Electric Utility Tax Reform Act of 1985

Electric Utility Tax Reform Act of 1985 - Amends the Internal Revenue Code to allow the Federal Energy Regulatory Commission and State regulatory authorities to adopt a least system cost plan for regulated public utilities and to establish a rate schedule for such utilities which provides for ratemaking treatment of the investment tax credit and the tax deduction for accelerated cost recovery in such manner as the State regulatory authority determines will further the purpose of such plan.

Defines "least system cost plan" as a plan which provides for meeting demand for electric energy services under which each measure to be implemented is forecast: (1) to be reliable and available within the time it is needed; and (2) to meet or reduce the electric power demand at an estimated incremental system cost no greater than that of the least-cost similarly reliable and available alternative measure or resource.