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Georgia Power reaches settlement with regulatory staff on tax cut rate impacts

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Georgia Power reaches settlement with regulatory staff on tax cut rate impacts

Georgia Power Co. announced March 6 that it has reached an agreement with the Georgia Public Service Commission staff on the retail rate impact of the recent federal tax overhaul.

Under the agreement, Georgia Power would refund to customers $185 million and $145 million as a bill credit for calendar years 2018 and 2019, respectively. Additionally, Georgia Power would defer as a regulatory liability an amount equal to the revenue impact of Georgia lowering its state income tax rate to 5.75% from 6.00% in 2019, as well as the benefit of $700 million in federal and state excess accumulated deferred income taxes.

The amortization of these regulatory liabilities would be addressed in Georgia Power's next rate case, to be filed by July 2019. If no base rate case occurs in 2019, customers will continue to receive $185 million annually in bill credits, with any federal income tax savings deferred as a regulatory liability until the next rate case.

To address negative cash flow and credit metric impacts of the tax reform, under the proposed settlement Georgia Power's equity ratio of 51% would be increased to either the utility's actual common equity weight in its capital structure or 55%, whichever is lower, until the next base rate case.

The agreement is subject to approval by the PSC.

Georgia Power, a Southern Co. subsidiary, said in a news release the assessment of the tax overhaul's impact would include approximately $1.2 billion in benefits for customers. That consists of approximately $130 million in reduced taxes on financing costs for the Alvin W. Vogtle nuclear expansion, $330 million in direct credits to customers as a result of lower federal income tax rates over the next two years and approximately $700 million in future benefits to be addressed in the company's next base rate case in 2019. An average residential customer using 1,000 kWh per month could receive approximately $70 in refunds over the next two years, according to the company.

In January, Georgia Power announced customers would pay approximately $139 million less than expected in Vogtle costs, thanks to lower tax rates and guarantees paid by Toshiba Corp. Additionally, the PSC approved bill credits totaling $188 million as part of the Vogtle nuclear expansion that will be distributed in three separate utility bills in 2018.

Fitch Ratings downgraded Southern and Georgia Power on Feb. 28, citing credit risks related to the construction of the Vogtle project and weaker credit metrics.

Additionally, Georgia Power plans to provide a 2018 refund of $43.6 million as a result of the company in 2016 earning above its current allowed ROE range of 10% to 12% annually.