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

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Posted by John Kartch and Michael Mirsky on Monday, June 7th, 2021, 9:30 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, Oklahoma 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 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 five Oklahoma 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 Oklahoma Corporation Commission, Oklahoma Gas and Electric Company, Public Service Company of Oklahoma, CenterPoint Energy Oklahoma Gas, Oklahoma Natural Gas and Arkansas Oklahoma Gas passed along tax savings to their customers.

Oklahoma Gas and Electric Company: As noted in this June 19, 2019 Oklahoma Corporation Commission document

The Oklahoma Corporation Commission today gave unanimous approval to a settlement in the Oklahoma Gas and Electric (OG&E) rate case that is the largest single rate reduction for an Oklahoma electric utility.

Commission Chairman Dana Murphy called the agreement a win-win for all concerned.

“The settlement will cut rates by $64 million and refund to customers $18.5 million in tax savings from federal tax reform,” Murphy said. “The timing of this couldn’t be better, as the savings will begin at a time when electric bills are the highest because of the summer heat.

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Under the agreement, the average residential customer will receive a one-time tax credit and monthly rate reduction totaling an estimated $18.70 in July. Subsequent average monthly rate savings will be approximately $4.40.

Oklahoma Natural Gas: As noted in this January 9, 2019 The Oklahoman excerpt

An order approved Tuesday by the Oklahoma Corporation Commission might help take a little chill off the state's winter nights.

The order requires Oklahoma Natural Gas to pass through $22.7 million in credits to customers to compensate them for taxes collected as part of their bills the company didn't have to pay.

Officials said those credits will compensate for the lowered tax liabilities that the utility enjoyed in 2018 after Congress approved and President Donald Trump signed the Tax Cuts and Jobs Act of 2017.

Officials said the order requires the utility, a division of investor-owned ONE Gas, to provide $11.7 million in credits to its customers in Oklahoma in February. They said that represents the amount the utility over-collected from customers in 2018 that didn't account for its lower tax liabilities.

It also requires Oklahoma Natural Gas to lower its rates by $11 million to compensate customers for ongoing reduced tax liabilities, going forward. That reduction will remain in place until the company files its next rate case for consideration.

Officials said the average ratepayer will see a $15 reduction on February's bill and will see smaller reductions in subsequent bills this year.

Public Service Company of Oklahoma: As noted in this August 1, 2018 Oklahoma Corporation Commission document:

The Oklahoma Corporation Commission today unanimously approved an order directing Public Service Company of Oklahoma (PSO) to return approximately $428 million in deferred excess income taxes to customers. 

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“This is money that is owed customers as a result of the Tax Cuts and Jobs Act that took effect January 1,” said Murphy. “The Commission issued an order in the first week of January for all utilities to begin tracking the resulting over collection of taxes for refund to customers. I commend the company for moving promptly to follow the order."

CenterPoint Energy Oklahoma Gas: As noted in this March 13, 2020 Oklahoma Corporation Commission document:

CenterPoint Energy Resources Corp., d/b/a CenterPoint Energy Oklahoma Gas ("CenterPoint Oklahoma or the "Company"), hereby applies for an order of the Oklahoma Corporation Commission (the "Commission"): (a) approving the calculations presented by the Company according to requirements of the Company's Performance Based Rate Change Plan (the "PBRC Plan") for the calendar year ended December 31, 2019, and related customer bill credits; (b) approving additional customer credits for Protected and Unprotected Excess Deferred Income Tax ("EDIT") arising from the Tax Cuts and Jobs Act of 2017 ("TCJA"); and (c) approving proposed base rate adjustments due to the Company's Energy Efficiency ("EE") true up adjustment and its EE incentive.

In this proceeding, CenterPoint Oklahoma will present calculations from Test-Year 2019 to support an aggregate credit to customers of approximately $2 Million. These credits arise expressly from the PBRC Plan. Customers would not be receiving such a benefit under the traditional rate process. The PBRC Plan provides that the $2 Million in credits will be returned to individual customers though monthly billings over a twelve-month period, to begin as soon as the Commission issues a final order in this Cause.

Arkansas Oklahoma Gas: As noted in this December 30, 2020 Oklahoma Corporation Commission document

THE COMMISSION THEREFORE ORDERS that the reduction in federal corporate tax rates resulting from the Tax Cuts and Jobs Act provides reduced tax expenses and new excess tax reserves, which were available to be returned to customers

THE COMMISSION FURTHER ORDERS that its previous order in this proceeding, Order No. 671980, required AOG to record a deferred liability to preserve tax savings until a review of AOG’s rates in its next-filed PBR change plan proceeding, to include consideration of tax savings. 

THE COMMISSION FURTHER FINDS that competent, sworn statements have been submitted and are hereby admitted as evidence that AOG complied with Order No. 671980 in Cause No. PUD 201900028, its next PBR proceeding filed after the entry of Order No. 671980. Through consideration of tax savings in that proceeding and in Cause No. PUD 202000051, the effects of the Tax Cuts and Jobs Act of 2017 on customer rates have therefore been addressed.

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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