§ 69.52. General.
Unless necessitated by a change in the Pennsylvania Capital Stock Tax, Corporate Net Income Tax, Gross Receipts Tax or Public Utility Realty Tax which would increase or decrease rates in a manner governed by the Commission’s State Tax Adjustment Procedure, 44 Pa. P.U.C. 545 (1970), a utility which has a State tax adjustment surcharge or gross receipts tax rider shall maintain its surcharge and rider rates at 0%.
Authority The provisions of this § 69.52 issued under the Public Utility Code, 66 Pa.C.S. § § 501, 1301, 1302, 1504 and 1509.
Source The provisions of this § 69.52 adopted January 8, 1988, effective January 9, 1988, 18 Pa.B. 185.
(Editor’s Note: The following Exhibit is codified under 1 Pa. Code § 3.1(a)(9) (relating to contents of Code) as a document which the Legislative Reference Bureau finds to be general and permanent in nature.)
Exhibit A
STATE TAX ADJUSTMENT PROCEDURE
BY THE COMMISSION, March 10, 1970:
By enactments at the end of 1969 and during February of 1970, the Legislature has retroactively increased the rates of three types of taxes paid by public utilities, and has imposed a new tax upon real estate of public utilities, as follows:
Former Rates Present Rates Increase Capital Stock Tax … 6 Mills 7 Mills 1 Mill Corporate Net Income Tax … 7.5% 12% 4.5% Gross Receipts Tax … 20 Mills 45 Mills 25 Mills Realty Tax … None 30 Mills 30 Mills It should be noted here that the increase of 25 mills in the gross receipts tax, which will produce the greatest tax revenues, was enacted as a temporary tax effective for the period January 1, 1970 to September 1, 1971. Prescribed assessment procedures for the realty tax may cause the relative effective rate for each utility to fluctuate in subsequent years. It is also possible that predicted tax reform may modify or eliminate these recent tax increases.
Public utilities under our jurisdiction are subject to regulation, which permits them to recover, in the form of rates, their legitimate costs, plus a fair return which compensates investors for the use of the funds they have provided for the construction of utility facilities.
The new and increased taxes constitute a legitimate cost, and, unless compensated for, will reduce the return of public utilities at a time when many of them, particularly the electric and telephone groups, are engaged in unprecedented construction programs in order to assure adequate facilities for service to customers. These large construction programs must be financed by attracting funds from investors; and such attraction will be difficult in many instances, and impossible in others, if the returns of the public utilities are permitted to decline appreciably as a result of these increases in taxes. Unless relief is granted, there could be serious deterioration of service to the public.
The public utilities are deluging us with requests to preserve their present returns by filing individually for rate increases which are retroactive because the new taxes are retroactive and any delay for rate relief would make the impairment of return inescapable. We have 620 electric, gas, water and telephone utilities, as well as many utilities of other types, under our jurisdiction and to attempt to give necessary and prompt relief on an individual basis would be an impossibility.
A more sensible and practicable approach is to temporarily allow those public utilities which are affected by the increased taxes to recover, prospectively but not retroactively, such costs by a surcharge on service furnished after the charge is approved; to study various long-term procedures; to compute the surcharge so as to prevent overcompensation for the increased costs; to provide for subsequent modification of the surcharge to reflect any elimination or modification of these tax increases; and to later review each public utility’s situation to enable us to require refunds or other remedies to customers in any appropriate case; THEREFORE,
IT IS ORDERED:
A. Every public utility which has been subjected to new or increased taxes enacted by the General Assembly of 1969-1970, and proposing to impose a surcharge to recover such taxes, shall compute the surcharge in the following manner and submit the computation to this Commission:
1. The one-mill increase in the capital stock and franchise tax rate shall be applied to the most recently settled valuation placed on the utility for that tax.
2. For the 4 1/2% increase in the corporate net income tax rate, add together (a) the Pennsylvania corporate net income tax liability for the most recently completed calendar year and (b) the net income, as defined in Section 2 of the Corporate Net Income Tax Act, upon which that liability was computed; and multiply the resulting total by (c) the factor 4.186%. (Note: This factor is the increase of 3.738% in the effective tax rate, divided by .983 which is the complement of the effective tax rate; and this factor shall be changed if the effective tax rate changes.)
3. The new 30-mill Public Utility Realty Tax shall be applied to the utility’s ‘‘State taxable value’’ (as defined in section 2(d) of the tax act) at the end of the most recently completed calendar year.
4. For any utility subject to the gross receipts tax (act of 1889), the 25-mill increase in the gross receipts tax rate shall be applied to the gross receipts tax base for the most recently completed calendar year.
5. Items 1, 2, 3, and 4 where applicable, shall be totaled.
6. For any public utility subject to the gross receipts tax, the total of item 5 shall be divided by a factor which is the complement of the gross receipts tax rate (such factor being .955 as of the date of this order).
7. The total of item 5 for any utility not subject to the gross receipts tax, and the quotient of item 6 for any utility subject to such tax, shall be divided by the utility’s gross intrastate operating revenues derived from service under rates subject to the jurisdiction of this Commission for the most recently completed calendar year, exclusive of the revenues produced by the surcharge permitted by Section A. The quotient of such division shall be expressed as a percentage.
8. If the utility shall have increased or decreased its rates under this Commission’s jurisdiction during or after the most recently completed calendar year, it shall include in its computation the appropriate adjustments to items 2, 4, 5, 6, and 7, as if such increased or decreased rates had been in effect for all of such year.
9. The surcharge imposed shall not exceed the percentage determined by item 7, subject to the adjustments prescribed by item 8.
10. Any public utility which, prior to the effective date of its initial surcharge permitted by this order, shall have placed new rates in effect, or has filed a proposed rate increase, which include any compensation for the tax increases referred to in section A, shall adjust those rates or filings to eliminate such compensation, and instead incorporate those increases in the surcharge permitted by this order as prescribed by section A.
B. Every tariff or supplement imposing such surcharge shall provide that the utility will recompute the surcharge, using the elements prescribed by section A:
1. Whenever any of the tax rates referred to in section A is changed, in which case the recomputation shall take into account the changed tax rate.
2. Whenever the utility makes effective increased or decreased rates under this Commission’s jurisdiction, in which case the recomputation shall take into account the adjustments prescribed by section A-8.
3. And on March 31, 1971, and each year thereafter.
C. Every tariff or supplement imposing such surcharge shall also provide that every recomputation prescribed by section B shall be submitted to this Commission within ten days after the occurrence of the event or date which occasions such recomputation; and that if the recomputed surcharge is less than the one then in effect the utility will, and if the recomputed surcharge is more than the one then in effect the utility may, accompany such recomputation with a tariff or supplement to reflect such recomputed surcharge.
D. Every tariff or supplement filed pursuant to this order shall carry an effective date which shall be ten days after its filing with this Commission, and be applicable for service rendered on or after the effective date.
E. Nothing in this order shall be deemed to preclude this Commission from investigating the financial affairs of any utility and, in appropriate cases, ordering refunds or other proper remedies for its customers. This order is intentionally couched in permissive rather than mandatory language, to preclude the possibility that any surcharge imposed hereunder is a Commission-made rate.
Cross References This section cited in 52 Pa. Code § 54.94 (relating to recovery of changes in State tax liability); 52 Pa. Code § 54.97 (relating to State tax adjustment surcharge); and 52 Pa. Code § 69.51 (relating to definitions).
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