Gathering Plant FERC accounts as “distribution system” property for the purposes of the DSIC and to apply the DSIC to the Company’s Appalachian Gathering Service class (Rate AGS). The OCA’s Formal Complaint remained pending. On March 13, 2013, the Company filed a Letter stating it did not oppose PIOGA’s intervention. On April 29, 2013, the United States Steel Corporation (USSC) filed a Petition to Intervene in the DSIC proceeding. On June 3, 2013, USSC petitioned to withdraw its intervention petition, and the withdrawal request was granted by the Commission. By Opinion and Order entered July 16, 2013 (July 2013 Order), the Commission approved the Company’s LTIIP. In the same Opinion and Order, the Commission also approved the Company’s DSIC Petition, subject to recoupment and/or refund pending the issuance of a Recommended Decision by an ALJ on certain matters. More specifically, the July 2013 Order directed that the following issues be assigned for hearing and the preparation of a Recommended Decision: Whether field lines that serve residential and commercial customers under Natural Gas Production and Gathering Plant FERC accounts are DSIC-eligible property; Impact of accumulated deferred income taxes associated with DSIC investments; and Calculation of state income tax component of the DSIC revenue requirement. July 2013 Order, Ordering Paragraph 5 at 43-44. On July 19, 2013, BI&E filed a Notice of Appearance in the proceeding.
The ALJ indicated that the OCA later retreated and through its witness Catlin submitted the following explanation in direct testimony: Equitable has included investment in the replacement of gathering or field lines in its DSIC-eligible investment. These lines are included in Account No. 332, which is not explicitly identified as a DSIC-eligible plant account in the Commission’s Model Tariff. However, subject to the conditions that the gathering lines are part of the utility’s distribution system and that all customers who make use of and benefit from the replacement of those lines are required to bear a share of their costs, their inclusion in the DSIC appears to be appropriate. OCA St. 1 at 4. As the OCA did not object to the inclusion of gathering or field lines as DSIC-eligible, as presented in the Company’s presently effective DSIC tariff, the OCA submits that this issue has been resolved without the need for briefs. OCA M.B. at 27, R.D. at 12. Additionally, Peoples - Equitable Division notes that witness Catlin and the OCA are no longer challenging the field lines (FERC Account 322) as DSIC-eligible property. Peoples – Equitable Division M.B. at 8, R.D. at 12. Accordingly, since the OCA has effectively withdrawn its initial position on this issue, the ALJ recommended that the Commission approve the OCA’s withdrawal of this issue. R.D. at 13. Based on our review, we find that the ALJ’s recommendation that we approve the OCA’s withdrawal on this issue is reasonable and appropriate. We note that the ALJ’s decision reaffirms the Company’s intent to include field lines (FERC Account 322) in its list of DSIC-eligible property. Furthermore, the Company has stated that the OCA’s witness Mr. Catlin testified that inclusion of this item as a DSIC-eligible property
depreciation in the calculation of state income taxes is “mandated.” Pa. PUC v. Metropolitan Edison Co., 60 Pa P.U.C 349, 398 (1985). In addition, the OCA argued that, consistent with the Commission’s holding in Jackson Sewer, appellate law and Act 11 requires that the DSIC recover only costs incurred, and that rates cannot include phantom taxes, as follows: [UGI] stands for the proposition that the Commission does not have the authority to permit the inclusion of hypothetical expenses not incurred, and more specifically, establishes the “actual taxes paid” doctrine, prohibiting a utility from collecting “phantom taxes.” OCA M.B. 24-25. Peoples – Equitable Division countered that the OCA’s “actual taxes paid” doctrine does not apply to this DSIC proceeding as it has only been applied to base rate proceedings. The Company argued that the only way of determining its actual taxes paid for state income tax purposes on the plant additions would be to conduct a full rate case tax analysis, which is not consistent with the simple DSIC calculation. Peoples – Equitable Division maintained that the purpose of the state tax gross-up in the DSIC is to simplify the calculation. Therefore, the OCA’s incremental deduction proposal should be rejected because it would incorporate inaccurate tax adjustments into the DSIC and would require a much more complicated and extensive calculation than intended by Act 11. Further, the Company contended that the “actual taxes paid” doctrine is a concept related to base rate proceedings when a utility’s complete tax structure can be analyzed. Company R.B. at 13-14. 2. ALJ’s Recommendation