Commission approves new rates based on IRS decision
LACEY, Wash. - Puget Sound Energy customer rates are going up on Oct. 1 due to a recent Internal Revenue Service ruling on how the company can return federal tax savings from the 2017 Tax Cuts and Jobs Act to its customers.
The three-member commission previously approved customer rates in PSE’s 2020 general rate case, authorizing a revenue increase of approximately $102.5 million. The commission used a set of cost-saving measures to keep all but $31 million of those increases from customers’ bills for at least two years considering the financial hardships customers are facing because of the COVID-19 pandemic.
One of those measures involved returning 2019 and 2020 excess deferred income taxes of $67.5 million which reflect federal tax savings from the 2017 Act.
However, in a private letter ruling requested by PSE, the Internal Revenue Service determined that the return of the funds could not be fast-tracked without also making similar adjustments to the rate base because that would create inconsistencies prohibited by IRS rule.
In compliance with the IRS’ directive, the commission reversed its earlier ruling and authorized a revenue increase of approximately $122.4 million. The commission again has used a set of cost-saving measures to keep all but $53.2 million of those increases from customers’ bills which results in an overall annual revenue increase of $31.6 million for electric and $7.9 million for natural gas.
PSE’s average residential electric customer using 900 kWh a month will see a rate increase of 1.85% and can expect to pay $1.81 more, for an average monthly bill of $99.56.
The average residential natural gas customer using 64 therms a month will see a 0.73% increase and pay $0.52 more for an average monthly bill of $71.71.
In July 2020, the three-member commission issued orders resolving all contested issues in PSE’s general rate case, including issues relating to the ratemaking treatment of protected excess deferred income taxes (EDIT).
On Aug. 8, 2020, PSE filed a petition in King County Superior Court, asking for a review of the commission requirement ordering PSE to speed up the return of federal tax savings to customers, and a stay of the final orders. PSE believed that the order violated Internal Revenue Service rules and the 2017 Tax Cuts and Jobs Act.
King County Superior Court denied the stay, and PSE voluntarily dismissed its petition when the commission agreed to revisit its orders if PSE obtained a ruling from the IRS upholding their concerns.
On July 26, 2021 the IRS issued a ruling determining that PSE could not return the tax credits as the commission had ordered, so on Aug. 10, 2021 the commission notified interested parties that they would amend their final orders and asked parties to the general rate case for comments.
Bellevue-based PSE provides electricity service to more than 1.1 million electric customers in eight Washington counties: Island, King, Kitsap, Kittitas, Pierce, Skagit, Thurston, and Whatcom. They also provide natural gas service to more than 800,000 customers in six Washington counties: King, Kittitas, Lewis, Pierce, Snohomish, and Thurston.
The UTC is the state agency that regulates private, investor-owned electric and natural gas utilities in Washington. It is the commission’s responsibility to ensure regulated companies provide safe and reliable service to customers at reasonable rates, while allowing them the opportunity to earn a fair profit.