxes. This statement shall show the gas utility taxes, other than federal or state income taxes in sepa

rate columns, as follows: (a) Tax expense per books for the 12 months of actual experience, (b) adjustments, if any, to amounts booked, and (c) the total adjusted taxes claimed. The taxes shall be shown by states and by kind of taxes.

The following schedules and additional material shall be submitted as a part of Statement H(4):

Schedule H(4)-1, to be a part of the working papers, showing each kind and amount of gas utility taxes paid in each state. All adjustments shall be fully and clearly explained.

Schedule H(4)-2, to be a part of the working papers, shall be submitted showing computations of adjusted taxes claimed in Statement H(4).

Statement I—Allocation of overall cost of service. This statement shall show with respect to overall cost of service (Statement A); (a) Grouping and allocation of various items of cost and credits to cost of service into functional totals; (b) Classification of items of cost and credits into demand, commodity, customer or other appropriate categories; and (c) Allocation among jurisdictional and nonjurisdictional sales and service, including allocation factors used and data used in computing such allocation factors.

The following schedules and additional material shall be submitted as part of Statement I:

Schedule I-1. Particulars of allocating general or common (joint) costs to various functions.

Schedule I-2. Sufficient detailed breakdown or operation and maintenance expense accounts and taxes to disclose how component items (e.g., compressor station fuel, purchased gas, taxes other than income taxes) have been classified among demand, commodity, customer or other category of cost.

Schedule 1-3. If the revenues from field or gathering system sales are not credited to the cost of service, then a separation of costs applicable to field or gathering system sales from costs applicable to sales from the transmission system shall be made. If such revenues are credited to the cost of service, a statement with respect thereto should be made, together with the reasons therefor.

Schedule I-4. Details on the cost of compression and transportation of gas by others setting forth the name of the transporter and the basis of payment for such service. Schedule I-5. If utilized by applicant in its cost allocation, there shall be furnished, with respect to the various classes of service, the total number of metering points and the number of metering units grouped on the basis of the occurrence of meter reading (such as 24-hour, 7-day, 30-day, etc.)

Schedule 1-6. Deliveries to the jurisdictional and nonjurisdictional customers on three continuous days of maximum transmission system deliveries during the winter heating season within the 12 months of actual experience, classified as between firm, interruptible, exchange, transportation, gasoline plants, emergency, etc. If the 12 months of actual experience represent a calendar year these data shall be submitted for the winter heating seasons beginning immediately prior to such year and at the end of such year to the extent practicable. The deliveries made from field or gathering systems shall be reported for the same three continuous days as maximum transmission system deliveries. Full particulars and justification shall be furnished of any claimed adjustment to the actual experience of the peak periods used. The deliveries on each of the three days should be submitted together with withdrawals from storage, line-pack fluctuations and temperature. If abnormal amount is supplied from line-pack, the company shall supply the second and third highest three-day peaks, giving the same information on line-pack.

Schedule I-7 showing by months, and total thereof, for the 12 months of actual experience, the company's Gas Account, in the form required by the Commission's Annual Report Form No. 2 page 567. In addition, there shall be shown corresponding estimated data, if claimed to be different from actual experience.

Statement J-Allocation of cost of service by zones. If the rates on file are zoned, or if it is proposed to establish zone rates, the cost of service for the test period shall be further allocated to the existing or proposed rate zones. A detailed description of methods and procedures used to allocate cost to zones shall be given. Where zones are sought to be established for the first time, the reasons for this establishment and for the zone boundaries selected shall be set forth.

The following schedules and additional material shall be submitted as a part of Statement J.

Schedule J-1, if the system rates are zoned or are to be zoned, the company shall furnish an allocation of system costs. If during the last five years a Commission decision was issued relating to the subject concerning the company, and the company's allocation does not follow such decision, then, in addition, the company shall also furnish in working papers a study and a classification of costs adhering to such decision.

Schedule J-2, to be a part of the working papers, if the company's zone costs are determined as provided in Schedule J-1, but the zone rate differentials depart from those resulting from the allocated unit zone costs, the company shall furnish in this

schedule the development of the zone rate differentials proposed.

Statement K-Comparison of estimated revenues with cost of service. This statement shall consist of a comparison of the total jurisdictional revenues with the allocated cost of service for the test period. Where zone rates are in existence or are proposed, this statement shall also include a comparison of revenues and costs by zones. The following schedule and additional materials shall be submitted as a part of Statement K:

Schedule K-1 showing the derivation of each of the increased rates shall be submitted. If the increased rates are predicated on costs as classified and allocated, all calculations involved in derivation of the rates shall be shown. If in computing the increased rates, weight is given in whole or in part to value of service, competition, historical revenue pattern, etc., a full and complete explanation and justification therefor shall be included.

Statement L-Balance Sheet. A balance sheet in the form prescribed by the Commission's Uniform System of Accounts for Natural Gas Companies as of the beginning and end of the 12 consecutive months of the actual experience utilized for the test period, including therein the notes, if any, applicable to the balance sheet; similarly, a balance sheet on a consolidated basis if the natural gas company is a member of a system group of companies.

Statement M-Income statement. An income statement, including a section on earned surplus in the form prescribed by the Commission's Uniform System of Accounts for Natural Gas Companies for the 12 consecutive months of actual experience utilized for the test period, including therein the notes, if any, applicable to the income statement; similarly, an income statement on a consolidated basis if the natural gas company is a member of a system group of companies.

Statement N-Cost determinants for minor changes in rate level. This group of schedules shall contain the principal determinants essential to test the reasonableness of the proposed rate or charge. Any adjustments to book figures shall be separately stated and the basis for the adjustment shall be explained. The following shall be submitted for the test period:

Schedule N-1. Cost of plant by functional classification as of the beginning and as of the end of the test period.

Schedule N-2. Accumulated provisions for depreciation, depletion, amortization, and abandonment by functional classifications as of the beginning and as of the end of the test period.

Schedule N-3. Working capital, setting forth the various components provided for

in Statement E. Instead of 13 monthly balances, however, the average may be based on beginning and ending balances for the test period.

Schedule N-4. Rate of return claimed with a brief statement of the basis therefor. Schedule N-5. Operation and maintenance expenses by functional classifications. Schedule N-6. Depreciation, depletion, and amortization expense by functional classifications.

Schedule N-7. Income tax allowances computed on the basis of the rate of return claimed.

Schedule N-8. Other taxes.

Schedule N-9. Cost of service allocated to the sales or services for which the increase in rate, or charge is proposed, including the principal determinants used for allocation purposes.

Schedule N-10. Comparison of cost of service with revenues under proposed rates for the test period.

Schedule N-11. A complete description of amounts, by venture, recorded in Account 188, Research, development, and demonstration expenditures, as of the beginning and end of the test period, increased or reduced, as appropriate, by the applicable accumulated deferred income taxes. This schedule shall also include all related amortization for the same period.

When this group of schedules is filed by a Class A company pursuant to § 154.63(b)(3) and the beginning of the 12 consecutive months of the most recently available actual experience is more than one month beyond the 12 months of actual data used in the prior rate increase filing, the natural gas company shall also report separately for the intervening period actual data comparable to that required by Schedules N-1, N-2, N-5, N-6, and N-8, above, and total sales volumes and revenues for such period broken down between jurisdictional and nonjurisdictional sales.

Statement O-Description of Company Operations. A description of the company's area and diversity of operations including the following:

(1) A detailed system map.

(2) A complete rate history showing filing and rate levels since the beginning of the company with a brief description of each filing.

(3) A detailed history of each major expansion, (new service) and major abandonment certificate filing for the last 5 years of the company along with a brief description of each filing.

(4) A digest of contractual provisions with individual producer suppliers who deliver in excess of 1 Bcf annually relative to volumes (minimum and maximum obligations) and term, by contract. Digest should include estimated peak day deliverability for reserves

dedicated under each contract as well as contemplated "swings" between sources of supply.

(5) A detailed description of how the company designs and operates its systems, including design temperature or temperatures and the effect of conjunctive billing on design consideration.

Statement P-Explanatory text and prepared testimony. This statement shall contain copies of proposed testimony indicating the line of proof which the company would offer for its case-in-chief in the event the rates should be suspended and the matter set for hearing.

Statement Q-Price stabilization exhibit.

(a) All applications for rate increases shall be accompanied by a special Price Stabilization Exhibit. This exhibit shall contain by cross reference or otherwise all of the necessary information by the applicant to demonstrate that the applicant's filing is in compliance with the intent and purposes of the Economic Stabilization Act of 1970, as amended, Executive Orders Nos. 11615, 11627, 11640, and with the criteria as hereinafter set out in (b), except as provided in (c), (d), (e), and (f).

(b) These criteria are as follows:

(1) The increase is cost justified and does not reflect future inflationary expectations.

(2) The increase is the minimum required to assure continued, adequate, and safe service or to provide for necessary expansion to meet future requirements.

(3) The increase will achieve the minimum rate of return needed to attract capital at reasonable costs and will not impair the credit of the applicant.

(4) The increase does not reflect labor cost increases in excess of 5.5 percent per annum, unless the increase is required by a contract which becomes binding before November 8, 1972, or unless not allowing the excess cost would work an undue hardship on the employer.

(c) Whenever an applicant is of the opinion that a requested increase is in conformity with the Economic Stabilization Program even though any or all of the criteria in (b) are not met, the exhibit shall:

(1) Set forth the criteria in (b) to the extent possible;

(2) Contain a statement by the applicant justifying its position that the requested increase is in conformity with the goals of the Economic Stabilization Program.

(d) Justification for price increases in conformity with the above criteria shall not be required for price increases resulting from the pass-through of special allowable costs including taxes (except income tax), purchased gas costs, and fuel cost. However, the criteria shall apply to labor cost unless otherwise specified by this Commission.

(e) The requirements for this exhibit shall not apply to any applicant's price increase where the rate base-cost of service criteria are not the basis for assessing a price increase under the terms of the Natural Gas Act and the rules, regulations, and orders promulgated thereunder.

(f) Under existing Commission regulations and applicable law, rate increases for producers of natural gas are determined on an area basis utilizing, inter alia, composite cost data after investigation and study of the various gas producing areas. This practice established by Area Rate Proceeding, Docket No. AR 61-1, et al. Opinion No. 468, 34 FPC 159 (1965), and affirmed by the Supreme Court in Permian Basin Area Rate Cases, 390 U.S. 747 (1968). Small producers will not be required to file the exhibit since they are regulated under Order No. 428 (36 FR 5598, March 25, 1971) and its amendments and will be monitored for Price Stabilization purposes by using reports submitted pursuant to Order No. 428 as amended and section 154.104 of the Commission's Regulations Under the Natural Gas Act which requires filing of annual statements. Moreover, area maximum rates determined in conformity with the Natural Gas Act and intended to balance all interests are constitutionally permissible according to the U.S. Supreme Court. Ibid. Since the Commission will take into consideration the relationship between establishing an area ceiling and national economic stabilization goals in setting area rates, and because of the Price Commission Regulations, § 300.16(d)(5), the requirements for filing the Price Stabilization Exhibit shall not apply to producers of natural gas. Staff shall develop Price Stabilization data on a composite basis in all area cases commenced on or before June 1, 1972. [Order 254, 27 FR 9502, Sept. 26, 1962; 27 FR 10157, Oct. 17, 1962, as amended by Order 304, 30 FR 12069, Sept. 22, 1965; Order 410, 35 FR. 15910, Oct. 9, 1970; Order 436, 36 FR 15530, Aug. 17, 1971; Order 451A, 37 FR 12064, June 17, 1972; Order 465, 38 FR 1388, Jan. 12, 1973; Order 483, 38 FR 12116, May 9, 1973; Order 488, 38 FR 20068, July 27, 1973; Order 490, 38 FR 23334, Aug. 29, 1973; Order 499, 39 FR 1265, Jan. 7, 1974; Order 488, 39 FR 5312, Feb. 12, 1974; Order 535, 40 FR 43892, Sept. 24, 1975; 41 FR 10424, Mar. 11, 1976; Order 549, 41 FR 24995, June 22, 1976; Order 566, 42 FR 30159, June 13, 1977; Order 567, 42 FR 30615, June 16, 1977]

§ 154.64 Cancellation or termination.

When a filed tariff, contract or part thereof is proposed to be canceled or is to terminate by its own terms and no new tariff, executed service agreement