Customer Meeting Questions 2-1: Regarding SPS s response to Customer Meeting Question 1-4, please provide the following:

Size: px

Start display at page:

Download "Customer Meeting Questions 2-1: Regarding SPS s response to Customer Meeting Question 1-4, please provide the following:"

Gilbert Chambers
8 years ago
Views:

1 Customer Meeting Questions 2-1: Regarding SPS s response to Customer Meeting Question 1-4, please provide the following: A. A detailed explanation, including the formula rate implications, of the statement that For sometime (sic), the basis differences and resulting deferred taxed associated with CWIP were allocated to primarily one functional group ; B. A identification of such functional group; and C. A detailed explanation, including an example, of how At the end of 2010, we allocated CWIP differences and their related deferred taxes to the functional groups to be consistent with what was taking place with regard to PIS. A. In the past, the basis differences and resulting deferred taxes associated with CWIP Avoided Cost Interest were allocated to only the electric production plant functional group. At the time this allocation was made, it was thought that the electric production plant functional group would capture the majority of the dollars associated with CWIP Avoided Cost Interest due to both the large dollar amount and long construction period usually associated with electric production plant projects. In 2010, an analysis was performed to align CWIP Avoided Cost Interest to the appropriate functional group using information gathered out of the PowerPlant system, in a manner similar to what is done to align Plant-in- Service (PIS) Avoided Cost Interest by functional group. The first step in the analysis was to align the CWIP Avoided Cost Interest balance as of the beginning of 2010 by functional group. This process involved calculating the difference between Avoided Cost interest accrued and Avoided Cost Interest classified (i.e., unitized to plant-in-service) by functional group. The result of this difference was the CWIP Avoided Cost Interest (Reclass) amount which reclassed CWIP Avoided Cost Interest at the beginning of 2010 from Electric Production to the appropriate functional group. (See Question 2-1, Attachment 3, Columns [a] through [e].) The next step in the analysis was to combine CWIP Avoided Cost Interest beginning, expenditures, and classifications balances for 2010 by functional group to arrive at CWIP Avoided Cost Interest year-end 2010 balances by functional group. (See Question 2-1, Attachment 2, Columns [a] through [g].) The final step in the analysis was to apply a composite tax rate to CWIP Avoided Cost Interest at year-end 2010 to arrive at CWIP Avoided Cost Page 1 of 5

primarily one functional group ; B. A identification of such functional group; and C.

2 Interest ADIT at year-end 2010 by functional group. (See Question 2-1, Attachment 2, Column [h].) The analysis resulted in CWIP Avoided Cost Interest being functionalized among the four functional groups as opposed to solely electric production. With respect to formula rate implications, there is an increase to transmission rate base because there was an increase in the balance of CWIP Avoided Cost Interest ADIT allocated to the electric transmission functional group at yearend 2010 of $1,347,443 (total company). (See Question 2-1, Attachment 1, and Column [b] for CWIP Avoided Cost Interest for Electric Transmission for support for this amount.) B. As indicated in Question 2-1.A, CWIP Avoided Cost Interest ADIT balances were allocated to the electric production functional group in the past but the balances are now functionalized among the four functional groups. C. Please see the response to Question 2-1.A above. Prepared by Dave Picconi Page 2 of 5

With respect to formula rate implications, there is an increase to transmission rate base because there was an increase in the balance of CWIP Avoided Cost Interest ADIT allocated to the electric

3 Customer Meeting Questions 2-2: Regarding SPS s response to Customer Meeting Question 1-5, please provide the following: A. A detailed explanation as to whether the Basis Differences are maintained by function or were allocated to the functions; B. If allocated to the functions, how each item was allocated; and C. A detailed explanation as to why the ESOP Dividend Capitalized item is solely related to Electric Distribution Plant. A. All the basis differences for FERC Account 190, Avoided Cost Interest (both CWIP and PIS) along with CIAC (there is no CWIP associated with CIAC) are maintained by/at the functional group level. These two basis differences are maintained by/at the functional group level because these two basis differences are either calculated, as in the case of Avoided Cost Interest, or specifically identifiable within the PowerPlant system. The basis difference for Benefits Capitalized is allocated to electric distribution plant, electric general plant, electric production plant, and electric transmission plant based on the respective functional groups book additions to plant in service. Finally, the basis difference for ESOP Dividends Capitalized is allocated to electric distribution plant only. With respect to both Benefits Capitalized and ESOP Dividends Capitalized, these two basis differences are calculated outside of the PowerPlant system and as such, their amounts need to be allocated. B. Please refer to the above response to Question 2-2, A. C. It should be noted that the basis difference for ESOP Dividends Capitalized arose out of an IRS audit of then New Century Energies Inc (NCE) and Subsidiaries (of which SPS was a subsidiary) for the tax years 1998 and It was determined at that time and agreed to on audit that a portion of the dividends paid by NCE on stock held by its ESOPs (although allowed as a deduction) were subject to capitalization under Section 263A of the Internal Revenue Code. At that time, NCE determined that it was too difficult to trace the costs to be capitalized to individual assets. Since the majority of the applicable construction was for electric and gas utility assets it was agreed that a 20 year MACRS life would be utilized for all amounts capitalized. In keeping with this agreement of a 20 year MACRS life, it was determined at Page 3 of 5

A detailed explanation as to why the ESOP Dividend Capitalized item is solely related to Electric Distribution Plant. A.

4 that time that ESOP Dividends Capitalized would be allocated to electric and gas distribution only. Prepared by Dave Picconi Page 4 of 5

5 Customer Meeting Questions 2-3: Regarding SPS s response to Customer Meeting Question 1-6, please explain in detail why any portion of the Account 190 item State Tax Deduction Cash vs. accrual should be allocated to transmission, given that OATT formula rate does not recognize Schedule M timing differences and the associated deferred tax amortizations but rather that the formula rate collects income taxes based on the full marginal income tax rates. The Accumulated Deferred Income Tax ( ADIT ) item labeled State Tax Deduction Cash vs. accrual recorded in FERC Account 190, is associated with SPS state income taxes. It is the temporary timing difference between the state income taxes accrued and the actual state income taxes paid in a given year. The ADIT amount is the temporary timing difference multiplied by the current tax rate. The ADIT amount is allocated to transmission based on the Gross Plant allocation factor. The reason SPS included this ADIT item in the transmission rates is because state income taxes are included in the income tax calculation in the formula rate on page 9, lines 265 through 274, and shown on Worksheet L. Prepared by Deborah Blair Page 5 of 5

rate collects income taxes based on the full marginal income tax rates. The Accumulated Deferred Income Tax ( ADIT ) item labeled State Tax Deduction Cash vs.

EMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

EMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) TABLE 1 Quarter Ended March 31, Percent Change Net Sales $ 5,854 $ 5,919 1% Costs and expenses: Cost of sales 3,548 3,583