California remand case: controversy over normalization
In 1969 Congress began to specify the method which state public utility commissions should apply in dealing with the accelerated depreciation tax break. Later Congress also applied method control to the investment tax credit in rate making. The congressional policy of long standing is to safeguard the financial integrity of public utility companies by way of amendments to the Internal Revenue Code. Pursuant to this policy, Congress has required normalization of accelerated tax depreciation and ratable flow through of investment tax credits in public utility rate making. The California Public Utilities Commission has made an issue of alleged Federal intrusion into local public utility rate-making policy through composition of Federal tax laws. The commission's preference is to flow all tax breaks through to public utility customers immediately in the form of reduced rates for service. Clashing Federal and California regulatory philosophies are in a tug-of-war over the right to determine accounting procedures for accelerated depreciation and the investment tax credit in rate making for Pacific Telephone and Telegraph Company and General Telephone and Electronics Corporation. This article relates essentially to PT and T with occasional references to GTE. Normalizing accounting procedures and the California versions of normalization are reviewed. The article reviews briefly the permanent versus temporary tax savings controversy relative to accelerated depreciation, to tell the unfolding story of the California remand case, to indicate the potential consequences of unsuccessful brinkmanship, and to consider the implications for public utilities if California prevails in the matter of the policy issues discussed. Some $2 billion of potential tax liabilities, refunds to customers, and rate reductions are at stake.
- Research Organization:
- Univ. of Nevada, Reno
- OSTI ID:
- 5743834
- Journal Information:
- Public Util. Fortn.; (United States), Journal Name: Public Util. Fortn.; (United States) Vol. 104:13; ISSN PUFNA
- Country of Publication:
- United States
- Language:
- English
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