Arkansas utilities told to file plans for passing tax savings on to customers

Federal tax cut to benefit ratepayers

The Arkansas Public Service Commission on Thursday ordered the state's eight investor-owned utilities to explain to the commission how they plan to pass tax savings on to their customers.

The commission gave the utilities 30 days to file their plans.

Thursday's order is the result of the federal Tax Cuts and Jobs Act that Congress passed in December. It reduced the corporate tax rate from 35 percent to 21 percent.

On Jan. 11, Gov. Asa Hutchinson asked the commission to pass on benefits of the reduction in the federal corporate tax rate to Arkansas ratepayers "as expeditiously as possible."

The utilities included in the case are Entergy Arkansas, CenterPoint Energy, Black Hills Energy Arkansas, Arkansas Oklahoma Gas, Oklahoma Gas and Electric Co., Southwestern Electric Power Co., Empire District Electric Co. and Liberty Utilities, which is the water utility in Pine Bluff.

Entergy Arkansas, the state's largest electric utility with about 700,000 customers, said in March that it would reduce customer billing by up to $466 million. That reduction began with April's bills. The average monthly reduction in bills was 18.4 percent. That means that a residential customer with a monthly electric bill of $100 would see the bill drop to about $81.60.

The commission directed the other seven utilities to follow the Entergy template when making their separate filings with the commission.

After the utilities respond, it could take the commission another month to review each filing, said Donna Gray, executive director of the commission.

Thursday's order didn't specify how much the other utilities are expected to lower their rates.

It isn't as simple as saying that a customer's bill will drop by 14 percent because Congress reduced corporate income taxes by 14 percent, Gray said.

"Because taxes are only a part of your bill," Gray said. "While the tax expense is declining by that amount, if one part goes down and the other parts don't, then it would be a lesser percentage [reduction in the bill]."

The utilities must complete refunding the amount by Dec. 31, 2019, the commission ordered.

CenterPoint Energy, the state's largest natural-gas utility, argued for a three-year period to complete the refund, but the commission disagreed.

"While [CenterPoint] may be required to seek other forms of financing resulting in higher financing costs, the expeditious refund to ratepayers outweighs any reasons argued by [CenterPoint] for a longer time period," the commission said.

CenterPoint Energy is reviewing the commission's order and will determine next steps accordingly, said Alejandra Diaz, a company spokesman.

Entergy Arkansas believes the order is reasonable and ensures that customers will get all of the benefits of the Tax Cuts and Jobs Act in a timely manner, said Kerri Case, an Entergy spokesman.

"The order specifically recognizes our bill-credit plan as the model approach for all utilities," Case said.

Jordan Tinsley, who represents Arkansas Electric Energy Consumers and Arkansas Gas Consumers, associations for large industrial companies, said he was a little disappointed with the commission's ruling.

"We won on some issues that we litigated and lost others," Tinsley said. "We were primarily concerned with ensuring the timely return of the most significant benefits to ratepayers."

Tinsley disagreed with one commission ruling that supported larger utilities with formula rate plans, or "riders" that those utilities use to handle all of their expense items.

The commission ruled that it was a policy matter that the formula rate plans are in the public interest.

"[The plans] will create just and reasonable rates within a reasonable period of time,' the three-member commission said. Ted Thomas is chairman and Elana Wills and Kimberly O'Guinn round out the panel.

The commission has moved about as swiftly as it could, Tinsley said. There was a hearing on the case in late May.

"It also had to give due process to all parties, which is important," Tinsley said. "They obviously did take some time to rule in the matter. But I think, given that the issue is as complicated as it is -- it involves eight utilities, each of which presents different challenges -- I think the commission did a good job in resolving all those issues."

Whether his clients will choose to take any future action related to the order "is very much up in the air," Tinsley said.

"On the whole, I'd say the order is a mixed bag," Tinsley said. "But with an issue that is that complicated, that's sort of what I expected, that we would win some and lose some."

A Section on 07/27/2018

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