By Greg Bird
Two recent orders from the Kentucky Public Service Commission (PSC) could result in lower power rates for customers of Kentucky Utilities and other for-profit utilities as a result of lower corporate tax rates that took effect on January 1.
The orders, issued on December 27, calls for investor-owned utilities to monitor their savings from the new tax rates and pass those savings back to the customers.
Investor-owned utilities, such as KU and Kentucky Power, can charge their customers for a portion of the cost of paying federal taxes. Lower corporate tax rates mean those utilities would have to lower their charge to customers and refund the recovered costs to consumers.
“Since taxpayers are required to pay through their rates the tax expenses of a utility, any reduction in tax rates must be timely passed through to taxpayers,” the PSC order states.
The order also calls for those utilities to calculate the excess amount of future tax liabilities they have budgeted for and refund those savings to customers.
The orders effect four utilities in Kentucky; Duke Energy, Kentucky Power Co., Kentucky Utilities Co., and Louisville Gas and Electric. All four provide electric service, while Duke and LG&E also provide natural gas.
“While the exact amount of the tax savings and resulting reductions cannot be determined with precision at this time, each of the (companies) should use its best estimate to determine the amount to be recorded…subject to review and adjustment as part of this case,” the PSC said.
PSC Spokesperson Andrew Melnykovych stated about 1.5 million customers will benefit from the move, with an additional half million would gain from a second order directed at three other natural gas utilities.
The orders stem from a complaint filed in December by the Kentucky Industrial Utility Customers, a group representing large electric customers in rate cases. The complaint alleges the new corporate tax rates means the current rates charged by the utilities would no longer be “fair, just and reasonable,” once the new tax rate took effect.
The KIUC estimates rates could decrease by four to seven percent for customers as a result of the tax rates.
The order does not effect electric cooperatives, such as South Kentucky Rural Electric Company.