For Pa. utility users expecting refunds from federal tax changes, keep waiting
Earlier this year, as utilities in other parts of the country celebrated the new federal tax plan by lowering customer rates, the Pennsylvania Public Utility Commission wondered whether companies in the state should follow suit.
It asked the utilities it regulates — which include electric, gas and water companies — to weigh in on whether rates should be adjusted to reflect the drop in the corporate income tax rate from 35 percent to 21 percent, and whether customers should be issued refunds from the savings.
“The answer in each instance is a definitive ‘no,’” FirstEnergy Corp. wrote in its response to the PUC earlier this month.
Like other utilities that responded by the March 9 deadline, the Akron, Ohio-based company — speaking on behalf of its Pennsylvania utilities, which include West Penn Power — said the commission can’t just look at this one issue in isolation when setting rates.
The Tax Cuts and Jobs Act is a sweeping piece of legislation, the utilities argued, and its other provisions may have the opposite effect on the companies’ tax liabilities.
Plus, if there are savings to be had, FirstEnergy said, the utility might want to use them to accelerate its infrastructure improvement program instead of simply lowering rates or handing out credits to consumers.
Columbia Gas made the case that “having the option of temporarily retaining the 2018 value of the tax savings for a limited period of time would support the company’s ability to avoid a potential rating downgrade and associated increase in cost of debt.”
North Shore-based Peoples Natural Gas also thought the best forum for this discussion would be during a rate case, which is a fairly drawn-out legal process that examines the utility’s financial situation more holistically and sets commission-approved rates for the future.
Peoples indicated it expects to file one in the near future.
Not surprisingly, consumer advocate groups took positions in the opposite corner, advocating for the swift distribution of these benefits to ratepayers.
“Refunds or rate reductions are the only reasonable options,” wrote the Industrial Energy Users of Pennsylvania, an association of large electricity users. The tax reform law, passed in December, “provides a once-in-a-generation opportunity” to pass savings on to ratepayers, the group argued.
The Office of Small Business Advocate even went so far as to liken the tax law to a “force majeure” event — industry speak for something akin to an act of God, like “a massive ice storm” so unpredictable and consequential that its impact must be dealt with outside of the regular course of business.
The PUC, on Thursday, met the stakeholders somewhere in the middle.
The commissioners acknowledged that the matter is complex and said they need more time to analyze the data.
They took the technical step of keeping current rates the same, but designating them “temporary,” which allows the commission to adjust them at some point.
For utility customers wondering if their monthly bills will be seeing some of that federal tax boost, the answer is: Not yet.