Question:

What is the proper period for capitalization of interest during construction?

Answer:

Interest during construction may be capitalized starting from the date that construction costs are continuously incurred on a planned progressive basis. Interest should not be accrued for the period prior to: (1) the date of issuance of the preliminary permit by the Commission of a licensed hydroelectric project; and (2) the date of the application to the Commission for a certificate to construct facilities by a natural gas company. Interest accruals may be allowed by the Commission for the period prior to the above dates if so justified by the company. No interest should be accrued during period of interrupted construction unless the company can justify the interruption as being reasonable under the circumstances.

Capitalization of interest stops when the facilities have been tested and are placed in or ready for service. This would include those portions of construction projects completed and put into service although the project is not fully completed. Should the test period exceed thirty days, the company must submit full particulars and justification for an extension of such period to the Commission in accordance with Plant Instruction 9.D.