Echoing similar requests made recently by some state attorneys general and consumer advocates, the Edison Electric Institute asked the Federal Energy Regulatory Commission to detail how electric utilities should go about adjusting rates to pass on the benefits of tax reform to consumers.
"Such guidance will benefit both utilities and their customers and help ensure continued investments in a smarter, more resilient energy grid," wrote Phil Moeller, a former FERC commissioner and current EEI official who signed the investor-owned utility trade group's filing.
Moeller noted that before Congress reduced the federal corporate income tax rate from 35% to 21% in late December 2017, that rate had not been cut in more than 30 years. Then, the commission responded to the Tax Reform Act of 1986 by seeking comment and subsequently issuing a new rule, Order 475, establishing an abbreviated filing procedure that allowed electric utilities to propose a new rate reflecting the decrease in the federal income tax rate. It also dealt with various related issues, such as limiting the voluntary filings to the issue of taxes and providing for a waiver of interest on refunds to customers for any company that chose to make such a filing.
Order 475 set out "a reasonable process that created certainty for jurisdictional utilities and their customers, while minimizing filing burdens," Moeller said. EEI is asking FERC to provide similar guidance in response to the latest tax reform measure.
Moeller suggested that providing such guidance may be more complicated this time around, given that many electric utilities have adopted formula rates and no longer have fixed, stated rates. He also urged that the guidance be flexible and recognize the different rate structures, services and agreements that exist today and said one-size-fits-all solutions may not be appropriate.
"Given the heterogeneity of rates and contracts, any generic methodology likely would not satisfy the [Federal Power Act's] requirement that rates be just, reasonable and not unduly discriminatory," Moeller said. He suggested that the commission could provide a simplified formulaic methodology that electric utilities voluntarily could use to adjust nonformula rates.
Moeller further suggested that FERC allow utilities to make single-issue rate filings that only address the new tax reform law and certain permanent tax differences such as excesses or deficiencies in accumulated deferred income tax balances. Other issues, such as modifications to returns on equity that can take years to resolve, should be proposed separately. Doing so would be cost-effective and allow customers to see benefits more quickly, Moeller wrote.
EEI also is urging FERC to waive the 60-day prior notice requirement before a rate change can take effect, just as it did in Order 475.
Finally, among other things, Moeller asked that FERC allow each electric utility to decide the method and schedule for refunding to customers certain excess deferred income tax balances. The agency also should recognize that negotiated service agreements are not necessarily unjust and unreasonable just because of the change in the federal corporate income tax rate, he said.
