Opinion ID: 2347721
Heading Depth: 1
Heading Rank: 11

Heading: Accelerated Depreciation (State)

Text: Ellsworth, Washburn, Caribou, and Fort Kent have appealed the Commission's decision requiring the flow-through of accelerated depreciation on state income taxes. [40] Their contention is that the Commission changed its policy of permitting normalization on post-1969 qualifying property in computing their state income tax expenses without giving them adequate notice prior to the consolidated hearing that the Commission was contemplating such a change. [41] We find this due process argument to be without merit. Due process safeguards extend to hearings before state administrative agencies such as the Commission where a deprivation of the utility's property is plainly in issue. Smith v. Pennsylvania Public Utility Commission, 192 Pa.Super. 424, 162 A.2d 80 (1960). The outer limits of the due process clause in a public utility rate proceeding we need not here decide for it undoubtedly includes notice to the utility sufficient to enable it to present evidence on any issue relevant to that proceeding. Alabama-Tennessee Natural Gas Co. v. Federal Power Commission, supra at 341. Where, however, the Commission is contemplating a change in a long-standing policy which would adversely affect a utility, a general notice of a rate proceeding may not be sufficient. New England Telephone and Telegraph Co. v. Department of Public Utilities, Mass., 354 N.E.2d 860, 871 (1976). In such circumstances, due process may require a more particularized notice so that the utility could introduce evidence on that issue if it so desires. Alabama-Tennessee Natural Gas Co. v. Federal Power Commission, supra at 341; New England Telephone and Telegraph Co. v. Department of Public Utilities, supra at 871. In this case, the Commission had a long-standing policy of permitting normalization of state income taxes. However, the Companies did not receive merely a general notice of a rate hearing. They received a particularized notice of the consolidated hearings which stated: [T]he . . . cases . . . are consolidated for the purpose of trying and resolving together the issues of the proper fair rate of return, the proper federal income tax rate, the proper management and service contract expense to be used for rate-making purposes, the propriety of normalization of depreciation for tax purposes and the propriety of depreciation on contributed property, . . . . (emphasis supplied). The propriety of normalization for income tax purposes was not limited in the notice to federal income taxes. When this broad language is juxtaposed to other, more specific, language in the notice such as the proper federal income tax rate the Companies should have been aware that the propriety of normalization could include state income taxes. That the Companies were consciously aware that normalization was in issue becomes evident from their requested findings of fact which stated: That the Commission allow normalization of income tax expense which results from the use of liberalized depreciation for income tax purposes (both State and Federal). Even if we were to assume, which we do not, that the Companies did not receive adequate notice that the normalization of state income taxes would be in issue, they must show substantial prejudice in order to succeed on their due process claim. Arthur Murray Studio, Inc. v. Federal Trade Commission, 458 F.2d 622, 624 (5th Cir. 1972). The Companies testified in support of normalization for federal income tax purposes. Since they would have used the same arguments for normalizing state income taxes, we fail to see how they were prejudiced. Memphis Light, Gas and Water Division v. Federal Power Commission, 163 U.S.App. D.C. 130, 138-39, 500 F.2d 798, 806-07 (1974). [42]