FORT WALTON BEACH — Gulf Power customers could see lower electricity bills as soon as early spring, the result of a corporate tax rate cut signed into law by President Trump in December.

"Our plan is to be able to return whatever we can to customers," Gulf Power spokesman Jeff Rogers said Tuesday. "It needs to go back to our customers." 

Gulf Power serves more than 460,000 customers in eight Northwest Florida counties from Pensacola to Panama City.

As of Jan. 1, the Tax Cuts and Jobs Act reduced the corporate tax rate from 35 percent to 21 percent, and electric utilities in a number of states have announced plans to pass those savings on to customers in the form of lower rates.

Investor-owned electric companies like Gulf Power are subject to state regulation. Under that regulation, utilities are allowed to recoup costs of doing business, including tax liabilities, and to provide an investment return to shareholders. Thus, the reduction in the corporate tax rate could be expected to lower electricity bills.

Rogers confirmed this week that the utility's management is looking into how it will address electricity rates in light of the corporate tax reduction. The utility plans to file a proposal with the Florida Public Service Commission by the end of February. With a favorable review from utility regulators, Gulf Power customers could see lower rates as soon as April, Rogers said.

As Gulf Power officials consider how to address the corporate tax savings, the state Office of Public Counsel — created by the Legislature in 1974 to represent the public in utility-related matters — has filed a petition with the PSC asking that all investor-owned utilities in Florida be required to adjust rates downward in light of the new federal corporate tax savings.

In asking the PSC to "investigate and adjust (utility) rates for 2018 tax savings," the Office of Public Counsel argues that investor-owned utilities' current rates "based on a statutory corporate income tax rate of 35 percent, are unreasonable and excessive." The OPC also contends the commission "has an obligation to take action to pass the tax reduction benefits of the Act back to customers."

In a staff analysis of the Office of Public Counsel filing, the PSC contends it is too early to set any definitive rate-reduction criteria. The staff report notes the Tax Cuts and Jobs Act "is complex with many moving parts, some of which will increase revenue requirements (for affected electric utilities) and some of which will reduce revenue requirements. ... While good corporate management requires that each regulated utility immediately begin to analyze the impact of the Act on its finances, that task takes time, particularly when one considers that Florida's electric utilities are part of larger conglomerates ... ."

Gulf Power is part of the larger Atlanta-based Southern Company, which operates a number of utility companies. Gulf Power is keeping the Southern Company advised of its rate reduction discussions, but the ultimate decision regarding what to take to the PSC will belong with Gulf Power, Rogers said.   

 

On a related note, three Florida electric utilities — Florida Power & Light, Duke Energy and Tampa Electric — already have announced that the new tax law will allow them to forgo billing customers for a combined total of nearly $2 billion in costs associated with restoring power after Hurricane Irma battered the Florida peninsula last summer. FP&L estimated its Irma recovery costs at $1.3 billion, Duke said its costs were in the range of $500 million and Tampa Electric put its recovery costs at $88 million. Rate agreements with the Florida PSC allow the utilities to recover those costs from customers.

Meanwhile, the new tax bill won't affect customer-owned nonprofit electric utilities like Choctawhatchee Electrical Cooperative (CHELCO), which serves 50,000 accounts in Walton, Okaloosa, Holmes and Santa Rosa counties.

Because of their nonprofit status, utilities like CHELCO don't pay corporate taxes, said Rumi Nielson-Green, a spokeswoman for the cooperative. Additionally, according to Nielson-Green, CHELCO gets its electricity from Power South, a nonprofit energy cooperative like CHELCO.

Because they are nonprofit organizations, cooperative utilities like CHELCO return any net earnings to their customer-owners each year as a capital credit, based on the length of time an individual customer-owner has been a part of the cooperative.

"We like to think we're showing our owner-members a benefit every year," Nielson-Green said.