CPUC OKs Tracking PG&E Tax Benefits

15 Apr 2011

The California Public Utilities Commission voted 4-1--with commissioner Tim Simon dissenting--to establish a memorandum account that captures for ratepayers some of the tax benefits accruing from utility investments this year and next under a 2010 federal tax law. The law, known as the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act, was enacted on December 17, 2010.

The account, applicable principally to Pacific Gas & Electric, provides companies with 100 percent bonus depreciation on certain investments made in 2011 and 50 percent bonus depreciation on capital spending in 2012. Congress passed the act to spur job creating investments.

At the vote April 14, Simon expressed concern that establishing the memorandum account could diminish job creation.

Commissioner Mark Ferron said it was important to make sure ratepayers share some of the potential benefits of the favorable tax treatment.

When it comes to the state’s investor-owned energy utilities, the commission decided to make only PG&E subject to the memorandum account because it settled its general rate case before the law was passed. As such, it could benefit from expenditures it is making due to the tax law and not pass them on to consumers.

Commissioner Catherine Sandoval said PG&E is investing $800 million that would be eligible for the bonus deprecation allowances, about $400 million this year and $400 million next year. She said the memorandum account could capture a substantial amount of the resulting tax savings for ratepayers.

The commission noted that because San Diego Gas & Electric, SoCal Gas, and Southern California Edison won’t start their next general rate cases until 2012, it could account for any investments under the act at that time.

In other action, the commission restructured rates for firm access rights to the natural gas pipeline systems operated by SoCal Gas and SDG&E for independent gas shippers. The aim is to improve scheduling certainty, the commission decision said.

Finally, regulators approved an unopposed modification of two contracts between Southern California Edison and CPV Sentinel for more than 700 MW of power from natural gas units. Construction of the natural gas projects slated for Riverside County was stalled by a shortage of emission credits in the South Coast Air Quality Management District. The deal extends the start date for the projects to August 2013.

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