The Kentucky Public Service Commission has asked Kentucky Power to determine how much money it will save from the corporate tax cut passed by Congress just before Christmas, and it will set a hearing at a later date to determine whether the company should cut its rates.
The company had been seeking a rate increase of 16.8 percent for residential customers and eight to 15 percent for businesses.
The KPSC issued a statement yesterday (Jan. 2) saying it has asked all investorowned public utilities to track their savings under the tax bill, which cuts corporate rates to 21 percent from 35 percent. Utilities pass their tax costs along to customers as part of their rate billing.
“Since ratepayers are re- quired to pay through their rates the tax expenses of a utility, any reduction in tax rates must be timely passed through to ratepayers,” the PSC said in its orders this week.
The orders direct the affected utilities to begin tracking their savings from the immediate reduction in the corporate tax rate. The PSC also ordered the utilities to calculate the excess amount of future tax liabilities that they are carrying on their books and that will need to be refunded to ratepayers.
The order affecting Kentucky Power also affects Duke Energy Kentucky, Kentucky Utilities, and Louisville Gas and Electric (LG&E). A second order affects gas companies. The PSC filed the orders after a complaint by Kentucky Industrial Utilities Custom- ers, an organization that represents large commercial electric users, that said the companies should not have to continue to pay high rates to cover tax costs that the power companies no longer have.
The second order directs three other natural gas utilities — Atmos Energy Corp., Delta Natural Gas Co. and Columbia Natural Gas of Kentucky — and two water utilities — Kentucky-American Water Co. and Water Service Corp. of Kentucky — to begin recording their estimated tax savings.
The electric utilities have 10 days to respond. The other companies have to submit more information and have 30 days.
The PSC estimates the change will result in rate decrease of 4 to 7 percent, meaning Kentucky Power rates would still likely increase by 9 percent for residential customers and 1 to 8 percent for commercial customers.