PSC Approves Rate Decrease to Reflect Federal Tax Changes

Nov 02, 2018

The Kentucky Public Service Commission (PSC) has approved a two-phase customer credit to reflect reduced federal corporate income tax rates that took effect in early 2018.

In May, Columbia Gas customers began receiving an interim monthly credit of $1.10 as the company began tracking the savings from the tax reduction, which cut taxes from 35 percent to 21 percent and thus reduced the annual revenue needs of the investor-owned utility.

The first phase, which begins this month and continues through April 2019, reflects tax savings that have accumulated since the tax cut took effect. During this phase, a typical residential customer with average monthly usage of 5,000 cubic feet will receive a monthly credit of $2.46, about $1.36 more than the interim credit.

The second phase, to begin in May 2019, will reflect ongoing savings. The average monthly credit for residential customers will be reduced to $1.41. It will remain in place until the conclusion of Columbia Gas files its next base rate adjustment case or until further revisions to either federal or state tax laws require it to be changed.

The savings applies only to base rates, which covers the company’s cost of operating and maintaining its system, as well as any profit margin. The savings for residential customers will vary because natural gas usage often fluctuates dramatically with the time of year.

Natural gas base rates do not include the cost of the gas itself, which accounts for about half the average total bill. The gas cost is adjusted quarterly to reflect wholesale market prices and is passed along to customers by Columbia Gas with no markup. Because there is no additional profit for the utility, the commodity cost is not affected by Columbia’s tax rate.