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PENNSYLVANIA ELECTRIC COMPANY v. PENNSYLVANIA PUBLIC UTILITY COMMISSION (07/23/80)

decided: July 23, 1980.

PENNSYLVANIA ELECTRIC COMPANY, PETITIONER
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION, RESPONDENT



Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission v. Pennsylvania Electric Company, Docket No. R-78040599.

COUNSEL

Samuel B. Russell, with him W. Edwin Ogden, Ryan, Russell & McConaghy, for petitioner.

Gregg C. Sayre, Assistant Counsel, with him Steven A. McClaren, Deputy Chief Counsel and George M. Kashi, Chief Counsel, for respondent.

Craig R. Burgraff, Assistant Consumer Advocate, for Office of Consumer Advocate.

President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Mencer, Blatt, Craig and MacPhail. Judges Rogers and Williams, Jr. did not participate. Opinion by Judge Crumlish, Jr. President Judge Bowman did not participate in the decision in this case.

Author: Crumlish

[ 53 Pa. Commw. Page 187]

Pennsylvania Electric Company (Penelec) has filed a petition for review of a final rate order entered by the Public Utility Commission (PUC). We affirm.

On April 28, 1978, Penelec filed a tariff with the PUC which provided for a general increase in its retail electric base rates based upon data projected for a "future test year"*fn1 to end December 31, 1978. By order of May 23, 1978, the PUC instituted an investigation into the fairness and reasonableness of the proposed tariff and conducted evidentiary hearings in which the Office of the Consumer Advocate (Consumer Advocate), the PUC prosecutory Staff, and Penelec participated. The PUC, by final order entered January 26, 1979, denied a portion of the increase Penelec sought.

Penelec raises three issues for our review:*fn2 (1) whether the PUC erred in excluding from rate base a

[ 53 Pa. Commw. Page 188]

    full year's accumulated deferred income tax associated with liberalized depreciation; (2) whether the PUC erred in excluding from rate base the unamortized balances of certain expenses; and (3) whether the PUC erred in reducing the rate base claim for cash working capital by an amount equal to a portion of accrued but unpaid interest on long term debt and dividends on preferred stock. We hold that the PUC did not commit reversible error in deciding these issues.

Penelec's first attack upon the PUC's order focuses on the ratemaking treatment accorded accumulated deferred Federal income taxes associated with liberalized depreciation deductions on its 25% undivided ownership interest in Unit 2 of the Three Mile Island nuclear generation station (TMI-2).*fn3 With important exceptions not here applicable, I.R.C. § 167(1) provides that post-1969 public utility property may be depreciated at a liberalized rate only if the taxpayer uses a "normalization" method of accounting. I.R.C. § 167(1)(3)(G) defines the accounting method:

(G) NORMALIZATION METHOD OF ACCOUNTING -- In order to use a normalization method of accounting with respect to ...


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