(1) Definition of terms of this rule.
    (a) Allowance for funds used during construction (AFDUC) is the carrying cost of funding an eligible utility project investment during its construction.
    (b) A project means a temporary endeavor with a defined beginning and end series of tasks that need to be completed in order to reach a specific outcome (e.g., a specific utility investment placed into service or devoted to public use for the provision of electric service), designed to produce an in-service plant investment result.
    (2) Construction work in progress (CWIP) or nuclear fuel in process (NFIP) not under a lease agreement that is not included in rate base may accrue AFUDC under the following conditions:
    (a) Eligible projects. The following projects may be included in CWIP or NFIP and accrue AFUDC:
    1. Projects that involve gross additions to plant in excess of 0.40 percent of the sum of the total balance in Account 101, Electric Plant in Service, and Account 106, Completed Construction not Classified, at the time the project commences and
    a. Are expected to be completed in excess of one year after commencement of construction, or
    b. Were originally expected to be completed in one year or less and are suspended for six months or more, or are not ready for service after one year.
    2. A utility may bundle related projects that achieve a specific outcome if it demonstrates that the total cost of the bundled projects excluding AFUDC is less than the total cost of the unbundled projects.
    (b) Ineligible projects. The following projects may be included in CWIP or NFIP, but may not accrue AFUDC:
    1. Projects, or portions thereof, that do not exceed the level of CWIP or NFIP included in rate base in the utility’s last rate case.
    2. Projects where gross additions to plant are less than 0.40 percent of the sum of the total balance in Account 101, Electric Plant in Service, and Account 106, Completed Construction not Classified, at the time the project commences.
    3. Projects expected to be completed in less than one year after commencement of construction.
    4. Property that has been classified as Property Held for Future Use.
    (c) Unless otherwise authorized by the Commission, the following projects may not be included in CWIP or NFIP, nor accrue AFUDC:
    1. Projects that are reimbursable by another party.
    2. Projects that have been cancelled.
    3. Purchases of assets which are ready for service when acquired.
    4. Portions of projects providing service during the construction period.
    (d) Other conditions. Accrual of AFUDC is subject to the following conditions:
    1. Accrual of AFUDC is not to be reversed when a project originally expected to be completed in excess of one year is completed in one year or less;
    2. AFUDC may not be accrued retroactively if a project expected to be completed in one year or less is subsequently suspended for six months, or is not ready for service after one year;
    3. When a project is completed and ready for service, it must be immediately transferred to the appropriate plant account(s) or Account 106, Completed Construction Not Classified, and may no longer accrue AFUDC;
    4. Where a work order covers the construction of more than one property unit, the AFUDC accrual must cease on the costs related to each unit when that unit reaches an in-service status;
    5. When the construction activities for an ongoing project are expected to be suspended for a period exceeding six months, the utility must notify the Commission of the suspension and the reason(s) for the suspension, and must submit a proposed accounting treatment for the suspended project; and
    6. When the construction activities for a suspended project are resumed, the previously accumulated costs of the project may not accrue AFUDC if such costs have been included in rate base for ratemaking purposes. However, the accrual of AFUDC may be resumed when the previously accumulated costs are no longer included in rate base for ratemaking purposes.
    (e) Subaccounts. Account 107, Construction Work in Progress, and Account 120.1, Nuclear Fuel in Process of Refinement, Conversion, Enrichment and Fabrication, must be subdivided so as to segregate the cost of construction projects that are eligible for AFUDC from the cost of construction projects that are ineligible for AFUDC.
    (f) Prior to the commencement of construction on a project, a utility may file a petition to seek approval to include an individual project in rate base that would otherwise qualify for AFUDC treatment per paragraph (2)(a).
    (g) On a prospective basis, the Commission, upon its own motion, may determine that the potential impact on rates may require the exclusion of an amount of CWIP from a utility’s rate base that does not qualify for AFUDC treatment per paragraph (2)(a) and to allow the utility to accrue AFUDC on that excluded amount.
    (3) The applicable AFUDC rate will be determined as follows:
    (a) The most recent 13-month average embedded cost of capital, except as noted below, must be derived using all sources of capital and adjusted using adjustments consistent with those used by the Commission in the utility’s last rate case.
    (b) The cost rates for the components in the capital structure will be the midpoint of the last allowed return on common equity, the most recent 13-month average cost of short term debt and customer deposits, and a zero cost rate for deferred taxes and all investment tax credits. The cost of long term debt and preferred stock will be based on end of period cost. The annual percentage rate must be calculated to two decimal places.
    (4) Discounted monthly AFUDC rate. A discounted monthly AFUDC rate, calculated to six decimal places, must be employed to ensure that the annual AFUDC charged does not exceed authorized levels.
    (a) The formula used to discount the annual AFUDC rate to reflect monthly compounding is as follows:
    M = [((1 + A/100)1/12)-1] x 100Where:
M