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Connecticut finalizing utility rates after Trump tax cuts

January 21, 2019

Connecticut regulators are scheduled to issue a final ruling this week that would revise previously approved rates for the state’s two big utilities and several smaller ones, after the Trump administration cut the federal tax on corporate profits to 21 percent from 34 percent previously.

On the premise that Connecticut ratepayers should be repaid at the earliest the full amount of those lower taxes, the state Public Utilities Regulatory Commission opened separate dockets in early January last year to review rates for Eversource Energy; the United Illuminating subsidiary of Avangrid; natural gas suppliers owned by the two companies; and water companies including Bridgeport-based Aquarion acquired by Eversource at the close of 2017.

PURA reached a preliminary decision on that review this past December, with companies and ratepayer advocates having since had the opportunity to register any objections.

A similar process has been under way in other states, including in New York where utilities were required to adjust rates last October to reflect any windfalls under federal tax reform.

In seeking rate approvals in Connecticut, utilities must account for both what they charge customers to cover their income tax expenses, as well as the amounts they accrue for any accumulated liabilities from deferred taxes.

Eversource, which provides utility services in Connecticut, Massachusetts and New Hampshire, reported income tax expenses of $220 million through the first nine months of 2018, down from $448 million for the same period the year before, while absorbing a 14 percent increase in other types of taxes during that period.

Eversource’s income tax expense for its historic Connecticut Light & Power territories totaled $102 million in the first three quarters of the year, down from $159 million, with the company having already accounted for the new tax rate in its most recent electric rate approvals.

According to PURA, Eversource balked last summer at any adjustments to the 2018 rates for its Yankee Gas subsidiary on grounds it would constitute “retroactive ratemaking,” and asserting that stance as well for Aquarion after the water company had previously indicated last February it would pass on the full benefit of any tax savings to customers.

Among other arguments, Eversource disclosed it has paid nearly twice as much in municipal property taxes as it has been allowed to collect under its previous rate agreement with PURA. Eversource reached a Yankee Gas settlement last September on the issue of federal tax rebates for customers.

The office of Connecticut’s attorney general had rejected any argument claiming retroactive ratemaking, under former AG George Jepsen, stating tax revenues to government entities are “qualitatively different” that any prohibitions against retroactive ratemaking in current regulations.

Avangrid had proposed applying the federal tax savings it reaps to furthering incentives for the purchase of electric vehicles in Connecticut, as well as improving the ability of its transmission system to withstand storms and other dangers.

Avangrid calculated United Illuminating’s initial income tax savings at $7.5 million, with another $6.3 million annually in the form of deferred taxes amortized over 30 years.

Includes prior reporting by Luther Turmelle.

Alex.Soule@scni.com; 203-842-2545; @casoulman

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