HELENA — Montana regulators want to make sure utility customers benefit from the recently passed tax overhaul that reduces corporate tax rates starting next year.
The Public Service Commission on Wednesday directed regulated utilities to calculate the change in tax liability they expect under the Tax Cuts and Jobs Act and, by the end of March, offer proposals for how it would apply the savings.
The commission issued the order before the new tax law takes effect to preserve its authority to determine how the additional revenue should be spent, the commission said.
“Our commission is, if not the first, one of early movers on this issue among the 50 state utility commissions in the nation,” said Commissioner Travis Kavula. “Taking this first step is essential to ensuring that consumers reap the benefits of the tax reform legislation.”
Corporations currently pay a 35 percent tax rate that is passed on to consumers. Under the new tax bill, the rate will be reduced to 21 percent. Commission staff estimated the new tax law will lower taxes on Montana utilities by tens of millions of dollars a year.
“The commission wants to ensure that this money is not simply captured by shareholders, but instead is directed in a way that provides a long-term benefit to the consumer,” Commission Chairman Brad Johnson said in a statement.
NorthWestern Energy’s electric and natural gas utilities are required to make the calculations as is the electric service of Montana-Dakota Utilities. Natural gas utilities under Energy West and MDU will have their rates adjusted for the effect of the new tax law as part of rate cases pending before the PSC, the commission said.
Commissioner Roger Koopman said utilities “can issue customer refunds, use the money as a source of zero cost financing for capital projects, direct the funds to offset large, unusual expenses or propose some combination of these three applications.
“I suspect the commission will be strongly inclined toward ratepayer refunds,” Koopman said in a statement.
It could be a while before Montana utility customers see rate changes under the new tax law, PSC spokesman Chris Puyear said.
The five-member PSC works to ensure that Montanans receive safe and reliable service from unregulated public utilities at reasonable rates.