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New federal tax rates could save Xcel Energy up to $33 million a year in Wisconsin, but customers may not see that savings for another two years.

Alltogether, Wisconsin’s investor-owned utilities expect to see savings of more than $150 million a year under the Tax Cuts and Jobs Act, according to documents filed Friday with state regulators.

Passed in December, the bill lowered the corporate tax rate from 35 percent to 21 percent, which will result in lower costs for investor-owned utilities such as Xcel. Because utility rates are based on expenses, including taxes, those savings should result in lower rates.

Xcel’s Wisconsin subsidiary, NSPW, estimates the new rates will save $25 million to $30 million next year for its 247,500 electricity customers and about $2 million to $3 million for 113,000 natural gas customers.

In addition, the utility anticipates one-time savings of $20 million to $22 million associated with the cleanup of a former gas plant in Ashland, Wis., as well as a one-time additional expense of $2 million to $3 million.

Utilities expect to see additional savings once the Federal Energy Regulatory Commission rules on how to apply tax savings for electric transmission and natural gas pipeline charges.

“We’re really excited about the fact that customers could see savings, given where Wisconsin’s energy price competitiveness has trended,” said Tom Content, executive director of the Citizens Utility Board, which represents the interests of residential and small business customers.

Thomas Content mug

Content

Xcel proposes applying the savings to its next rate case, which is scheduled to be filed in the spring of 2019 and will affect bills starting in 2020, arguing it will take time to accurately calculate customer impacts and consider other implications of the bill, the first major change to tax law in more than 30 years.

The tax bill was signed into law the day after the PSC approved Xcel’s combined electric and natural gas revenue increases of $19.3 million for 2018.

“I don’t have complete guidance on the return of those funds and how exactly the law will impact revenue requirements,” said Karl Hoesly, manager of regulatory affairs for NSPW. “To interpret it quickly and make haste is probably not the best course of action for the utilities or the customers.”

Hoesley notes that the tax law will also have negative consequences for utilities: with lower cash flows, their cost of borrowing will likely increase. An analysis by The Brattle Group notes that Moody’s has already put “negative outlooks” on debt ratings for 24 utilities because of these effects.

The WEC Energy group estimates savings of $67 million for the 1.1 million customers of WE Energies and $34 million for almost 466,000 customers of Wisconsin Public Service. The parent company proposes using the savings to pay down debt and argues that an immediate refund could result in larger rate increases in 2020.

Wisconsin Power and Light reported Tuesday that it expects the tax changes will result in savings of $40 million to $50 million for its customers. WPL proposed refunding part of the money in a 2018 bill credit and applying the rest to future rates.

Madison Gas & Electric estimates its customers should save $8 million to $12 million, about three quarters of which would apply to its 150,000 electric customers. MG&E suggests using that money to invest in capital improvements, including renewable generation, paying down debt, and offering customers a bill credit this year.

It will ultimately be up to the three-member PSC to determine how customers of the state’s investor-owned utilities reap the benefits. (Customers of municipal and cooperative utilities won’t see a similar savings as those utilities operate as non-profit companies.)

The commission hasn’t scheduled a hearing on the issue, but an agency spokesman said it would be taken up “in the not too distant future.”

The Minnesota Public Utilities Commission is also looking at how to distribute the savings and has given utilities until March 2 to submit comments.

Consumer advocacy groups have pushed for the savings to be returned to rate payers as quickly and smoothly as practical.

Todd Stuart, executive director of Wisconsin Industrial Energy Group, said he will poll his members, who are the state’s largest energy users, though he expects they will not want to wait.

“As a general rule, large customers almost always want money back as soon as possible,” Stuart said.

Content said he appreciates the complexity of the law but notes utilities in some states were proposing to refund millions of dollars in the first week of January.

“Sooner than later is always the preference,” he said. “It’s not as if every dollar has to be returned on day one.”

Note: This story was updated on Feb. 13, 2018, to include savings estimates for Wisconsin Power & Light, which did not initially make those numbers publicly available.

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Reporter

Rhymes with Lubbock. La Crosse Tribune reporter and data geek. Covers energy, transportation and the environment, among other things.

(8) comments

41

Exactly Why did Admin Governor Mayors Judges PSC State gift Xcel $600 Million profits?

GrandpaS

“We’re really excited about the fact that customers could see savings, given where Wisconsin’s energy price competitiveness has trended,” said Tom Content, executive director of the Citizens Utility Board, which represents the interests of residential and small business customers." -End of quote. Customers "could" see savings? "Could?" I hope that was just a slip of the tongue or use of an expression. I know the utility companies aren't as disgusting as pharmaceutical companies with their profits, but after a cut in taxes this big, some of that had darn well better "trickle down" to their customers. If it doesn't, then the GOP has sold the United States a bogus bill of goods. Okay, it's too early to freak out over the bad possibilities, but this situation will bear watching. "Profit over people." "Cash over customers." Those are the prevailing business winds right now, and have been for years. Let's hope that changes, at least a little bit, or we're going another $1.5 trillion into the hole for nothing. I'm afraid I've reached a point where I don't trust the US government or US businesses much anymore. I hope they prove me wrong.

Rick Czeczok

The company is not required and can rightfully keep any savings they obtain from the tax relief. Just not very ethical, if that means anything to them any more. We will wait and see before passing judgment. I am a share holder of the company, and I say give it to the customers.

GrandpaS

Ethics and America's big businesses don't sit in the same room very often anymore. Hopefully, power companies will take the right path by cutting rates, not by increasing their profits by huge amounts.

Rickwillenberg

Correction.... Over $100 million savings for utilities rather than profit. Still, hope that any savings can be shared with customers to soften their monthly utility bill at this time as costs are up. I misspoke in saying profit....

Rickwillenberg

The refund to the customers should not be delayed. Apply the correct amount as a credit on all customer bills as sure all would welcome a lower payment. I also hope the state PSC regulators scrutinize more of the Xcel rate requests in light of the over $100 million dollar profit reported for year 2017. Ask now who wins and loses with the refund delay.

Frangel45

Sure, just postpone any benefit to 'trickle down' while we forget and get used to the heavy burden you foist on us each year. You jerks lie to the public all the time - it really speaks volumes of your your lack of integrity. What the heck, we all need gas and electric, right? You fit right in with the Wells Fargo's of America

GrandpaS

From Frangel45: ".......while we forget and get used to the heavy burden you foist on us each year." Legitimate point. We better make darn sure we DON'T forget.

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