Those big corporate tax cuts Congress passed last year could trickle down to Alaska energy consumers. At least in the case of investor-owned energy utilities whose rates are regulated by the state.
One of the main thrusts of the Trump administration’s federal tax overhaul was slashing the corporate income tax rate.
Economists have found so far many companies used this tax savings to buy back their own stock to boost shares. But regulated utility companies selling energy like electricity and natural gas can’t legally do that. That’s because since most utilities are essentially monopolies, their rates are regulated and have to be calculated based on costs and expenses – including their tax bills.
Take ENSTAR for example. The natural gas company sells gas to consumers in Anchorage, the Matanuska-Susitna Valley and Cook Inlet. It went through a rate review last year when its projected income tax liability would be about 35 percent. But as of Jan. 1, its tax rate drops to 21 percent. That means ENSTAR should save about $3.6 million in taxes.
So what should it do with this windfall?
“It’s an open question that we’ve asked the Regulatory Commission of Alaska to take a look at,” said Chief Assistant Attorney General John Ptacin of Alaska’s Regulatory Affairs and Public Advocacy section. His petition argues that investor-owned utilities shouldn’t be allowed to keep the money; it should flow back to consumers.
At least 29 other states and the District of Columbia are also looking into this issue.
“When the regulators of utilities look at this situation,” Ptacin said, “they’ve kinda across the country said, ‘OK, well clearly the income tax allowances were high in your rates. We need to essentially study this to figure out whether you need to provide that money back to the consumers you’ve been collecting that higher income tax allowance from.'”
The Regulatory Commission of Alaska sets utility rates. At its meeting this week in Anchorage, it agreed to put the question directly to the companies.
“The sense of the body is to fire off an epistle to the investor-owned utilities inquiring as to what their intention is with respect to the savings that will be incurred as a result of the passage of the tax legislation in December,” said RCA Chairman Stephen McAlpine.
Most consumers in Alaska buy their electricity from municipal or cooperatively owned utilities that aren’t affected.
But in Juneau, electricity is generated and sold by Alaska Electric Light and Power, an investor-owned company that will benefit from the tax break.
The company said it’s studying the tax code and said a dollar amount of tax savings wasn’t available. But AEL&P spokeswoman Debbie Driscoll said ratepayers stand to benefit.
“We fully expect to pass the benefits stemming from tax reform back on to our customers,” she said.
The RCA’s letter to utilities is expected to be sent later this month. Regulators will see how companies respond before taking any further action.
