Potomac Electric Power Co. wants to charge ratepayers for $11.2 million in additional federal income taxes it owes as part of the after-effect of a raise in city taxes mandated by the City Council back in 1983.
The City Council had raised the gross receipts tax on utilities in the District from 6 percent of total revenue to 6.7 percent. Also, the Public Service Commission changed the method for collecting the tax.
In effect, the utility had to pay two years' worth of taxes at the same time that year because of the new collection method, said Nancy Moses, a Pepco spokeswoman. The new collection method also reduced the amount of deductions that Pepco could take on its federal income taxes.
The PSC allowed a surcharge at that time to be placed on all classes of customers for 36 months to recover expenses associated with a new method of collecting tax.
But the PSC did not at that time, or in subsequent cases, resolve the issue of who would pay additional federal income taxes associated with the new collection process.
The utility is now proposing to extend the existing surcharge another 13 to 15 months to recover additional income taxes associated with it. The surcharge varies depending on a customer's consumption, but the average residential customer who uses 500 kilowatt hours pays a 48 cent surcharge.
The PSC is now examining whether Pepco should be allowed to receive any additional money to cover income taxes.
A community hearing will be held today at 6 p.m. at the Public Service Commission at 451 Indiana Ave. NW, Hearing Room 200.