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Tax code change could mean a break for Alaskans on utility bills

WASHINGTON — More than 100,000 Alaskans could be in for a break on their bills by next winter as privately-held utility companies catch the windfall from a federal corporate tax cut.

In December, Congress passed new tax law that included a major cut to the corporate tax rate — to 21 percent from 35 percent. That will likely mean major savings for the small number of Alaska utilities that aren't cooperatives or municipally owned.

Those utilities include Enstar Natural Gas, which serves Anchorage, the Kenai Peninsula and Mat-Su; Alaska Electric Light and Power (AEL&P) in Juneau; and Golden Heart Utilities and College Utilities, water and sewer utilities in Fairbanks.

None of those Alaska utilities have announced specific plans for rate-cuts or customer rebates, like some utilities have nationally. But all are closely reviewing the legislation to see how it will affect them. Utilities are highly regulated, and the benefits of the tax windfall are generally directed to ratepayers. Sometimes that means a rate cut, or infrastructure upgrades, or it could prevent rate increases in some cases.

While the results have been clearer for some larger utilities in the Lower 48, the Alaskan utilities are still sussing out where they stand.

"These tax changes are fairly new and significantly complex. It is my understanding that many public utility commissions and utilities are starting to look into this," said Grace Salazar, media liaison for the Regulatory Commission of Alaska (RCA). "In general… an economically regulated utility's revenue requirement includes operating expenses, as well as taxes and interest, so when these costs decline, the benefits ultimately flow to customers," Salazar said.

The RCA opened a docket to gather information, at the request of the Regulatory Affairs and Public Advocacy section of the Alaska Attorney General's office. The commission might ask for comment from the industry and the public, and will likely hold a public meeting, Salazar said. The commission opened a similar line of inquiry in 1987, in response to Reagan-era tax cuts.

Affected privately owned Alaska utilities, according to the commission, include Enstar, AEL&P and the two water utilities; Doyon Utilities, which serves the U.S. Army exclusively, at Fort Greely, Joint Base Elmendorf-Richardson and Fort Wainwright; TDX North Slope Generating, which serves oil companies out of Deadhorse; and Cook Inlet Natural Gas Storage Alaska.

Enstar has 144,000 Alaska customers, according to Communications Manager Lindsay  Hobson. AEL&P has 17,000 customers in the city and borough of Juneau. The water utilities in Fairbanks serve 8,500 accounts and up to 55,000 people, according their joint website.

Like other utilities across the country, Enstar is currently evaluating the legislation to determine the impact on its coffers, Hobson said. Savings that the company sees would be reflected in rates, she said.

"Due to the regulated nature of our business, that's going to be a direct benefit to our customers," said Eric Grey, senior director of government relations at the Edison Electric Institute, an association that represents investor-owned electric companies, like AEL&P.

Already, utilities elsewhere in the country have announced how the tax cut will translate to their customers. That can come in the form of bill credits, rate reductions, avoided rate increases or other options.

But when "it comes to the corporate rate cut, in one way or another, the benefits are going to be making their way back to the customer," Grey said. "It's just a matter of when and how."

AEL&P is owned by Avista Corp., headquartered in Spokane, Washington.

As a result of the tax cut, Avista "revalued our deferred tax assets and liabilities and a $442 million regulatory liability was recorded which will be returned to customers through the ratemaking process," said Scott Morris, chairman and chief executive officer, in a statement with its quarterly earnings report February 21.

What that means for AEL&P in Juneau remains to be seen.

"We are currently working to understand what the changes in federal tax codes mean for us and for our customers," said Debbie Driscoll, the company's vice president. "We fully expect to pass the benefits stemming from tax reform back to our customers," she said.

The regulatory authority's inquiry should be a start toward figuring out how to pass that money back to customers, Driscoll said.

The latest rate increase — 3.86 percent — for AEL&P took 15 months for the Regulatory Commission of Alaska to work through, according to the Juneau Empire. Residents pay $0.1240 per kilowatt hour from November to May and $0.1020 per kilowatt hour from Junen to October, along with a $9.22 fee.

A reporter's inquiry to the Fairbanks water utilities was not returned.

Some other states' regulatory commissions have been more aggressive towards their privately-owned utilities than in Alaska. Regulatory proceedings are underway in half of the states to pass the tax cuts on to ratepayers, according to a report from The Brattle Group, a consulting firm. Louisiana's regulators said the 14 percent tax cut should force lower rates. Oklahoma Attorney General Mike Hunter asked his state's utility regulators to require immediate rate reductions. Kentucky's public service commission told utilities there to track and report their savings. States including California, Montana, Maryland and Michigan have made similar moves.

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