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Governor Asks PSC to Pass On Benefit of Tax Cut

3 min read

Gov. Asa Hutchinson said in a letter Thursday that the Arkansas Public Service Commission should, “as expeditiously as possible, take whatever steps are necessary to pass the benefit of the corporate tax cut to Arkansas families and businesses in the form of lower utility rates.”

The letter was addressed to PSC Chairman Ted Thomas.

In December, Congress passed and President Donald Trump signed into law the Tax Cuts & Jobs Act of 2017. Energy providers will benefit from the corporate tax cut included in that legislation, according to a news release.

Hutchinson also wrote in the letter, “Investor-owned utilities have a monopoly, regulated by the Public Service Commission, on providing electricity and natural gas services to Arkansas’ families and businesses. Arkansas law allows utility providers to charge rates that recover the cost of providing utility service plus a rate of return on investment. Federal income taxes paid by the utility are one such cost.”

Read the letter here.  

John Bethel, executive director of the PSC, said the commission can and would likely initiate a “proceeding” where the utilities and the commission will figure out how much revenue the utilities will need as a result of the tax cut and how best to implement a lower rate for customers that is reflective of that benefit. 

The last time the commission held such a “proceeding” was following the Tax Reform Act of 1986.

He doesn’t expect the tax cut to have a direct impact on the commodity prices of gas or electricity.

Bethel also said the tax cut would have a different impact on each utility.

CenterPoint Energy Spokesperson Alicia Dixon agrees. She said in an email to Arkansas Business, “The tax bill would affect every utility differently based on their regulatory environments and each company’s deferred tax constructs. As an industry, it was emphasized that any final legislation should include important provisions that will benefit customers.

“The lower tax rate, along with other key elements in the Tax Reform Bill, should allow customers the benefit of continued utility infrastructure investment and the opportunity to reduce costs driven by lower federal tax rates. At CenterPoint Energy, we are reviewing the bill to determine what impact it will have on our 2017 financial statements and will update regulators accordingly.”

Entergy Spokesperson Kerri Jackson Case wrote in an email to Arkansas Business, “Entergy believes that the tax reform legislation will benefit our customers by lowering the tax costs that they otherwise would pay in rates, and we look forward to working with our regulators to implement the benefits of these lower tax rates.

“These lower tax costs come at a time when our utility is making significant investments to modernize our electric infrastructure in order to better serve our customers, and they will help us keep rates down. Today, our rates are among the lowest in the United States, and we want that to remain the case.”

Rob Roedel, spokesman for Electric Cooperatives of Arkansas, said it is reviewing the issue and whether it pertains to not-for-profit electric cooperatives.

In addition, Hutchinson released a statement praising Walmart for its plans to raise its starting wage, offer new employee benefits, and pay bonuses to employees.

The statement reads, “Walmart’s quick reaction to the new law is exactly the response we expected under the tax cut. I am proud that Arkansas’ largest corporate citizen is leading the way in putting more money in the pockets of its hard-working employees.”

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