against over earnings by the earnings cap under Section 1358(b)(3) which the revenue “captures impact of all other adjustments and insure that the DSIC does not result in unreasonable rates.” The OCA asserts that following the intent of the General Assembly and the historic water DSIC practice, by not including ADIT, the Company would recover Commission’s costs that it has not Columbia argues when the Company invests in DSIC eligible “incurred.” property, it uses shareholder capital to make the necessary investments. Whether it subsequently receives incremental deferred tax benefits is not known until after a return is filed. The Commission recognized in its Final Implementation Order, that the impact of ADIT is already factored into the DSIC through the calculation of the earnings cap, which prohibits Columbia from exceeding its allowable rate of return. The DSIC will be Company’s reset to zero if the data included in the most recent Annual or Quarterly Earnings report filed with the Commission shows that Columbia would earn a rate of return that would exceed the allowable rate of return used to calculate its fixed costs under the DSIC as described in the return section. According to Columbia, as shown in Exhibit NJDK-R2, the Company’s calculation of rate base for earnings report purposes includes the current book amount of ADIT. Thus, in order for Columbia to get the benefit of a DSIC, it must be in an under-earning position after taking into consideration the very tax matters that the OCA is concerned about. Columbia St. No. 1-RJ, p. 3. Since earnings are reviewed quarterly, the earnings cap adequately addresses the concern associated with ADIT for plant additions under the DSIC, without the complication of reviewing these issues in each quarterly DSIC filing. The OCA has argued that changed circumstances exist which make the inclusion of ADIT, outside of the earnings cap, appropriate at this time. However, while changes have occurred in tax benefits since the initial water DSIC, those changes occurred prior to the enactment of Act 11, and accordingly were known to the General Assembly before it adopted Act 11. Columbia witness Fischer explained that the total ADIT balance reflected in a base rate proceeding changes yearly, and ADIT on new plant can be offset by declining ADIT on
against over earnings by the earnings cap under Section 1358(b)(3) which “captures the revenue impact of all other adjustments and insure that the DSIC does not result in unreasonable rates.” The OCA asserts that following the intent of the General Assembly and the Commission’s historic water DSIC practice, by not including ADIT, the Company would recover costs that it has not “incurred.” Columbia argues when the Company invests in DSIC eligible property, it uses shareholder capital to make the necessary investments. Whether it subsequently receives incremental deferred tax benefits is not known until after a return is filed. The Commission recognized in its Final Implementation Order, that the impact of ADIT is already factored into the DSIC through the calculation of the earnings cap, which prohibits Columbia from exceeding its allowable rate of return. The Company’s DSIC will be reset to zero if the data included in the most recent Annual or Quarterly Earnings report filed with the Commission shows that Columbia would earn a rate of return that would exceed the allowable rate of return used to calculate its fixed costs under the DSIC as described in the return section. According to Columbia, as shown in Exhibit NJDK-R2, the Company’s calculation of rate base for earnings report purposes includes the current book amount of ADIT. Thus, in order for Columbia to get the benefit of a DSIC, it must be in an under-earning position after taking into consideration the very tax matters that the OCA is concerned about. Columbia St. No. 1-RJ, p. 3. Since earnings are reviewed quarterly, the earnings cap adequately addresses the concern associated with ADIT for plant additions under the DSIC, without the complication of reviewing these issues in each quarterly DSIC filing. The OCA has argued that changed circumstances exist which make the inclusion of ADIT, outside of the earnings cap, appropriate at this time. However, while changes have occurred in tax benefits since the initial water DSIC, those changes occurred prior to the enactment of Act 11, and accordingly were known to the General Assembly before it adopted Act 11. Columbia witness Fischer explained that the total ADIT balance reflected in a base rate proceeding changes yearly, and ADIT on new plant can be offset by declining ADIT on
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