Several major Nevada businesses are accusing NV Energy of failing to pass through millions of dollars in excess revenue to ratepayers realized through the recent reduction in corporate tax rates.
In a series of filings made over the last week, several top Nevada casinos and Walmart accused NV Energy of excluding a key component in its proposal to lower electric rates, reflecting a change in federal corporate tax rates approved as part of the Republican-driven Tax Cuts and Jobs Act in December.
NV Energy proposed an $83.7 million cut to its annual revenue (good for an estimated $4 per month cut for Southern Nevada ratepayers) as part of a request sent in February to the state Public Utilities Commission, reflecting the 14 percent reduction in corporate tax rates approved as part of the federal tax legislation. The utility requested the change take effect on April 1.
As with other investor-owned public utilities, NV Energy is allowed to charge rates that both recoup its operating expenses (including taxes) and make a profit for shareholders, as long as state energy regulators find the rates to be “reasonable.” As the tax bill was approved and signed into law concurrently with the utility’s general rate case, several entities — including NV Energy — have asked the PUC to take another crack at determining what savings the utility will see from the tax bill and how to pass the benefits to ratepayers.
But filings submitted to the PUC this week from the casinos and Walmart indicate that the utility’s proposed solution doesn’t cover all of the savings the utility will see under the tax bill — specifically covering the so-called accumulated deferred income tax (ADIT), which could lead to savings worth roughly $46.5 million according to one estimate.
Nevada Gaming Group — composed of Boyd Gaming Corporation, Station Casinos, Las Vegas Sands, Eldorado Resorts, Silver Legacy Resort and Peppermill Casinos — requested that the commission approve the suggested cut in rates by April 1, but to continue further examination of the effect of tax cuts on NV Energy given the utility’s “vague and inconclusive” proposal to deal with the tax bill.
Lucas Foletta, the group’s attorney, wrote that the ADIT tax, which represents unpaid future federal taxes that come from the depreciation of capital investments held by the utility, was likely a “significant” amount and should be included in any plan to return financial benefits from the tax bill back to consumers.
“The extent to which and the timing of when the savings associated with the protected balance with amortize to ratepayers through rates is unclear,” Foletta wrote.
Foletta also wrote that the utility failed to address the four month time difference between the planned April 1 effective date of the cut in rates, and the tax bill taking effect on Jan. 1 — a value he estimated to be approximately $20 million.
“There is no justification for the Company to retaining any of the savings associated with the (Tax Cuts and Jobs Act),” he wrote.
In a response to Walmart, which raised similar concerns about the ADIT value, NV Energy attorney Elizabeth Elliot wrote that the utility did not include the impact of the taxes on revenue reductions because federal law prohibited the utility from refunding taxes to ratepayers faster than the normal depreciation schedule for assets or accounts that it holds.
“NV Energy is evaluating the when and how to flow this benefit to customers,” she wrote in the filing.
PUC Chairman Joe Reynolds said in February that the commission would open a seperate docket to investigate the effects of the tax bill on other regulated utilities in the state.
Other groups requested to intervene in the case include grocery store chain Kroger, the federal government through Nellis and Creech Air Force bases and Wynn Las Vegas. The PUC is scheduled to hold a hearing on the utility’s proposed rate cuts on March 16.
From the Editor