New Mexico Residents Will Get Stuck with Even Higher Utility Bills Due to Biden Corporate Tax Rate Hike

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Posted by John Kartch on Tuesday, June 8th, 2021, 1:23 PM PERMALINK

If Biden and Sens. Martin Heinrich and Ben Ray Luján impose 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, New Mexico households and businesses will get stuck with even 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 officials to pass along the tax savings to customers, including at least five New Mexico utilities. The savings take the form of either a rate reduction, or, a reduction to an existing/planned rate increase.

Working with the  New Mexico Public Regulation Commission, Public Service Company of New Mexico, El Paso Electric, Southwest Public Service Company, New Mexico Gas Company and Zia Natural Gas Company passed along tax savings to their customers.

Public Service Company of New Mexico: As noted in this February 27, 2018 Albuquerque Journal article excerpt

The company will gain about $48 million from the lowering of the corporate income tax rate from 35 percent to 21 percent. It will pass those gains onto consumers starting this year as part of Public Service Co. of New Mexico’s latest rate case that concluded in December, allowing PNM to lower its newest rate hike to just 1.4 percent.

El Paso Electric: As noted in this April 25, 2018 El Paso Electric news release:

The New Mexico Public Regulation Commission (NMPRC) today approved El Paso Electric’s (EPE) filing to begin issuing a credit in bills to reflect the reduction of the federal tax rate for New Mexico customers. The federal tax credit will be reflected on customer bills beginning May 1, 2018. 

EPE estimates the credit for the average residential New Mexico customer will range from $1.67 per month in the winter to $2.68 per month in the summer. The credit will appear as a line item adjustment on monthly bills.

EPE estimates that customers will see an annual reduction of approximately $4.9 million in base rates or a credit for all customers at 3.87 percent.

Southwest Public Service Company: As noted in this February 15, 2019 S&P Global excerpt:

Southwestern Public Service Co. reached a settlement agreement with the New Mexico Public Regulation Commission, under which the utility would see an annual revenue increase of $12.5 million.

The settlement will revise the commission's September 2018 order, which granted the company a revenue increase of approximately $8 million, based on a return on equity of 9.1% and a 51% equity ratio.

The original order also directed the Xcel Energy Inc. subsidiary to refund customers $10.2 million related to adjustments associated with the federal Tax Cuts and Jobs Act, retroactive to Jan. 1, 2018. Southwestern Public Service, or SPS, appealed the order to the New Mexico Supreme Court.

SPS in October 2017 originally requested a $43 million increase in base rates, an ROE of 10.25% and an equity ratio of 53.97%. The utility later filed a request to reduce revenue requirements by $11 million to reflect the federal tax overhaul.

New Mexico Gas Company: As noted in this New Mexico Gas Company 2018 Rate Case Overview:

The Company is requesting an $8 million increase in annual base revenues, which correlates to approximately a 1.4% increase in an average residential customer bill.

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This rate request applies the benefits of recently enacted federal tax reform to our customers and is $9.6million lower as a result of passing through the tax reform benefits. The request would have been $17.6 million before application of the tax reform benefits

Zia Natural Gas Company: As noted in this March 20, 2018 New Mexico Public Regulation Commission document

On January 26, 2018, ZIA tiled NMPRC Case No. 18-00018-UT, an Application for Revision of its Rates, Rules, and forms under Advice Notice No. 57 ("Application"); supporting schedules, direct testimonies and exhibits; and the Certificate of Service. In summary, ZIA is requesting a general rate increase of $2,597,203. As part of its Application, the Company incorporated the change in federal tax rate as a result of the passage of TCJA. The tax rate change impacted both the income tax expense and ADIT line items used to calculate the proposed customer rates.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households try to recover from the pandemic.

Many small businesses operate on tight margins and can't afford higher heating, cooling, gas, and refrigeration costs. President Biden should withdraw his tax increases.

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