Case Background
This docket was
opened to consider the impacts of the Tax Cuts and Jobs Act of 2017 on Duke
Energy Florida, LLC (DEF). In Order No. PSC-2019-0053-FOF-EI, the
Commission approved stipulated positions agreed upon by the Office of Public
Counsel (OPC) and DEF that resolved all issues in the docket. The Commission left the docket open to
consider feedback from the Internal Revenue Service (IRS) regarding the
treatment of excess accumulated deferred income taxes (EDIT) and the cost of
removal (COR) and until all true-ups and offsets were fully implemented. The true-ups
and offsets have been fully implemented and the only item left for the
Commission to address is the feedback from the IRS.
On March 9, 2022, DEF and the OPC filed a joint motion requesting
that the Commission approve DEF’s proposed treatment of the EDIT associated
with the COR, as per IRS guidance, and close this docket.
The Commission has jurisdiction over this matter pursuant
to Sections 366.04, 366.05, and 366.06, Florida Statutes.
Discussion
of Issues
Issue
1:
Should
the Commission approve DEF's proposed treatment of the excess accumulated
deferred income taxes (EDIT) associated with the cost of removal (COR) as
satisfying the requirements set forth in Order No. PSC-2019-0053-FOF-EI?
Recommendation:
Yes.
Staff recommends that the Commission approve DEF’s proposed treatment of the EDIT
associated with the COR as satisfying the requirements set forth in Order No.
PSC-2019-0053-FOF-EI. (Cicchetti)
Staff Analysis:
At the time the Commission issued Order No. PSC-2019-0053-FOF-EI,
there was uncertainty concerning the IRS’s position regarding the COR and the
determination of protected and unprotected EDIT. The Commission ordered that
the instant docket remain open to consider feedback from the IRS regarding the treatment
of EDIT relating to the COR. In the joint motion, DEF and the OPC proposed a reasonable
resolution of the COR EDIT issue based on information from the IRS as reflected
in Private Letter Rulings (PLR) 202033002 and 202124003. The adjustment to accumulated
deferred income taxes for COR results in an EDIT of approximately $68 million
to be recovered from customers. DEF’s EDIT related to COR will be amortized at the
same rate as the protected EDIT. DEF’s amortization of EDIT related to COR at the
same rate as the protected EDIT is not a normalization violation. Furthermore,
as stated in the joint motion:
“The amortization of both protected and unprotected
EDIT has already been incorporated in the 2022-2024 revenue requirement in the
2021 Settlement. Accordingly, DEF’s proposed treatment of the EDIT related to
COR has no immediate impact on customer rates.”
Staff has reviewed the PLRs and agrees with DEF and OPC
that DEF’s proposed treatment of COR will not result in a normalization
violation. Based on the foregoing, staff recommends that the Commission approve
DEF’s treatment of the EDIT associated with the COR as satisfying the
requirements set forth in Order No. PSC-2019-0053-FOF-EI.
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. (DuVal)
Staff Analysis:
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.
