Minnesota regulators are looking at passing down to ratepayers some of the millions of dollars in savings that regulated utilities would get from the new federal tax cuts.
The Minnesota Public Utilities Commission (PUC) opened an investigation in late December on how the 2017 Federal Tax Act affects electric and natural gas utility rates and services. The PUC is scheduled Tuesday to hear preliminary reviews of the law's effects from utility representatives.
Utility regulators in many other states are doing similar investigations, as rates across the country have been set assuming the old corporate tax rate of 35 percent. That rate has been lowered to 21 percent.
Several Minnesota utilities have made filings with the PUC over the past month that offer few hard numbers on savings. However, savings could total around $200 million, said Rep. Pat Garofalo, R-Farmington, chairman of the Minnesota House Job Growth and Energy Affordability Committee.
The state Legislature must pass a bill to make utility savings from the tax cut retroactive to Jan. 1, Garofalo said. Rep. Nolan West, R-Blaine, is expected to pre-file a bill later this week for the upcoming legislative session.
Savings passed down to individual residential ratepayers will be moderate — i.e., don't expect a windfall on your electric bill.
"It's not substantial when you break it down to individual ratepayers' monthly bill," said David Springe, executive director of the National Association of State Utility Consumer Advocates. "But it is a big number when you look at it in the aggregate."
The "vast majority of states" have begun some sort of process to return part or all of those aggregate savings to ratepayers, Springe said.
For most companies, savings from the tax cuts would simply be extra income they could give back to shareholders, invest in new equipment or use for worker raises. But since most utilities are monopolies, their income is regulated. Lower taxes could essentially give utilities a higher rate of return than prescribed by regulators.
Plus, many utilities have been using accelerated depreciation for several years, which builds up deferred taxes. The new tax law could allow utilities to recognize deferred tax expenses at a lower rate than when they were incurred — an issue regulators are also likely to address.
The Minnesota attorney general's office, which advocates for ratepayers, hasn't yet weighed in on the tax cuts with the PUC.
"We anticipate filing comments that any savings utilities get from these cuts should be passed on to ratepayers," said Ben Wogsland, a spokesman for the office.