Utilities Passing Tax Cut Benefits on to Customers Is Welcome Relief

The Tax Cuts and Jobs Act (TCJA) was the most significant tax legislation passed since the Reagan administration, and we're still seeing interesting effects of the historic law.

Due to the reduction of the corporate tax rate from 35 percent to 21 percent, many employees saw increases in their paychecks from corporate bonuses, but that isn’t the only place people are seeing the corporate tax cut benefiting every day Americans.

The corporate tax rate reduction has also left many utility companies with more cash on their hands, or at the very least, a growing gap in their expected earnings and their actual earnings.

This has prompted many utility companies to pass through the savings they're receiving on their corporate tax rate down to the utility payer. For example, Commonwealth Edison in Illinois asked the commerce commission for approval to pass along approximately $200 million in tax savings to its customers this year. The Public Service Enterprise Group out of New Jersey said in a January filing that it would realize a one-time benefit of $600 million to $850 million from the tax bill, and its subsidiaries have hinted at changing rates that reflect this benefit.

The essential message that these companies are sending is that any public utility should be passing down its savings from the tax bill to the customer on a one-to-one basis. The profits that many energy producing companies or utilities will see from the tax plan shouldn’t be allocated to extraneous projects or to filling the pockets of executives and shareholders.

The point of the tax bill was to put more money in the pockets of the average citizen, and that spirit should be respected. This isn’t meant to shut out utilities that will use the extra cash to make their grids more efficient, but that efficiency should be passed down the line as cheap future rates, not as an opportunity to increase margins for the parent company.

Overall, I’ve counted dozens of consumer advocacy groups and utility regulators in several states that have requested the savings from the tax bill are passed down to the consumer level. While the savings aren’t going to move any markets massively, those savings are still in the pockets of the average American rather than in the hands of government bureaucrats.

The increase in the cost of living is something that many Americans dread to see every year, it’s good to finally see an administration that can make a meaningful impact in reducing that fear.

Richard S. Bernstein, CEO of Richard S. Bernstein & Associates, Inc., West Palm Beach, is an insurance advisor for high net worth business leaders, families, businesses, municipalities, and charitable organizations. An insurance advisor to many of America’s wealthiest families, he is a writer, trusted local and national media resource and expert speaker on estate planning and health insurance. Visit his website at www.rbernstein.com. To read more of his reports — Click Here Now.