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Utilities’ plans to keep tax savings should be rejected

August 3, 2018

Two days of hearings before the West Virginia Public

Service Commission recently did little to change the view that two major utilities — Appalachian Power and West Virginia American Water — are off base in their plans for dealing with the tax savings they reap from the federal tax cuts approved late last year.

The PSC conducted the hearings in regard to its directive early this year that all privately owned utilities in the state were to file an explanation of the impact of the federal tax cuts and a plan on how the utilities’ savings should be shared with customers.

Appalachian Power and West Virginia American Water duly submitted their plans as directed, but before doing so they both filed for rate increases. The “share with customers” aspect of the PSC’s directive apparently didn’t sink in.

According to a filing by American Electric Power affiliates Appalachian Power and Wheeling Power, they project savings from tax reform of $235 million. However, instead of returning any of that money directly to customers through lower monthly bills, the company proposes to apply it to a variety of other expenses. Its plan does call for giving back $30 million to its customers, but over a three-year period. Yet, it is realizing the savings from tax cuts now.

Beyond those savings, however, the two AEP subsidiaries are asking to charge customers a total of $115 million more. In essence, the company proposed to extract a combined $350 million more from its customers, based on the savings it is realizing and NOT returning to customers and the additional amount it is requesting. It should be noted that the same week of the hearings that Appalachian Power proposed to reduce its proposed rate increase by $18 million. Apparently, that’s a sweetener for the PSC when considering the company’s plan. Prior to that reduction, the estimated monthly increase for the power company’s customers was about $15.

West Virginia American Water’s proposed increase would raise its residential customers’ monthly bills by more than $10 a month.

Spokesmen for the power and water companies failed to make convincing cases in support of their plans during last month’s hearings. Meanwhile, the PSC’s independent staff and its Consumer Advocate Division both argued rightly that tax savings should start flowing back to customers quickly in the form of credits on their bills, as has been the case involving many utilities in many other states.

Unlike utility companies, many of the corporations who are benefiting from the tax reductions don’t have to answer to regulators about how they use that extra money. But utilities providing essential services, such as power and water, hold monopolies on those services. Traditionally they have been regulated by public bodies that are charged with protecting consumers while allowing the companies a fair rate of return. That’s the mission of the PSC.

Within that framework, it’s unreasonable for utilities to think they can hold on to the windfall in tax savings without sharing with their consumers.

Let’s hope the PSC keeps that in mind when reaching a decision on the proposals by Appalachian Power and West Virginia American Water. The two utilities should tear up their proposals and start again.

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