Utility rate cuts spare Columbia Water
A ruling by the Pennsylvania Public Utility Commission last week will bring relief to most utility customers statewide by cutting their rates to reflect recently lowered federal taxes.
But the order left out one Lancaster County-based utility: Columbia Water Co.
Columbia Water is unique in that it has not been charging customers federal taxes so there is no need to adjust its rates.
The company has been in that position because it has been using the tax code’s loss-carry-forward provisions, which allow companies to use losses in previous years to offset federal taxes, said Thomas J. Sniscak, an attorney with Harrisburg-based Hawke, McKeon and Sniscak LLP, which represents Columbia Water.
“We have not been paying federal income tax because of the loss carry-forward provision,” Sniscak said. “The fact is, it helps ratepayers.”
The issue arose during the PUC’s efforts to examine how the federal Tax Cuts and Jobs Act would affect utility companies and their customers. A lot of Pennsylvania companies are now paying 21 percent in federal taxes instead of 35 percent under the new law, and the PUC wanted to ensure that ratepayers would benefit.
In its ruling May 17, the PUC required rate cuts for 17 utility companies effective July 1. Those cuts remain in place until the next rate adjustments for each individual company, when all costs will be considered for either a higher or lower rate.
The Pennsylvania Public Utility Commission voted May 17 to lower rates for most utilities in Pennsylvania.
The cuts, which affect the distribution portion of a customer’s bill, vary by utility. Rates for Metropolitan Edison Co., for example, will drop 8.55 percent, while the cut is 0.56 percent for PPL Electric Utilities Corp., according to the PUC.
The agency is currently reviewing - or plans to soon review - rate changes for another seven utilities and will incorporate the impact of tax cuts on its decisions in those cases, according to the PUC. They include The York Water Co., Columbia Gas of Pennsylvania Inc. and Suez Water Pennsylvania Inc.
Two others face a higher tax liability; they will continue with their existing rates for now.
Overall, residents and businesses statewide are expected to enjoy annual savings of $210 million on electricity, $66 million on natural gas and $48 million on water and wastewater, according to a statement from PUC Chairman Gladys M. Brown.
Columbia Water was unique because it had no savings to pass on, Sniscak said.
Last year – before the federal tax plan was passed into law – the company had sought a rate increase. The PUC approved an increase in March, though it was not as much as the company had initially requested.
According to the PUC, Columbia Water provides water to more than 10,000 customers in two districts: the Marietta Rate District covering Marietta and East Donegal Township in Lancaster County and in Hellam Township in York County; and the Columbia Rate District, covering the boroughs of Columbia and Mountville and the townships of West Hempfield, East Donegal and Manor, in Lancaster County.
When the company seeks another rate adjustment in the future, the loss-carry-forward rule might no longer apply, so that would become one of many factors for state regulators to consider in that future rate case, Sniscak added.
But he had to argue to the PUC and the Pennsylvania Office of Consumer Advocate about why the federal tax cut should not be a factor in the rate adjustments affecting other utilities this summer.
“It was a lot of time and expense for an issue that does not exist,” he said.
Tanya J. McCloskey, of the Pennsylvania Office of Consumer Advocate, agreed that it will be best to revisit the issue, along with other issues, in a future rate case for Columbia Water.
David P. Zambito, an attorney with the law firm Cozen O’Connor in Harrisburg, represents a number of utilities statewide. Speaking generally, he said a number of details are likely to be re-examined from the PUC’s May 17 ruling.
Individual utilities might challenge various points in the ruling based on their circumstances, such as what they may perceive as errors in calculations in what the PUC said should be the benefit to ratepayers, he said.
“But, by and large, I think the utilities know they are dealing with their regulator and will try to work with this ruling,” Zambito said.