Because of federal tax cuts, Xcel Energy’s revenue needs in Minnesota will be reduced by around $140 million, savings that could be passed back to customers.
The Minnesota Public Utilities Commission (PUC) opened an investigation in late December on how the 2017 Tax Cuts and Jobs Act affects electric and natural gas utility rates and services. Several other states also have opened such inquiries, with many looking at returning some tax savings to rate payers.
The new law cut the corporate income tax rate from 35 percent to 21 percent. Most companies would return income tax savings to their shareholders. But since utilities are often monopolies, their income is regulated.
Minneapolis-based Xcel expects to require $133 million less in revenue for its Minnesota electric operations in 2018, according to a filing Friday with the PUC. The company’s gas utility operations would require $8 million less in revenue. Those estimates account for the general corporate tax cut, as well as from utility-specific federal tax changes in the new law.
“We intend to ensure our customers receive the full value of the tax reform benefits,” Xcel said in the PUC filing.
Xcel noted that the PUC could choose to use tax savings in ways besides direct payments to rate payers, including furthering state policy goals, such as reducing greenhouse gases and keeping utility rates stable. Specifically, Xcel said its current three-year electric rate plan could be extended, using tax savings to keep customers’ rates flat.
The company makes no recommendation, though, on how the money should be used.
“We believe the savings from tax reform can help us keep customers’ bills low and allow for ongoing investment in clean, reliable and low-cost energy,” the company said in a statement.
Xcel is the state’s largest electric utility with 1.3 million customers. Any direct refunds to residential taxpayers are likely to be modest — in other words, don’t expect a windfall.
CenterPoint Energy, Minnesota’s largest gas utility, plans to return any savings to its customers, said Rebecca Virden, a company spokeswoman. The tax savings could be applied to CenterPoint’s current rate case, leading to a “smaller impact” on customers, she said.
Houston-based CenterPoint, which has 840,000 Minnesota customers, filed for a $56.5 million, or 6.4 percent, rate increase in August.
CenterPoint, in a PUC filing Friday, said the corporate tax cut alone would reduce its federal income taxes by $4.4 million. The filing didn’t include an estimate for any savings from other utility-related tax changes.
Duluth-based Minnesota Power said in a PUC filing that the tax reform law, including utility-specific tax changes, will result in a $23.6 million reduction in its revenue needs.
Minnesota Power proposes that tax savings be used at least partly to cover some of its costs.
“While the company agrees that impacts of the tax legislation should flow to customers, those impacts should not be treated in isolation from other operating costs,” the filing said.
In January, the PUC approved a rate hike for Minnesota Power of $13 million, only about 40 percent of what the company sought. The PUC wouldn’t allow certain costs that Minnesota Power had already incurred. That left the company’s return on equity well short of what is allowed by the PUC, Minnesota Power said in the filing.
Minnesota Power, which serves 145,000 customers in northeastern and north central Minnesota, recently announced cost-cutting plans that are likely to include layoffs.