- 23 -
future electric services. See id. at 1113. In reaching its
conclusion, the court stated:
In reality, Iowa Southern must be viewed simply as
enjoying higher rates, and greater income, during the
construction period, and lower rates, and presumably
less income, during the thirty years that follow
completion of the plant. As a result, it is also
incorrect to view the change in the rate structure as a
cost of goods sold. * * * [Id. at 1114.]
One of the factors considered by the court was that future
refunds were to be made to future customers, some of whom were
not in privity with the customers who paid the original surcharge
during plant construction. See Chernin v. United States, 149
F.3d 805, 816 (8th Cir. 1998).
In Roanoke Gas Co., the taxpayer collected utility fees that
were based on the costs that it incurred for purchasing gas. Due
to the lag between the effective date of a price change for gas
and implementation of a rate adjustment to reflect this change,
the taxpayer overcollected from its customers when gas prices
dropped. The taxpayer was required at the end of each year to
determine the amount, if any, that it had overcollected and to
adjust rates accordingly for the next year. The taxpayer claimed
that the obligation to refund excessive collections through a
rate adjustment constituted a deductible business expense. The
years in issue predated the section 461(h) economic performance
rules.
Page: Previous 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 NextLast modified: May 25, 2011