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California slashes PG&E's revenues to pass on federal tax cut benefits

Pacific Gas and Electric Co. will have to reduce its revenues and return to ratepayers a total of $563 million to reflect the financial break it received from the federal tax overhaul of 2017, California utility regulators decided Aug. 15.

Public Utilities Commission President Michael Picker, who attended his final meeting that day after announcing his retirement May 30, voted with the other four commissioners to lower the PG&E Corp. subsidiary's revenues by requiring it to provide savings to ratepayers of $267 million for 2018 and $296 million in 2019.

Specifically, the utility will cut its electric revenues by $285 million in 2018 and $299 million in 2019 but raise its gas distribution revenues $18 million and $3 million in those years, respectively. PG&E's gas distribution revenue requirements for 2018 and 2019 will increase because of major tax law changes that have significant impacts on the company's estimated tax expense and rate base for 2018 and 2019, according to the commission's decision.

The tax cut savings will be passed on to retail electric customers later this year, according to the PUC's decision, which lowers the revenues the commission authorized May 11, 2017, in a general rate case decision. The federal tax cut, signed into law on Dec. 22, 2017, provided for a reduction in PG&E's corporate federal income tax rate from 35% to 21%.

However, PG&E on Dec. 13, 2018, filed a request with the commission for electric and gas rate increases totaling more than $1 billion, premised upon $22.51 billion average electric and $7.52 billion average gas rate bases for a 2020 test year. PG&E also asked the PUC to increase its authorized revenues in 2021 by $454 million and in 2022 by $486 million.

A decision on those rate increases is pending.