Sec. 32.1220  Inventories.

    (a) This account shall include the cost of materials and supplies 
held in stock and inventories of goods held for resale or lease. The 
investment in inventories shall be maintained in the following 
subaccounts:

1220.1 Material and supplies
1220.2 Property held for sale or lease

    (b) These subaccounts shall not include items which are related to a 
nonregulated activity unless that activity involves joint or common use 
of assets and resources in the provision of regulated and nonregulated 
products and services.
    (c) 1220.1 Material and supplies. This subaccount shall include cost 
of material and supplies held in stock including plant supplies, motor 
vehicles supplies, tools, fuel, other supplies and material and articles 
of the company in process of manufacture for supply stock. (Note also 
Sec. 32.2000(c)(2)(iii) of this subpart.)
    (d) Transportation charges and sales and use taxes, so far as 
practicable, shall be included as a part of the cost of the particular 
material to which they relate. Transportation and sales and use taxes 
which are not included as part of the cost of particular material shall 
be equitably apportioned among the detail accounts to which material is 
charged.
    (e) So far as practicable, cash and other discount on material shall 
be deducted in determining cost of the particular material to which they 
relate or credited to the account to which the material is charged. When 
such deduction is not practicable, discounts shall be equitably 
apportioned among the detail accounts to which material is charged.
    (f) Material recovered in connection with construction, maintenance 
or retirement of property shall be charged to this account as follows:
    (1) Reusable items that, when installed or in service, were 
retirement units shall be included in this account at the original cost, 
estimated if not known. (Note also Sec. 32.2000(d)(3) of this subpart.)
    (2) Reusable minor items that, when installed or in service, were 
not retirement units shall be included in this account at current prices 
new.
    (3) The cost of repairing reusable material shall be charged to the 
appropriate account in the Plant Specific Operations Expense accounts.
    (4) Scrap and nonusable material included in this account shall be 
carried at the estimated amount which will be received therefor. The 
difference between the amounts realized for scrap and nonusable material 
sold and the amounts at which it is carried in this account, so far as 
practicable, shall be adjusted in the accounts credited when the 
material was taken up in this account.
    (g) Interest paid on material bills, the payments of which are 
delayed, shall be charged to Account 7540, Other interest deductions.
    (h) Inventories of material and supplies shall be taken during each 
calendar year and the adjustments to this account shall be charged or 
credited to Account 6512, Provisioning expense.
    (i) 1220.2  Property held for sale or lease. This subaccount shall 
include the cost of all items purchased for resale or lease. The cost 
shall include applicable transportation charges, sales

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and use taxes, and cash and other purchase discounts. Inventory shortage 
and overage shall be charged and credited, respectively, to Account 
5280, Nonregulated operating revenue.
[ 52 FR 39534 , Oct. 22, 1987, as amended at  53 FR 49322 , Dec. 7, 1988]