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the years in issue, petitioner was an accrual method taxpayer
reporting, except for 1990, on a calendar year basis.
Petitioner’s operations are subject to the rules and
regulations of Federal and State agencies, including the Federal
Energy Regulatory Commission (FERC), the Iowa Utilities Board
(IUB), the Minnesota Public Utility Commission, the South Dakota
Public Utility Commission, and certain municipal governments in
Nebraska (regulatory agencies). Under established procedures,
these regulatory agencies prescribe the rates at which petitioner
may sell gas and electricity (approved tariff rates), the
accounting methods and practices that petitioner may adopt for
regulatory and financial accounting purposes, the billing
practices, the payment practices, and other terms and conditions
for the sale of gas and electricity to its customers. The
approved tariff rates for gas are generally made up of gas costs
and the nongas margin. The nongas margin represents the recovery
of all costs other than gas costs, including physical plant
costs, meter-reading expenses, and labor and other nongas related
expenses, as well as overhead and a reasonable rate of return.
The approved tariff rates for electricity include several
components in addition to costs incurred to supply energy.
Purchased Gas Adjustment
Petitioner implements approved tariff rates for gas using
the purchased gas adjustment (PGA) mechanism. Once rate
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