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<br />I <br />. <br />I <br />I <br />I <br />I <br />I <br />I <br />'. <br />I <br />I <br />I <br />I <br />I <br />I <br /> <br />" <br /> <br />I <br />I <br />I <br />II <br /> <br />12 <br /> <br />EFFECT ON FEDERAL AND LOCAL TAX REVENUES <br />Durina the April subcommittee hearings, the utilities claimed that, as a <br />result of accepting their offers to wheel Project energy, some $4 million <br />weul. aCCll'Ue to state and federal treasuries in the form of added tax revenues. <br />This statement cannot be even approximately reconciled'with the utility trans- <br />mission system investment proposed, expected revenues from utility wheeling <br />offers, and past records of utility financial operations as reported to the <br />Federal Power Commission. <br />,Consider first the wheeling revenues of about $8 million annually expected <br />from a system investment of what is now something over $100 .mi11ion with the <br />three 230 kv lines Arizona Public Service Company proposes from Glen Canyon to <br />Phoenix. These revenues are less than 8% of first cost, whereas about 12% <br />would be required to repay all costs including taxes, and provide a normal <br /> <br />return on steadily depreciating investment. The indication of these figures is <br /> <br />that such revenues could not provide enough for return for stockholders and, <br /> <br />hence, there would not be federal income taxes applicable to these wheelinl <br />revenues, Again, we should emphasize the importance of the utility wheeling offers <br />beine subject to regulation. A review of such an earnings position would force <br /> <br />the regulatory authorities to order an increase in wheeling rates. <br /> <br />From a second viewpoint, if the claim is made that only a part. of the $100 <br />million investment is devoted to wheeling, and that $8 million is an adequate <br />revenUe to produce normal return, we can roughly determine that part. At'12% <br />fixed charges, $8 million would be adequate for a system costing about $66 million. <br />It is certainly not consistent reasoning to conclude that the utilities can build <br />thei~ portion of the combined system for some two thirds of what the Bureau esti- <br />mates as construction costs for similar facilities. <br /> <br /> <br />Finally, past utility records of the Federal Power Commission show utilities <br /> <br /> <br />in this area devote about 22% of their annual gross revenues to federal and local <br /> <br />i <br />