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Petitioner contends that its agency-imposed accounting
method, which uses the PGA and EAC mechanisms to recover current
gas costs, allows petitioner to recover December gas costs and
alleviates the need to accrue gas costs from the unbilled period.
We disagree. Section 451(f) focuses on the inclusion of income
from utility services actually provided during the taxable year,
and the PGA and EAC mechanisms address only the pricing of
utility services billed. Irrespective of its pricing mechanisms,
petitioner is still using meter readings as a proxy for utility
services actually provided during the taxable year in direct
contravention of section 451(f). It is also well settled that
consistency with agency-imposed accounting practices is not
determinative of the adequacy of petitioner’s accounting method
for tax purposes. See Thor Power Tool Co. v. Commissioner, 439
U.S. 522, 542-543 (1979) (there are “vastly different objectives
that financial and tax accounting have”, and “any presumptive
equivalency between tax and financial accounting would be
unacceptable.”), affg. 563 F.2d 861 (7th Cir. 1977), affg. 64
T.C. 154 (1975). Accordingly, we conclude that petitioner’s
accounting method violates the requirements of section 451(f).
To reflect properly the requirements of section 451(f) and
prevent double counting, petitioner’s section 481 adjustment in
1986 should have also included the unbilled revenue attributable
to gas costs from the unbilled period as of December 31, 1986.
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