South Carolina utilities will have to draw up plans to give customers the money they save from federal tax cuts, state regulators decided Wednesday, a move that's likely to slice tens of millions from ratepayers' bills.
The state Public Service Commission voted to require investor-owned utilities to report how much they're saving under the tax law signed last month by President Donald Trump. They'll also have to show how they plan to return the extra money to their customers.
The order affects a wide swath of utilities across the state — from small water companies to big power providers — but it comes at a moment when electric rates are a matter of fierce debate in Columbia in the wake of the state's failed $9 billion nuclear construction project.
The extent of the savings isn't clear. The Office of Regulatory Staff, the utility watchdog agency that requested the order, says it doesn't know how much could be returned to ratepayers, much less the average ratepayer, though it asked the commission to have utilities "propose procedures for changing rates to reflect these impacts."
The possibility of rate cuts tied to the tax law was floated last week when Virginia-based Dominion Energy announced plans to buy SCANA Corp., the Cayce-based owner of South Carolina Electric & Gas.
Dominion vowed to pass along its tax savings in the form of a rate cut worth at least 1.5 percent, but executives have said the impact could be higher. The commission's decision effectively makes that promise a legal mandate.
Dominion's pitch also included a 3.5 percent rate cut tied to the failure of SCE&G's expansion of the V.C. Summer Nuclear Station and a refund of most of the $1.8 billion ratepayers have paid into the scuttled project. The deal, which requires several regulatory approvals, isn't expected to close until the second half of the year.
How much SCE&G's more than 700,000 customers will save in the meantime isn't clear: Spokesman Eric Boomhower said the tax bill's impact on the power company's rates "is still to be determined." In 2016, the company paid more than $250 million in federal taxes, financial records show.
Duke Energy, the Charlotte-based energy giant that provides electricity in the Pee Dee and the Upstate, is likewise still "evaluating any impacts" from the tax law, spokesman Ryan Mosier said.
Those impacts could be significant all the same: The new federal tax code charges corporations at a 21 percent rate, compared to 35 percent. The Office of Regulatory Staff says customers are entitled to receive whatever tax savings the companies receive because taxes are baked into utility rates.
"It's basically just a request for them to be thinking about what they need to charge in 2018 in order to cover their tax bill when they file in 2019," said Jay Jashinsky, the agency's director of auditing. “We want to know what they are earning and what they should be earning."
The commission's Wednesday decision didn't set a timeline for rate cuts or refunds to begin, and it's possible that companies could ask to use the tax savings to invest in infrastructure projects. Instead, the order gave companies two weeks to weigh in on the information they're required to disclose and how much time they get to report it.
Similar processes are under way across the country as regulators sort out how to handle the first major rewrite of the federal tax code in three decades — and how to make sure utilities pass on the benefits. South Carolina joins a handful of other states, including Montana and South Dakota, in ordering companies to calculate their savings.
