Opinion ID: 1902608
Heading Depth: 1
Heading Rank: 4

Heading: operating income

Text: The Commission has, over the years, as in rate base design, established precedent for the proper and lawful method of calculating operating income. The adjusted operating income applicable to the Company's retail electric service for the twelve months ended November 30, 1978, as presented by the Company, is as follows: Operating revenues $945,680,698 Operating expenses: Operation and maintenance expenses 590,287,857 Depreciation expense 116,058,191 Amortization of plant acquisition adjustments 16,082 Amortization of property losses 7,100,887 Amortization of investment tax creditCredit (1,630,912) Taxes other than income taxes 63,320,432 Income taxesFederal (27,140,555) State (3,060,884) Provision for deferred income taxes 54,983,989 Provision for deferred income taxesCredit (19,087,858) Provision for investment tax credits 6,185,000 ___________ Total electric utility operating 787,032,229 ----------- expenses Net electric utility operating income $158,648,469 ============ Portion of Above Applicable to Retail Service Operating revenues $861,759,666 Operating expenses 761,877,625 ____________ Operating income $144,882,041 ============ For testing return on rate base there is added to the computations above the allowance for funds used during construction account separated to retail in the amount of $47,853,125. The total return which will be available to the Company to meet its capital requirements consists of both operating income and the below the line item of allowance for funds used during construction (AFUDC). The total amount of AFUDC included in the retail return is $47,853,125. Numerous adjustments to operating income were proposed by parties of record. We find these adjustments not to be well founded and are inconsistent with the past action of this Commission. There is no compelling evidence of record which would justify our departing from precedent in regards to treatment of operating income except the following adjustment of the Commission. The evidence of record indicates clearly the distressed financial condition of the Company. The Company has laid off employees and taken numerous measures to cut back on expenditures. The construction program has come to a complete standstill. One measure the Company did not and has not taken is a reduction in the executives salaries. In fact, the executives received an increase in salaries during the test period which to us indicates poor judgment. We feel that the action taken by the Company was not proper and we are hereby deducting from retail electric operating expenses the amount of all executives salaries above $50,000 per person. This total amount is $288,574. The net effect on the retail electric operating income is to increase the operating income of $144,882,041 by $146,061 resulting in adjusted retail electric operating income of $145,028,102. Taking into consideration the adjustments mentioned above, the test period operating income applicable to the retail portion of the Company's operation is $192,881,227 computed as follows: $145,028,102 Adjusted retail electric operating income 47,853,125 AFUDC (including tax effect on debt portion) ____________ $192,881,227 Total test year operating income.