The Pennsylvania Public Utility Commission on Thursday ordered a $320 million rate reduction for most of the state’s electric, gas and water utilities on July 1 to reflect the lower federal tax rate that went into effect this year.
The PUC, by a 5-0 vote, approved rate adjustments that will amount to small bill reductions for most customers. In utility-speak, the customers will receive “negative surcharges.”
But customers of several utilities, including Aqua Pennsylvania and Newtown Artesian Water Co. in Bucks County, will actually see small increases in rates. That is because those utilities are operating currently at tax losses. A reduction in the federal tax rate results in less tax savings than anticipated.
In aggregate, the rate reductions amount to $210 million for electric utilities, $66 million for natural gas utilities and $48 million for water and wastewater utilities, according to Gladys Brown, the PUC’s chair.
Under the 2017 Tax Cuts and Jobs Act, the federal corporate tax rate declined from 35 percent to 21 percent on Jan. 1. Unlike other corporations, which have reinvested the Trump administration’s tax cuts into operations or rewarded employees or shareholders with bonuses, utilities with regulated rates are required to pass through the savings to customers.
Pennsylvania’s action follows those taken in other states. In New Jersey, the Board of Public Utilities ordered utilities to cut rates on April 1 to reflect the lower taxes. Public Service Electric & Gas Co., New Jersey’s largest utility, in January filed a request to pass along $280 million in tax cuts — though the cut will be offset by other increases in costs.
For Pennsylvania electric utilities, the rate cuts will range from a reduction of 0.6 percent for customers of PPL Electric Utilities to 8.6 percent for customers of Metropolitan Edison Co.
The reductions, which average 4.83 percent across the state for electric customers, apply only to a utility’s distribution charge, not to its energy or generation charges. The distribution charge accounts for about half the monthly bill. So the amount customers will pay each month will go down by a smaller percentage.
Peco’s 1.6 million electric customers, who will benefit from a $68.3 million tax reduction, will see no decrease on July 1. That’s because Peco filed for rate increases this year, whose impact will be offset by the lower tax rates. Peco’s 2.2 percent rate increase request is now pending before the PUC and will be decided before the end of the year.
Peco’s natural gas rates will go down by about 1.4 percent on July 1 to reflect a $4.2 million annual reduction in federal taxes for the gas utility, according to the PUC’s filing.
Aqua Pennsylvania, which is based in Bryn Mawr, needs to collect $10.2 million more a year, or about 2.4 percent, to make up for its reduced tax-loss benefits. But its customers will not be immediately affected because Aqua told the PUC that it intends to file for a general rate increase this summer, and the tax impact will be considered at that time as part of its broader request for more money.