If Warren and Markey enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills

If President Biden and Sens. Elizabeth Warren and Ed Markey hike the corporate income tax rate, Massachussets households and businesses will get stuck with higher utility bills.

Democrats plan to impose a corporate income tax rate increase to 28%, even higher than communist China’s 25%. 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 Massachusets 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.

Tax Cuts and Jobs Act Impact: Working with the Massachusetts Department of Public Utilities, Eversource Energy, National Grid, Unitil, Berkshire Gas, Columbia Gas of Massachusetts, Liberty Utilities and Aquarion Water Company of Massachusetts, Inc. passed along tax savings to their customers.

Eversource Energy: As noted in this February 5, 2018 Massachusetts Department of Public Utilities press release:

To ensure Massachusetts ratepayers receive the benefit of recent federal tax cuts, the Department of Public Utilities (DPU) ordered NSTAR Electric Company (NSTAR) and Western Massachusetts Electric Company (WMECo), together doing business as Eversource Energy, to reduce rates due to the federal tax law in their base rates that will take effect on February 1, 2018. Additionally, in an effort to capture savings for ratepayers in the Commonwealth, DPU opened an investigation to analyze how the recently enacted federal tax reform may affect gas, electric, and water utility rates for Massachusetts utility customers.

As a result of the reduction in the tax expense and the rate consolidation of the companies, the DPU’s Order reduced the recently approved rates for Eversource Energy by approximately $56 million. Eversource customers will now see an approximately $20 million, or 1.8 percent, decrease in rates, instead of the approximately $36 million increase that was initially approved by the DPU.

National Grid: As noted in this June 30, 2018 article from the Daily News of Newburyport:

The state is ordering more than a dozen electric, gas and water companies to fork over $116 million in tax savings to their customers.

A directive issued Friday by the state Department of Public Utilities requires 14 publicly regulated companies — including National Grid, Eversource and Unitil — to reduce their distribution rates, effective July 1, to reflect savings from a cut in the federal corporate tax rate.

The agency says residential customers can expect average annual savings from $9 to $40 — or a 1 to 8.5 percent reduction on their bills.

Unitil: As noted in this February 28, 2020 Massachusetts Department of Public Utilities document:

In the filing, Unitil sought to increase its rates to generate $7.3 million in additional base distribution revenues. This increase included the Company’s request to transfer the recovery of $3.4 million in Gas System Enhancement Plan (“GSEP”) investments from the Local Distribution Adjustment Factor (“LDAF”) to base distribution rates. Consequently, if approved, the proposed increase in base distribution revenues of $7.3 million would be offset by a revenue decrease of $3.4 million to the LDAF, which resulted in a $3.9 million, or11.1 percent, increase over current total gas operating revenues. The Company also statedthat its requested rate increase considered the reduction in the federal corporate income tax rate that results from the Tax Cuts and Jobs Act of 2017 (“Tax Act”), which became effective January 1, 2018

Berkshire Gas: As noted in this December 10, 2018 Daily Hampshire Gazette article:

The agreement also incorporates tax savings Berkshire received as a result of the reduction of the federal corporate tax rate. That resulted from the AG’s petitioning the DPU last December to ensure that utility tax savings go to ratepayers, and not to gas, electricity, and water utility owners.

Columbia Gas of Massachusetts: As noted in this April 14, 2018 Western Mass News excerpt:

Columbia Gas of Massachusetts is filing a petition with the Massachusetts Department of Public Utilities (DPU) to increase annual revenues by $24.1 million, representing a 3.9 percent increase in current operating revenues.

The request addresses increases in operating and maintenance costs incurred to comply with increasingly stringent federal and state regulatory mandates and capital costs incurred to upgrade gas infrastructure since the last time Columbia Gas changed its rates in 2016.

The Columbia Gas request is reduced by the impact of the federal Tax Cuts and Jobs Act, which became effective on January 1, 2018.

The request includes a proposal for a refund to customers of $9.1 million, beginning on the effective date of the revised rates, related to the benefit of the tax cut as of January 1, 2018.

Liberty Utilities: As noted in this May 23, 2018 Massachusetts Department of Public Utilities notice of filing and public hearing:

On May 1, 2018, Liberty Utilities (New England Natural Gas Company) Corp. d/b/a  Liberty Utilities (“Company”) filed its compliance filing in D.P.U. 18-15. The Department docketed the Company’s filing as D.P.U. 18-15-7. The Company proposes to incorporate the current corporate income tax rate in its base distribution rates beginning on July 1, 2018. The Company expects that this change will reduce its revenue requirement by approximately $929,000. The Company proposes to return any excess tax collected from January 2018 through June 2018 only if the Company’s actual return on equity (“ROE”) exceeds its allowed ROE for 2018. Finally, the Company proposes to return approximately at $2.3 million in excess ADIT over yet to be determined amortization periods, through a credit to its Local Distribution  Adjustment Clause starting in November 2018.

Aquarion Water Company of Massachusetts, Inc.: As noted in this February 9, 2018 Aquarion Water Company of Massachusetts, Inc. filing:

Specifically, with this Motion, the Company is requesting to amend its initial filing submitted to the Department on April 13, 2017 to incorporate certain changes to the request for a base-rate change (the “Amendment”). Collectively, the changes to the Company’s initial filing proposed in this Amendment reduce the Company’s requested rate relief from $2.347 million to $2.121 million, or by $226,000. The reduction of the proposed requested increase is enabled by the federal “Tax Cuts and Jobs Act,” enacted December 22, 2017 (“2017 Tax Act”), along with other circumstances. 

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.