Opinion ID: 1106788
Heading Depth: 1
Heading Rank: 2

Heading: Materials and Supplies and Cash Requirements.

Text: In disallowing these items the Commission held: We do not think that Materials and Supplies ($1,298,476) or Cash Requirements ($541,856), both aggregating $1,840,332, are entitled to an earnings allowance since they are not carried by bondholder and stockholder investment. The record shows that Southern Bell accrues a substantial sum of money for federal income, property, gross receipts, and miscellaneous taxes in advance of their due dates, and thereby enjoys the use and benefit thereof in its business. The telephone subscribers contribute this money through their monthly bills. During the year ended December 31, 1957, there was an average monthly balance in the accrued reserve of $4,739,467 for the payment of Federal income taxes, $1,444,716 for the payment of property taxes, and $762,710 for the payment of gross receipts and miscellaneous taxes, or an aggregate monthly balance of $6,946,893. In addition, the company enjoyed the benefit of certain operating revenues which were subject to advance billing, averaging $3,050,000 each month during the test period. If the tax accruals alone are considered, it is patent that the telephone subscribers have, thus, made an advance contribution of more than 3.7 times the company's total working capital requirements of $1,840,332. As a consequence, if these subscribers were obligated to pay a return on this working capital, it would be tantamount to a return on funds which they have themselves supplied. And it would constitute unjust enrichment to Southern Bell. In Re South Carolina Generating Co. (1956) 16 F.P.C. 52, 15 P.U.R.3d 289, the Federal Power Commission said: `And, with respect to income tax accruals, we have consistently held that when funds for working capital are supplied by ratepayers and result from the annual lag in income tax payments, the utility has available to it funds which offset capital requirements otherwise to be supplied by investors. To the extent income tax accruals are available from payments by Georgia Power Company, it is inequitable to require it to pay a return upon working capital. Alabama-Tennessee Nat. Gas Co. v. Federal Power Commission, 3 Cir., 1953, 203 F.2d 494, 99 P.U.R., N.S., 141; Northern Nat. Gas Co. v. Federal Power Commission, 8 Cir., 1953, 206 F.2d 690, 1 P.U.R. 3d 310, certiorari denied 1954, 346 U.S. 922, 74 S.Ct. 307, 98 L.Ed. 416.' [7] Here again we agree with the Commission which has so aptly stated the answer to the Company's contentions.