The North Carolina Utilities Commission ordered the state's utilities to implement an "immediate reduction" in rates to reflect their lower federal corporate income tax rate.
The 2017 federal tax overhaul lowered the corporate income tax rate to 21% from 35% beginning in the 2018 tax year. Several North Carolina utilities proposed deferring any corresponding rate reductions or flowing back customer savings until their next general rate cases.
"The Commission finds that the federal corporate income tax rate reduction mandated by the Tax Act is material and substantial, a fact that no party disputes, and that ratepayers should not be forced to continue paying base rates that were set to recover a 35% federal corporate income tax rate that has been reduced to 21% until the utility's next general rate case proceeding," the commission, or NCUC, wrote in its Oct. 5 order.
"The Commission concludes that the ratepayers should receive the benefit of the tax reductions from the Tax Act as a reduction to expense and therefore a base rate decrease as soon as possible," regulators wrote in the order.
The NCUC ordered several utilities — including Duke Energy Corp. subsidiaries Duke Energy Progress LLC and Piedmont Natural Gas Co. Inc., Dominion Energy Inc. subsidiary Dominion Energy North Carolina, and SCANA Corp. subsidiary Public Service Co. of North Carolina Inc. — to file rate reduction proposals that reflect the lower tax rate by Oct. 25. The commission opened separate dockets to track the utilities' rate reduction proposals.
The commission in January ordered the state's utilities to implement provisional rates tied to the federal corporate income tax expense portion of their bills in response to the newly enacted tax cuts. The Jan. 3 order also required utilities to set up deferred accounting for the difference between revenues billed before and after the tax reform was implemented.
The NCUC's most recent action says utilities "shall continue to hold in a deferred regulatory liability account the difference between revenues billed under the prior federal corporate income tax rate and the federal corporate income tax rate." The disposition of the regulatory liability will be considered in each utility's next general rate case or within three years. Federal excess deferred income tax liabilities are to be returned to customers with interest.
The NCUC on June 22 ordered a revenue reduction for Duke Energy Carolinas LLC largely to address the lower federal income tax rate. The commission ordered the company to return $60 million of state excess deferred income taxes annually for the next four years and to reduce rates by $212 million annually to reflect the reduction in the federal tax rate.
Dominion Energy North Carolina is known legally as Virginia Electric and Power Co. (NCUC docket M-100, SUB 148)