- 4 -
from two components, the estimated costs of providing future
services and an approved rate of return on its invested capital.
The projected amount of Federal income tax that Florida Power
will pay is a component of the estimated costs of providing
future services.
Excess Deferred Federal Income Tax
The Federal income tax expense that Florida Power uses in
determining its costs of providing future services for rate-
making purposes is generally different from the Federal income
tax expense that it currently owes to the Government. This
difference is attributable to timing differences in recognition
of items of income and expense. For example, the FPSC and the
FERC allow Florida Power to use straight-line depreciation for
rate-making purposes, while accelerated depreciation is used for
determining current taxable income. In an earlier year when
accelerated depreciation is greater than straight-line
depreciation, this timing difference causes a utility to collect
a higher Federal income tax component for rate-making purposes
than the income taxes currently owed to the Government for that
year. This excess of the estimated Federal income tax expense is
referred to as “deferred Federal income tax expense”. In a
subsequent year when the timing differences reverse, the income
tax component that the utility charges yields collections that
are less than the Federal income taxes owed by the utility. The
Page: Previous 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Next
Last modified: May 25, 2011