Profit sharing
Published October 18, 2014
Editorial by Greensboro News-Record, October 18, 2014.
When a power company gets a tax break, are its customers entitled to share in it?
Yes, the N.C. Utilities Commission said in May.
No, it said last week, reversing itself over the strenuous objections of three commissioners.
The case began when the legislature cut the corporate income tax rate from 6.9 percent to 6 percent effective in January, with a further reduction to 5 percent in January 2015.
On its first look, the commission decided 6-1 in May that utilities should reduce what they charge customers. Duke Energy Carolinas and Duke Energy Progress immediately complied. Dominion North Carolina Power and PSNC Energy asked the commission to reconsider. It did, and three commissioners changed course. By a 4-3 margin last week, the commission decided it was wrong the first time.
Was it? A possible appeal to the courts may determine the answer. But the outcome sounds like a bad deal for ratepayers.
There’s a political angle. The four commissioners in last week’s majority were appointed by Republican Gov. Pat McCrory, although Chairman Edward Finley previously had been named to the commission by Democratic Govs. Mike Easley and Bev Perdue. The three dissenters are Democrats.
Finley has been consistent. As the lone dissenter in May, he said the impact of the tax cut was too small to justify a separate ratemaking decision. If there had been such a small tax increase instead, he reasoned, there would be no case.
On reconsideration, Commissioners James Patterson, Jerry Dockham and Don Bailey agreed with Finley on that point and also that the law cutting the tax didn’t allow them to make a “single-issue adjustment” in utility rates.
Commissioners Bryan Beatty, Susan Rabon and ToNola Brown-Bland strongly disagreed. They denied the commission even had the right to reconsider its previous order without holding new hearings. They said allowing the companies to keep their tax windfall was a single-issue ratemaking decision, just as the May ruling was. And they also objected to approval of an “over-collection,” noting that all four companies exceeded their authorized return on equity and rate of return in the fiscal year that ended June 30.
Despite the bitter contention, customers will see little difference in their monthly bills — maybe 10 to 20 cents. But the companies can save millions of dollars. If they keep it, they ought to invest in cleaner energy or other upgrades.
More important than the money is the principle. The General Assembly may have granted a corporate income tax cut to fatten the bottom line or stimulate investment. But publicly regulated utilities are different. They are already guaranteed a fair profit. When an act of the legislature provides a windfall, should the Utilities Commission step in to pass on some of it to customers? If not, what else can the legislature give them that consumers will never see?
