If Bennet and Hickenlooper enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Michael Bennet and John Hickenlooper hike the corporate income tax rate, Colorado households and businesses will get stuck with higher utility bills as the country tries to recover from the pandemic.
Democrats plan to impose a corporate income tax rate increase to 26.5%, even higher than communist China’s 25% and higher than the developed world average of 23.5%. This does not even include state corporate income taxes, which average 4 – 5% nationwide.
Customers bear the cost of corporate income taxes imposed on utility companies. Corporate income tax cuts drive utility rates down, corporate income tax hikes drive utility rates up.
Electric, gas, and water companies must get their billing rates approved by the respective state utility commissions. When the 2017 Tax Cuts and Jobs Act cut the corporate income tax rate from 35% to 21%, utility companies worked with state officials to pass along the tax savings to customers, including at least five Colorado utilities.
The savings typically come in the form of a rate reduction, a bill credit, or a reduction to an existing or planned rate increase.
According to a report published in the trade publication Utility Dive, customers nationwide were to receive a $90 billion utility benefit from the Tax Cuts and Jobs Act:
Estimates derived from 2017 annual SEC 10-K filings indicate that the 14-percentage-point reduction in the corporate tax rate enacted under the 2017 Tax Cuts and Jobs Act (TCJA) resulted in investor-owned utilities establishing significant regulatory liability balances, totaling approximately $90 billion to be refunded back to customers.
Americans for Tax Reform has compiled a 90-second nationwide utility savings video from local news reports which may be viewed here.
If Democrats now impose a corporate income tax rate increase, they will have to reckon with local news coverage noting utility bills are going up. A vote for a corporate income tax hike is a vote for higher utility bills as households try to recover from the pandemic.
Tax Cuts and Jobs Act Impact: Working with the Colorado Public Utilities Commission, Public Service Company Gas Department, Public Service Company Electric Department, Black Hills Energy Electric Utility, Black Hills Energy Gas Utility and Colorado Natural Gas, Inc. passed along tax savings to their customers.
Black Hills Energy Electric Utility: As noted in this January 27, 2021 Black Hills Energy news release:
Black Hills Energy’s Southern Colorado electric utility residential customers will see the benefits of a federal corporate tax rate reduction in the form of a $50.32 credit on February electric bills. The bill credit is part of a plan approved by the Colorado Public Utilities Commission to return funds to customers resulting from the 2017 Tax Cuts and Jobs Act (TCJA).
As part of the same agreement, Black Hills Energy will also provide residential customers with an additional annual bill credit of approximately $5 beginning in April 2021. The credit will appear on customer bills as a separate line item: “Tax Cuts and Jobs Act Adj.”
Public Service Company Gas Department: As noted in this Public Utilities Commission of Colorado document:
Effective March 1, 2018, the Company’s gas rate case provisional rates will be reduced to reflect the Company’s preliminary estimate of TCJA net impacts of $20 million, as set forth in Appendix A to this Settlement Agreement. The Settling Parties acknowledge that this preliminary estimate in Appendix A is based on high level early estimates using the limited information presently available. To this end, this preliminary estimate includes a contingency to account for uncertainty and avoid a surcharge to customers in the event the final determination of tax law reductions to rates is lower than the preliminary estimate of the reduction to provisional rates.
Public Service Company Electric Department: As noted in this Public Utilities Commission of Colorado document:
As set forth in more detail below, the Settling Parties agree that the following TCJA benefits be delivered to Public Service’s electric customers beginning June 1, 2018:
- $42.0 million – reduction of base rate revenue with a negative General Rate Schedule Adjustment (“GRSA”) of 4.19 percent from June 1, 2018 to December 31, 2018;
- Extension of the negative 4.19 percent GRSA from January 1, 2019 (annual $67.5 million rate reduction) until new rates take effect from the Company’s next filed rate case;
- Recovery of the Legacy Pre-Paid Pension Asset: $59.2 million during 2018; and for 2019, $33.7 million (annual) until new rates take effect from the Company’s next filed rate case.
Black Hills Energy Gas Utility: As noted on the Black Hills Energy website:
We filed for a reduction to the general rate schedule adjustment, or GRSA, to reflect the savings associated with the federal Tax Cuts and Jobs Act. These benefits first appeared on both gas and electric customers’ July 2018 bills.
For Colorado gas customers, the GRSA decreased from 0.827% to -2.59%. For Colorado gas distribution customers, the GRSA decreased from 8.56% to 4.41%.
Colorado Natural Gas, Inc.: As noted in this Colorado Natural Gas statement:
At Colorado Natural Gas, our goal is to provide safe, reliable, clean burning and affordable natural gas to individuals, families and businesses in underserved areas of Colorado through exceptional customer service and a commitment to community.
To achieve that goal of providing safe and reliable natural gas to tens of thousands of Coloradans for home heating, hot water, cooking and more, we must maintain and invest in more than 1,200 miles of pipeline, while continuing to provide the quality customer service you’ve come to expect from your local natural gas utility.
All this costs money, which is why we filed a natural gas rate case in May of 2018 with the Colorado Public Utilities Commission (Commission). Until our 2018 rate case, we had not changed our rates since 2013, which meant the cost of providing safe and reliable natural gas exceeded what customers were paying.
After thorough review by the Commission and ample time for public input, the rate case settlement was approved on November 1, 2018. New rates went into effect on December 1, 2018.
- Eastern Colorado District: The service and facility charge is now $14.00 for residential customers, $27.00 for commercial customers, and $40.00 for large volume customers. The new distribution rate is $0.4392 per therm.
- Mountain District (Bailey, Pueblo West and Cripple Creek District): The service and facility charge is now $16.00 for residential customers and $50.82 for commercial customers. The new distribution charge is $1.1428 per therm.
You may have heard about the benefits of the federal income tax reform passed in 2017. We were happy to be able to pass on those benefits to our customers through this rate case.
Conversely, if Biden and Democrats raise the corporate tax rate, they will add to the burden faced by working families. And any small businesses operate on tight margins and can’t afford higher heating, cooling, gas, and refrigeration costs.
President Biden should withdraw his tax increases.