Alabama Power Co. customers will see slightly lower power bills because of a federal tax cut to utilities.
Alabama Power spokesman Michael Sznajderman said the typical residential customer, who uses 1,000 kilowatt hours each month, would see their bill decrease by $9 per month starting in July.
"Certainly we are pleased to return these dollars to our customers," Sznajderman said. "Essentially, all of it is going back to customers in one form or the other."
The Alabama Public Service Commission approved related measures and discussed this week the utility giant's plans to pass the savings on to consumers in the form of a bill credit.
Similar rate cuts are taking place across the country as companies and regulators discuss what to do with the windfall and how much to return to customers. President Donald Trump in December signed a $1.5 trillion tax cut package into law that provides generous tax cuts for corporations, including utilities.
The 2017 federal tax package cut the federal income tax rate from
35 percent to 21 percent beginning Jan. 1, 2018. Because the tax cut was implemented after the company filed rate calculations for the year, Alabama Power said it would give customers a bill credit to reflect the tax cut that began in January. The adjustment to customers is to total $257 million for the remainder of the year.
Moving forward, the tax cut will be passed along to customers in rate calculations.
Commissioners did not have to approve the credit, but approved related requests from Alabama Power on rate calculations. The company, in filings to the PSC, said the changes were needed to protect the company's credit rating because of the cash flow effect of collecting less revenue for the payment of current taxes and other reasons.
In exchange, the company committed to no base rate increases through 2020, and to provide another $50 million in bill credits in 2019.
"They cannot increase rates and if they have any savings there, they can utilize it to put forth into their equity which, actually, in the long run will save customers money," Commission President Twinkle Andress Cavanaugh said.
Electric rates in the Tennessee Valley, which is supplied by the federal government agency created during the New Deal — the Tennessee Valley Authority — are not affected by the tax cut because TVA doesn't pay federal taxes and is not affected by the drop in the tax rate. But TVA is cutting its power rates slightly this month because of a drop in its fuel costs.
In Tennessee, The Public Utilities Commission is still studying how the tax changes will affect rates for Tennessee American Water, the state's biggest privately owned water utility, and Chattanooga Gas, a subsidiary of AGL Resources.