If Wyden and Merkley enact a corporate income tax rate increase, they will have to explain why they just increased your utility bills
If President Biden and Sens. Ron Wyden and Jeff Merkley hike the corporate income tax rate, Oregon 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 six Oregon 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 Utility Commission of Oregon, Avista Utilities, Pacific Power, Idaho Power, Cascade Natural Gas Corporation, Avion Water Company, Inc. and Northwest Natural passed along tax savings to their customers.
Avista Utilities: As noted in this February 11, 2019 Public Utility Commission of Oregon document:
As explained in more detail below, the Company is requesting a rate decrease of $3,708,000 or 4.2%, effective March 1, 2019.
The primary purpose of this filing is to pass back the 2018 deferred portion of the benefits attributable to the revisions of the federal income tax code caused by the enactment of the Tax Cuts and Jobs Act signed into law on December 22, 2017. Per discussions with Commission Staff, the Company is requesting less than statutory notice to begin returning the deferred tax benefits of $3.708 million to customers over a twelve month period effective March 1, 2019 to February 29, 2020.
A residential customer using an average of 47 therms a month could expect their bill to decrease by $2.18 or 4.3%, for a revised monthly bill of $49.02 effective March 1, 2019.
Pacific Power: As noted in this January 29, 2019 Gorge County Media excerpt:
Following through on a pledge made when the Tax Cuts and Jobs Act became law in late 2017, Pacific Power’s 550,000 customers in Oregon will see a decrease in their bills starting Feb. 1, 2019.
Under the tax cut-related reduction, as approved by the Oregon Public Utility Commission, residential customers in Oregon will see a bill decrease of approximately 3.8 percent. A typical Oregon residential customer using 900 kilowatt hours of electricity per month will see their bill drop from about $98.52 to about $94.40 per month after Feb. 1. Commercial and industrial customers in the state will see reductions ranging from 3 percent to 4 percent depending on the customer classification.
Northwest Natural: As noted in this October 30, 2018 Portland Business Journal excerpt:
A NW Natural spokeswoman said rates also reflect savings from the Tax Cuts and Jobs Act, which cut the corporate tax rate from 35 percent to 21 percent. It’s standard regulatory practice in Oregon for rates to incorporate shifts in the tax burden companies face, up or down
Idaho Power: As noted in this December 29, 2020 Public Utility Commission of Oregon document:
On May 30, 2018, the Commission issued Order No. 18-199 approving a Term Sheet agreed to by Idaho Power, Staff, and the Oregon Citizens’ Utility Board, collectively “Parties”, that quantified the cost-of-service benefits of the 2017 Tax Act and the 2017 Tax Act impacts associated with the North Valmy power plant levelized revenue requirement. The Parties agreed that the annual Oregon-jurisdictional tax benefits of $1,483,736 are a reasonable quantification of all tax benefits resulting from the 2017 Tax Act for 2018 and 2019. Further, the Parties agreed that the annualized tax benefits will remain in customer rates through May 31, 2020, to provide customers with a full 24-month benefit period associated with 2018 and 2019 tax benefits. In order to facilitate this ratemaking treatment, the Company agreed to request reauthorization from the Commission of the Oregon jurisdictional tax reform benefits authorized in UM 1928.
On December 23, 2019, Idaho Power filed with the Commission a request to update the quantification of Tax Reform benefits to be included in customer rates beginning June 1, 2020. On May 5, 2020, the Commission issued Order No. 20-148, approving Idaho Power’s quantification of $1,519,887 in annualized Oregon jurisdictional benefits associated with Tax Reform and adjusted customer rates to reflect amortization of the Tax Reform benefits effective June 1, 2020. This amount will remain in customer rates until Idaho Power’s next general rate case or other proceeding where the then current tax expenses and other tax related revenue requirement components are reflected in rates.
Cascade Natural Gas Corporation: As noted in this September 12, 2019 Public Utility Commission of Oregon document:
The parties agreed the Company would return a total of $1.4 million to rate-payers over a 12 month period beginning November 1, 2019. This amount is inclusive of all remaining interim Tax Act benefits and is comprised of $1.2 million dollars for the 2018 deferral period and $200 thousand dollars for the January – March 2019 deferral period.
Avion Water Company, Inc.: As noted in this March 1, 2021 Public Utility Commission of Oregon document:
In 2017, the 115th United States Congress passed H.R.1 – Tax Cuts and Jobs Act (H.R.1or Act). The Act was signed into law on December 22, 2017 by President Donald Trump, with most provisions going into effect on January 1, 2018. The Act contains provisions that impact regulated utilities’ federal tax obligations, including a reduction in the corporate income tax rate and the treatment of Contributions in Aid of Construction (CIAC) for water utilities. On March 1, 2018, Staff filed its initial Application for an order authorizing deferred accounting to track the impact, for later ratemaking treatment, of the Tax Act for the twelve month period beginning March 1, 2018. On February 28, 2019, Staff submitted an application for reauthorization to defer these amounts, and again on March 2, 2020, Staff submitted an application for reauthorization of the deferral. These applications were approved by the Public Utility Commission of Oregon (Commission) on November 19, 2020 in Order No. 20-443. The ratemaking treatment for these deferrals is addressed in Avion’s most recent general rate case, Docket UW 181, Order No. 20-488.
This filing is Staff’s application for reauthorization to continue deferring amounts related to the tax benefits associated with the TCJA. While most of the issues associated with TCJA benefits were addressed in Order Nos. 20-443 and 20-488, there is a narrower subset of tax benefits associated with CIAC that require a continued deferral, as described below, to ensure future ratemaking treatment for tax benefits and obligations not currently reflected in rates.
Staff requests to defer, for later ratemaking treatment, certain CIAC-related tax benefits associated with the Act. The Act resulted in the taxability of CIAC for water utilities, which was not present prior to the Act. The CIAC-related tax obligation will be due to the taxing bodies for the year in which the CIAC is assumed, and will be paid along with other taxes paid for the year in which the CIAC is received. Also beginning in that year, and then for each year over the tax life of the asset, water utilities will claim the tax depreciation of the CIAC assets, which functions as a deduction to the utility’s taxable income (CIAC Tax Benefits). The benefits at issue for this Application are the CIAC Tax Benefits.
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.