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PSC Acts Quickly, Pushing Utilities to Pass On Tax Savings

2 min read

The Arkansas Public Service Commission, acting quickly after Gov. Asa Hutchinson requested a review of how the recent federal tax cut bill might affect public utilities in the state, began proceedings Friday afternoon to determine how the utilities might pass their savings on to ratepayers.

All of the state’s investor-owned utilities, including the biggest, Entergy Arkansas and CenterPoint Energy, were made parties to action, entered as Docket No. 18-006-U.

The commission, which regulates public utilities, received a letter Thursday from the governor, who asked that benefits of the Tax Cuts & Jobs Act be passed along to “Arkansas families and businesses” in the form of lower rates “as expeditiously as possible.”

The staff of the three-member commission was as expeditious as could be, filing the new docket just after noon Friday. 

“The Commission issued Order No. 1 in Docket No. 18-006-U initiating a proceeding to address the effects of the federal income tax rate change on the affected jurisdictional utilities,” the commission’s executive director, John P. Bethel, wrote in an email to Arkansas Business.

The order directs investor-owned utilities to file an analysis of the ratemaking effects of the new tax rates on each company’s revenue requirement. (The PSC takes the revenue required to serve customers into account in establishing fair utility rates. As corporate tax rates fall from 35 to 20 percent, utilities are expected to save money on taxes and thus have savings that could then be passed on to ratepayers.)

The order also calls on utilities to “book regulatory liabilities to record the current and deferred impacts” of the new tax law. “While the exact amount of the tax savings and resulting rate reductions cannot be determined with precision at this time, each of the Arkansas IOUs should use its best estimate to determine the amounts…” the order said.

The last time the commission issued a similar order was after the Tax Reform Act of 1986, Bethel said. Utility representatives said their companies are reviewing the order and pointed out that Arkansas electricity rates are among the lowest in the country, and likely to stay that way.

The order does not apply to not-for-profit utilities like the state’s municipal power companies and electric cooperatives. The docket lists the commission itself as the initiating party, and includes along with the utilities its general staff, the Arkansas attorney general’s office and two consumer groups, the Arkansas Electric Energy Consumers Inc. and Arkansas Gas Consumers Inc. The utilities listed as parties, along with Entergy and CenterPoint, are Arkansas Oklahoma Gas Corp., Black Hills Energy Arkansas, Liberty Utilities, Oklahoma Gas & Electric Co., Southwestern Electric Power Co. and Empire District Power Co.

“Other interested entities may petition to intervene in accordance with Rule 4.02 of the Commission’s rules,” the order said.

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