Exercise 8-8 Equipment repairs and rate regulation (LO 8-2) In 20x1, Illinois Power & Heat spent $5 million repairing one of its electrical generating stations that was damaged by a tornado The loss was uninsured Management has asked the public service commission for approval to treat the $5 million as an asset for rate making purposes rather than as an allowed expense. Additional information: Allowed operating costs (before loss): $600 million per year. Allowed return on assets: 8% of beginning-of-period assets. Assets in service: $1,600 million Depreciation method if loss is capitalized: Straight-line over five years. Estimated demand: 14,000 million KWH per year. Rates are set annually. Required: 1. What difference will the commission's decision make to the allowed rate in 20x1? 2. What difference will the commission's decision make to the allowed rate in 20x2