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Corporate Tax Cuts Could Mean ‘Quite Substantial’ Savings In New Englanders’ Electricity Bills

Joel Page
Associated Press File
Steve Music works to replace a power line damaged by Tropical Storm Irene in Buxton in Aug. 2011.

This story was originally published Jan. 8, 2017 at 5:22 p.m. ET.

New England electricity customers could get a direct benefit from a cut in federal corporate taxes — lower utility bills.

Consumer advocates in New England are calling on regulators and utilities to turn over to ratepayers any savings from a reduction in the corporate income tax rate, which the recent tax law knocked down by 40 percent.

“Nobody really saw it until the very end of the process, that this little piece of it would allow these savings to be passed on directly to consumers,” says Don Kreis, New Hampshire’s consumer advocate.

Kreis says in most cases, for-profit utilities’ federal taxes are actually covered by their customers. So the tax cut could make a real dent in the portion of utility bills residents and businesses pay for the distribution lines that take electricity from the regional grid to their locations.

“You could be looking at something that could reduce the electric bill paid by a residential customer over the course of a year in the $100 range. That’s a significant amount of money to a customer that has to worry about how much her electric bill is,” he says.

“We believe that it’s only fair that our customers reap the benefit of a lower tax rate,” says Priscilla Ress, a spokeswoman for Eversource, which provides poles and wire service to more than two million electric customers in New Hampshire, Connecticut and Massachusetts.

Ress says customers in all three states should receive the benefits of the new tax law, although the processes that would lead to that outcome may vary. For its Massachusetts customers, though, she says the process is well on its way. And in greater Boston, the savings will turn a rate increase regulators recently approved into a rate decrease.

There are complexities in the tax law that the company is still working through, so exact bill effects can’t be assessed yet. But Ress says they won’t be small.

“That’s part of our rate, what we’re paying in federal taxes. So when that goes down, we pass that savings along to our customers and in this case, it’s quite substantial,” she says.

Eversource was the first major utility in the region to announce a give-back plan. But others whose charges are regulated under a policy known as “cost-of-service ratemaking” are moving in the same direction.

Officials at Maine's largest utility, Central Maine Power, declined interview requests regarding the tax cut, saying in a statement that to the extent its operating costs are reduced by the tax act, it will pass those savings through to customers.

Emera Maine, which provides service to the state's northeastern quadrant, made a stronger statement.

“Our rates are being adjusted right now in a proceeding before the [Maine Public Utilities Commission], and our cost of distribution service will be updated in that proceeding to reflect the lower tax rate,” says Judy Long, an Emera spokeswoman.

Each state has a similar regulatory body. In Maine, the PUC is about to formally open inquiries into how the tax cut should be handled by most of the state’s for-profit utilities — electricity, natural gas and water. And for some, it may not be as simple as just reducing rates by an amount equal to the tax cut.

One Maine commissioner noted there could be a negative effect on utility credit ratings. That’s because utilities can hold cash for a period between collecting it from customers and paying it to the IRS, providing a cash-flow balance credit agencies like to see.

One concern is that if utilities are required to shovel excess collections right back to customers, the companies will lose the timing benefit. And some advocates for electricity customers say that if utilities can stall regulatory action, they will.

“Some states, including Maine, have alternative rate-making formulas which encourage, supposedly, utilities to be more efficient. Utilities, however, are very good at gaming the formulas,” says Tony Buxton, an energy lobbyist who represents many of Maine’s largest energy consumers, such as paper mills. Those companies can have huge electricity bills, with the federal tax a significant portion of that.

Buxton says any windfall that flows through utility books should be passed on to consumers, and quickly. And Maine’s public advocate, Barry Hobbins, agrees that it’s consumers, not shareholders, who should benefit.

“They should not be receiving a windfall of that action by the federal government. I don’t think that will be the case, I’m giving them the benefit of the doubt,” he says.

In addition to state action, Hobbins and his counterparts in New England are urging federal regulators to require a cut in a part of energy bills that the feds control, to account for the value of the tax cut.

Due to a reporting error, an earlier version of this story incorrectly characterized the regulatory plan that governs Central Maine Power’s rates. We regret the error.

A Columbia University graduate, Fred began his journalism career as a print reporter in Vermont, then came to Maine Public in 2001 as its political reporter, as well as serving as a host for a variety of Maine Public Radio and Maine Public Television programs. Fred later went on to become news director for New England Public Radio in Western Massachusetts and worked as a freelancer for National Public Radio and a number of regional public radio stations, including WBUR in Boston and NHPR in New Hampshire.