Montana's largest utilities will save millions from federal tax cuts passed last week and state regulators want customers to benefit.
The Public Service Commission on Wednesday gave utilities until the end of March to come up plans for how savings under the Tax Cuts and Jobs Act will be put to use.
As regulated utilities, with a guaranteed customer base and a fixed return on equity, companies like Montana Dakota Utilities and NorthWestern Energy can't simply pocket the savings.
The five-member, all-Republican commission issued the order Wednesday to get in front of the new tax law, which begins in 2018.
"Our commission is, if not the first, one of the early movers on this issue among the 50 state utility commissions in the nation," said Commissioner Travis Kavulla in a press release. "Taking this first step is essential to ensuring that consumers reap the benefits of the tax reform legislation."
The current corporate tax rate is 35 percent, which ultimately shows up on the monthly bills of utility customers. Under the new tax law, the rate drops to 21 percent, but that doesn't mean the savings will pass directly to customers.
NorthWestern Energy expects a tax savings of up to $10 million a year, said Butch Larcombe, utility spokesman. NorthWestern is Montana's largest utility with roughly 340,000 metered customers
Utilities met privately before Christmas with PSC Chairman Brad Johnson and Kavulla to talk taxes, Larcombe confirmed.
"We went and we talked to them and we kind of outlined an idea for them of what we would like to do," Larcombe said. "We need to do a lot more tree trimming along power lines."
Tree trimming is already worked into customer bills, but the extra money could pay to accelerate the job.
Natural gas utilities under Energy West and MDU could have their rates adjusted for the effect of the new tax law as part of rate cases pending before the PSC, the commission said.
Commissioner Roger Koopman said in a press release that utilities "can issue customer refunds, use the money as a source of zero cost financing for capital projects, direct the funds to offset large, unusual expenses or propose some combination of the three applications.
"I suspect the commission will be strongly inclined toward ratepayer refunds," Koopman said.
Kavulla told the trade publication Utility Dive last week that the consumer could keep paying the same rates while the company's tax savings were spent on infrastructure.