NorthWestern Energy customers get a $20.5 million cut of the utility’s Trump tax break, under a plan approved Tuesday by Montana regulators.
Bill credits, about $19.17 million, should be divided among customer accounts by December’s end, under the plan approved by the Montana Public Service Commission. Another $1.33 million is targeted for rate reductions for the South Dakota corporation’s Montana natural gas customers.
NorthWestern is Montana’s largest monopoly utility, servicing about 340,000 metered customers. An average electricity ratepayer should receive about $24 in credit, the utility estimates.
The windfall stems from the Tax Cut and Jobs Act passed by congressional Republicans last December. The tax cuts lowered NorthWestern’s federal tax rate from 35 percent to 21 percent. Customers were entitled to some of that savings, though early on it wasn’t clear how much the utility’s customers would benefit, or whether the savings would go directly to lowering customer bills.
Initially, NorthWestern pegged its tax savings at $14 million and suggested that customers be compensated with bill credits of roughly $5 million for electric customers and ramped-up tree trimming by the utility around power lines. Natural gas customers were to benefit by about $3.5 million. The amount pledged to customers increased once consumer groups and utility watchdogs intervened, arguing that what was owed consumers be estimated differently, using a “restated historic method” which looks at how much of NorthWestern’s income taxes are actually paid by ratepayers.
The number jumped to $21.5 million and NorthWestern’s tree trimming idea was negotiated off the table.
Tuesday, PSC Commissioner Tony O’Donnell worried that NorthWestern’s customers might be getting too good of a deal, given the disparity between the two estimates debated.
“These are estimates. They’re not off by a couple pennies, $22 million is 50 percent higher than the $14 million. We’re talking about $7 million right here,” O’Donnell said. “I would much rather there be a lot of certainty to this. I at the same time want ratepayers to get exactly what is coming to them, but at the same time it’s not fair that NorthWestern should pay anything more or anything less than what the true impact of what the tax act has upon them.”
Commissioner Travis Kavulla countered that the higher estimate was the one that most accurately estimated the customers' share of the tax windfall. The “current year method” favored by NorthWestern didn’t.
“The restated historic method measures what customers are actually paying for the income tax-related elements of their rates. The current year method ignores that entirely, and while it may be more fair to the utility, it’s grossly unfair to consumers,” Kavulla said.
The plan also directs as much as $1 million to help low-income NorthWestern customers with weatherization and energy assistance. This money was to be a collection of credits owed to customers who couldn’t be reached.
Not everyone on the PSC was pleased with the low-income provisions, which Commissioner Roger Koopman of Bozeman said benefited too specific of a group.
“To me having something that would benefit all would be better than continually defaulting to just another low-income assistance donation,” Koopman said.
A similar tax windfall discussion is in process for Montana Dakota Utilities.
The intervenors in the NorthWestern case were the Human Resource Council, Natural Resources Defense Council, Montana Environmental Information Center, NW Energy Coalition, Montana Large Customer Group and Montana Consumer Counsel.