After Tax Cut, Kentucky Regulators Want Savings Passed On To Ratepayers
The corporate tax cut ushered through by the Republican Congress earlier this month could end up lowering the utility bills of some Kentucky ratepayers.
In two orders issued yesterday, the Kentucky Public Service Commission ordered the state’s four for-profit utilities — Louisville Gas and Electric, Kentucky Utilities, Kentucky Power and Duke Energy Kentucky — to start tracking their tax savings and report back to the PSC.
President Donald Trump signed the tax bill into law on December 22; it will permanently lower the corporate tax income rate from 35 percent to 21 percent. And because Kentucky for-profit utilities are allowed to pass along “fair just and reasonable” costs to ratepayers, the PSC wants the utilities to reevaluate their rates in light of their new tax savings.
“Since ratepayers are required to pay through their rates the tax expenses of a utility, any reduction in tax rates must be timely passed through to ratepayers,” the PSC said in the orders.
The orders came in response to a complaint filed by the Kentucky Industrial Utilities Customers — an association that represents the interests of the state’s largest energy consumers.
In the complaint, KIUC attorneys say as of January 1, 2018, when the new tax law goes into effect, they estimate Kentucky’s four largest utilities will save a collective $209 million. And those savings, they argue, should be passed on to ratepayers and could save individuals four to seven percent on their utility bills.
“Complainant submits that because of the tax expense savings that Defendants will almost certainly receive from the Tax Cuts and Jobs Act, Defendants' rates will no longer be fair, just, and reasonable beginning January 1, 2018,” said KIUC in the complaint.
Attorney Michael Kurtz of KIUC said though it's an under-the-radar effect of the tax bill, the lower corporate tax rate should be felt by all Kentuckians.
"The reduction in the federal corporate income tax rate should result in lower rates for all consumers, should make Kentucky manufacturing more competitive, and we’re encouraged that the commission is taking expeditious action to make sure that consumer bills are lowered as quickly as possible," he said.
LG&E spokeswoman Chris Whelan said the company supports that reevaluation of profits.
“We were supportive of the corporate tax law changes, because we believe they provide benefits for our customers,” Whelan said. “We anticipated the order from the commission and are beginning to pull together that information to comply with the request.”
She said it’s too early to tell how much money LG&E will save from the tax cut — and therefore how much could be passed on to ratepayers — because a lot of it depends on financial information from 2017.
This post has been updated.