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

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Posted by John Kartch and Michael Mirsky on Monday, May 24th, 2021, 5:07 PM PERMALINK

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

If President Biden and Senator Tammy Baldwin hike the corporate income tax rate, Wisconsin 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 Wisconsin 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 Service Commission of Wisconsin, Alliant Energy, Madison Gas & Electric, Superior Water, Light & Power, We Energies, and Wisconsin Public Service Corporation passed along tax savings to their customers.

Alliant Energy, Wisconsin: As noted in this May 26, 2018 Wisconsin State Journal article excerpt:

The average residential customer of Madison-based Alliant Energy can expect some of the highest amounts back, with a one-time credit of $22.92 on their electric bills and $6.99 for natural gas during the June billing cycle, followed by monthly credits of $4.11 for electricity and $1.15 for natural gas. That totals $40 million in refunds for 2018.

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Alliant said its retail electric costs will rise by a total of $194 million in 2019 and 2020 as it brings on the 700-megawatt, natural gas-fueled West Riverside power plant near Beloit in the second half of 2019.

Alliant’s natural gas expenses are projected to rise $24 million over that period.

But rather than raising customer rates, the utility said it will cut costs via fuel savings and income tax reductions.

Madison Gas & Electric: As noted in this As noted in this May 26, 2018 Wisconsin State Journal article excerpt:

Madison Gas & Electric will return a one-time credit of $9.23 to its residential electric customers and $4.80 to natural gas customers by July 31. After that, electric bills will dip about $1.56 a month and gas bills by about $1 a month in 2018, MGE spokesman Steve Schultz said. That totals about $8 million worth of credits, according to PSC calculations.

The money represents excess taxes the companies have been collecting from ratepayers. Utility rates, set in advance, anticipated a 35 percent corporate tax rate. But Congress, in its tax reform package, lowered the rate to 21 percent.

Superior Water, Light & Power: As noted in this May 29, 2018 Superior Telegram article excerpt:

Residential customers of Superior Water, Light & Power will receive a $31.80 lump-sum credit on July bills as a result of savings accrued from the tax law Congress passed last year, according to an order issued Thursday by the Public Service Commission.

Customers in all categories will receive lump-sum and ongoing credits for each provided service. The largest electrical customer will receive a $61,807 lump sum credit and other non-residential customers will receive lump-sum electric credits varying from $13.70 to $3,106 depending on customer classification, according to the PSC order.

SWL&P estimated its total customer credits this year at $1.322 million.

We Energies: As noted in this April 26, 2018, Milwaukee Journal Sentinel article excerpt:

We Energies electric customers will receive a one-time credit in July and a slight decrease in electric rates in subsequent months from a portion of the savings from the company's lower federal corporate tax rate, state regulators decided on Thursday.

The Public Service Commission determined that 20 percent of the immediate savings from the lower tax rate should be passed on to customers.

The remaining 80 percent of the savings will go toward paying down deferred costs that stood at $424.5 million as of Dec. 31 but that are not included in current rates.

"It will be a win-win for our customers — providing an immediate bill credit while also helping to reduce future rate increases," Cathy Schulze, a We Energies spokeswoman, said in an email.

Wisconsin Public Service Corporation: As noted in this December 19, 2019 Public Service Commission of Wisconsin document

On March, 23, 2019, WPSC requested Wisconsin jurisdictional revenue increases of $48.6 million (4.9 percent) in 2020 and $48.6 million (4.9 percent) in 2021 for its electric operations and revenue increases of $7.2 million (2.4 percent) in 2020 and $7.1 million (2.4 percent) for its natural gas operations. To accomplish an effective rate increase of 4.9 percent in each year for WPSC’s electric operations (WPSC electric), WPSC sought approval to apply $16 million of unprotected tax benefits resulting from the federal 2017 Tax Cuts and Jobs Act (TCJA) for the benefit of customers in 2020, $21 million of 2018 WPSC deferred revenue sharing benefits to customers in 2020, $7 million of 2018 excess fuel collections in 2020, and another $24 million of unprotected tax benefits in 2021. To accomplish an effective rate increase of 2.4 percent in each year for WPSC’s natural gas operations (WPSC gas), WPSC sought approval to apply $7 million of unprotected tax benefits resulting from the TCJA for the benefit of customers in 2020

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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