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

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Posted by John Kartch, Michael Mirsky on Saturday, September 4th, 2021, 12:50 PM PERMALINK

If Brown enacts a corporate income tax rate increase, he will have to explain why he just increased your utility bills

If President Biden and Senator Sherrod Brown hike the corporate income tax rate, California 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 nine Ohio 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 Public Utilities Commission of Ohio, Cleveland Electric Illuminating Company, Dominion Energy Ohio, Duke Energy Ohio, Inc., Ohio Edison, Toledo Edison, Vectren, Suburban Natural Gas Company, Northeast Ohio Natural Gas Corp. and South Central Power Co. passed tax savings along to their customers.

Cleveland Electric Illuminating Company: As noted in a July 2019 First Energy Corp. press release:

“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters. 

“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”

"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” 

Dominion Energy Ohio: As noted in this December 5, 2019 WKTN article:

The Public Utilities Commission of Ohio (PUCO) today adopted an agreement that authorized Dominion Energy Ohio (Dominion) to establish a credit on gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.

Dominion will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rate. The $50.9 million credit will be passed back to all customers over a 12 month period.

Dominion will return to customers annually approximately $18.9 million, which reflects the remaining tax savings not currently accounted for in rates, on a going-forward basis, until the Commission approves updated rates through a distribution rate case. Dominion is expected to file an application with the PUCO for its next distribution rate case in 2024.

Dominion will return to customers normalized excess deferred income tax (EDIT), estimated by the utility to be approximately $416 million, over a federally prescribed time period of approximately 38 years.

Dominion will credit customers non-normalized EDIT, estimated by the utility to be approximately $181 million, over approximately a six-year period.

A residential customer will see a bill reduction of approximately $5.80 per month for the first year, a $3.15 reduction in years two through six and a $1.55 reduction in year seven and beyond. 

Duke Energy Ohio, Inc.: As noted in this April 13, 2018, Duke Energy press release:

Duke Energy Ohio customers will receive approximately $20 million in annual tax savings on their electric bills beginning this month. The bill reduction is a result of the recent Tax Cuts and Jobs Act, which federal lawmakers passed in late 2017.

"The tax act provides a unique opportunity for us to reduce customers' bills by millions of dollars," said Jim Henning, president of Duke Energy Ohio and Kentucky. "And that's exactly what we're doing here – delivering real savings to our customers."

Duke Energy Ohio also plans to lower its customers' natural gas bills by about $3 million beginning in May – subject to the approval of proposals filed with state regulators.

"The tax act reduced our corporate tax rate – and that's a benefit we are pleased to pass along to our customers," said Henning. "However, the impacts on our business and customers go far beyond the reduction in the corporate tax rate. While some of the changes reduce our federal tax liabilities over time, others could actually increase our tax obligations.

"We considered all of these scenarios as we determined the best ways to pass along the benefits of the tax act to our customers. And we continue to work through various regulatory proceedings in our efforts to ensure that our customers receive the benefits of this new law." 

Ohio Edison: As noted in this July 17, 2019 First Energy Corp. press release:

“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters. 

“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”

"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” 

Toledo Edison: As noted in this  July 17, 2019 First Energy Corp. press release:

“Ohio Edison, Cleveland Electric Illuminating Company and Toledo Edison – announced today that the Public Utilities Commission of Ohio (PUCO) approved a comprehensive settlement agreement that will return additional savings to customers related to federal income tax law changes and includes investments to modernize the electric distribution system with advanced automation equipment, real-time voltage controls and smart meters. 

“FirstEnergy's Ohio customers will receive 100 percent of the tax savings created by the federal Tax Cut and Jobs Act, which includes tax savings already credited to customers since last year. As a result of the additional tax savings, a typical residential customer using 1,000 kilowatt hours of electricity could expect to see a reduction of over $4 in monthly bills.”

"We are pleased to resolve the tax reform issues and will pass along the tax savings to customers," said Samuel L. Belcher, senior vice president and president of FirstEnergy Utilities. "We look forward to modernizing our electric system with advanced equipment that will help reduce the number and duration of power outages. Smart meters also will allow our customers to make more informed decisions about their energy usage.” 

Vectren: As noted in this July 1, 2020 Ohio Public Utility Commission statement:

The Public Utilities Commission of Ohio (PUCO) today adopted an unopposed agreement authorizing Vectren Energy Delivery of Ohio (Vectren) to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates. 

Vectren will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $6 million credit, including interest, will be passed back to customers through the end of 2021. 

Vectren will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be $74.6 million, over an approximately 25-year period.

Vectren will credit customers non-normalized EDIT of $25.9 million over a six-year period.

Each Vectren residential customer is estimated to receive approximately $270 in total credit over the duration of the refunds. 

Suburban Natural Gas Company: As noted in this September 9, 2020 Ohio Public Utility Commission statement:

The Public Utilities Commission of Ohio (PUCO) today authorized Suburban Natural Gas Company to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates. 

Suburban will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $454,785 credit, which includes interest, will be passed back to customers over a 24-month period. 

Suburban will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be approximately $1.6 million.

Suburban will credit customers non-normalized EDIT of $233,650 over a 10-year period. 

Northeast Ohio Natural Gas Corp.: As noted in this May 20, 2020 Ohio Public Utility Commission statement:

The Public Utilities Commission of Ohio (PUCO) today authorized Northeast Ohio Natural Gas Corp. (NEO) to establish a credit on natural gas customer bills to reflect the impact of the Tax Cuts and Jobs Act (TCJA) of 2017 on its rates.

NEO will credit residential customers the amount it has over collected, plus interest, since Jan. 1, 2018 under the previous corporate tax rates. The $500,423 credit, including interest, will be passed back to customers over a 12-month period.

NEO will return to customers normalized excess accumulated deferred income tax (EDIT), estimated by the utility to be approximately $2.3 million, over a federally prescribed time period.

NEO will credit customers non-normalized EDIT of $50,867 over a 72-month period.

A residential customer, using approximately 10 Mcf per month, will see a bill reduction of approximately $1.37 per month for the first year. 

South Central Power Co.: As noted in this July 24, 2018 South Central Power Co. statement

As some of the year’s highest electric bills are hitting consumers’ mailboxes thanks to near-record heat this summer, South Central Power members are getting a one-time break on transmission charges that could decrease the average member’s July bill by around $10.

The bill reduction is a result of the recent Tax Cuts and Jobs Act, which federal lawmakers passed in late 2017. “Thanks to tax savings realized by our transmission provider, we received a credit of roughly $1.7 million toward our transmission costs,” said Allison Saffle, VP of member service for South Central Power. “We’ve passed those savings directly on to consumers, who will see them reflected in lower transmission charges on this month’s bills. Going forward, the impact of the lower tax rates will be passed directly on to consumers, who will see transmission costs lowered by roughly $1 per month.” 

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.

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