Friday, January 12, 2018
In a letter Thursday to Ted Thomas, chairman of the Arkansas Public Service Commission, Gov. Asa Hutchinson asked the commission "as expeditiously as possible" to pass on benefits of the recently passed federal corporate tax cut to Arkansas ratepayers.
Congress passed a bill in December that reduced the federal corporate tax rate from 35 percent to 21 percent.
"As you know, investor-owned utilities have a monopoly, regulated by the Public Service Commission, on providing electricity and natural gas services to Arkansas' families and businesses," Hutchinson wrote to Thomas. "Arkansas law allows utility providers to charge rates that recover the cost of providing utility service plus a rate of return on investment."
Federal income taxes paid by the utility are included in those costs, Hutchinson said. Lowering the corporate tax rate is a reduction in costs charged to Arkansas ratepayers, Hutchinson said.
The commission's general staff already has been evaluating the best way to address the tax change and how utility rates should be adjusted, said John Bethel, executive director of the commission's general staff.
It is likely the commission will address the situation in the near future, Bethel said. The commission has no way of estimating how much rates will change, Bethel said.
"A change in the corporate tax rate is something that doesn't happen often," Bethel said, and each utility in the state will be affected differently.
The last time the commission faced a similar situation was in December 1986, when Congress lowered the corporate tax rate from 46 percent to 34 percent, Bethel said.
By April 1987, the commission had determined the rate changes for most of the state's utilities, Bethel said.
Entergy Arkansas, which has about 715,000 customers in the state, believes that the tax legislation will benefit its customers, said Kerri Case, spokesman for Entergy.
"We look forward to working with our regulators to implement the benefits of these lower tax rates," Case said. "These lower tax costs come at a time when our utility is making significant investments to modernize our electric infrastructure in order to better serve our customers, and they will help us keep rates down."
CenterPoint Energy is reviewing the federal tax measure to determine what impact it will have on the utility's 2017 financial statements, said Alicia Dixon, spokesman for the utility, which has about 403,000 customers in Arkansas.
After the review, CenterPoint will update regulators accordingly, Dixon said.
The tax measure will affect every utility differently based on their regulatory environments and each company's deferred tax constructs, Dixon said.
"As an industry, it was emphasized that any final legislation should include important provisions that will benefit customers," Dixon said. "The lower tax rate, along with other key elements in the Tax Reform Bill, should allow customers the benefit of continued utility infrastructure investment and the opportunity to reduce costs driven by lower federal tax rates."
Nationally, some utilities have already determined the cost savings their customers will get.
Baltimore Gas & Electric Co. said it will pass on $82 million in savings to its customers, which will lower bills by an average of $4.27 a month.
Pepco, which has almost 300,000 customers in the Washington, D.C., area, has announced that it will file with its Public Service Commission in early February with its plans to provide savings to customers.
Business on 01/12/2018
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