I am just wondering where exactly do the rules say this?

thanks!

The rules do not say this. It's Magic Blast that the poster is thinking of.

Unlimited Rules, Page 10:

"Ranged combat formations can only be used when the attack is only going to affect a single figure, and the intent is to damage (not heal) it."

Note the wording; "...going to affect..." This precludes using a ranged combat formation with Flame/Lightening, at least when that attack will affect more than just the target fig.

*** Amotep gunners are far superior to the ** Amotep gunners. +1 attack across the board, +2" range, all for +2 points.

The *** amotep gunner is the definitive broken figure.