The million customers of Entergy Louisiana could see their monthly bills drop by about $4 per month if the Public Service Commission heeds the request of Gov. John Bel Edwards and lowers rates to match savings from the federal tax rewrite.
“He’s right,” PSC Commissioner Foster Campbell said of fellow Democrat Edwards’ letter released Thursday. “If these investor-owned companies get a break, they need to pass it down.”
Edwards pointed out that Dominion Energy announced plans to lower rates in South Carolina partially because of the new federal tax law and suggested that Louisiana utilities follow suit. (Based in Richmond, Va., Dominion is trying to purchase SCANA's South Carolina Electric & Gas Company for $7.9 billion and included rate reductions as part of that package.)
Businesses would receive about a 14 percent reduction in tax rates under the recently signed federal “Tax Cut and Jobs Act,” a savings that should translate in Louisiana utility customers paying less, Edwards wrote.
The five elected commissioners on the PSC determine how much privately owned utilities can charge their customers because the companies operate as monopolies within set service areas. Generally, base rates are computed using a complex formula that includes the costs of making and delivering electricity plus a profit. Taxes are part of that calculation.
When asked for comment, Entergy Louisiana’s press office released a statement saying the corporation is working with the PSC to analyze how the new tax law would affect customer rates.
"We look forward to working with our regulators to implement the benefits of these lower tax rates," the statement said. “Entergy believes that the tax reform legislation will benefit our customers by lowering the tax costs that they otherwise would pay in rates. These lower tax costs come at a time when our utility is making significant investments to modernize our electric infrastructure in order to better serve our customers, and they will help us keep rates down."
Entergy Louisiana LLC is one of a dozen utility companies regulated by the PSC that would also pay less federal taxes. But Entergy is the largest by far, providing electric service to more than 1 million customers – roughly half the state – in 58 parishes, including the greater Baton Rouge area, the New Orleans suburbs and much of Acadiana.
A typical Baton Rouge residential customer using 1,500 kilowatt hours of electricity each month paid $130.63 in December, according to PSC filings. Of that figure, the base rate was $61.38. The rest was fees, surcharges to pay for storm recoveries, and the cost of fuel to run the generators that make the electricity.
Louisiana had the lowest average residential electricity rates in the nation and the 12th lowest commercial rates, based on August and September data, according to Choose Energy Inc., a Plano, Texas-based online marketplace for electricity and natural gas.
Entergy customers will see another reduction in October of between $4.73 and $6.80 each month, depending on where they live, when the surcharge for restoring service after hurricanes Katrina and Rita roll off. The money was used to secure a loan that repaid Entergy for the work.
About half of the energy that Entergy Louisiana sells is made in generators fueled with natural gas. Over the past three years, natural gas prices have dropped by approximately 38 percent, compared to 2014, and have been modestly lower during the second half of 2017. Customers pay Entergy’s costs for generator fuel but the company adds no profit.
PSC Commissioner Craig Greene, R-Baton Rouge, said all the PSC members agree that the federal tax savings need to find their way to the utility companies’ customers. The key issue is deciding how the savings fit into the formula that decides the rates.
“We didn’t expect this much to go into the formula,” Greene said. “It’s a good problem to have.”
Campbell, D-Bossier Parish, said the estimates are that Entergy, alone, would save about $100 million annually in taxes. That translates to a reduction of about $4 a month for the typical residential customer. The other utilities, though much smaller than Entergy, also will realize significant savings and will have to reduce their rates as well, he said.
PSC Chairman Eric Skrmetta, R-Metairie, responded Thursday in a letter to Edwards that he instructed the commission’s staff to analyze the situation and report at the Feb. 21 monthly meeting.
“Once all the data is collected, the commission will order that all necessary and legal rate modifications are enacted and refunds in the forms of credits and that future rate reductions are put into effect,” Skrmetta wrote.