Utilities’ tax windfall evaluations get started
Administrative law judges at the Oklahoma Corporation Commission started a process Thursday to evaluate how publicly regulated utilities should be required to compensate their customers for tax benefits the utilities will get from the Tax Cut and Jobs Act of 2017.
In hearings before the elected commission and the judges, a representative of Oklahoma Attorney General Mike Hunter’s office argued the utilities should be required to immediately return tax break dollars to ratepayers in amounts his office already has calculated.
The utilities are Oklahoma Gas & Electric, Public Service Co. of Oklahoma, Oklahoma Natural Gas, CenterPoint Energy and Arkansas Oklahoma Gas.
Hunter's office estimates OG&E will pay nearly $52 million less in corporate taxes next year, while it estimates PSO will save $24 million and ONG will save $20 million.
CenterPoint and AOG will save less than $1 million, it estimates.
Assistant Attorney General Jared Haines also asked the administrative law judges Thursday to recommend that the utilities be asked to provide an accounting on how much they have set aside for accumulated deferred income tax, and to work with regulators to determine how much of that should be returned to customers.
By Thursday afternoon,
administrative law judges had made recommendations in several of the causes, patterned after one recommended by Administrative Law Judge Mary Candler.
Candler handled the hearing on the cause the attorney general brought involving PSO, and she drafted a recommendation that, if approved, would require PSO to begin tracking both its reduced income tax liability as well as its accumulated deferred income tax as the cause works its way through the process.
A Public Utility Division official said it’s likely those dollars would be returned to ratepayers in future rate cases, ensuring that correct amounts are returned.
By Thursday afternoon, the same recommendation had been made in causes Hunter’s office had brought involving ONG and Centerpoint Gas, while other hearings either were being held or were planned for the causes brought by Hunter’s office against OG&E and Arkansas Oklahoma Gas.
During the PSO hearing, several organizations that regularly testify in utility rate cases offered their opinions on what they would prefer.
The Oklahoma Industrial Energy Consumers' Tom Schroedter and the AARP Oklahoma’s Deborah Thompson both argued they favored immediate reparations to PSO's customers.
Complex issue
But Commission Chairman Dana Murphy, who attended the PSO hearing with the other commissioners, said she worried the complexities of the new federal tax measure and each utility's unique situation might make it hard for regulators to quickly calculate what utilities customers are due.
"It is important to look out for customers and make sure they are adequately compensated," Murphy said. “But ... I think this will be a little bit more complicated and that there is more involved. Wouldn't the ratepayers be protected with an order that would make rates subject to refund?"
Haines acknowledged the attorney general's office would accept that as an alternative.
Mike Valez, a member of the commission’s legal staff representing its Public Utility Division, agreed with Murphy, saying, “this tax change is more complex than just going from 35 to 21 percent.”
Valez said it appears the law affects depreciation rates for plant assets, eliminates deductions for fringe benefits, lobbying expenses, compensation expenses related to employees earning more than $1 million, some tax credits and many other tax-related issues.
“That's not a comprehensive list, and the impacts of all of these changes are still unknown," Valez said.
”Rates must be fair, just, and reasonable, but they also must be based on known and measurable changes," Valez said, adding the commission’s Public Utility Division supported Candler’s recommendation.
It didn’t appear commissioners have a unanimous opinion that Candler’s recommendation is the appropriate way to go, however.
Commissioner Bob Anthony, who actively has been calling attention to the issue, asked for Attorney General Hunter’s office to prepare recommended orders that would require the companies to make immediate refunds based on its calculations, as well.
Anthony indicated he's prepared to ask his fellow commissioners to consider both the recommendations from the administrative law judges and the Attorney General during a hearing early next week.
“I am going to see if I can get those posted at the earliest opportunity,” Anthony said, adding he hopes they could be considered either Monday or Tuesday.