Opinion ID: 2173140
Heading Depth: 2
Heading Rank: 2

Heading: Federal Income TaxesPre-1970 Property

Text: In Mechanic Falls Water Co. v. Public Utilities Commission, Me., 381 A.2d 1080, 1101 (1977), we discussed the operation of section 167( l )(1), which concerns pre-1970 public utility property: [10] For pre-1970 property, the Code provides that a utility may use 1) straight-line depreciation, 2) the method used prior to August of 1969 if it also employs normalization, or 3) accelerated depreciation with flow-through, but only if that method was used prior to August of 1969. In interpreting the pre-1970 utility property provision, the United States Supreme Court has declared that a utility may not unilaterally switch from flow-through to normalization. Rather, if a utility is flowing through the benefits of accelerated depreciation, it must continue to do so unless the appropriate regulatory body permits a change. Federal Power Commission v. Memphis Light, Gas and Water Division, 411 U.S. 458, 93 S.Ct. 1723, 36 L.Ed.2d 426 (1973). If, before August, 1969, the Water Companies were using accelerated depreciation with flow-through, they must continue to flow through the benefits of accelerated depreciation with respect to pre-1970 property, unless permitted to change to normalization by the Commission. Moreover, The burden was on the Companies to convince the Commission that a change from flow-through to normalization would be in the public interest. Mechanic Falls Water Co. v. Public Utilities Commission, supra, at 1101. In its decree, the Commission notes that the Water Companies provided no evidence or documentation as to the method of accounting used during the July, 1969, accounting period. See Re Mars Hill & Blaine Water Co., 19 P.U.R. 4th 380, 389 (Me. Pub. Util. Comm'n 1977). [11] The Water Companies may thus be treated as if they used a flow-through method of accounting prior to August, 1969, in accordance with the Commission's long-standing policy of flowing through the benefits of accelerated depreciation. See 35 M.R.S.A. § 307. Moreover, at the time of the proceedings before the Commission, there was no showing that the Commission had ever permitted the Water Companies to change to a normalization method of accounting. The burden was therefore on the Water Companies to seek the Commission's permission to change from a flow-through to a normalization method of accounting. The choice between flow-through and normalization rests in the sound judgment of the Commission. Central Maine Power Co. v. Public Utilities Commission, supra (1957). On the basis of the record we cannot find that the Water Companies have sustained their burden of showing that the Commission abused its discretion in deciding to require the flow-through of the benefits of accelerated depreciation for pre-1970 property. See Mechanic Falls Water Co. v. Public Utilities Commission, supra at 1102.