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Although petitioner argues that Florida Power paid a form of
constructive interest on deferred income tax because both the
FPSC and the FERC calculated allowable rates using formulas that
penalized Florida Power for deferred income tax, these rate
formulas were used even before TRA triggered the liability to
return excess deferred income tax. Therefore, no interest became
payable upon the formation of the obligation to return excess
deferred income tax, which would have suggested that a liability
had arisen at that point in time.
Our holding also applies to the portion of returns made to
wholesale customers by check. These returns were carried out by
check only because they represented funds that should have been
refunded to customers under FERC regulations in previous months.
The refund should have been returned to wholesale customers
starting 10 months earlier in 1987 and 8 months earlier in 1988.
Had Florida Power made these returns in the time required by FERC
regulations, they would have been carried out by setoff on
customers’ bills. Combined with the other characteristics of the
refunds, this characteristic makes the returns by check resemble
a reduction in rates rather than a deductible expense.
Petitioner also claims that section 1341(b)(2) and section
1.1341-1(f)(2)(i), Income Tax Regs., provide that utility refunds
shall be eligible for section 1341 treatment. However, the
language of section 1341(b)(2) that refers to utility refunds and
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