December 23, 2022
ER18-1182-001, EL23-11-000
I concur in part and dissent in part from today’s order[1] affirming in part and modifying in part the Initial Decision issued by the Presiding Judge in the captioned proceeding.[2] I concur in part to the extent that the order finds that the Commission may not lawfully direct a refund based on factual premises now known to be untrue. According to the Initial Decision, “[t]he central question in this proceeding is whether $147.3 million related to nuclear decommissioning tax deductions, now under [U.S. Internal Revenue Service (IRS)] audit, constitutes unprotected Accumulated Deferred Income Taxes (ADIT) required to be returned to customers pursuant to the filing.”[3] I dissent to the extent the Commission did not find this proceeding mooted as a result of the change in circumstances brought about by the resolution of SERI’s uncertain tax position following the completion of the IRS audit.
This issuance institutes a proceeding in Docket No. EL23-11-000 to determine whether it is unjust and unreasonable that System Energy Resource, Inc. (SERI) has failed to return to customers the value of excess ADIT prior to IRS resolution of SERI’s nuclear decommissioning tax deductions. It directs SERI to either: (1) propose revisions to its Unit Power Sales Agreement (UPSA) to return the appropriate amounts to customers; or (2) show cause why it should not be required to do so.[4]
I write separately to note that the issuance acknowledges that the IRS has now resolved SERI’s 2015 uncertain tax position regarding its nuclear decommissioning tax deductions.[5] According to SERI, it is now established that its tax position resulted in approximately $13.4 million of unprotected excess ADIT and that there is thus no set of circumstances that could result in SERI being found to have the entire $147.3 million in unprotected excess ADIT that was identified by the Initial Decision issued in the captioned proceeding.[6] Thus, the majority is quite correct to state that it “is now only required to return the recomputed amount of excess ADIT.”[7] However, despite the acknowledged resolution of this issue, the order nevertheless states that the amortization of the ADIT is to be determined later and may share issues in common with those raised in Docket No. ER21-129-000.[8]
Yet, the very filing SERI is directed to make here has already been made and has been pending before the Commission since the fall of 2020. As SERI explained in its Motion to Vacate in this proceeding, it had already “filed in Docket No. ER21-129-000 to return to customers approximately $13.4 million in excess ADIT related to the actual resolution of that formerly uncertain tax position. The Commission should, therefore, vacate the Initial Decision because it has been rendered moot by the resolution of the formerly uncertain tax position.”[9] As SERI further explained, “[r]endering a decision on the Initial Decision that has been overtaken by changed circumstances would serve no useful purpose and would create significant administrative inefficiencies without providing any advantages to the public interest.”[10]
In its December 8, 2020 filing in Docket No. ER21-129-00, SERI stated that:
when the Tax Cuts and Jobs Act of 2017 was enacted, SERI re-measured the Account 283 balance to reflect the lower federal income tax rate (21%). The difference between the original balance and the post-Tax Cuts Act balance was approximately $147.3 million. This amount was not considered excess ADIT owed to customers because of the expectation that the underlying [Cost of Goods Sold] Tax Position would require SERI to pay taxes at the federal income tax rate in effect in 2015. Consequently, SERI expected that some or all of the $147.3 million would be owed to the IRS.[11]
SERI explained that it made the October 16, 2020 filing to provide the “concrete and quantifiable” unprotected excess ADIT of $13,353,906 to customers as soon as possible following resolution of its uncertain tax position by the IRS.[12]
Yes, SERI is also directed to provide documentation in its compliance filing regarding whether its uncertain tax positions from tax years 2016 and 2017 have also been resolved by the IRS. But, again, the majority has also already directed SERI to address this very issue in Docket No. EL18-152-001: “If uncertain tax positions taken in tax years 2016 and 2017 have each individually been resolved by taxing authorities, then all necessary and proper documentation supporting the resolution for each tax year shall also be provided as required under Issue 6, to support the computation of excess ADIT.”[13]
According to the majority also in Docket No. EL18-152-001, “[t]he record indicates that SERI’s uncertain tax positions taken in prior tax years (2004 to 2014) have been resolved, but SERI has never made a request to change those resulting ADIT balances for accounting and reporting purposes.”[14] The majority there too “require[s] a refund amount that appropriately captures the revenue requirement impact resulting from the exclusion of all ADIT amounts resulting from SERI’s decommissioning uncertain tax positions during the entire 2004 to present period of noncompliance.”[15] SERI is required to “compute a refund amount that considers all ADIT amounts resulting from SERI’s decommissioning uncertain tax positions, and also considers the timing of when such uncertain tax positions were actually resolved by taxing authorities, such that the ADIT balances used to compute the revenue requirement only include those balances for periods during and until the tax position was actually resolved.”[16] “The refund amount shall be clearly computed for each year, with interest, and include all necessary and detailed documentation to support the timing of the taxing authority’s resolution of all previous tax positions.”[17] Fair enough. And I concur to the extent the order finds that the Commission may not lawfully direct a refund based on factual premises now known to be untrue.
But we should pause to ask, what exactly is the Commission trying to accomplish with these duplicative and burdensome inquiries that seek to extinguish uncertainty that no longer exists? Surely it cannot be lost on the majority that its own order recognizes that “because we are directing SERI to recompute excess ADIT in the instant proceeding, and will subsequently determine its amortization . . . the resolution of these issues may entirely overlap with the resolution of issues raised in Docket No. ER21-129-000.”[18]
We should not be wasting everyone’s time with these requirements. We already have or will receive answers to all of the questions posed above in other proceedings.
For these reasons, I respectfully concur in part and dissent in part.
[1] Sys. Energy Res., Inc., 181 FERC ¶ 61,244 (2022) (Order).
[2] Sys. Energy Res., Inc., 172 FERC ¶ 63,003 (2020) (Initial Decision).
[3] Id. P 1.
[4] Order, 181 FERC ¶ 61,244 at P 2.
[5] Id. P 116.
[6] Id. P 38.
[7] Id. P 116.
[8] Id. P 117.
[9] System Energy Resource, Inc. November 24, 2020 Motion to Vacate at 1 (emphasis in original).
[10] Id. at 1-2.
[11] System Energy Resource, Inc. December 8, 2020 at 2.
[12] Id. at 3.
[13] La. Pub. Serv. Comm’n v. Sys. Energy Res., Inc., 181 FERC ¶ 61,243 at P 341 (2022).
[14] Id. P 324.
[15] Id. P 323 (emphasis in original); cf. Order, 181 FERC ¶ 61,244 at P 182 (“[T]he Commission requires SERI to compute a refund amount, with interest, that appropriately captures the revenue requirement impact as a result of the exclusion of all ADIT amounts resulting from SERI’s decommissioning uncertain tax positions during the entire 2004 to present period.”) (citing La. Pub. Serv. Comm’n v. Sys. Energy Res., Inc., 181 FERC ¶ 61,243 at P [323]).
[16] La. Pub. Serv. Comm’n v. Sys. Energy Res., Inc., 181 FERC ¶ 61,243 at P 323.
[17] Id.
[18] Order, 181 FERC ¶ 61,244 at P 117 (emphasis added).