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Retail Supplier Seeks Evaluation Of Rates Charged By Utilities To Retail Supplier In Light Of Federal Tax Cuts

February 16, 2018

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Copyright 2010-17 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

The Public Utilities Commission of Ohio's review of the impact of the federal Tax Cuts and Jobs Act of 2017 (TCJA) should include an evaluation of cost-based rates charged to retail suppliers under utility tariffs, Interstate Gas Supply said in comments to PUCO

"Although Ohio has restructured its retail electric and natural gas markets, the rates of distribution utilities are often established based upon principles of cost-based ratemaking. Moreover, rates, fees, and assets that distribution utilities assess or assign to competitive market participants may be based upon these principles. Naturally, when a critical component of the ratemaking formula decreases across the board, downward pressure is placed on the amount of revenue that a utility should collect under the regulatory compact. Income taxes are one such component; therefore, the Commission opened this investigation to evaluate the impact on regulated utilities," IGS Energy said

"[I]t is important to ensure that these changes are thoughtfully implemented across all rate structures. For example, suppliers often pay fees and charges for services such as balancing or data retrieval. To the extent that there is a return on equity component in the calculation of these rates, the rates must be evaluated and reduced to account for the impact of the TCJA," IGS Energy said

IGS Energy also urged PUCO to be active in federal proceedings to reduce upstream pipeline rates, as a result of the TCJA, which ultimately impact retail rates.

"For example, on the gas side, retail rates are impacted substantially by upstream pipeline and storage rates authorized by FERC. Just like in Ohio, these rates may be based upon a higher assumed tax rate. Retail customers will not receive the full benefit of tax reform unless the upstream rates are reduced. IGS encourages the Ohio utilities and the Commission to be engaged in the FERC process to ensure that pipeline, storage, and transmission rates are also reviewed to ensure that they are just and reasonable," IGS said

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