EEI has been participating in discussion with FASB concerning the application 
of SFAS 133 and 138 to utility power purchase agreements where power is 
obtained to serve load obligations, as opposed to power marketing.  EEI's 
position is that such contracts should be treated under the  normal purchase 
and normal sale contracts exception under SFAS 138, for which derivatives 
accounting treatment would not apply.   Occaisonally a utility may agree to 
bookout certain transactions.  EEI's position is that a bookout is not a net 
settlement of the underlying purchase and sale contract because every party 
must fulfill each and every contractual transaction.  EEI also has maintains 
that even if there is a bookout title passes under the terms of the 
underlying contract.  See attached letter to FASB.

FASB has asked for additional information on the bookout issue.  In 
particular, it wants more information on the passing of title between 
entities in a bookout chain; what are the legal requirements for title to 
pass to another entity in a bookout chain?

FASB also wants to know whether under bookouts are cash payments always 
settled gross with each company paying the total contract price for the 
purchase involved and receiving the total contract price for its sale or are 
there exceptions in normal practice?  I assume settlment in gross does not 
occur in the case of a buyer and seller in the chain whose underlying 
contract(s) provide for payment and/or transaction netting.

The close of the comment period is on Friday, so we are trying to get a 
letter back to FASB asap.   I would appreciate it if anyone in our group 
could comment on the questions FASB asks and/or the letter we previously sent 
to FASB.  Thanks in advance.

Andrew S. Katz, Director Industry Legal Affairs
Edison Electric Institute
701 Pennsylvania Avenue, N.W.
Washington, D.C.  20004
Voice:  202-508-5616
Fax:     202-508-5673
e-mail:  akatz@eei.org
 - TEXT.htm
 - FASB 133 Bookouts.pdf
 - Andy Katz.vcf