With corporate tax cuts limiting the amount of cash utilities can collect from ratepayers, NiSource Inc. has filed numerous rate change requests in 2018 to account for the changes and get funding for continued system upgrade work.
The utility has gas-related rate increase requests pending in five states, with many of the requests filed since the federal tax overhaul took effect. Utilities pass their tax costs — and tax cuts — to their customers, and many of NiSource's recent rate filings account for the new federal corporate tax rate of 21%, down from 35%.
"The benefits of the Tax Cuts and Jobs Act are beginning to flow to our customers," Joseph Hamrock, NiSource's president, CEO and director, said during a May 2 earnings call. "Lower tax rates ... help offset other revenue increase requests in the Indiana, Pennsylvania, Maryland and Massachusetts base rate cases, as well as the annual tracker update in Ohio's Gas Infrastructure Replacement Program."
NiSource subsidiary Northern Indiana Public Service Co. already had a rate case in progress before the tax cut came into play, but the company in April filed a settlement agreement that incorporated the tax changes, decreasing the total increase requested. Even with the tax cut, the settlement would raise annual revenues by $107 million, company officials said.
NIPSCO has also asked the Indiana Utility Regulatory Commission to approve a seven-year, $1.25 billion system modernization program, building off past upgrade work. NIPSCO has already invested more than $400 million in the previous program since 2014. NiSource expects the Indiana Utility Regulatory Commission to make a decision on both the rate case settlement and the seven-year plan in the second half of 2018.
Columbia Gas of Pennsylvania Inc.'s March base rate case filing incorporated the tax rate shift but also asked for a $46.9 million annual revenue increase to continue funding infrastructure modernization and other pipeline safety work. The company anticipates a fourth-quarter decision from the Pennsylvania Public Utility Commission.
The Public Utilities Commission of Ohio in late April approved a Columbia Gas of Ohio Inc. annual cost recovery adjustment case, incorporating both about $207 million in 2017 infrastructure investments and the decrease in corporate tax costs, NiSource officials noted. Still pending in Ohio is a capital expenditure program rider, which would let the company start recovering costs incurred since 2011 that are not part of existing infrastructure investment cost recovery trackers.
NiSource subsidiaries' base rate cases in Massachusetts and Maryland, filed April 13, requested $24.1 million and $6 million annual revenue increases, respectively. The rate hikes would support the utility's plans to continue replacing aging infrastructure and implement other safety measures. Tax cuts offset the requested increases in these cases, too, company officials noted.
"We're engaged with regulators and stakeholders across all our jurisdictions to manage and implement a balanced approach to providing these [tax] benefits to customers," Hamrock said during the call. "With this clarity emerging around the regulatory implementation of tax reform, we're able to effectively manage the cash impacts from these outcomes as well as through business initiatives and cash management."
To address nearer-term cash flow needs more quickly than regulatory processes might allow, the company announced May 2 that it plans to issue 24,964,163 shares of common stock in a private placement, expecting to bring in proceeds of $606 million. Hamrock said during the May 2 earnings call that the common equity offering "completely resolves any credit and negative cash impacts of tax reform."
NiSource on May 2 reported net operating earnings of $259.7 million, or 77 cents per share, in the first quarter, improving from $230.6 million, or 71 cents per share, a year earlier. The S&P Capital IQ consensus normalized EPS estimate for the most recent quarter was 76 cents.
