Eversource to pass tax savings on to customers

Uncle Sam's tax gift to Eversource will be repackaged for its customers, the utility said Tuesday.

Rather than pocket tens of millions of dollars in savings through a lowering of the corporate tax rate, Eversource will support trimming the rate increase it won just a month ago.

"We agree our customers should receive the benefits of the new tax law, so we are voluntarily submitting a filing this week to address this issue," said Priscilla Ress, a utility spokeswoman.

Word of Eversource's action, obtained Tuesday by The Eagle and expected to be detailed Wednesday, comes as the company faces a challenge from the Attorney General's Office to pass the savings along to its 1.4 million customers in Massachusetts, including 200,000 served by the Western Massachusetts Electric Co.

When state regulators weighed an Eversource rate increase over 10 months last year, they gave it a cushion to pay its taxes.

But within days of their Nov. 30 decision, all tax bets were off. The utility's federal tax bill fell by an estimated $74 million after Congress cut the corporate rate from 35 to 21 percent.

That meant it was time for a do-over, the Attorney General's Office claimed.

The office argued in a brief filed with the Department of Public Utilities that the tax savings should go to customers by reducing electricity costs set to take effect Feb. 1 in 19 Berkshire County communities.

"The Department should take immediate steps," the office said in a Dec. 20 filing, "to avoid this major corporate windfall."

State Sen. Adam Hinds, D-Pittsfield, said he remains concerned about the impact that rate increases will have on customers, both households and businesses. He said that since the higher federal taxes were factored in to the rate increase approved by the DPU, the utility needed to act.

"If they don't have to pay the federal taxes, they shouldn't be allowed to profit from them," Hinds said. "This absolutely should be passed on to the consumer."

The utility's move adds one more layer — albeit a welcome one — to an already complicated puzzle.

The Eversource rate case this year was broken into two parts. The part yet to be announced concerns how the utility can apply the rate increase it was granted Nov. 30 to its customers in either its WMECO or NSTAR Electric Co. units.

That means customers still don't know the precise impact on their monthly bills when increases go into effect Feb. 1.

If it had not elected to forgo the new tax benefit, Eversource would have had to oppose a move by the attorney general Dec. 20 to reopen the rate case.

Attorney General Maura Healey said she acted out of a belief that the federal tax break belongs to "the American people."

"We're taking this action to ensure that the companies use these corporate savings to lower rates for Massachusetts customers instead of lining their own pockets," Healey said in a statement.

As of Tuesday, DPU commissioners had not decided whether to reopen the rate case, which awarded Eversource an overall $37 million increase in the first year and set it on a path to receive 3.5 percent increases over the next four years.

Of that increase, $25 million would be paid by WMECO customers.

The DPU award cut Eversource's rate request by one-third for its WMECO operations; Healey had opposed any increase.

Ress, the Eversource spokeswoman, said the company planned to explain its response in a DPU filing. It remains to be seen whether the utility will allow the entire tax savings to be removed from its rate increase.

Appeal filed

At the same time, on another front, the Attorney General's Office has appealed the DPU's decision to allow Eversource to earn a 10 percent rate of return on equity.

That complicated measure refers to how much money regulators let a utility earn for its shareholders.

It remains a point of contention.

During the rate case, all expert witnesses, except those called by the utility, called the company's request for a 10.5 percent rate of return on equity excessive.

The Attorney General's Office, which recommended an 8.875 percent rate of return, claims that the DPU neglected to properly explain why it granted the higher rate.

By not justifying its decision, the office said, the DPU failed to provide transparency and its action "threatens the integrity of the regulatory process." The appeal will be heard by the Supreme Judicial Court.

State Rep. William "Smitty" Pignatelli, D-Lenox, said electricity customers deserve a break.

"I'm extremely pleased that the Attorney General is keeping the heat on, no pun intended, with the Eversource rate case," Pignatelli said.

He and other local lawmakers have argued that the cost of electricity is imperiling the region's economy.

"The Berkshires have a fragile year-round economy, and the costs of electricity will be crippling to many of our larger businesses," Pignatelli said. "We can't be putting businesses in the position of choosing between finding ways to hire more people or deciding to lay people off in order to pay the electric bill."

The AG's move to help ratepayers is also backed by the leader of the state Senate.

"Taking this action is about protecting consumers, and is in the best interests of families across Massachusetts," said acting Senate President Harriette L. Chandler, D-Worcester.

"I applaud the Attorney General's leadership on this issue," Chandler said.

Pulling back

The $1.5 trillion tax bill President Donald Trump signed into law Dec. 22 will save WMECO more than $8 million a year, according to estimates filed by the attorney general with the DPU.

In its Dec. 20 brief, the attorney general asked the DPU to reduce WMECO rates by $11.8 million and the NSTAR Electric Co. rates in Eastern Massachusetts by $62.2 million.

The reduction the attorney general seeks for WMECO customers represents a 50 percent cut in the rate granted Nov. 30.

In the brief he filed with the DPU, Assistant Attorney General Joseph W. Rogers cites a precedent for reopening rate cases.

It came in 1986, when President Ronald Reagan signed a tax bill that reduced the corporate rate from 46 to 34 percent. At that time, the DPU opened an investigation into utility rates in order to pass tax savings through to ratepayers.

A change is warranted again, Rogers writes, to avoid "unjust and unreasonable rates."

In the rate case, WMECO's estimated "cost of service" was $161,048,552. Of that, the Eversource division was expected to pay $14,958,039 in federal corporate taxes, based on a tax rate of 35 percent.

"Unless the Department adjusts the Companies' revenue requirements to reflect this federal income tax reduction, Eversource customers will be overpaying for their electric service by hundreds of millions of dollars," Rogers writes.

"The reduction in the federal corporate income tax rate is an extraordinary circumstance that requires a fresh look at the record for the express purpose of substantively modifying the Department's final revenue requirements decision," he writes.

Appeal request

In its other challenge related to return on equity, the Attorney General's Office will ask the Supreme Judicial Court to vacate the DPU rate decision and order further study to establish that the regulatory agency used facts and was "free from legal error."

Small changes in the allowed "return on equity" trigger higher rates, the office argues.

"Even a change of a tenth of a percentage point to a utility's allowed ROE can be worth millions of dollars in extra charges to customers," the office says in its appeal, signed by Rebecca Tepper, an assistant attorney general in the Division of Energy and Telecommunications.

Eversource supplies electricity to Adams, Becket, Cheshire, Dalton, Hancock, Hinsdale, Lanesborough, Lee, Lenox, New Ashford, Otis, Peru, Pittsfield, Richmond, Sandisfield, Savoy, Tyringham, Washington and Windsor.

Larry Parnass can be reached at lparnass@berkshireeagle.com, at @larryparnass on Twitter and 413-496-6214.


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