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Mass. regulators order 14 utilities to reduce base rates to reflect tax reform

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Mass. regulators order 14 utilities to reduce base rates to reflect tax reform

The Massachusetts Department of Public Utilities ordered 14 regulated electric, gas and water utilities to reduce their base rates collectively by about $116 million, effective July 1, to reflect federal tax reform.

The department had earlier directed the affected utilities to file on or before May 1 proposals to reduce their rates by establishing a revised cost of service that incorporates the lower federal corporate income tax rate. Legislation signed in late 2017 reduced the corporate tax rate to 21% from 35%, effective Jan. 1.

The affected utilities are Agawam Springs Water Co.; Algonquin Power & Utilities Corp. subsidiary Liberty Utilities (New England Natural Gas Co.) Corp.; Aquarion Water Co. of Massachusetts; Eversource Energy subsidiaries NSTAR Electric Co. and NSTAR Gas Co.; Iberdrola SA subsidiary Berkshire Gas Co.; Milford Water Co.; National Grid PLC subsidiaries Boston Gas Co., Colonial Gas Co., Massachusetts Electric Co. and Nantucket Electric Co.; NiSource Inc. subsidiary Bay State Gas Co.; Pinehills Water Co.; and Unitil Corp. subsidiary Fitchburg Gas and Electric Light Co.

Massachusetts Attorney General Maura Healey originally petitioned the department to open an investigation to reduce the rates of 12 utilities. The DPU added Agawam Springs Water, Blackstone Gas Co. and Pinehills Water to the investigation.

Blackstone Gas, however, has been granted a waiver from the DPU directive after records showed that the utility's current embedded federal corporate tax rate is 21.53%. A downward adjustment to the 21% tax rate would result in a nominal reduction to the company's overall revenue requirement.

The DPU's June 29 order approves proposals from Bay State Gas, Berkshire Gas, and Fitchburg Gas and Electric Light to return all tax savings accrued since Jan. 1. The proposals of the remaining companies will be considered in a second phase of the department's investigation.

In the order, the DPU also allowed utilities that have pending rate cases to defer any tax-related rate adjustments until the end of their cases. However, they must return all tax savings back to July 1 with interest at the prime rate.

"[T]his Order guarantees that the hundreds of millions of dollars in tax savings for utility companies are passed on to hard-working Massachusetts residents, who will see real reductions in their monthly utility bills," DPU Chairman Angela O'Connor said in a statement.

Residential customers of the utilities are expected to see average annual bill reductions from approximately $9 to $40, or a decrease of approximately 1% to 8.5%. (Massachusetts DPU Docket No. 18-15)