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WALTER W. COHEN v. PENNSYLVANIA PUBLIC UTILITY COMMISSION (08/15/83)

decided: August 15, 1983.

WALTER W. COHEN, CONSUMER ADVOCATE, PETITIONER
v.
PENNSYLVANIA PUBLIC UTILITY COMMISSION, RESPONDENT. PENNSYLVANIA POWER COMPANY, INTERVENOR



Appeal from the Order of the Pennsylvania Public Utility Commission in case of Pennsylvania Public Utility Commission v. Pennsylvania Power Company, No. R-811510C006.

COUNSEL

Daniel Clearfield, Assistant Consumer Advocate, with him Walter W. Cohen, Consumer Advocate, for petitioner.

Julian S. Suffian, Assistant Counsel, with him Steven A. McClaren, Deputy Chief Counsel, and Charles F. Hoffman, Chief Counsel, for respondent.

Alan L. Reed, with him Thomas P. Gadsen and Margaret B. Dardess and of counsel: James R. Edgerly, General Counsel, and Stephen L. Feld, Morgan, Lewis & Bockius, for intervenor, Pennsylvania Power Company.

Albert D. Brandon, for Amicus Curia, Ralph D. Pratt.

President Judge Crumlish, Jr. and Judges Williams, Jr., Craig, MacPhail and Doyle. Opinion by Judge Doyle.

Author: Doyle

[ 76 Pa. Commw. Page 355]

Walter W. Cohen, the Consumer Advocate of Pennsylvania (Consumer Advocate) here appeals a final order of the Public Utility Commission (PUC) which established rates for the Pennsylvania Power Company (Power Company), an electric utility company serving portions of northwestern Pennsylvania. We affirm the order of the PUC.

The controversy in this case is focused on that part of the PUC order which allowed the Power Company to normalize deferred federal and state income taxes for ratemaking purposes.*fn1 Under the Internal

[ 76 Pa. Commw. Page 356]

Revenue Code a corporation may accelerate the depreciation of its capital assets, claiming greater depreciation deductions in the early years of an asset's life and lesser depreciation deductions in later years, as an alternative to straight-line depreciation, in which the depreciation deduction is the same in each year of an asset's life.*fn2 When accelerated depreciation is employed, the greater depreciation deductions in the early years reduces the taxpayer's taxable income, resulting in a lower tax expense than if straight-line depreciation had been used. Later in the asset's life, the deduction is less, resulting in a greater tax expense than if straight-line depreciation had been used. The total depreciation over the entire useful life of the asset remains the same. The normalization permitted by the PUC order allowed the Power Company to compute its tax expense chargeable to ratepayers as though its assets were depreciated according to the straight-line method when, in fact, for tax purposes, the Power Company used accelerated depreciation.*fn3

[ 76 Pa. Commw. Page 357]

Our scope of review is limited by Section 704 of the Administrative Agency Law, 2 Pa. C.S. ยง 704, which ...


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