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NATIONAL ASSOCIATION OF STATE UTILITY CONSUMER ADVOCATES
RESOLUTION
Requesting Congress to clarify applicable provisions of the Internal
Revenue Code to provide that the normalization rules set forth therein
are not violated when the benefits of unamortized investment tax
credits and excess deferred income taxes are passed on to ratepayers
due to the sale of generation property
WHEREAS, In 1986 Congress amended the Internal Revenue Code by
lowering the corporate income tax rate, terminating investment tax
credits on certain utility property and thereby creating a condition
of over-recovery for deferred taxes and tax credits calculated under
the prior income tax rates applicable to public utilities;
WHEREAS, prior to Congressional enactment of the Tax Reform Act
of 1986 which accomplished these changes, the representatives of
electric utilities argued that immediate recognition in utility
rates of the excess deferred tax amounts and investment tax credits
would constitute a financial hardship to the utilities and create
cash flow difficulties;
WHEREAS, the representatives of the National Association of State
Utility Consumer Advocates (NASUCA), the National Association of
Regulatory Utility Commissioners (NARUC) and others argued that,
to the contrary, ratepayers deserved full and immediate recognition
of all tax credits associated with utility property in rates, prior
to enactment of the1986 tax changes;
WHEREAS, the representatives of electric utilities asserted during
this Congressional debate that, if ratepayer receipt of these tax
benefits were to be delayed as proposed by the same electric utilities,
ratepayers advocates could nonetheless count on the full amount
of these deferred credits to be eventually returned to the benefits
of ratepayers in future state and federal ratemaking proceedings;
WHEREAS, in 1997 and 1998 the states of Maine and Connecticut,
respectively, enacted Electric Restructuring legislation providing
for the divestiture of electric generating property that previously
had been included in rate base for ratemaking purposes,
WHEREAS, numerous other states have subsequently adopted similar
provisions providing for the divestiture of generating property
by means of mandatory or voluntary sale, as a means for reducing
the level of stranded costs which otherwise were eligible for recovery
in rates from electric customers;
WHEREAS, in rent Private Letter Rulings involving utilities in
Maine and Connecticut, the Internal Revenue Service has ruled against
the flowthrough to ratepayers of any excess deferred income taxes
or investment tax credits associated with generation property divested
under a state restructuring statute; and
WHEREAS, these rulings are inconsistent with the statements of
utility representatives that informed the Congressional debate prior
to the enactment of the Tax Reform Act of 1986 and constitute a
significant hardship to electric consumers who must pay for stranded
costs associated with the same assets.
THEREFORE, BE IT RESOLVED, that the National Association of State
Utility Consumer Advocates requests Congress to clarify applicable
provisions of the Internal Revenue Code to provide that the benefits
of unamortized investment tax credits and excess deferred income
taxes are passed on to ratepayers due to the sale of generation
property;
BE ALSO RESOLVED, THAT NASUCA may join with NARUC and other organizations
vested with responsibility for the interests of utility consumers
in seeking to argue jointly and in concert for such changes to federal
law as override and reverse the Private Letter Rulings referred
to above; and
BE IT FINALLY RESOLVED, that the Executive Committee of NASUCA
is authorized to take all steps consistent with this Resolution
in order to secure its implementation.
APPROVED BY NASUCA: Submitted by:
By Faxed Ballot NASUCA Electric Committee
Place
April 14, 2001
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