Federal tax cut more than reverses Eversource rate increase in Massachusetts

Published on February 09, 2018 by Bill Yingling


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Credit: Eversource

Many Eversource Energy electricity customers in Massachusetts who were expecting to see a rate increase this year instead will see a rate reduction because of the recent federal corporate tax cut.

What was expected to be about a $36 million annual rate increase has turned into a $20 million annual decrease, said the Massachusetts Department of Public Utilities (DPU), which approved the increase Nov. 30 and then, more recently, approved the tax savings pass-through.

Because of the rate design, the impacts on individual customers will vary depending upon where they live. Some will see increases, some will see decreases. Overall, the tax savings will result in an average 1.8 percent decrease on monthly bills across the state.

Scenarios similar to the one in Massachusetts are playing out across the nation. This year the federal corporate tax rate was reduced from 35 percent to 21 percent providing companies with a big windfall.

As a result, many state regulators who oversee and set the rates of monopoly utilities are directing those companies to pass along the savings to customers.

The Massachusetts DPU also has launched an investigation to determine how the complex federal tax cuts will affect the rates of all major gas, electric and water utilities across the state.

“Through the reduction of rates for utility customers, coupled with an investigation into possible additional savings from federal tax reform, the Department of Public Utilities remains committed to ensuring that utility consumers are provided with the most reliable service at the lowest possible cost,” DPU Chairman Angela M. O’Connor said in a written statement.

Under the investigation, the state’s regulated utilities must file proposals with the DPU by May 1 regarding rate reductions. To that end, Eversource will be making an additional filing by May 1, said company spokesperson Priscilla Ress in an email.

Eversource serves 1.4 million electricity customers in Massachusetts. The vast majority, about 1.2 million, are in the former NSTAR Electric Co. territory in eastern Massachusetts, including Boston, where rates were expected to increase by $12.2 million. Instead those customers will see rates decrease by about $34.5 million, Ress said.

The company also serves about 200,000 customers in the former Western Massachusetts Electric Co. territory, where rates will increase by $16.5 million. But because of the federal tax cut, the increase will be about $8.3 million less than the original $24.8 million approved by the DPU.

Eversource initially requested an overall increase of about $90 million. The recent adjustments represent the first base distribution rate changes in the eastern territory since 2005 and in the western territory since 2010.

Shortly after President Trump signed the tax cuts into law in December, the state’s attorney general, Maura Healey, who opposed Eversource’s rate increase throughout last year’s proceeding in front of the DPU, filed to have utilities pass along the savings to customers.

Eversource said in early January that because the tax cut would reduce the utility’s costs it voluntarily would pass along the savings.

“We believe it’s important that our customers reap the benefit of a lower tax rate,” said Eversource Massachusetts Electric Operations President Craig Hallstrom in a company statement. “As a regulated power company our rates are based on our costs, including federal taxes, so if taxes are reduced ultimately costs are reduced and that benefits our customers.”

The company said that during the next several months it will calculate the exact amount that will be returned to customers and see if there will be further reductions.

Healey acknowledged the company’s decision. “This tax bill is being paid for by the people of Massachusetts, so the money should go back in their pockets,” she said on her Facebook page. “Our office filed this action to ensure that these savings go to customers. We are glad that Eversource has done the right thing by agreeing to lower its rates and we call on all our state regulated utilities to do the same.”

National Grid, another energy provider in Massachusetts, said in January it plans to reduce its rate request in a natural gas proceeding now underway in front of the DPU, lowering its proposal by about $36 million to an estimated $51 million.

“We are committed to ensuring that the tax savings of the legislation are fully realized and are used to help our customers in their energy bills,” said Cordi O’Hara, president and COO of National Grid in Massachusetts, as quoted in a company news release. “We’ll continue to seek opportunities to provide this benefit to all of our customers.”

For National Grid’s electric distribution business, the company has indicated it will comply with the DPU’s order to file a proposal in the investigation.

“Working with our regulators and stakeholders, we will ensure the tax savings are fully realized and used to benefit our customers,” said Robert Kievra, spokesman for National Grid, in an email.

National Grid serves 908,000 natural gas customers in Massachusetts and 1.3 million electricity customers.