Entergy proposes rate cuts of $466M

U.S.-tax savings mean costs lower

Entergy Arkansas plans to cut its customers’ bills by about $466 million as a result of the federal law reducing corporate income tax rates, the electricity utility said Wednesday.

The federal Tax Cuts and Jobs Act that passed in December reduced the maximum corporate tax rate from 35 percent to 21 percent beginning Jan. 1.

If the plan is approved by the Arkansas Public Service Commission, Entergy estimates that the reduction will lower the average residential customer’s bill by 18.4 percent a month. A customer with a monthly bill of $100 would see it drop to about $81.60.

Entergy said the new rates will begin in April so customers can benefit quickly and before summer, when electricity usage is higher because of air conditioning. The lower rates, if approved, will continue for 21 months, from April to December 2019. The total savings for the 21 months for a residential customer would be about $386.40.

Entergy is proposing to use the lower rates through December 2019 because a shorter time frame of nine or 10 months could create the potential for rate shock in the future, said Ventrell Thompson, regulatory affairs manager for Entergy Arkansas.

The $466 million in tax savings being passed on includes the Jan. 1-to-April 30

period, Thompson said.

After December 31, 2019, the new tax rates will be incorporated into the company’s 2020 filing with state regulators that lays out its cost-recovery needs, Thompson said.

Business customers also will see significant savings ranging from 27 percent to 35 percent, but only for nine months, Thompson said.

Other effects of the tax cut are being considered in a docket opened by the commission.

“We expect those customer benefits to be reflected in future rate changes,” Entergy said in a news release.

Gov. Asa Hutchinson asked the commission on Jan. 11 to

pass on benefits of the reduction in the federal corporate tax rate to Arkansas ratepayers “as expeditiously as possible.”

In a letter to Ted Thomas, chairman of the commission, Hutchinson said: “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.”

Arkansas law allows utility providers to charge rates that recover the cost of providing utility service plus a rate of return on investment, Hutchinson said in the letter. Federal income taxes paid by utilities are included in those costs, Hutchinson said.

Lowering the corporate tax rate means there also should be a reduction in costs charged to

Arkansas ratepayers, Hutchinson said.

Entergy has worked with various entities, including Attorney General Leslie Rutledge, to meet Hutchinson’s objective of passing the benefits of the tax cut to ratepayers as quickly as possible, said Rick Riley, Entergy Arkansas’ chief executive officer.

“The tax reduction will allow us to provide substantial bill credits to all customers for a significant period of time,” Riley said in a prepared statement.

Hutchinson said Wednesday that Entergy’s proposal would “result in substantive savings for residential customers each month upon regulatory approval.”

The commission is studying Entergy’s filing, said John Bethel, executive director of the commission’s general staff.

“I can’t offer much comment

on it other than that we’re reviewing it since we just got it,” Bethel said.

Entergy Arkansas supplies electricity to about 700,000 customers in 63 counties.

Based on a schedule established by the commission, the other investor-owned utilities with operations in Arkansas do not have to file plans with the commission until April or May.

Entergy filed so early because it is hopes to return money to its customers as quickly as possible, as Hutchinson requested, Thompson said.

The other seven investor-owned utilities are Oklahoma Gas & Electric Co., Southwestern Electric Power Co., the Empire District Electric Co., Arkansas Oklahoma Gas Corp., Black Hills Energy Arkansas, CenterPoint Energy Arkansas and the Pine Bluff water utility Liberty Utilities.