Opinion ID: 1929636
Heading Depth: 2
Heading Rank: 1

Heading: Incremental Income Taxes

Text: OPC contends that the cash working capital allowance should have been reduced by the amount of the incremental income taxes associated with the increased revenues from the rate increase. The Commission, however, rejected such an adjustment, noting that additional taxes would have no effect on the computed expense lag. The Company used a lead-lag study, [3] based upon test period experience data, to calculate the cash working capital allowance. In the lead-lag study relied upon by the Company, dollar day lead or lag times were assigned to income tax payments and, thus, the incremental tax payments were taken into account in the Company's calculations. In choosing to credit the Company's cash working capital allowance calculation, the Commission implicitly took into consideration the fact that actual expenses and actual revenues in the utility's actual year may vary from those in the test year used in the study; this, however, should have no effect on the calculated expense lag. We defer to the Commission's use of a lead-lag methodology in calculating cash working capital allowance and, consequently, conclude that the Commission did not err in refusing to reduce the cash working capital allowance by the amount of the incremental income taxes.