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Retroactive Rate‐making Affirmed After Accounting Change
Pennsylvania's Financial Accounting Standards Board in 1990 announced a change in the generally accepted method of accounting for a category of expenses apart from pension payments called “other postemployment benefits” (e.g., health insurance payments). This changed the accounting method of utilities from cash to accrual. In 1994, the Pennsylvania Power & Light Company filed a rate base application requesting recovery of $31.1 million in incremental costs, to be amortized over 17.3 years. This was approved by an administrative law judge and affirmed by the Public Utility Commission (PUC). The Office of Consumer Advocate petitioned for review, claiming this amounted to impermissible retroactive rate‐making. The appellate court said the imposed new method necessitated the utility's request in regard to this substantial expense item, which it could not have anticipated at its last rate base application in 1984. The court said the PUC may take into account extraordinary losses or gains that occurred in the past by amortizing them over several years. “Once a particular expense is recognized as falling within this exception,” the court said, “its recovery at a later time does not violate the rule against retroactive rate‐making.” The court affirmed the PUC decision.
Retroactive Rate‐making Affirmed After Accounting Change
Pennsylvania's Financial Accounting Standards Board in 1990 announced a change in the generally accepted method of accounting for a category of expenses apart from pension payments called “other postemployment benefits” (e.g., health insurance payments). This changed the accounting method of utilities from cash to accrual. In 1994, the Pennsylvania Power & Light Company filed a rate base application requesting recovery of $31.1 million in incremental costs, to be amortized over 17.3 years. This was approved by an administrative law judge and affirmed by the Public Utility Commission (PUC). The Office of Consumer Advocate petitioned for review, claiming this amounted to impermissible retroactive rate‐making. The appellate court said the imposed new method necessitated the utility's request in regard to this substantial expense item, which it could not have anticipated at its last rate base application in 1984. The court said the PUC may take into account extraordinary losses or gains that occurred in the past by amortizing them over several years. “Once a particular expense is recognized as falling within this exception,” the court said, “its recovery at a later time does not violate the rule against retroactive rate‐making.” The court affirmed the PUC decision.
Retroactive Rate‐making Affirmed After Accounting Change
1998-01-01
1 pages
Article (Journal)
Electronic Resource
English
Legislation , Accounting , Pennsylvania , Costs , Utilities , Water Rates
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