AG wants utilities to pass along tax savings to you
Attorney General Mike Hunter believes the state's utility companies must lower their rates because they stand to benefit from federal tax reform.
In motions filed with the Oklahoma Corporation Commission, the Republican attorney general asked the OCC to force five utilities to lower utility rates "in an amount necessary to reflect lower tax rates."
“These companies will begin seeing major savings after the tax cut is implemented on Monday,” Hunter said in a statement. “Oklahomans who are customers of these companies should immediately retain the benefits of the savings from the tax cut in the form of lower rates.”
Republicans in Congress passed a tax reform package this month and President Donald Trump signed it into law. The package will, among other changes, dramatically lower the corporate tax rate from 35 percent to 21 percent.
The Corporation Commission will consider Hunter's motions at a Jan. 4 hearing. The five utilities are Oklahoma Gas & Electric, Public Service Company of Oklahoma, Oklahoma Natural Gas, CenterPoint Energy and Arkansas Oklahoma Gas.
Brian Alford, a spokesman for OG&E, said the state’s largest electricutility has been working with the Corporation Commission for more than a month on possible rate changes and planned to file a rate review in mid-January that would reflect modifications to the tax code.
“Right now, we’re still in the process of understanding the impact of tax reform and what that means to us,” he said. “It was a very comprehensive bill and taxes are just one component of many that go into a rate review. So, we’re taking all of that into account.”
Alford said it’s not clear what the implications of Hunter’s motion might be for OG&E. He said the utility will continue to move forward with its own rate review, regardless of what the Corporation Commission decides next week.
Hunter’s office estimates OG&E will pay nearly $52 million less in corporate taxes next year due to the tax bill. PSO will save $24 million and ONG will save $20 million, according to the attorney general. CenterPoint and AOG will save less than $1 million.
“We urge the (Corporation Commission) to act quickly and in the best interests of customers, not company shareholders,” he said.
Tiffini Jackson, spokeswoman for PSO, said the utility shares Hunter’s goal of keeping electric rates affordable.
“However, the corporate tax rate is only one component of PSO’s cost to serve and should be reviewed in the context of our other costs, many of which have increased substantially since our rates were set,” she said.
“PSO is earning a rate of return that’s insufficient to continue our current level of investment in our system, and reviewing this issue in isolation could further diminish PSO’s financial health, which wouldn’t benefit our customers,” Jackson added.
Cherokee Ballard, a spokewoman for ONG, said, “We are looking forward to working with the AG’s office and the Corporation Commission as we move through this process.”
Requests for comment from CenterPoint and AOG were not answered Thursday.
In the motions, Hunter states he will also request refunds to taxpayers at a later date to ensure utilities do not pocket their accumulated deferred income tax, or ADIT, which is a tax liability stretched out into future years.
Because that tax liability will now shrink, Hunter says utilities will have excess pools of money. He is asking the Corporation Commission to set those pools aside and later refund utility ratepayers.
“The value of ADIT is set based on the rates when the deferred income tax is recorded,” he wrote in one motion, “meaning OG&E’s tax reserves were largely recorded assuming a 35 percent federal income tax rate. Since OG&E will only be required to cover income taxes at a 21 percent rate in the future, a portion of its ADIT ... can and should be returned to customers.”