North Dakotans Will Get Stuck with Higher Utility Bills Due to Biden Corporate Tax Rate Hike

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Posted by John Kartch on Wednesday, April 14th, 2021, 10:00 AM PERMALINK

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, North Dakota 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%.

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 three North Dakota utilities.

Working with the Public Service Commission, MDU, Xcel Energy North Dakota and Otter Tail Power Company passed along tax savings to customers.

MDU: As noted in this Sept. 26, 2018 PSC statement:

In September 2017 the Commission approved a $4.6 million interim rate increase in accordance with state law. That interim rate was reduced to $2.7 million in March 2018 to reflect tax savings due to the Tax Cuts and Jobs Act. Because the agreement approved today includes a smaller increase than the interim rate, MDU natural gas customers will receive a refund for any excess revenue collected from September 2017 to present. The refund will be issued within 90 days of approval of a refund plan.

As part of the agreement, the fixed basic service charge will be $20.87 per month for residential customers. Because the rate approved today is less than the current interim rate, customers will actually see a decrease in their bills.

Otter Tail Power Company: Also as noted in the Sept. 26, 2018 PSC statement:

The PSC also today approved an approximately $4.6 million (3.09%) annual revenue increase for Otter Tail electric service. The company had originally asked for an increase of $13.1 million (8.72%). The company has not asked for a rate increase since 2008. Since then, Otter Tail Power has experienced increased operating expenses and costs driven by the company’s investments in generation, transmission, and distribution infrastructure.

In December 2017 the Commission approved a $12.8 million interim rate increase in accordance with state law. That interim rate was reduced to $8.3 million in February 2018 to reflect tax savings due to the Tax Cuts and Jobs Act. Because the agreement approved today includes a smaller increase than the interim rate, Otter Tail electric customers will receive a refund for any excess revenue collected from December 2017 to present. The refund will be issued within 90 days of implementation of the final rates.

As part of the agreement, the fixed basic service charge will be no higher than $14 a month for residential customers. Because the rate approved today is less than the current interim rate, customers will actually see a decrease in their bills.

Xcel Energy North Dakota: As noted in a Feb. 8, 2019 Fargo Forum article:

Utility companies across the country paid lower taxes after the federal Tax Cuts and Jobs Act of 2017 passed. Since then, states have been ordering those companies to pass on the savings to customers.

There was some discussion of using the money to improve energy equipment in North Dakota, or possibly holding down future rate increases.

But on Friday, Feb. 8, Xcel announced its North Dakota customers will receive a rebate. Xcel Energy will soon distribute nearly $10 million to all North Dakota electricity customers as a result of the federal tax cut. All Xcel Energy electricity customers in the state will receive a credit on their bills. The refund for a residential electricity customer will average about $46, but will vary based on each customer’s actual use.

The North Dakota Public Service Commission approved the refunds this week and customers should receive them as one-time bill credit beginning this spring.

As an additional part of the agreement, North Dakota customers will not see any increases in their base electric rates until at least Jan. 1, 2021, which is the earliest any future rate reviews could take effect. The agreement also allows Xcel Energy the ability to provide customers with additional refunds should the company achieve higher earnings than authorized by the commission.

Conversely, a vote for a corporate income tax rate hike is a vote for higher utility bills as households 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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