Kentucky Public Service Commission to track savings from federal corporate tax cut

The Kentucky Public Service Commission (PSC) issued orders Wednesday requiring for-profit utilities to track their savings resulting from lower corporate tax rates that take effect Jan. 1, so that those savings can be passed on to customers through rate reductions.

Under recently enacted federal tax law lowers the corporate income tax rate will decline from 35 percent to 21 percent next year. Kentucky investor-owned utilities recover their federal tax expenses from ratepayers.

“Since ratepayers are required to pay through their rates the tax expenses of a utility, any reduction in tax rates must be timely passed through to ratepayers,” the PSC said in the two orders.

In addition to tracking their savings from the corporate tax rate reduction, the orders also direct the utilities to calculate the excess amount of future tax liabilities that they are carrying on their books, which will need to be refunded to ratepayers.

One of the two orders is in response to a complaint filed by the Kentucky Industrial Utility Customers (KIUC). KIUC estimated that the tax cut would result in rate reductions between four percent and seven percent, depending on the utility. The PSC order directs the four utilities, Duke Energy Kentucky, Kentucky Power Co., Kentucky Utilities Co. and Louisville Gas and Electric Co. (LG&E), to respond within ten days to the KIUC complaint.

The second order directs three other natural gas utilities, Atmos Energy Corp., Delta Natural Gas Co. and Columbia Natural Gas of Kentucky, and two water utilities, Kentucky-American Water Co. and Water Service Corp. of Kentucky, to submit testimony within 30 days on the impact of the federal tax cuts on their finances. They must also propose new rates that reflect the tax reductions.