PUC cuts utility rates to reflect lower federal taxes

Annual savings pegged at $324 million

Joel Berg//May 17, 2018

PUC cuts utility rates to reflect lower federal taxes

Annual savings pegged at $324 million

Joel Berg//May 17, 2018

The Pennsylvania Public Utility Commission on Thursday approved rate cuts for 17 utility companies, reflecting newly lowered corporate taxes. 

The cuts take effect July 1 and remain in place until the next time utilities come before the PUC individually to adjust their rates up or down. 

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.

One utility – Columbia Water Co. in Lancaster County – saw no impact from the tax law, according to the PUC. 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. 

“As economic regulators, it is the Commission’s responsibility to ensure that utility rates are just and reasonable. Further, it is necessary for utility rates to reflect relevant tax expenses,” Brown said in a statement at Thursday’s PUC public. “I believe this work [by PUC staff] has resulted in an innovative answer by this Commission to effectively flow-through the benefits of the [Tax Cut and Jobs Act] back to customers.”

The PUC began exploring a rate-cutting move earlier this year, soon after President Trump signed a law that slashed the federal corporate income tax rate to 21 percent from 35 percent. In some states, utilities and regulators jumped quickly to reduce prices after the tax law’s passage.

In comments to the PUC, utilities in Pennsylvania were leery, noting that state law generally forbids regulators from setting rates based on a single factor, like taxes. And, they argued, the benefits of the tax law are mixed.

“Indeed, the changes in federal income tax law made by the [Tax Cut and Jobs Act] are not an unalloyed benefit for regulated utilities and, in fact, may adversely affect utilities’ financial metrics and cost of capital,” FirstEnergy Corp. wrote in comments it filed in March, citing a report by Moody’s Investors Services on the tax law’s negative impacts. Ohio-based FirstEnergy is the parent of Met Ed and other utilities operating in Pennsylvania.

But consumer and businesses advocates, as well as elected officials, pushed for lower rates.

In a March 9 letter to the PUC, U.S. Rep. Lloyd Smucker, a Republican from Lancaster County, and U.S. Rep. Bill Shuster, a Republican whose district includes Franklin County, came out in support of lower rates.

Smucker, in a statement Thursday, welcomed the PUC’s action.

“I wrote to the Commission in March urging it to review the impact of recent tax changes because I wanted to be sure my constituents were receiving the full benefits of the new tax law,” Smucker said. “I’m glad to see the Commission take action to lower utility bills for the families I represent.”

An environmental group, meanwhile, had urged the PUC to put some of the tax-cut savings toward advancing the use of electric vehicles in Pennsylvania.

The group, the New York-based Environmental Defense Fund, suggested in a May 14 letter to the PUC that the tax-cut savings could be mixed with the $118 million that Pennsylvania got from Volkswagen as part of a settlement over the automaker’s fraudulent emissions testing.

“Combining utility rebate programs with the Volkswagen settlement funds could greatly accelerate the electrification of Pennsylvania’s transportation system, and result in major health and economic development benefits,” said the letter, signed by the fund’s midwest senior director, Dick Munson.

(Editor’s note: This story has been updated from its original version to include comments from Rep. Lloyd Smucker and additional information from the PUC.)

Utility Rate Changes on Scribd

Who’s doing what

Utilities required to start lowering rates starting July 1:

  • Citizens’ Electric Co. of Lewisburg
  • Metropolitan Edison Co.
  • Pennsylvania Electric Co.
  • Pennsylvania Power Co.
  • Pike County Light & Power Co.
  • PPL Electric Utilities Corp.
  • Wellsboro Electric Co.
  • West Penn Power Co.
  • PECO Energy Co. (Gas Division)
  • National Fuel Gas Distribution Corp.
  • Peoples Gas Co. LLC
  • Peoples Natural Gas Company LLC—Equitable Division
  • UGI Central Penn Gas Inc.
  • UGI Penn Natural Gas Inc.
  • UGI Utilities, Inc.-Gas Division
  • Pennsylvania-American Water Co.
  • Pennsylvania-American Water Co.—Wastewater

Utilities not expected to act immediately due to current or pending rate cases that will incorporate the impact of the federal tax cut:

  • UGI Utilities Inc.
  • Columbia Gas of Pennsylvania Inc.
  • Duquesne Light Co.
  • PECO Energy Co. (Electric)
  • The York Water Co.
  • Suez Water Pennsylvania Inc.
  • Aqua Pennsylvania Inc.

Source: PUC