Public Utilities:

Information on the Cash Position of the Natural Gas and Telephone Industries

RCED-88-97: Published: Feb 26, 1988. Publicly Released: Feb 26, 1988.

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In response to a congressional request, GAO examined the natural gas and telephone industries' financial positions to determine whether the apparent improvement in the industries' available cash levels would enable utilities to return excess deferred taxes resulting from the Tax Reform Act of 1986 to utility ratepayers in a shorter time period than the act required.

GAO found that the natural gas industry's: (1) cash availability from 1976 to 1984 was varied but favorable; (2) cash availability after it met major obligations decreased, and the percentage of its total cash from internal operations decreased relative to cash obtained through borrowing and stock sales between 1984 and 1986; (3) cash devoted to construction decreased, while cash used to retire long-term debt and pay dividends increased; and (4) deferred taxes were in excess of $75 million. GAO also found that: (1) although the telephone industry's cash availability declined from 1976 to 1979, it improved from 1979 to 1983; (2) between 1981 and 1983, the industry's cash flow was positive and it could both fund its construction budget and pay dividends from internal sources; (3) between 1983 and 1986, the industry experienced a negative cash flow; and (4) the industry had an excess of $500 million in deferred taxes.

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