Homes that buy their electricity from Entergy Louisiana will see their monthly bills drop nearly 5 percent starting with the May invoice coming out in the next two weeks.
It’s part of a write-off of the savings the corporation received from the federal tax cut that was passed by Congress in December.
The Louisiana Public Service Commission approved the rate reduction plan at its Wednesday meeting. Another similar-sized reduction is coming in October when storm recovery loans are paid off.
The five elected regulators have asked all of the state’s privately owned utilities, natural gas companies, and water providers to report how much each expects to save from the Tax Cuts and Jobs Act of 2017. PSC staff is vetting those reports and similar rate reductions are expected to be announced by those companies.
Though federal taxes for utilities dropped by 14 percent on Jan. 1, the privately owned companies continue to collect at the old 35 percent ra…
Entergy is the largest utility company in Louisiana with about 1 million electricity customers, roughly half the state, so was taken up first.
Entergy Louisiana President Phillip May said his staff and the PSC’s worked over the past few months calculating how much the tax break was worth, and then determined the best way to return the money to its customers starting with next month's bill.
“Just in time for when you start cranking up the air conditioner,” May said Wednesday in an interview. Summer is the peak time for power usage in Louisiana and hence the most expensive utility bills of the year.
May said none of the money realized from the tax break would be used for building new assets or upgrading infrastructure. But lower costs do mean that some of the utility’s money is freed for those projects.
Because privately owned utilities operate as a monopoly in their service areas, the PSC sets the rates. Customers pay the cost of making and delivering electricity plus a profit for the company. The variables are put in a formula that calculates the rates customers pay for the electricity they use each month.
The PSC’s order Wednesday essentially was a change in that calculation, called the formula rate plan, to account for the savings realized from the new federal law.
Integrating the tax savings in the formula rate plan means lower bills on the long term, May said. (Another option could have been a one-time refund.) The method also addresses the problem that cropped up with the passage of the federal tax break.
The rate-setting formula included the old tax rate and that couldn't be changed without action from the PSC. So, Entergy, and the other companies, were collecting at the old tax rate even though the taxes they now pay are lower.
Beginning in May, Entergy’s residential customers using 1,000 kilowatt hours of electricity will pay $4.20 less per month through December.
In April a residential customer in Baton Rouge and Acadiana using 1,000 kWh paid a total of $90.52. The April bill for a residential customer living in suburban New Orleans and in north Louisiana paid $96.98.
Entergy saved about $210 million from the federal tax bill, $105 million of which is being returned to customers between May and December. The remainder will go towards lowering monthly bills by about $2 per month for the typical residential customer over four more years. That begins in September.
Then in October, the bills go down again. The loan Entergy took out to pay for restoring power after hurricanes Katrina and Rita will be paid off, thereby removing that surcharge from the monthly bills.
That translates to another $2.55 per month reduction for residential customers in Baton Rouge and Acadiana areas using the typical 1,000 kWh – another $4.15 off the bills in the New Orleans suburbs and north Louisiana.
In addition to the base rates, monthly electricity bills also include charges the utility paid for the fuel bought to run the generating plants as well as surcharges to repay the company for various approved projects and costs, like restoring power after storms. No profits are attached to these charges.
“The fact that all involved parties – from the Alliance for Affordable Energy to some of our largest industrial customers – either support or do not oppose the rate agreement speaks to how fairly it treats all of our customers,” May said.
It didn’t take long for some of the state’s Republican congressmen to weigh in on Entergy’s announcement.
“Lower energy bills means more money in your pocket, and that’s exactly why we cut taxes,” U.S. Sen. Bill Cassidy, R-Baton Rouge, said in a prepared statement.
“Entergy’s announcement is reflective of the growth and investment that businesses across America are making as a direct result of tax reform,” U.S. Rep. Clay Higgins, R-Port Barré, said in his press release.