BY MARK BALLARD | MBALLARD@THEADVOCATE.COM
The Louisiana Public Service Commission discusses partisanship at its Wednesday, Jan. 31, 2018 meeting. The PSC commissioners, from left to right are: Lambert C. Boissiere III, D-New Orleans, Foster Campbell, D-Bossier Parish, Eric Skrmetta, R-Metairie, Mike Francis, R-Crowley, and Craig Greene, R-Baton Rouge. Advocate Photo by Mark Ballard
Though federal taxes for utilities dropped by 14 percent on Jan. 1, the privately owned companies continue to collect at the old 35 percent rate from more than 2 million Louisiana customers.
All five elected regulators on the sharply partisan Public Service Commission reacted Wednesday with rare unanimity in demanding that the utilities to return the tax over-collections post-haste.
“Right now they are charging people for taxes they know they’re not going to have to pay and their ratepayers, right now, are paying bills that are very high because of the weather,” Commissioner Lambert Boissiere III, D-New Orleans, said after the panel’s monthly meeting. “Those benefits should go to the public immediately.”
Republican Commissioner Mike Francis, of Crowley, agreed: “We need the money in the pockets of the people.”
But the PSC doesn’t know exactly how much money companies saved when the federal corporate income tax dropped from 35 percent to 21 percent as part of the federal Tax Cuts and Jobs Act, signed into law Dec. 22. Plus, a web of laws and accounting regulations makes it difficult for the utilities to quickly change how much they collect from their customers – even to a lesser amount – and hard to refund those over-collections.
So, the PSC ordered their staff and company officials find a way, by March 21, to give all of the savings from the cut in the federal corporate tax rate back to customers.
“There’s a lot of money out there. It’s huge,” said interim PSC Secretary Brandon Frey.
In addition to what companies already have collected this year, utilities set aside money to pay future tax liabilities. With the change in the tax laws, those reserves are now far in excess of the future tax liabilities.
“Excess deferred taxes also must be returned to ratepayers,” Frey said.
Just how much all these various pots of tax savings amount to is still being calculated.
Entergy Louisiana, which sells electricity to about 1 million customers, estimates an annual tax savings of $110 million or about $9 million a month, according to a report submitted to the PSC.
Cleco Power, which services the north shore of Lake Pontchartrain and central Louisiana, didn’t release a figure but recommended refundingwhatever the “amount to customers on their September 2018 bills for their July 2018 usage.”
SWEPCO, with about 230,000 customers in northwest Louisiana, estimated its income tax liability would go down by about $19 million.
Phillip May, the president and chief executive officer of Entergy Louisiana LLC, said customers will benefit in several ways from the reduction of federal taxes. Company officials are working with staff to determine when and how the tax breaks will be reflected in the rates.
In other states, some regulators have ordered utilities to cut checks and some have told companies to credit the amounts to lower monthly bills.
In 1986, when another huge reduction in federal corporate taxes occurred, the PSC required utilities to reduce the rates paid by consumers by the same amount as the tax cut.
The accounting procedures and state laws that determine how much people pay each month are complicated. Generally, rates are set in a formula that takes into account the cost of making and transmitting power.
Utility companies legally can’t just unilaterally change the rates, even to go lower. Usually any differences from the amount the companies thought would be collected and what actually was gathered, is balanced out at the end of the year. Other rules prohibit retroactive changes to the rate formula.
PSC Chairman Eric Skrmetta, R-Metairie, said these are the issues that need to be sorted out.
“Each company is a little different,” he said, adding that he expects the utilities to refund the money all at once, probably in the form of a credit that would reduce a monthly bill or two sometime during the summer.
The lower tax rate should lead to a reduction of monthly rates into the future, Commissioner Craig Greene, R-Baton Rouge. “The issue is the amount that feeds into the formula and that amount, as far as taxes are concerned, has gone down,” which will lead to lower prices on future bills, he said.
But that’s in the future. As for the taxes being over-collected now, Greene said, “that money needs to be returned – the sooner the better.”
Like fellow Commissioner Foster Campbell, D-Bossier Parish, Greene was hit with an unusually expensive electric bill after the recent cold snap.
Campbell’s monthly bill jumped by $200 to $650 because he and his wife ran the heater, pretty much nonstop, through days of single digit temperatures.
“It wasn’t just me,” Campbell said. “My phone has been ringing off the wall from my people call to complain about high utility bills. I want people to get their money back and now is the time to do it, not four months from now.”
Original article: The Advocate