Earlier this year, Congress passed the Tax Cut and Jobs Act. Governor Asa Hutchinson then requested prompt action by the Arkansas Public Service Commission to pass that benefit on to customers as quickly as possible. As a result, in April 2018, customers began seeing a credit on their Entergy bill as line item “Tax Cuts & Jobs Act Credit.”
Entergy Arkansas will refund customers $466 million. Residential customers will see the credit each month through December 2019. All other industrial and commercial customers will see the credit through December 2018.
We wanted to accomplish two things:
In consultation with the APSC Staff, representatives of the Attorney General’s office, and other stakeholders, we proposed refunding the full credit to our large industrial and commercial customers during 2018, understanding that in January 2019, there could be a bump in rates when that credit rolls off the bill.
For our residential customers, we proposed to spread it out over a longer period of time in order for customers to see a noticeable difference in their monthly bill (approximately $20 for a customer using 1000kW of power per month), but also in a manner that would not be too burdensome when the rider expired and the credit rolls off the bill.
You may ask yourself, why is Entergy Arkansas giving money back to customers at all? Shouldn’t we just be collecting a lower tax rate going forward?
Entergy Arkansas collects from customers all taxes, including federal income tax. Like all companies, we defer a certain amount of those taxes based on whatever the IRS allows for capital investment and other options. We hold that money according to IRS rules, invest it on behalf of our customers, and eventually pay it when due.
Those deferred taxes were collected at 35% over the course of several years, but they will eventually be paid at 21%. The difference in what we collected and what will eventually be paid to the IRS is the $466 million that we are refunding to customers.
Many customers want to know what this means for their bill in the future.
If Congress doesn’t change the tax rate again, in the future we will recover costs based on the 21% rate for federal taxes.
However, that is just one component in each bill. There is the cost of fuel, annual capital for construction and maintenance, payroll, etc. It’s too early to say what any of those other line items might be going forward, so it’s difficult to predict if the overall bill will go up or down.