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* Press release…
Attorney General Kwame Raoul filed two requests with the Illinois Commerce Commission (ICC) to rehear and reconsider its decisions in the ComEd and Ameren Illinois formula rate cases that allow the companies to hold onto hundreds of millions of dollars in consumer refunds for a period of more than 35 years.
The Attorney General’s office is recommending ComEd return $385 million in excess tax dollars and Ameren return $158 million in excess tax dollars to consumers over a five-year period rather than the proposed 38- and 35-year periods, respectively. The Attorney General’s recommendation to the ICC would result in an additional $62 million rate reduction for ComEd consumers and $20 million for Ameren consumers each year for the next five years.
“Consumers paid public utility rates to ComEd and Ameren reflecting the higher federal tax rate, and now that the federal tax rate has lowered, fairness dictates that consumers should get that money back,” Raoul said. “Allowing an unreasonable refund period of close to 40 years nearly guarantees many customers will never get their fair share of the refunds.”
The federal Tax Cuts and Jobs Act (TJCA), which went into effect Jan. 1, 2018, reduced the federal corporate income tax rate from 35 percent to 21 percent. As a result of the lower federal tax rates, ComEd and Ameren now have millions of dollars in excess tax money they collected from consumers. Those dollars should now be returned in a timely manner to the consumers who paid the higher tax rates to ComEd and Ameren.
In December 2019, the Attorney General’s office asked the ICC to lower the refund periods to a more reasonable five-year period for ComEd and Ameren to return rate payer money to consumers. The ICC rejected the Attorney General’s recommendation to shorten the refund period and reduce rates by $62 million for ComEd customers and $20 million for Ameren customers.
The issue has to do with how utility rates are set and regulated. Essentially, companies are allowed to recover their cost of providing service and make a “reasonable” rate of return, or profit. The cost of service includes such things as the cost of building and operating power plants and transmission lines. It also includes the cost of taxes owed to various levels of government.
When a company builds a plant, it recovers that cost over the expected useful life of the plant, typically around 40 years.
In their cases before the ICC, ComEd and Ameren acknowledged that the tax law change reduces their cost of service, but they argued that the duty to return the excess deferred tax money they collected should be spread out over the life of their facilities so that both current and future ratepayers will be treated evenly.
But it also means customers will see a reduction in their bills of only a few pennies per month instead of a few dollars, according to Jim Chilsen, spokesman for the Citizens Utility Board, a nonprofit entity established by the state to represent residential and small-business customers in utility rate cases.
posted by Rich Miller
Tuesday, Jan 7, 20 @ 9:24 am
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=but they argued that the duty to return the excess deferred tax money they collected should be spread out over the life of their facilities so that both current and future ratepayers will be treated evenly.=
Horse hockey. They want to hang on to the money as long as possible. If this is the difference in taxes for a single year then it should be paid back in a single year, not 40 or five.
Comment by JS Mill Tuesday, Jan 7, 20 @ 9:40 am
@JS Mill
Alternately, the tax rate could change again and future rate payers would be on the hook for a larger increase thereby subsidizing past rate payers for the same lifecycle of the improvement.
This was a good decision for both past and future rate payers.
Comment by Nagidam Tuesday, Jan 7, 20 @ 9:48 am
Whar
Comment by Not for Nothing Tuesday, Jan 7, 20 @ 9:51 am
Sorry for the typo. What Nadigam said. If Kwame’s lawyers wanted a five year amortization they should have proved up a 5 year amortization.
Comment by Not for Nothing Tuesday, Jan 7, 20 @ 9:54 am
“This was a good decision for both past and future rate payers.”
If that’s true then why is it public utility commissions in other jurisdictions have demanded similar refunds in 1-5 years. Why is it a good idea for a utility to hold onto our money that they didn’t need to collect for 40 years by which time many of us will be dead. It’s insane and a ridiculous money grab. And where’s CUB in this? Why aren’t they taking the side of consumers? Oh, right, we know why.
Raoul is 100% correct in this position. I understand why the ICC under Brien Sheahan took ComEd’s side. I have no idea why the ICC under this chair took the same side. Neither does Crain’s.
https://www.chicagobusiness.com/opinion/dont-worry-comed-still-has-all-juice-it-needs
Comment by Chicago Cynic Tuesday, Jan 7, 20 @ 10:22 am
Let there be no doubt that anytime a utility spends a “new” dime (higher tax rate, new program cost, new equipment), it will immediately want to recover that dime as soon as possible. But when there needs to be a refund to customers… well, let’s not be hasty.
Looks like JB needs to give more thought to his appointments to the ICC. Let’s see what he does this month when a seat becomes available. Will it be politics or substance?
Comment by Nobody Sent Tuesday, Jan 7, 20 @ 10:37 am
Comed arguing they need to amortize the refund is such a joke. These are pass through costs, not capital expenditures. The ICC falling for Comed’s argument is evidence of blatant corruption.
Comment by Chicagonk Tuesday, Jan 7, 20 @ 10:50 am
Wait for Chairwoman Zalewski’s resignation just before her father-in-law cuts a plea deal with the feds. We will then have different leadership at the ICC.
Comment by dying HDO Tuesday, Jan 7, 20 @ 10:55 am
“And where’s CUB in this?” Ummmmmm in the Docket arguing for a quicker refund of the money, along with industrial customers. Too funny. Comical even. You should read the Docket sometime, Cynic. You might learn something.
Comment by j Tuesday, Jan 7, 20 @ 12:01 pm
When there were excess deferred taxes on the nuclear plants, those taxes were to be returned over the life of the assets. However, when the nuclear plants were sold or transferred to a non-regulated affiliate, the excess taxes were never refunded to the ratepayers.
Comment by Yossarian Tuesday, Jan 7, 20 @ 2:30 pm
The ICC decided this in 2018 and the rates charged in 2019 already reflected this decision. When the makeup of the ICC changed in 2019, the AG decided to raise the issue again. The ICC did not reverse the 2018 decision.
@ Cynic - the AG wasn’t the only party that opposed this in 2019, nor in 2018. Google is your friend.
@ Chicagonk - the IRS actually requires most of the excess taxes to be amortized over almost 40 years. The ICC can reduce the amortization period for a small category of the funds, but not most of them.
Comment by Notorious RBG Tuesday, Jan 7, 20 @ 3:20 pm