Juneau’s utility bills could be lowered, due to federal Tax Act

Utility rates may be lowering for Alaska Electric Lights & Power Company customers due to a new federal tax law.

The Regulatory Commission of Alaska on June 5 announced that it will be holding a hearing with AEL&P to discuss savings it received with the Tax Cuts and Jobs Act of 2017, which was passed into law Dec. 22, 2017.

The Tax Act includes provisions lowering the effective federal corporate income tax rate from a maximum of 35 percent to a flat rate of 21 percent. According to the RCA, AEL&P’s current rates were established based upon a $45 million annual revenue requirement. Annual revenue is the amount a regulated utility needs to earn in order to provide adequate service to its customers.

With the Tax Act, AEL&P is projected to have tax revenue savings of $3.9 million for this year, according to the RCA. Those savings, RCA commissioners Stephen McAlpine, Paul F. Lisankie, Robert M. Pickett, Anthony Scott and Janis W. Wilson said, should be reflected in customers rates.

“The RCA wants to make sure those (tax revenue) savings are going to the customers and so do we,” said AEL&P Director of Energy Services Alec Mesdag in a phone interview with the Empire Monday.

Because of this, the RCA has scheduled a hearing with AEL&P to discuss how its potential tax revenue savings can then trickle down to savings for customers. The hearing is scheduled for 11 a.m. June 19 at City and Borough of Juneau Assembly Chambers. It’s open to the public, and public testimony will be taken.

The potential amount of tax revenue savings, Mesdag said, may not end up being that high. In a phone interview with the Empire, Mesdag said the $3.9 million in tax revenue savings for AEL&P was taken from the first quarter of the year at $1.3 million. Because that was for four months, that number was multiplied by three as an estimate for the entire year of tax revenue savings. Since that is an estimated number associated with higher rates during the winter season, Mesdag said, it is not a clear projection for the entire year. Mesdag said winter rates are approximately 20 percent more than summer rates which run June-October.

“The timing of the revenues were front-loaded on tax savings,” Mesdag said.

Still, with the potentially higher tax savings for AEL&P due to the Tax Act, it is possible customers could see savings. Mesdag said AEL&P cannot do anything to adjust rates without the RCA approval. If there ends up being increased tax savings for AEL&P, Mesdag said customers could see it incorporated into rates.

“We still need to identify how that money can be moved back to customers,” Mesdag said. “Somehow that will be reflected through bills. It is a matter of figuring that out and coming to some sort of understanding.”

The RCA is required to make a final decision regarding the investigation no later than 365 days after the initial order was issued. The RCA will issue the final order in this proceeding no later than Wednesday, June 5, 2019.

Public comment will also be taken during the June 19 hearing.

The Regulatory Commission of Alaska regulates public utilities by certifying qualified providers of public utility and pipeline services and ensuring that they provide safe and adequate services and facilities at just and reasonable rates, terms, and conditions.

Sale of Avista to Hydro One will ‘not impact the existing Snettisham Option Agreement’

The sale of Avista Corp. (parent company AEL&P) to Canadian-owned Hydro One Limited will not impact the existing Snettisham Option Agreement, according to Mesdag. However, the option agreement could change if the RCA approves a transfer of controlling interest.

In an email from Mesdag to the Empire, he explained in the RCA’s June 5 approval of Avista to Hydro One and how it would impact the Snettisham Hydroelectric Project. Snettisham is owned by Alaska Industrial Development and Export Authority (AIDEA) but is managed by AEL&P’s sister company Snettisham Electric Company. The Snettisham Option Agreement granted SEC to purchase the project anytime after Aug. 18, 2003 but has chosen not to do so.

Mesdag explained in the negotiated agreement among Avista, Hydro One, and the City and Borough of Juneau a change in the controlling interest of Snettisham could happen, but there would have to first be an approval of an application by the RCA. If there was an effort to exercise the purchase option, it could not take place without RCA approval of a Transfer of Controlling Interest. Finally, a direct notice must be provided to the CBJ if SEC were to file for a transfer of controlling interest application.