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Texas Court Ruling Opens Door on Tax Cost Recovery

Fortnightly Magazine - June 15 1995

Texas Utilities Electric Co. and Gulf States Utilities are looking to an April 13 Texas Supreme Court decision (involving GTE-Southwest) that says the state PUC need not employ the actual taxes paid method in setting utility rates. Gulf States will now amend its appeal of a March 20 Texas PUC order forcing a $52.9-million rate reduction, which had included a $25.8-million actual taxes paid component. Texas Utilities had put its faith in legislative relief, but saw its hopes dashed in late April when a Texas state senate committee defeated a proposal to take up the matter. Under the actual taxes paid method, Texas Utilities might have to pay the IRS up to $1.3 billion, and lose up to $100 million annually of accelerated tax depreciation.

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