Lower federal taxes for several Kentucky utilities is likely to mean savings for hundreds of thousands of customers under an order from the state Public Service Commission.
This week, the commission ordered for-profit utilities, including Kentucky Utilities, which provides electricity in Lexington and other cities, to track the amount of money they save from lower federal taxes.
The two orders pave the way for the savings to be passed on to customers, according to a news release from the commission.
Investor-owned utilities can charge customers for the cost of paying federal taxes. The tax overhaul recently approved by Congress reduced the top corporate tax rate from 35 percent to 21 percent. The new rates take effect Jan. 1.
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In addition to tracking how much they save from lower taxes, the PSC ordered utilities to calculate the excess amount of their future tax liabilities, which will need to be refunded to ratepayers, according to the commission.
“Since ratepayers are required to pay through their rates the tax expenses of a utility. Any reduction in tax rates must be timely passed through to ratepayers,” the PSC said in the orders.
The orders would affect about 1.5 million customer accounts, said Andrew Melnykovych, spokesman for the PSC.
Some customers would have more than one account, such as someone who gets electricity from KU and gas from Columbia Natural Gas.
The tax cut will lead to rate decreases ranging from 4 percent to 7 percent depending on the utility, an organization called the Kentucky Industrial Utility Customers estimated in a complaint to the PSC.
Because of the tax savings that utilities are almost certain to receive, their rates would no longer be “fair, just and reasonable” as required, the complaint said.
The customer group is made up of large electricity users, including the Toyota plant in Georgetown and the Marathon refinery at Catlettsburg.
The utilities affected by the PSC’s order in that complaint are Kentucky Utilities; Louisville Gas and Electric; Kentucky Power, which provides electricity in Eastern Kentucky; and Duke Energy, which serves Northern Kentucky.
The four provide electricity service. LG&E and Duke also provide natural gas.
The commission ordered thre natural-gas providers — Delta, Columbia and Atmos Energy — to begin tracking their savings under the tax cut approved by Congress, and to propose new rates that reflect the tax cuts.
That order also applies to Kentucky-American Water, which serves Lexington and other cities, and Water Service Corp. of Kentucky, which has customers in Middlesboro and Fulton.