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Montana regulators direct utilities to use savings from tax bill to benefit ratepayers


(HELENA) Montana regulators say they’ve taken action to require utility companies to pass some of the benefits they receive from the sweeping federal tax reform onto their customers.

On Wednesday, the Montana Public Service Commission directed the utilities it regulates to determine how much they expect the tax bill to change their tax liability, then create a proposal for how they will apply any savings. Companies will have until the end of March to file their plans, and the PSC will then have to sign off on them.

“What we did was make sure that the commission was going to be involved in decisions as to how those tax savings were going to be used, and that they were going to result in benefit to the ratepayers,” said PSC Chairman Brad Johnson.

Johnson said that could include direct refunds to ratepayers or investments in large projects that would otherwise require rate increases.

The new requirements will apply initially to NorthWestern Energy’s electric and gas services and to Montana-Dakota Utilities’ electric service. The remaining utilities – MDU’s gas service and Energy West Montana – each have pending rate cases with the PSC, and Johnson said the effects of the tax bill will be taken into account in those cases.

President Donald Trump signed the tax reform plan into law last week. Congressional leaders have called it the most substantial change in the federal tax code in decades.

The tax bill makes several large changes that affect utility companies, including reducing the corporate tax rate from 35 percent to 21 percent. But PSC staff said it will take several months for them to determine the full impact on Montana utilities.

Butch Larcombe, a spokesperson for NorthWestern Energy, said the company estimates the tax changes could add a total of $5 million to $10 million to its bottom line.

One possibility is that NorthWestern could use some of the savings to pay for a program to trim trees and other vegetation along power lines in Montana. Larcombe said the company had planned to spend more on that work in the coming years, and that they would ordinarily add the extra expense to customers’ bills. He said added trimming could reduce the number of power outages and wildfires caused by trees falling into electrical lines.

Commissioners decided to issue their directive before the new tax bill took effect in January, because they aren’t allowed to make rates retroactively. They said they believe the PSC is one of the first state regulatory bodies in the U.S. to take this step.

“We really are at the tip of the spear in terms of this approach, of proactively going to utilities saying, ‘Hey, there’s going to be a chunk of money here that you guys are going to have to do something with; we’re going to insist you do it in a way that benefits the ratepayers,’” said Johnson.