depreciation in the calculation of state income taxes is Pa. PUC v. “mandated.” 60 Pa P.U.C 349, 398 (1985). In addition, the OCA argued Metropolitan Edison Co., that, consistent with the holding in appellate law and Jackson Sewer, Commission’s Act 11 requires that the DSIC recover only costs incurred, and that rates cannot include phantom taxes, as follows: [UGI] stands for the proposition that the Commission does not have the authority to permit the inclusion of hypothetical expenses not incurred, and more specifically, establishes the taxes doctrine, prohibiting a utility from “actual paid” collecting “phantom taxes.” OCA M.B. 24-25. Peoples Equitable Division countered that the taxes – OCA’s “actual paid” doctrine does not apply to this DSIC proceeding as it has only been applied to base rate proceedings. The Company argued that the only way of determining its actual taxes paid for state income tax purposes on the plant additions would be to conduct a full rate case tax analysis, which is not consistent with the simple DSIC calculation. Peoples – Equitable Division maintained that the purpose of the state tax gross-up in the DSIC is to simplify the calculation. Therefore, the incremental deduction proposal should be OCA’s rejected because it would incorporate inaccurate tax adjustments into the DSIC and would require a much more complicated and extensive calculation than intended by Act 11. Further, the Company contended that the taxes doctrine is a “actual paid” concept related to base rate proceedings when a complete tax structure can be utility’s analyzed. Company R.B. at 13-14. 2. Recommendation ALJ’s
depreciation in the calculation of state income taxes is “mandated.” Pa. PUC v. Metropolitan Edison Co., 60 Pa P.U.C 349, 398 (1985). In addition, the OCA argued that, consistent with the Commission’s holding in Jackson Sewer, appellate law and Act 11 requires that the DSIC recover only costs incurred, and that rates cannot include phantom taxes, as follows: [UGI] stands for the proposition that the Commission does not have the authority to permit the inclusion of hypothetical expenses not incurred, and more specifically, establishes the “actual taxes paid” doctrine, prohibiting a utility from collecting “phantom taxes.” OCA M.B. 24-25. Peoples – Equitable Division countered that the OCA’s “actual taxes paid” doctrine does not apply to this DSIC proceeding as it has only been applied to base rate proceedings. The Company argued that the only way of determining its actual taxes paid for state income tax purposes on the plant additions would be to conduct a full rate case tax analysis, which is not consistent with the simple DSIC calculation. Peoples – Equitable Division maintained that the purpose of the state tax gross-up in the DSIC is to simplify the calculation. Therefore, the OCA’s incremental deduction proposal should be rejected because it would incorporate inaccurate tax adjustments into the DSIC and would require a much more complicated and extensive calculation than intended by Act 11. Further, the Company contended that the “actual taxes paid” doctrine is a concept related to base rate proceedings when a utility’s complete tax structure can be analyzed. Company R.B. at 13-14. 2. ALJ’s Recommendation
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