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know the amount of his liability at the end of the year. Florida
Power, however, is subject to a fixed and certain liability to
refund overrecoveries, and those overrecoveries are determinable
immediately after receipt of payment by subtracting its
collections for a given month by its costs actually incurred.
Our holding is also distinguishable from our opinions in
Southwestern Energy Co. v. Commissioner, 100 T.C. 500 (1993), and
Continental Ill. Corp. v. Commissioner, T.C. Memo. 1989-636,
affd. 998 F.2d 513 (7th Cir. 1993). In Southwestern Energy Co.,
the taxpayer collected monthly utility fees that were based on
the costs that it expected to incur for purchasing gas in the
subsequent month. Because the pricing was based on estimates,
over or undercollections occurred at the end of every month. At
the end of the year, the taxpayer was bound by regulatory law to
calculate the net overcollection for the year and return that
amount during the following year. Using this collection method,
the fuel cost charged to customers by the taxpayer fluctuated
each month. The purpose of the monthly gas collections was to
allow the taxpayer to recoup its cost of gas purchased and not to
create level pricing. This Court held that the obligation to
return a net overcollection during the next year was not an
immediately deductible expense.
In Continental Ill. Corp., the taxpayer made fixed-term
loans with floating interest rates to corporate borrowers.
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