The News Journal | by Karl Baker
Tax cuts passed by Congress in December have effectively caused Delmarva Power to reduce its power rate increase request in Delaware by $26 million, the company announced on Friday.
After Congress slashed corporate tax rates from 35 percent to 21 percent, state regulators in January directed public utility companies, such as Delmarva Power, to calculate their total amount of savings “to ensure that consumers will receive the benefits.”
The move came at the behest of Delaware Public Advocate Drew Slater and state legislators who argued in January that the entirety of the tax savings should bypass companies’ coffers and instead flow to ratepayers.
Earlier last fall, Delmarva had petitioned the state to grant it an electricity and gas rate increase of about $43 million, or roughly $9 per household.
With its calculated tax savings, the upper bound for possible rate increases now has been cut substantially to $12.5 million for electricity and $4 million for gas, Delmarva spokesman Jake Sneeden said.
“We’re still working through the rate case and what those numbers will be finalized at, but this is going to be a significant offset,” Sneeden said.
Five governor-appointed Public Service Commissioners regulate privately owned electricity, water and telecommunications companies, including Delmarva Power. 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.
Sneeden said Delmarva Power has spent “hundreds of millions of dollars” on Delaware’s electrical grid during the past five years. As a result, the average number of power outages decreased substantially in 2017, he said.
Still, more infrastructure upgrades are necessary, he said.