The Power of Tax Reform: Utility Companies Lower Rates For Consumers Because Of Tax Cuts and Jobs Act
WASHINGTON, D.C.— Not only has the Tax Cuts and Jobs Act given a jolt to the economy with companies announcing bonuses, pay raises, new hiring, and more investments, but the bill is also striking a chord with power companies seeing the utility of lowering rates for their consumers as a direct result of the savings they see under the new law.
This will come as a shock to Democrats who were unplugged from reality just days before the bill's passage, claiming it would result in Armageddon. Perhaps now they will see the light and flip the switch on their rhetoric, as millions of their constituents see lighter bills and more money in their wallets.
Take a look at the utility companies planning to lower rates for consumers:
Arizona (Arizona Public Service Co.):
- Arizona Public Service Co. wants to cut about $4.70 from the average residential customer's monthly bill thanks to the tax changes that President Donald Trump signed into law last month.
- The state's biggest electric company announced the proposal Tuesday, and is seeking to have the reduction take effect in February.
- The average household in APS territory uses about 1,100 kilowatt-hours of electricity a month, and with that usage, the reduction would be $4.68, or about $56 a year. Homes using more electricity would see bigger savings.
- APS will be able to reduce its revenue by $119 million because that is the estimated savings the company will see moving from a tax rate of 35 percent to 21 percent, the company said.
- APS officials told regulators at the Arizona Corporation Commission that they still are calculating all possible savings from the federal legislation adopted Dec. 23, but rather than wait, they want to offer a reduction now and a further reduction later once the more detailed changes are fully understood.
- "APS anticipates additional tax cut savings will be available at a later date once the full impact of the new law is realized," the company announcement said.
- APS serves more than 1.1 million customers across the state, and serves about half the homes and businesses in the metro Phoenix area.
- Other Arizona electric, gas and water utilities could present similar plans. After the tax legislation passed Congress last month, Arizona Corporation Commissioner Justin Olson asked all regulated utilities in the state that collect tax revenue through customers to submit comments to the regulators on possible rate cuts.
Illinois (Commonwealth Edison Company):
- ComEd is filing a petition with the Illinois Commerce Commission (ICC) seeking approval to pass along approximately $200 million in tax savings to its customers in 2018. If approved by the ICC, the average ComEd residential customer can expect to see an estimated $2-$3 decrease on their monthly bill related to the tax reduction.
- The Tax Cuts and Jobs Act (TCJA), which was signed into law on Dec. 22, 2017 and became effective on Jan. 1, 2018, decreased the corporate tax rate from 35 percent to 21 percent, reducing the amount of federal income tax ComEd will have to pay.
- “ComEd is able to promptly provide Illinois customers with the benefits of the federal tax reduction as a result of the fast action of the Illinois Commerce Commission and the new rate case design introduced by the Illinois General Assembly in the 2011 Smart Grid law. The Smart Grid law has delivered best on record reliability, thousands of jobs and now the prompt return of tax reduction benefits to Illinois consumers,” said Anne Pramaggiore, ComEd President and CEO.
Kentucky (Kentucky Utilities):
- Lower federal taxes for several Kentucky utilities is likely to mean savings for hundreds of thousands of customers under an order from the state Public Service Commission.
- This week, the commission ordered for-profit utilities, including Kentucky Utilities, which provides electricity in Lexington and other cities, to track the amount of money they save from lower federal taxes.
- The two orders pave the way for the savings to be passed on to customers, according to a news release from the commission.
- In addition to tracking how much they save from lower taxes, the PSC ordered utilities to calculate the excess amount of their future tax liabilities, which will need to be refunded to ratepayers, according to the commission.
- “Since ratepayers are required to pay through their rates the tax expenses of a utility. Any reduction in tax rates must be timely passed through to ratepayers,” the PSC said in the orders.
- The orders would affect about 1.5 million customer accounts, said Andrew Melnykovych, spokesman for the PSC...The tax cut will lead to rate decreases ranging from 4 percent to 7 percent depending on the utility.
Louisiana (Louisiana Public Service Commission):
- Gov. John Bel Edwards asked the Louisiana Public Service Commission Wednesday (Jan. 3) to look at lowering utility rates for state residents and businesses now that utility companies won't have to pay as much in federal taxes.
- Edwards, a Democrat, said current utility rates have been set based on utility companies having to pay more in federal income taxes than they will under a new tax plan Congress recently approved.
- Since the law drops federal income tax rates considerably for utilities, the utility rates should be reworked to reflect the lower costs for companies, according to Edwards. The governor said Dominion Energy has already announced a rate reduction in South Carolina for that state's residents.
- "We hope to hear similar news from Louisiana companies as they carefully review the impact of the federal tax legislation on their bottom lines," Edwards wrote in a letter to the Public Service Commission Wednesday.
- Edwards will also be sending a similar letter to the New Orleans City Council, which sets utility rates for city residents and businesses. The Public Service Commission regulates utilities for most parts of Louisiana, but New Orleans in an exception. The city council oversees rates at Entergy New Orleans.
- Public Service Commission chairman Eric Skrmetta, R-Metairie, said Thursday that the five-member elected commission already is looking at the issue. At the board's December meeting, Skrmetta directed utility companies to report back in February about possible savings tied to the new federal tax laws.
- "Once all the data is collected, the Commission will order that all necessary and legal rate modifications are enacted and refunds in the form of credits and that future rate reductions are put into effect," Skrmetta wrote in a letter to Edwards Thursday. "We are eager to see our consumers reap the benefits of the new tax code's impact on utility corporations."
Baltimore Gas & Electric:
- BGE will file with the Maryland Public Service Commission (PSC) to pass approximately $82 million in annual tax savings to customers, resulting from federal tax cost reductions. The Tax Cuts and Jobs Act, which decreased the corporate tax rate from 35 percent to 21 percent, was signed into law on Dec. 22, 2017 and became effective on Jan. 1, 2018. If approved by the PSC, the average BGE residential electric customer can expect to see an estimated $2.31 decrease on their monthly bill, and the average residential combined natural gas and electric customer can expect an estimated $4.27 monthly reduction, effective in February 2018.
- “Reduced tax costs create an opportunity for BGE customers to benefit from further decreases in their total energy bills,” said Calvin G. Butler Jr, chief executive officer of BGE. “Even prior to the tax reductions, the long-term trends of customers using significantly less energy and the declining costs of natural gas and electricity commodities have resulted in the average BGE residential customer’s total monthly bill remaining lower than 2008 levels.”
- Pepco and Delmarva Power today announced they will file with the Maryland Public Service Commission in early February, outlining plans to provide annual tax savings to more than 770,000 electric customers in Maryland. If approved, Pepco and Delmarva Power would plan to begin providing a credit lowering customer bills beginning in the first quarter of 2018.
- The tax savings are the result of federal tax reductions under the new Tax Cuts and Jobs Act, which was signed into law on Dec. 22, 2017, and became effective on Jan. 1, 2018. The decrease in the Corporate Tax Rate from 35 percent to 21 percent reduces the amount of federal income tax Pepco and Delmarva Power will have to pay.
- “The tax law will result in lower bills for our customers and lower taxes for Pepco and Delmarva Power,” said Dave Velazquez, President and CEO, Pepco Holdings, which includes both Pepco and Delmarva Power. “We are pleased to provide these savings to our customers, while at the same time ensuring we are making prudent investments in the local power grid to maintain the safe, reliable, and affordable service our customers have come to expect.”
- Eversource electricity customers in Massachusetts are getting a break on their monthly bills thanks to the corporate tax cut passed last month by Congress.
- In November, state regulators approved a combined $37 million in rate increases for customers in the company’s eastern and western Massachusetts service areas. But since rates are based on the company’s costs, including federal taxes, Eversource said it will pass on almost $56 million in savings from the new tax bill to its 1.4 million customers in the state.
- “If taxes are reduced ultimately, costs are reduced and that benefits our customers,” Craig Hallstrom, Eversource’s president of Massachusetts electric operations, said in a statement on Wednesday.
Missouri (Missouri Public Service Commission):
- Investor-owned utilities in Missouri have until Jan. 31 to report how much money they will save from recently enacted federal tax cuts, the Missouri Public Service Commission ordered today, the first step toward a potential rate cut for consumers.
- A joint filing of industrial users and the official consumer advocate argued that consumers should reap the benefits. The PSC regulates for-profit monopoly suppliers of utility services and the federal taxes those utilities pay is included in the calculation of rates paid by commercial and residential users.
- The filing from the Office of Public Counsel, the Missouri Industrial Energy Consumers and the Midwest Energy Consumers Group was delivered Tuesday as initial comments on the rate case. The PSC staff initiated the case.
- The result could be significant rate cuts. After the 1986 federal tax cut, most investor-owned Missouri utilities were required to cut rates or forego scheduled rate hikes.
- In Boone County, a cut in rates from the tax savings could benefit Ameren natural gas customers in Columbia, Ashland and other cities, and Ameren electric customers in Hallsville, Centralia and Ashland. Ameren is the service provider for 130,000 gas customers in central Missouri and 1.2 million electric customers in central and eastern Missouri.
- The 1986 law cut the federal corporate income tax rate from 46 percent to 34 percent. The magnitude of the rate impact was felt at the time by Ameren, then Union Electric, which began producing electricity at the Callaway Nuclear Power Plant in 1985. When the power plant went online, customer rates increased 14 percent, with an additional increases of 10 percent scheduled for 1986. Afterward, rates were to increase 7.3 percent per year for four additional years. In April 1987, the commission reduced the future rate hikes due to the nuclear plant to 4.6 percent per year and in December 1987 eliminated them entirely.
Montana (Montana Public Service Commission):
- Montana regulators want to make sure utility customers benefit from the recently passed tax overhaul that reduces corporate tax rates starting next year.
- The Public Service Commission directed regulated utilities to calculate the change in tax liability they expect under the Tax Cuts and Jobs Act and, by the end of March, offer proposals for how it would apply the savings.
- Corporations currently pay a 35 percent tax rate that is passed on to consumers. Under the new tax bill, the rate will be reduced to 21 percent. Commission staff estimated the new tax law will lower taxes on Montana utilities by tens of millions of dollars a year.
- “The commission wants to ensure that this money is not simply captured by shareholders, but instead is directed in a way that provides a long-term benefit to the consumer,” Commission Chairman Brad Johnson said in a statement.
- NorthWestern Energy’s electric and natural gas utilities are required to make the calculations as is the electric service of Montana-Dakota Utilities. Natural gas utilities under Energy West and MDU will have their rates adjusted for the effect of the new tax law as part of rate cases pending before the PSC, the commission said.
- Commissioner Roger Koopman said utilities “can issue customer refunds, use the money as a source of zero cost financing for capital projects, direct the funds to offset large, unusual expenses or propose some combination of these three applications.
- “I suspect the commission will be strongly inclined toward ratepayer refunds,” Koopman said in a statement.
Oklahoma (Oklahoma Corporation Commission):
- Most Oklahomans can expect to start seeing a lower utility bill in the mail later this year. The Oklahoma Corporation Commission voted Tuesday to transfer about $150 million a year in new corporate tax cuts to the customer.
- Five of the state’s largest utility companies are seeing the largest tax breaks under the new federal law. They are OG&E, PSO, AOG, ONG and Centerpoint Energy.
- The lowered rates will be retroactive from Jan. 9, so when your bill is lowered you will also see a refund with interest.
Oregon (Pacific Power):
- Pacific Power says they are committed to passing the benefit of this tax cut on to customers.
- “We strive to provide our customers reliable service while keeping rates low,” said Stefan Bird, President and CEO of Pacific Power. “The benefit of this tax cut should be passed on to our customers – and we will work with our regulators and stakeholders on the best way to do that.”
South Carolina (Dominion Energy):
- Dominion said that it plans an average 5% rate reduction for SCE&G customers, thanks in part to to lower corporate taxes under the new federal tax law in Washington.
- Dominion said the rate cut would lower the average SCE&G customer's electric bill by more than $7 a month.
- "It would lock in significant and immediate savings for SCE&G customers -- including what we believe is the largest utility customer cash refund in history," said Dominion chairman and CEO Thomas F. Farrell II said in a statement.
South Dakota (South Dakota Public Utilities Commission):
- Regulated utilities pass the costs of federal taxes to their customers, and South Dakota Public Utilities Commission (PUC) Chairperson Kristie Fiegen believes that federal tax savings should also be passed along.
- “If companies will experience a reduction in taxes, the expectation is, those savings should flow to consumers,” Fiegen said.
- The commission has set a Feb. 1 deadline for regulated utilities to submit reports on how the new tax law will affect their cost of service. After submitting those reports, the PUC will work with the utilities to ensure that the customers are the primary beneficiaries of the saved money.
- Some options that may be considered include rate reductions and infrastructure upgrades that could save consumers money over time.
- Montana-Dakota Utilities released a statement Thursday indicating that the company has begun preparing its report for the PUC. Black Hills Energy said in a statement that it is currently studying the new tax law and will work with utility regulators to provide customers the benefit of the corporate rate reduction.
Utah (Rocky Mountain Power):
- Rocky Mountain Power says it plans to pass some of its federal tax savings on to customers.
- "We strive to provide our customers reliable service while keeping rates low," said Cindy Crane, President and CEO of Rocky Mountain Power. "The benefit of this tax cut should be passed on to our customers — and we will work with our regulators and stakeholders on the best way to do that."
Washington, DC (Pepco):
- Pepco says it is working on plans to give tax reductions to over 296,000 D.C. electric customers as a benefit of tax breaks the company is receiving from the federal government.
- Under new federal tax reductions from the recently passed Tax Cuts and Jobs Act, Pepco says its Corporate Tax Rate decreased from 35 percent to 21 percent.
- “The tax law will result in lower bills for our customers and lower taxes for Pepco,” said President and CEO of Pepco Holdings Dave Velazquez in a statement.
- “We are pleased to provide these savings to our customers, while at the same time ensuring we are making prudent investments in the local power grid to maintain the safe, reliable, and affordable service our customers have come to expect.”
To see the growing list of companies increasing wages, investments, jobs, and bonuses because of the Tax Cuts and Jobs Act, click here.