Wednesday, January 23, 2019

FERC OKs Transcos’ Revised Tax Calculations

By Rich Heidorn Jr.

FERC approved tariff filings by more than a dozen transmission owners to correct how they calculate accumulated deferred income tax (ADIT) balances.

FERC on Thursday approved tariff filings by more than a dozen transmission owners to correct how they calculate accumulated deferred income tax balances.

The commission issued orders regarding: Ameren Illinois, Ameren Transmission Company of Illinois and Northern States Power (EL18-155, et al.); Public Service Company of Colorado and Southwestern Public Service (ER18-2319, et al.); ALLETE, Montana-Dakota Utilities, Northern Indiana Public Service Co., Otter Tail Power and Southern Indiana Gas & Electric (EL18-138, et al.); International Transmission Co., ITC Midwest and Michigan Electric Transmission Co. (EL18-159, et al.); American Transmission Co. (EL18-157); TransCanyon DCR (EL18-165); Virginia Electric and Power Co. (EL18-167); GridLiance West Transco (EL18-158); and Southern California Edison (EL18-164).

The companies’ filings came after the commission ordered Section 206 proceedings, finding that their use of the “two-step” averaging methodology used to calculate ADIT balances in the projected test year calculations or annual true-up calculations for formula transmission rates may no longer be just and reasonable.

The commission had previously permitted TOs to use a two-step averaging methodology to calculate ADIT balances based on the understanding that the methodology was necessary to comply with IRS rules. But after guidance that IRS provided in an April 2017 private letter ruling, the commission said it now believes the two-step method could lead to overstated rate bases and unreasonably higher rates.

Earlier this year, the commission issued a series of orders to ensure ratepayers benefit from the savings energy companies received through the Tax Cuts and Jobs Act, which reduced the maximum corporate income tax rate to 21% from 35%. (See FERC Acts on Tax Cuts and FERC Orders Pipelines to Pass Through Tax Savings.)

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