If Biden and the Democrats enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and congressional Democrats hike the corporate income tax rate, Florida 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 seven Florida 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 Florida Public Service Commission, Duke Energy Florida, Gulf Power Company, Tampa Electric, Florida Public Utilities Company, Peoples Gas System, Florida Power and Light and Florida City Gas passed along tax savings to their customers.
Florida Power and Light: As noted in this January 17, 2018 WPTV News excerpt:
Florida Power and Light customers will not have to pay for Hurricane Irma.
The power company said Tuesday that savings from recent tax reform signed by President Trump will offset any planned costs.
FPL said it will apply its savings to the $1.3 billion in costs from Irma that it had intended to recoup from customers.
Thousands of customers lost power for days and weeks during September because of the hurricane.
The utility had previously announced that it would have to implement a surcharge in March to pay for Irma after a year-long surcharge for 2016’s Hurricane Matthew ends in February.
Each of FPL’s customers will save an average of $250.
Duke Energy Florida: As noted in this June 11, 2019 Florida Public Service Commission news release:
The Florida Public Service Commission (PSC) today approved Duke Energy Florida, LLC’s (DEF) agreement to apply federal tax savings to offset storm restoration costs for Hurricane Michael, thereby avoiding a surcharge to DEF customers.
DEF had originally requested approval to recover $223.5 million, equating to $6.95 on a monthly 1,000 kWh residential bill for 12 months, beginning in July 2019. This agreement avoids these charges and continues DEF’s use of 2017 Tax Cuts and Jobs Act savings to cover hurricane recovery costs for its customers.
Gulf Power Company: As noted in this October 30, 2018 Florida Public Service Commission news release:
The Florida Public Service Commission (PSC) today ordered Gulf Power Company (Gulf) to pass additional savings from the Tax Cuts and Jobs Act of 2017 to its customers. The Commission approved an additional $9.6 million in customer bill reductions.
As a result, Gulf’s base rates will be reduced by $9.6 million, allowing residential customers to see a monthly bill reduction of $1.11 per 1,000 kWh in January 2019. In addition, Gulf proposes to reduce its 2019 fuel cost recovery amount by $9.9 million. This proposal will be considered at the PSC’s annual cost recovery clause hearing in November.
Tampa Electric: As noted in this March 1, 2018, Tampa Electric press release:
Tampa Electric bills won’t rise to pay for Hurricane Irma restoration costs, thanks to new tax savings. The Florida Public Service Commission (PSC) unanimously approved the measure today.
Because of recent changes made to the federal tax law, customers will directly benefit. What Tampa Electric would have paid in corporate income taxes will instead be used to cover the cost of restoring power after Hurricane Irma and several other earlier named storms. Additionally, Tampa Electric bills will reflect the ongoing benefits from tax reform starting in 2019.
Florida Public Utilities Company: As noted in this January 24, 2019 Chesapeake Utilities Corporation press release:
The Florida Public Service Commission has approved the settlement agreement between Florida Public Utilities Company (FPU), a subsidiary of Chesapeake Utilities Corporation (NYSE: CPK), and the Office of Public Counsel (OPC). The settlement agreement, which was filed on October 17, 2018, reduces electric rates as a result of the federal Tax Cuts and Jobs Act.
“This decision provides an immediate benefit to FPU electric customers, and we are appreciative of the Public Service Commission’s decision to approve our agreement which passes financial savings to customers,” said Jeffry M. Householder, President and Chief Executive Officer of Chesapeake Utilities Corporation. “The federal tax credit combined with declining electricity commodity costs reduces the average FPU residential customer’s total bill, which has remained unchanged from nearly a decade ago.”
FPU residential electric customers will be receiving an average estimated $3.32 decrease on their monthly bills. Commercial electric customers will also receive monthly bill reductions. Reduced rates for FPU electric customers are reflected on their January bills. The terms of the settlement will further reduce the average residential electric bill by an additional estimated $0.45 beginning January 1, 2021.
Peoples Gas System: As noted in this September 12, 2018 Florida Public Service Commission document:
The Florida Public Service Commission (PSC) today approved a Settlement Agreement that will reduce monthly bills for TECO Peoples Gas System (Peoples) customers beginning in January 2019.
A result of the Tax Cuts and Jobs Act of 2017, the Agreement reduces Peoples revenue requirement by $11.6 million annually. The revenue decrease will affect the base rate portion of the bill for all customer classes. For example, a residential customer using a monthly average of 20 therms would see a $1.00 reduction in the base rate portion of the bill.
Florida City Gas: As noted in this December 11, 2018 State of Florida Public Service Commission news release:
The Florida Public Service Commission (PSC) today approved Settlement Agreements for Florida Public Utilities Company (FPUC) and for Florida City Gas (FCG) to implement savings from the Tax Cuts and Jobs Act of 2017.
In the Florida City Gas case, the company, OPC, and the Federal Executive Agencies agreed to a 2018 Stipulation and Settlement that will reduce the gas utility’s base rates by a total of $305,000 in January 2019 to reflect ongoing tax savings. Also starting in January 2019, the company’s revenues will be reduced by an additional $305,000 annually for five years to compensate customers for retroactive impacts of the tax law.
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.