CenterPoint Energy’s initial request for a $56.5 million gas-rate hike has shrunk to only $3.9 million, partly due to federal corporate tax cuts that reduced the company’s revenue needs.

CenterPoint, the largest gas utility in Minnesota, had requested a 6.4 percent rate increase in August, which would have increased the average residential customer’s bill by about $4.50. Instead, under a rate settlement approved Thursday, the increase will be 27 cents per month for the average residential customer, the company said.

“It’s really a dramatic reduction, driven in part by savings from the federal tax act,” said Nancy Lange, chairwoman of the Minnesota Public Utilities Commission (PUC), which approved the rate increase Thursday. The tax cut alone cut CenterPoint’s revenue requirements by $21 million.

The law passed in December reduced the federal corporate income tax rate by from 35 percent to 21 percent. Since utilities are regulated monopolies, tax savings are being passed down to ratepayers in Minnesota and many other states, either through rate cases or special regulatory proceedings.

Despite the large reduction for CenterPoint, the company and rate case interveners reached an amicable rate settlement. The Minnesota Department of Commerce and the Office of the Attorney General intervene in rate cases as representatives of the public interest. The PUC unanimously approved the settlement.

Houston-based CenterPoint supplies natural gas to about 857,000 customers in Minnesota, including in the Twin Cities and portions of central and southern Minnesota. Ninety-two percent of those customers are residential ratepayers. They are due refunds, too, with the new rate settlement.

An interim gas-rate increase of 5.4 percent approved by the PUC in September will be largely given back to all of CenterPoint’s customers. The company estimates the average interim rate refund for a residential customer will be about $37.

Several other factors also played into the reduction in CenterPoint’s revenue needs.

They include a cut in CenterPoint’s property tax expenses by about $6 million from what the company originally proposed; the removal of anticipated pipeline-related expenses of about $4 million, due to delays in federal pipeline rules; and a $3.5 million reduction in CenterPoint’s gas storage costs from what was originally anticipated.