Case Background
On September 14,
2021, the Florida Department of Revenue issued a Tax Information Publication
(TIP) that stated the “Florida corporate income/franchise tax rate is reduced
from 4.458% to 3.535% for taxable years beginning on or after January 1, 2021,
but before January 1, 2022. The tax rate returns to 5.5% for taxable years
beginning on or after January 1, 2022.”
Section 8 of
Peoples Gas System’s (Peoples or the Company) 2020 Settlement Agreement
describes the procedures and principles to be followed for changes in federal
or state corporate income tax rates. On January 12, 2022 Peoples filed a
petition to allow the adjusted net operating income impacts on annual revenue
requirements from the 2021 state tax rate change and the 2022 anticipated state
tax rate change to be offset and addressed via the Company’s Cast Iron Bare
Steel Replacement Rider (CIBS Rider) that will be filed in September 2022 for
rates effective January 2023.
The Commission
has jurisdiction over this matter pursuant to Sections 366.076 and 366.06(3),
Florida Statutes.
Discussion
of Issues
Issue 1:
Should the Commission allow the adjusted net
operating income impacts on annual revenue requirements from the 2021 state tax
rate change and the 2022 anticipated state tax rate change to be offset and
addressed via the Company's Cast Iron Bare Steel Replacement Rider that will be
filed in September 2022 for rates effective January 2023?
Recommendation:
Yes. Staff recommends the Commission allow the
adjusted net operating income impacts on annual revenue requirements from the
2021 state tax rate change and the 2022 anticipated state tax rate change to be
offset and addressed via the Company's Cast Iron Bare Steel Replacement Rider
that will be filed in September 2022 for rates effective January 2023.
Staff Analysis:
Peoples 2020 Settlement Agreement contained
provisions for addressing tax changes to federal and state tax rates. The
Florida Department of Revenue issued a TIP on September 14, 2021 that stated the
“Florida corporate income/franchise tax rate is reduced from 4.458% to 3.535%
for taxable years beginning on or after January 1, 2021, but before January 1,
2022. The tax rate returns to 5.5% for taxable years beginning on or after
January 1, 2022.”
Per the 2020 Settlement Agreement, Peoples used the 2021
and 2022 Forecasted Earnings Surveillance Reports to calculate the impact of
the Florida corporate income tax rate changing from 4.458 percent to 3.535
percent in 2021 and to 5.5 percent in 2022. The change in the Florida corporate
income tax rate resulted in a revenue requirement decrease of $843,751 for 2021
and a revenue requirement increase of $1,096,830 for 2022. Netting the 2021 and
2022 revenue requirement impacts results in a net revenue requirement increase
of $253,079. Attachment 1 shows Peoples’ calculation of the net revenue
requirement impact.
In its petition, Peoples requests that the Commission
allow the adjusted net operating income impacts on annual revenue requirements
from the 2021 state tax rate change and the 2022 anticipated state tax rate
change to be offset and addressed via the Company’s Cast Iron Bare Steel
Replacement Rider (CIBS Rider) that will be filed in September 2022 for rates
effective January 2023. Because the 2021 state tax rate change was
retroactively instituted for 2021 only and the state tax rate increased January
1, 2022 it is administratively burdensome to separately implement two slight
rate adjustments. The Company has in place, in the form of the Cast Iron Bare
Steel Rider, a mechanism for making yearly rate adjustments which the parties
contemplated in the 2020 Settlement Agreement. As stated in the Company’s
petition, “By allowing the Company to ‘net’ the effects of the 2021 state tax
rate change and the higher state tax rates in 2022, these administrative
burdens can be avoided and the effects of the state income tax changes on
Peoples’ rates will be less volatile and less likely to create customer
confusion.” Peoples consulted with the Office of Public Counsel and the Florida
Industrial Power Users Group and they do not object to the proposal and
consider it to be efficient and not inconsistent with the provisions of the
Settlement Agreement.
For the reasons discussed above, staff recommends the
Commission allow the adjusted net operating income impacts on annual revenue
requirements from the 2021 state tax rate change and the 2022 anticipated state
tax rate change to be offset and addressed via the Company's Cast Iron Bare
Steel Replacement Rider that will be filed in September 2022 for rates
effective January 2023.
Issue 2:
Should this docket be closed?
Recommendation:
Yes. If no person whose substantial interests are
affected by the proposed agency action files a protest within 21 days of the
issuance of the order, this docket should be closed upon the issuance of a
consummating order. If a protest is
timely filed, the docket shall remain open pending resolution of the
proceeding. (Brownless)
Staff Analysis:
At the conclusion of the protest period, if no
protest is filed this docket should be closed upon the issuance of a
consummating order. If a protest is
timely filed, the docket shall remain open pending resolution of the
proceeding.
