Customs and Revenue Agency (GLYPH<210>CCRAGLYPH<211>) in 2000, that confirmed the deductibility of general expenses capitalized (GLYPH<210>GECGLYPH<211>), Newfoundland Power received a refund related to GEC for the 1994 through 1998 taxation years. This refund contributed to the excess earnings of $0.9 million in 2001. This amount has been set aside in an Excess Revenue Account and will be accounted for as ordered by the PUB. 

Maritime Electric operates under the provisions of the Maritime Electric Company Limited Regulation Act (1994) (GLYPH<210>Regulation ActGLYPH<211>), which governs the rates charged for electricity and ancillary services. Base rates charged to customers are set at 110% of rates charged by New Brunswick Power Corporation for comparable services in New Brunswick. Adjustments to base rates (commencing April 1, 2002), as a result of legislative changes to the Regulation Act, will enable Maritime Electric to recover from/return to customers 90% of energy-related costs above/below $0.05 per kilowatt hour (GLYPH<210>kWhGLYPH<211>). In 2001, 90% of energy costs above $0.05 per kWh totalled $13.2 million. This amount will be collected from customers over a twelve-month period commencing on April 1, 2002. The Regulation Act further stipulates that Maritime Electric will be allowed to recover from/return to customers a Cost of Capital Adjustment based on an 11% target return on average common equity. The total amount of the Cost of Capital Adjustment to be rebated commencing on April 1, 2002 is $0.2 million. Monies collected through a 4.53% rate increase implemented on January 1, 2001, amounting to $3.7 million, are being set aside to be returned to customers through an offset to recoverable energy costs over a twelve- month period commencing on April 1, 2002. On April 1, 2002, the 4.53% rate increase implemented on January 1, 2001 will be eliminated. The Regulation Act also includes service reliability and capital require- ments related to the power system on Prince Edward Island. At December 31, 2001, Maritime Electric was not in compliance with the required minimum equity component of its capital requirement. 

FortisUS Energy operates under a license from the U.S. Federal Energy Regulatory Commission. 

Belize Electricity operates under the Electricity Act (Belize) and is monitored by the Public Utilities Commission of Belize (GLYPH<210>PUCGLYPH<211>). 

BECOL operates under a Franchise Agreement with the Government of Belize and a Power Purchase Agreement between the Government of Belize and Belize Electricity. 

Canadian Niagara Power operates under the Electricity Act (Ontario). 

The timing of the recognition of certain assets, liabilities, revenues and expenses as a result of regulation may differ from that otherwise expected using Canadian generally accepted accounting principles for non-regulated entities. 

## Revenue 

Revenue from the sale of electricity by Newfoundland Power and Belize Electricity is recognized on billings rendered monthly, on a cyclical basis, to customers. Revenue from the sale of electricity by Maritime Electric, FortisUS Energy, BECOL and Canadian Niagara Power is recognized on the accrual basis. 

## Utilities’ Capital Assets 

Capital assets of Newfoundland Power are stated at values approved by the PUB as at June 30, 1966 with subsequent additions at cost. Capital assets of all other utilities are stated at cost. The cost of capital assets retired, less net salvage, is charged to accumulated amortization. 

Maintenance and repairs are charged against revenue, while renewals and betterments are capitalized. 

## Amortization 

Amortization is provided on a straight-line method based on the estimated service life of capital assets. 

Amortization rates range from 2.1% to 9.3%. The composite rate of amortization before reduction for amortization of contributions in aid of construction is 3.6% (2000 - 3.7%). 

## Interest Charged to Construction 

On certain construction projects interest is capitalized and included as a cost in the appropriate capital assets account until the asset is avail- able for service. 

## Contributions in Aid of Construction 

Contributions represent the cost of property, plant and equipment contributed by customers and governments. These accounts are being reduced annually by an amount equal to the charge for amorti- zation provided on the related assets. 

## Weather Normalization Account 

The PUB has ordered provision of a Weather Normalization Account for Newfoundland Power to adjust for the effect of variations in weather and streamflow when compared to long-term averages. The balance in the Weather Normalization Account is subject to annual approval by the PUB. 

## Cost of Power Rate Stabilization Adjustment 

Effective January 1, 2000, Belize Electricity and the PUC established a Cost of Power Rate Stabilization Account (GLYPH<210>CPRSAGLYPH<211>). Through the CPRSA, Belize Electricity is allowed to recover excess energy costs over an established benchmark. These amounts are recovered as a surcharge on basic rates over a four-year period. 

## Materials and Supplies 

Materials and supplies are recorded at average cost. 

## Deferred Charges 

Deferred charges are amortized as follows: 

Debt discount and expenses - over the life of each issue. 

Capital stock issue expenses - over a twenty-year period from date of issue at Newfoundland Power except for retractable preference shares which are amortized over the retraction period. 

Capital charge - Point Lepreau - over the remaining useful life of the Point Lepreau Nuclear Generating Station. 

## Income Taxes 

The Corporation and its subsidiaries, except Newfoundland Power, follow the asset and liability method of accounting for income taxes. Under this method, future income tax assets and liabilities are recog- nized for differences between the tax and accounting bases of assets and liabilities as well as for the benefit of losses available to be carried forward to future years for tax purposes that are likely to be realized and are measured using the enacted and substantively enacted tax rates and laws that will be in effect when the differences are expected to be recovered or settled. The effect of a change in income tax rates on future income tax assets and liabilities is recognized in income in the period that the change occurs. Current income tax expense is recognized for the estimated income taxes payable in the current year. 

