A consumer utility watchdog group has called on the state to move fast in ordering a reduction in utility rates based on the tax law Congress passed last month.
Consumers Council of Missouri wants swift attention paid to the new corporate tax rate, which has fallen this year from 35%-to-21% and will bring massive savings to the state’s investor utilities.
The watchdog group says the companies will realize hundreds of millions of dollars in extra money if utility rates continue to be calculated based on the 35% rate. Consumers Council notes electric companies in Massachusetts, Illinois, Oregon, Arizona and other states have announced plans to pass savings on to consumers as a result of the 40% drop in corporate income taxes.
In a statement to Missourinet, Ameren Missouri, the state’s largest utility was non-committal about lowering its customer rates, but indicated future savings for ratepayers would probably come to pass.
“We are carefully reviewing the provisions of this complex legislation,” said Kendall Coyne, Ameren Vice President for Tax. “At this time it is premature to determine the impact on customers’ energy bills in the future. However, we expect that Ameren’s customers will ultimately benefit from a reduction in the corporate income tax rate.”
The Missouri Public Service Commission (PSC) has opened a working case to investigate the effect the recent federal tax cut legislation will have on the revenues of Missouri’s regulated utilities.
In a statement, the state agency which oversees investor utilities said the PSC staff “is concerned that the reduction in federal tax obligations may mean that existing rates over-compensate the utilities for cost of paying taxes and that as a result, those rates may become unjust and unreasonable.”
In the PSC working case, staff asked the Commission to direct Missouri’s regulated utilities to respond to a number of questions by January 31st.
One of the five questions is, “What is the appropriate avenue for effectuating change to utility rates as a result of the federal income tax reductions?” Another one is, “How does the change to the federal income tax affect pending rate cases? Can the change be considered in the pending rate cases?”
Still another question asks for a calculation of the approximate change in cost of service resulting from the Tax Cuts and Job Acts of 2018 (the new tax law).
The early January news release from the PSC also invited the public to submit comments through the Public Service Commission’s Electronic Filing and Information System (EFIS) or by mailing written comments to the Commission.
The New York Times reported this month that the states quoted by Consumers Council have announced plans to lower rates, and noted the power company serving Washington D.C. would cut rates beginning in the current quarter.
The Times also quoted figures from the Penn Wharton Budget Model at the University of Pennsylvania, which estimates that the new law will reduce the industry’s federal tax bill by $1 billion this year, growing to $5 billion in five years. The Times said that the Penn economists projected that the law will yield a reduction of about 0.5 percent in electricity prices.
The next battle in Missouri could be during a rate case brought by the PSC over how much the states regulated utilities, Ameren Missouri, Kansas City Power and Light and Empire District (would supplies power to portion of southwest Missouri, including Joplin), will be required to reduce customer rates.