News Release      
  For Immediate Release | 1-31-18      
  Media Contact | Holly Ward      
  Direct | 602-542-3847      
  E-Mail | hward@azcc.gov      
         
 
Utility Tax Reform Workshop Recap
 
 

PHOENIX —The Arizona Corporation Commission today held a workshop to discuss the recently passed federal tax reform legislation and how it could affect current utility rates. The new federal tax reform law affects every regulated utility that maintains a corporate tax liability. Corporation Commissioners are addressing how any tax savings will be passed on to ratepayers.

Commissioner Justin Olson led today’s workshop outlining his proposed procedure for amending the rates of affected utilities. Commissioner Olson also addressed several accounting issues that had been raised by affected utilities in the Corporation Commission docket, concluding the issues could be addressed without slowing down a process to adjust rates.

During today’s workshop, Residential Utility Consumer Office (RUCO) Director Dave Tenney told Commissioners the federal tax benefits means utilities are collecting more money from their customers than what is due. “Ratepayers should be receiving the benefit, not the utilities,” said Tenney. When outlining the process in which utility companies must calculate tax savings and how that it passed on to customers Tenney said, “It is possible to do this and do it quickly.”

Commissioner Burns called for simplicity in what could be a complex process. “Let’s make this as simple as possible. Every tax policy seems to be more complicated than it needs to be and so what the companies have been or would be now sending to the federal government, they just need to send to the ratepayer.”

Ray Jones with the Water Utilities Association of Arizona reiterated comments made to the tax reform docket. “The Water Utilities Association does agree with the concept these tax savings should flow through to customers in the appropriate manner,” said Jones. “What I want to point out today is the water industry is very different from other services.” Jones asked Commissioners to consider excluding smaller, class D and E, utility companies. “For these small class D and E companies, the vast majority of them will have increased taxes under this tax reform bill.”

Meghan Grabel on behalf Arizona Water Company emphasized the company’s support of utility tax reform. “We are prepared to immediately pass through that impact to customers effective as of January 31, 2018,” said Grabel. She outlined how the utility could accomplish this without further regulation by reducing rates for its eastern, western, and northern groups.

Telecommunications companies Century Link and Cox Communications testified before Commissioners asking to be excluded from the utility tax reform effort. “You have acknowledged that the competitive telecommunications companies do not set their rates and the Commission does not approve their rates,” said Norman Curtwright, representing CenturyLink. Commissioner Olson acknowledged the benefit of deregulation in his response but noted that the Commission still has a role in establishing a maximum and a minimum rate that these competitive companies can charge. These competitive telecommunication companies are then free to establish their own rates provided that they remain within the maximum and minimum set by the Commission. Commissioner Olson proposed reducing these maximum and minimum rates down in acknowledgment of the tax savings resulting from federal tax reform.

Stephen Jennings with AARP says he supports utility tax reform for his organization’s 888,000 members. “We believe since the corporate tax rates went from 35 to 21% that you should lower the kilowatt hour rate or the therm rate or proportionate amount,” said Jennings. “That should be effective to the date the tax rates went into effect which is January 1, 2018.” Jennings concluded, “The companies currently are over collecting, they haven’t lowered their rate. So that money should be refunded to the ratepayers.”

“The opportunity we have before us is a great opportunity. It’s not something we see often, maybe once in a generation,” concluded Commissioner Olson. “It is very exciting that we do have this opportunity now as a Commission to establish the policy that would be appropriate in these circumstances and that is to pass this tax savings on to the ratepayers.”

Chairman Forese closed the workshop giving a directive to Corporation Commission staff for what happens next. Staff is directed to prepare a proposed order for consideration at the next Open Meeting. This would require all A, B and C sized utility companies to file an application with the Corporation Commission to address the tax issues discussed during today’s workshop. If Commissioners approve the proposed order, utility companies will be required to file their application within 60 days of the February Open Meeting.

All documents related to Commissioner Olson’s Utility Tax Reform efforts may be found in the Corporation Commission’s online docket at http://azcc.gov. Go to eDocket and enter docket number AU-00000A-17-0379.

The Corporation Commission’s next Open Meeting is scheduled for Tuesday, February 6, 2018. View the agenda and meeting details on our website http://azcc.gov/calendar.

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About us:
The Arizona Corporation Commission was established by the state’s constitution to regulate public utilities and business incorporation. The five Commissioners elected to the Corporation Commission oversee executive, legislative, and judicial proceedings on behalf of Arizonans when it comes to their water, electricity, telephone, and natural gas resources as well as the regulation of securities, pipeline, and railroad safety. To learn more about the Arizona Corporation Commission and its Commissioners, visit http://azcc.gov.