If Murphy and Blumenthal enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Chris Murphy and Richard Blumenthal hike the corporate income tax rate, Connecticut 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 eight Connecticut 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 Connecticut Public Utilities Regulatory Authority, AVANGRID, Eversource Energy, Connecticut Light & Power, Yankee Gas, Aquarion Water Company, Connecticut Natural Gas, Southern Connecticut Gas and Connecticut Water Company passed along tax savings to their customers.
AVANGRID: As noted in this January 11, 2018 Connecticut Post article excerpt:
Avangrid stated it will pass to its electricity and gas customers the full benefit of savings it will realize from the federal Tax Cuts and Jobs Act, with the Orange-based company’s service area covering portions of the New Haven and Bridgeport areas.
Avangrid issued a statement Wednesday night confirming the policy as “a matter of fairness,” more than a week after the Connecticut Public Utilities Regulatory Authority stated it would review Avangrid’s rates and those of other Connecticut electricity and gas utilities, with federal taxes a factor in the rates approved by PURA.
Avangrid subsidiaries include United Illuminating, Southern Connecticut Gas and Connecticut Natural Gas, as well as Central Maine Power and Maine Natural Gas; Berkshire Gas in Massachusetts; and New York State Electric & Gas and Rochester Gas & Electric.
Under the new tax law, U.S. companies will pay a 21 percent rate on their corporate income taxes, down from 35 percent. In December, PURA approved electricity rates for United Illuminating amounting to $375 million in 2018. The new federal tax rate would reduce that total by between $10 million and $11 million, according to Rich Sobolewski, supervisor of utility financial analysis for the office of Connecticut Consumer Counsel Elin Swanson, wiping out nearly the entirety of an $11.5 million distribution increase PURA had approved for this year.
Eversource Energy: As noted in this April 18, 2018 New Haven Register article excerpt:
State utility regulators have cut an electric distribution rate increase Eversource Energy had sought by more than half.
Connecticut’s Public Utilities Regulatory Authority issued its final ruling on a distribution rate increase request that Eversource Energy filed in late November 2017. The Hartford-based utility originally had requested a rate increase that would have brought in $336.9 million in additional revenue over three years, but PURA’s commissioners ruled that the company should only get $127.7 million more.
“There was some hiring that they had originally planned to do, but didn’t,” Sobolewski said of Eversource. “And the impact of the (federal) corporate tax change knocked off about $55 million from their original request.”
Connecticut Light & Power: As noted in this Connecticut State Office of Consumer Counsel document:
PURA approved a Settlement Agreement between Eversource, the Office of Consumer Counsel (OCC) and the Prosecutorial Staff of PURA (PRO) for rates effective April 1, 2018 that contained approximately $55 million in reduced federal income taxes associated with the TCJA. We estimate that this reduced the average Residential electric bill for CL&P/Eversource customers by approximately $2.00 per month and the average Business (Commercial) customer by approximately $15.00 per month.
Yankee Gas: As noted in this Connecticut State Office of Consumer Counsel document:
PURA approved a Settlement Agreement between Yankee Gas, the Office of Consumer Counsel (OCC) and the Prosecutorial Staff of PURA (PRO) for rates effective November 15, 2018 that contained approximately $8.7 million in reduced federal income taxes associated with the TCJA. We estimate that this reduced the average Residential gas bill for Yankee Gas customers by approximately $2.25 per month.
Aquarion Water Company: As noted in this Connecticut State Office of Consumer Counsel document:
PURA required AWC to defer about $4 million annually, until the company’s next rate case, associated with reduced federal income taxes associated with the TCJA. These future credits when applied could reduce future bills for the average residential customer by about $2.75 per quarter.
Connecticut Natural Gas: As noted in this Connecticut State Office of Consumer Counsel document:
PURA approved a Settlement Agreement between CNG, the OCC and PRO for rates effective January 1, 2019 approximately $4 million in reduced federal income taxes associated with the TCJA. We estimate that this reduced the average Residential gas bill for CNG customers by approximately $1.18 per month.
Southern Connecticut Gas: As noted in this Connecticut State Office of Consumer Counsel document:
Consistent with a prior settlement agreement, SCG is required to defer the federal income tax savings until the company’s next rate case. We estimate these as approximately $5.5 million annually. These future credits when applied could reduce future bills for the average residential customer by about $1.50 per month.
Connecticut Water Company: As noted in this Connecticut State Office of Consumer Counsel document:
In August 2018, PURA approved a settlement agreement between the Connecticut Water Company and the OCC, that included an offset to rates of approximately $1.5 million for reduced income tax expenses associated with the TCJA. We estimate this reduced the average residential bill by $3.00 per quarter.
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.