If Booker and Menendez enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Cory Booker and Bob Menendez hike the corporate income tax rate, New Jersey 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 fourteen New Jersey 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 New Jersey Board of Public Utilities, Atlantic City Electric, New Jersey American Water, New Jersey Natural Gas, Public Service Enterprise Group, Rockland Electric Company, Atlantic City Sewerage Company, SUEZ Water New Jersey, Inc., Middlesex Water Company, Gordon’s Corner Water Company, Jersey Central Power and Light Company, South Jersey Gas Company, Elizabethtown Gas, Aqua New Jersey, and New Jersey-American Water Company passed along tax savings to their customers.
Atlantic City Electric: As noted in this April 3, 2018 Exelon Utilities press release excerpt:
Atlantic City Electric will provide $23 million in annual tax savings to its customers. The company made a filing this month with the New Jersey Board of Public Utilities, which was approved on March 26, 2018. Customers will begin to see reductions on their bills around April 1, 2018.
New Jersey American Water: As noted in this October 28, 2020 American Water press release:
The New Jersey Board of Public Utilities (BPU) today approved changes to New Jersey American Water’s base water and wastewater rates. The BPU also approved a credit resulting in the pass-back to customers over the next 10 months of $32.5 million in excess accumulated deferred income taxes associated with the Tax Cuts and Jobs Act. For the average residential customer, the base rate increase of $39 million annually will be offset by the credit through August 31, 2021
New Jersey Natural Gas: As noted in this March 2, 2018 New Jersey Resources press release excerpt:
New Jersey Natural Gas (NJNG), a regulated subsidiary of New Jersey Resources (NYSE: NJR), today submitted a filing to the New Jersey Board of Public Utilities (BPU) to pass through the benefits of the recently enacted federal tax reform to customers. NJNG announced it will reduce customers’ rates by $21 million, effective April 1, 2018, resulting in a $31, or 3 percent, decrease to a typical residential heating customer’s annual bill.
NJNG also announced it will provide a one-time refund to customers totaling approximately $31 million. The estimated refund for a typical residential heat customer is $47. The actual refund amounts will be determined in May and reflect individual customer usage. Pending BPU approval, customers can expect to see these savings in their May or June bills.
For the rate decrease, a typical residential heating customer using 1,000 therms a year will see their annual bill go from $1,054 to $1,023, a savings of $31. When combined with the one-time refund, the customer will see an overall reduction of $78 or 7.4 percent this year. This adjustment will help ensure rates reflect the lower tax structure and any appropriate savings are passed on to customers.
“Our top priority is to ensure we deliver safe, reliable and affordable service to our customers, said Laurence M. Downes, chairman and CEO of New Jersey Resources. “We are pleased to pass along the benefits of tax reform to our customers through lower energy bills.”
Public Service Enterprise Group: As noted in this March 2, 2018 PSE&G press release:
Public Service Electric and Gas Co. (PSE&G) today proposed to lower customer bills by approximately 2 percent on April 1 to pass on the benefits of the federal tax reform legislation enacted earlier this year.
In its filing with the NJ Board of Public Utilities, PSE&G will reduce rates by approximately $114 million on an annual basis effective April 1 to reflect lower federal taxes the utility will pay. The typical residential combined electric and gas customer will save nearly $41 per year.
Rockland Electric Company: As noted in this June 22, 2018 New Jersey Board of Public Utilities document:
On March 2, 2018, the Company filed its petition pursuant to the Generic TCJA Order, including proposed tariffs as well as a proposed plan. Specifically, RECO’s petition stated that the 2017 TCJA would result in an annual revenue requirement reduction for the Company of approximately $2.868 million, as of April 1, 2018. The Company decreased its net deferred tax liabilities by $45 million, decreased its regulatory asset of future income tax by $17.million and accrued a regulatory liability for future income tax of $28 million. REGO calculated its new interim rates effective April 1, 2018 using billing determinants underlying the distribution rates established in RECO’s 2016 Base Rate Case. The Company calculated the current level of revenue based on the currently effective rates and allocated the distribution decrease among the service classifications in proportion to the relative contribution made by each class to the total current level of revenue.
The Company proposed to return to ratepayers the amounts deferred pursuant to the Generic TCJA Order for the period of January 1, 2018 until the effective date of the Company’s new rates, by means of a sur-credit. The Company proposed to employ a short-term borrowing rate to accrue interest on the deferred amounts until the Company’s returns such amount to ratepayers. The Company would return this total deferral amount over twelve (12) consecutive calendar months, commencing with the month immediately following when the Board issues an order approving the Company’s new rate. The sur-credit would be applied to all service classifications on an equal per kWh basis for the twelve (12) month period. According to the petition, the Company’s final effective rates reflect the proposed refund of the full amount of the excess accumulated deferred federal income tax liability to ratepayers.
Atlantic City Sewerage Company: As noted in this February 27, 2019 New Jersey Board of Public Utilities document:
The Update noted that effective April 1, 2018, ACSC implemented a rate decrease, to reflect the fact that the tax expense reflected in ACSC’s rates had been calculated at the statutory 34% rate. The new rates, made effective April 1, 2018, were based upon the new statutory rate of 21%.
The Update noted that the April 1, 2018 rate reduction was based upon a reduction in income tax expense of $319,945.00. After applying ACSC’s gross up factor, the rate decrease became an annual revenue reduction of $472,838.00.
SUEZ Water New Jersey, Inc.: As noted in this February 27, 2019 New Jersey Board of Public Utilities document:
On March 5, 2018, pursuant to the Generic Tax Order, SUEZ Water New Jersey, Inc., SUEZ Water Toms River, Inc. and SUEZ Water Arlington Hills, Inc. (collectively, “Joint Petitioners” or “Companies”) filed a joint petition requesting Board approval to implement a reduction in base rates effective April 1, 2018, of $12.1 million for SUEZ Water New Jersey, Inc., $1.6 million for SUEZ Water Toms River, Inc. and $0.2 million for SUEZ Water Arlington Hills, Inc.
On March 26, 2018, the Board issued an Order (“March 2018 Order”) approving the implementation of the Joint Petitioners’ proposed rate reduction on an interim basis, effective April 1, 2018. The proposed refund and other rider tariffs were deferred until a later date.
Middlesex Water Company: As noted in this August 29, 2018 New Jersey Board of Public Utilities document:
On March 26, 2018, the Board issued an Order Adopting Initial Decision/Settlement (“Middlesex Rate Case Order”) in BPU Docket No. WR17101049, Middlesex’s most recent base rate case. 3 This Order adopted a Stipulation of Settlement (“Rate Case Stipulation”) executed by Middlesex, the New Jersey Division of Rate Counsel and Board Staff (“Parties”). Under the Rate Case Stipulation, the Parties agreed that the Company included in the Rate Case Stipulation the effect on Middlesex’s rates of both phases of the required calculations as set forth in the Board’s Generic Tax Order.4 This included $500,000 for Phase Two adjustments accounted for as a result of an analysis performed by the Company and reviewed by the Parties. 5 The Parties further agreed in the Rate Case Stipulation to continue to review any calculations associated with the Company’s Phase Two adjustments on an ongoing basis, and to resolve any issues if they were to arise. 6 In addition, the Company agreed that, in the event the Phase Two adjustment resulted in less than the $500,000 returned to customers with the Board’s approval of the Rate Case Stipulation, no further adjustment will be made.
Gordon’s Corner Water Company: As noted in this August 29, 2018 New Jersey Board of Public Utilities document:
The Parties stipulated and agreed that all issues and requirements set forth in the Generic Tax Order as applied to Gordon’s Corner were resolved. 5 Consistent with the Rate CaseStipulation, Gordon’s Corner’s new rates to be set as a result of that case include a one-time $0.56 (i.e., a 56 cent) credit per customer, reflecting a stub period total credit due to customers of $8,394. This credit resolves both this matter with respect to Docket No. Ax:18010001 as well as all issues in the Gordon’s Corner Rate Case, associated with both Phase One and Phase Two of the Generic Tax Order. The Board NOTES that Gordon’s Corner has already complied with Phase One of the Generic Tax Order by lowering its volumetric rate from $5.15 to $5.04, or $154,676 on an annual basis, The Board FURTHER NOTES that the new base rates agreed to by the Rate Case Stipulation reflect a rate base adjustment of $137,421, which represents the Accelerated Deferred Income Tax owed to ratepayers pursuant to the 2017 Tax Cuts Act.
Jersey Central Power and Light Company: As noted in this May 8, 2019 New Jersey Board of Public Utilities document:
On March 2, 2018, the Company filed a petition pursuant to the Generic TCJA Order, which included proposed tariffs as well as a proposed plan. According to the petition, JCP&L recalculated its base rates to incorporate the impact of the mandatory reduction in the federal corporate income tax (“FIT”) rate from 35% percent to 21%, effective January 1, 2018 in accordance with the 2017 Act and the Generic TCJA Order. JCP&L’s proposed methodology and quantifications of the effects of the 2017 Act included the following: (1) a reduction in the FIT rate which would result in a base rate reduction of $28.6 million annually for the Company; (2) a deferral, as a regulatory liability, of $6.3 million on its books, with interest, for the impact of the reduction in the FIT rate on its tax gross-up between January 1, 2018 and March 31, 2018; and (3) non-rate base (unprotected) Excess Deferred Income Taxes (“EDITs”) of $90.89 million to be amortized over a ten-year period (levelized).
South Jersey Gas Company: As noted in this September 17, 2018 New Jersey Board of Public Utilities document:
On March 2, 2018, the Company filed its petition pursuant to the Generic TCJA Order, including proposed tariffs as well as a proposed plan. Specifically, SJG stated that it planned: (1) a reduction in base rates of $25.88 million effective April 1, 2018; (2) a corresponding estimated $12.88 million refund to customers for the period January 1, 2018 through March 31, 2018 for the corresponding rate adjustment (including interest at the Company’s short-term debt rate and (3) are-measurement and adjustment to rates related tci the “Unprotected” excess deferred income taxes of approximately $27.1 million associated with the implementation of the 2017 Act.
Elizabethtown Gas: As noted in this June 22, 2018 New Jersey Board of Public Utilities document:
On March 2, 2018, the Company filed its petition pursuant to the Generic TCJA Order, including proposed tariffs as w~II as a proposed plan. Specifically, ETG requested an annual reduction in firm distribution revenues of $10,938,818, effective April 1, 2018, which represents a 6.6% decrease. The Company also requested authorization to refund to customers for the difference between the effective April 1, 2018 rate and charges for January 1, 2018 through March 31, 2018, which was estimated to be $5.6 million. The Company proposed to refund the $5.6 million in a billing cycle during or before September 2018. Alternatively, the Company proposed to provide the refunds in May 2018 by filing a true-up after final rate approval by the Board. ETG proposed that the one-time refund would include interest at the Company’s short-term debt rate as specified in the Company’s last base rate case3 and· New Jersey Sales and Use Tax. ETG’s calculations include an adjustment to eliminate all Investment tax credits for the revenue requirements. The Company’s revenue factor will be reduced to 1.40828098. Additionally, the Company will use the Average Rate Assumption Method (“ARAM”) to amortize the protected excess deferred tax liability and proposed to amortize the unprotected potions of the excess • over five (5) years. ETG’s rate base includes an offset for deferred taxes, a portion of which will be used to provide customers an ongoing carrying cost benefit to the pre-tax weighted average cost of capital. To accomplish the rate reduction, the Company proposed to only reduce the distribution charges of its firm service classification and leave the monthly service charges untouched. The Weather Normalization Clause Margin Revenue Factor would be adjusted, effective January 1, 2018, to realize the full benefit of the 2017 Tax Act.
Aqua New Jersey: As noted in this July 25, 2018 New Jersey Board of Public Utilities document:
On March 2, 2018, the Company filed its petition pursuant to the January 31, 2018 Generic TCJA Order, including proposed tariffs as well as a proposed plan. The Company’s filing and proposed tariffs did not include an across-the-board rate reduction reflecting the reduction in the corporate tax rate from thirty-five percent (35%) to twenty-one (21 %). Therefore, Aqua refiled its petition (“Tax Rate Adjustment Filing”) which reflected the reduction in the corporate tax rate from thirty-five percent (35%) to twenty-one percent (21%) on March 19, 2018.
The Company represented that this rate change and one-time refund results in an overall rate decrease of approximately 6.8% to the average residential water customer using 5,000 gallons of water per month.
New Jersey-American Water Company: As noted in this July 10, 2019 New Jersey Board of Public Utilities document:
The Signatory Parties have reviewed the Company’s filing, exchanged discovery, filed comments and reply comments, and reached a resolution with regard to the disposition of the stub period amount and the difference between the originally implemented rate decrease of 5.88% and the agreed upon rate decrease of 6.12%. The resulting Partial Stipulation will result in NJAW issuing the agreed upon one-time credit to its customers.
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.