Customers of UniSource Energy Services’ rural electric and natural-gas utilities would see slightly lower bills under plans to return a major cut in federal corporate income taxes to ratepayers.
But like their larger sister utility, Tucson Electric Power Co., the companies in filings to the Arizona Corporation Commission have proposed holding back some of the tax benefits to offset future rate increases.
The Corporation Commission has ordered all state-regulated utilities that pay federal taxes to come up with plans to return to ratepayers the benefit of the federal tax reform law — which cut the corporate tax rate to 21 percent, from 34 percent — until the tax changes can be incorporated into their next general rate cases.
UES Electric, which serves Santa Cruz and Mohave counties, has proposed refunding annual tax benefits totaling about $3.8 million, with monthly credits for a year estimated at about $1.99 for home customers with average usage.
UES Gas filed a proposal to return to ratepayers about $2.9 million in annual tax savings to ratepayers, with monthly bill credits for the first year estimated at about $1 for the average home customer. The company provides gas service in Santa Cruz, Mohave, Yavapai, Coconino and Navajo counties.
But like TEP, the UES utilities have proposed retaining 25 percent of the tax benefits in the second year of their plans and 50 percent of the money in the third year.
TEP filed a plan in mid-March to pass along to ratepayers some $34 million in annual tax benefits through usage-based credits starting in May, amounting to about $3 a month for the typical home customer for a year.
TEP says tax benefits withheld during the second and third years of the plan would be considered a “regulatory liability” that will act as a hedge against future rate increases and eventually be returned to ratepayers with interest.
The utilities’ plans must be approved by the full Corporation Commission, which plans its next open meeting April 26.
In February, the commission approved a plan by Arizona Public Service Co., the largest state-regulated utility, to return about $119 million in annual tax savings to ratepayers through a previously adopted regulatory mechanism. The bill credit is about $5.40 per month for the typical APS residential customer.
Southwest Gas Corp., which provides natural gas to much of Arizona, has told regulators some other federal tax changes will hurt its cash flow but it will propose a plan to pass the income-tax benefit along to ratepayers by April 30.