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Transmission Asset Sales: Running the Regulatory Gauntlet

There are many considerations and obstacles to overcome before transmission assets can be bought or sold.
Fortnightly Magazine - May 15 2003

tax purposes than for ratemaking purposes. Typically, the accumulated deferred taxes balance, which at any point in time is the difference between a property's book and tax basis, is treated as zero-cost capital for rate purposes. When a utility sells an asset, the accumulated deferred taxes become payable, and it loses the benefit of any such zero cost capital. In past transactions in which transmission assets have been sold, the buyer has typically reimbursed the seller for the lost tax benefit and has sought to reflect the additional consideration paid in future rates to be paid for transmission services. This is potentially allowable under the exception to the general principle of original cost ratemaking allowing recognition of the premium paid by the buyer where the transaction will ultimately benefit ratepayers. -

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