HARRISBURG – In response to the federal Tax Cuts and Jobs Act (TCJA) signed into law by the President on Dec. 22, 2017, and effective Jan. 1, 2018, the Pennsylvania Public Utility Commission (PUC) is seeking comments from utilities and interested parties on how reductions in utilities’ federal taxable income may affect ratepayers.
In a Secretarial Letter, the PUC is commencing the process by which the Commission will seek to determine the effects of the TCJA on the tax liabilities of Commission-regulated public utilities for 2018 and future years, and the feasibility of reflecting such effects in the rates charged to Pennsylvania utility ratepayers.
One of the many modifications to the Tax Reform Act of 1986 (TRA) resulting from the passage of the TCJA is a reduction in the corporate Federal Income Tax (FIT) rate. Specifically, the TCJA reduces the corporate FIT rate from 35 percent to 21 percent.
The rates charged by Commission-regulated public utilities to their ratepayers reflect, among other things, annual taxes paid both to the federal and state governments. Those utilities currently pay a state Corporate Net Income (CNI) tax rate of 9.99 percent based on their federal taxable income. If implementation of the TCJA results in lower federal taxable income amounts, it is the PUC’s intention to ascertain how the reduced annual tax obligations may be addressed in rates charged to ratepayers by public utilities.
Specific utilities in the electric, gas and water industries are asked to respond to data requests per the Secretarial Letter, and interested parties are asked to submit comments on the effect on accumulated deferred income taxes of Commission-regulated public utilities to the federal government resulting from implementation of the TCJA, and how reduced annual tax obligations may be addressed in rates charged to Pennsylvania’s utility customers by public utilities. The PUC also will examine the effect of the TCJA on telecommunications utilities and smaller public utilities not listed on the initial request for comments.
The Pennsylvania Public Utility Commission balances the needs of consumers and utilities; ensures safe and reliable utility service at reasonable rates; protects the public interest; educates consumers to make independent and informed utility choices; furthers economic development; and fosters new technologies and competitive markets in an environmentally sound manner.
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Docket No. M-2018-2641242