The News Journal | by Karl Baker
More than two dozen members of the Delaware General Assembly announced support this week for lowering power and water rates.
The announcement comes two weeks after Congress and President Donald Trump slashed tax rates from 35 percent to 21 percent for public utilities and other corporations.
The state legislators, all but two of whom are Democrats, stated in a letter sent to the Delaware Public Service Commission that regulators should grant “in its entirety” a petition to cut utility rates filed by Delaware Public Advocate Drew Slater.
Slater, who is the chief lobbyist for ratepayers, argued last week that federal tax windfalls benefiting Delmarva Power, Artesian Resources Corp., and other utilities, should bypass those companies’ coffers and “flow back to ratepayers.”
“We have a responsibility to the customers of each regulated utility to safeguard against unjust and unreasonable rates,” Slater said in a statement last week.
Public Service Commission Executive Director Bob Howatt on Thursday said lawmakers’ support for Slater’s petition convinced him to rescind his staff’s competing petition, which had called for regulators to examine how savings from federal tax cuts could be split between infrastructure upgrades and rate reductions.
“If rate cuts are the soup de jour and the Legislature agrees, there is limited need for the commission staff to seek potential broader, longer term benefits for ratepayers,” Howatt said in an email.
Five governor-appointed Public Service Commissioners regulate privately owned electricity, water and telecommunications companies in Delaware. In markets that lack competition, commissioners set utility rates to ensure they are “reasonable.”
A utility company is allowed to earn up to 9.7 percent return on its equity in Delaware. A complex analysis of potential revenues and costs, such as federal tax liabilities, are used to determine rates that will lead to the targeted returns.
Commissioners are supported by a staff, led by Howatt. They will consider Slater’s petition during a public meeting on Jan. 16 at 1 p.m. at the Cannon Building in Dover.
Despite lawmakers support, rate reductions are not a guarantee as negotiations between utilities companies and regulators could lead commissioners to decide that the cash windfalls should pay for upgrading infrastructure, like power lines, or they could allow companies to keep the savings.
In addition to Delmarva and Artesian, the utilities regulated by the Public Service Commission include Tidewater Utilities, Suez Water, Chesapeake Utilities and numerous small water companies.
Municipally run utilities and cooperatives are not regulated by the commission.
Delmarva power customers may not see overall rate reductions, but instead a smaller rate hike than was proposed last summer in order for the company to raise more than $30 million.
For Delmarva’s coverage area, Slater has agreed to lump his request for lower power rates into the already established rate increase case, according to the Public Service Commission.
“The Advocate has agreed to include the tax implications within the current rate case, one that is already rampant with tremendous million-dollar changes,” Howatt said.
State law allows Delmarva, the state’s largest electricity utility, to put into effect the full rate increase seven months after it was filed, which would then be subject to refunds based on regulators final decision.
Last week, Jake Sneeden, spokesman for Delmarva, said the company has not yet determined how much money it will save in the new tax environment, nor how much of those savings it believes should flow to ratepayers through lower prices.
Delmarva’s parent company, Exelon Corporation, is the largest utility company in the United States, operating in 48 states. The $37 billion company had a profit of $824 million during the third quarter of 2017.
Trump in late December signed into law the Tax Cut and Jobs Act of 2017, after it narrowly passed Congress amid a bitter partisan dispute. The law lowers the corporate tax rate to 21 percent from 35 percent and gives companies more freedom regarding when they can deduct depreciation incurred on assets.
During the lead-up to a vote by Congress on the measure, the president argued that the tax cuts will stimulate the economy, prompting companies to hire more employees.
Democrats said the tax bill, estimated to add $1 trillion to the national debt over the next decade, leaves the country hamstrung, unable to fund critical national priorities, such as rebuilding public infrastructure.