Lykes Energy, Inc. and Subsidiaries - Page 3




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          Practice and Procedure.  Dollar amounts are rounded to the                  
          nearest dollar.                                                             
                                  FINDINGS OF FACT                                    
               Some of the facts have been stipulated and are so found.               
          The stipulation of facts and the exhibits submitted therewith are           
          incorporated herein by this reference.  Lykes is the parent                 
          corporation of an affiliated group of corporations that files               
          consolidated Federal income tax returns based on a fiscal year              
          ending on September 30.  Lykes was headquartered in Tampa,                  
          Florida, when the petitions were filed.                                     
               People's distributes natural gas in Florida.  It is a                  
          utility subject to regulation by the Florida Public Service                 
          Commission (PSC).  Pursuant to the Florida Energy Efficiency and            
          Conservation Act (FEECA), the PSC required that People's design             
          and administer the FEECA programs.  People's administers these              
          programs subject to the PSC's supervision.  The FEECA programs              
          are generally designed to reduce consumption of high cost                   
          petroleum and to lower electrical energy consumption.                       
               For its 1988 through 1991 taxable years, People's included             
          receipts from the FEECA programs (FEECA receipts) in its gross              
          income, and it deducted its expenditures under the programs                 
          (FEECA expenditures).  Starting with its 1992 taxable year,                 
          People's excluded FEECA receipts from its gross income and did              
          not deduct any FEECA expenditures.                                          





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