The State Corporation Commission (SCC) has ordered Dominion Energy Virginia and Appalachian Power Company — the state’s two biggest utilities — to reduce rates in July to pass on the benefits of the corporate tax cut contained in federal tax legislation passed by Congress in December 2017.
The federal corporate income tax rate was reduced from 35% to 21% effective January 1, 2018. A week later, on January 8, the SCC ordered the companies to preserve the savings from this tax cut for the benefit of their customers.
During the 2018 session of the General Assembly, legislation was adopted (Senate Bill 966) that included a clause specific to the federal tax impact. Dominion Energy Virginia is to reduce rates by $125 million. Appalachian Power is to reduce rates by $50 million. The SCC’s order ensures that the companies will comply within 30 days of July 1, the effective date of the state law.
More to come
The July rate reduction is the first step to pass the corporate tax savings to customers. Further submissions by the two utilities will be made in 2019 to make certain the tax savings are properly calculated and reflected in rates as of April 1, 2019.
In addition to the rate reduction for the lower federal tax rate, Dominion Energy Virginia will also be issuing a rate credit to customers in July, reflecting excess earnings in 2015 and 2016. The $133 million refund was directed by the 2018 General Assembly.
The statute also calls for an additional $67 million to be refunded in January 2019. That refund is associated with calendar year 2017 earnings. Those earnings will be analyzed in the company’s next scheduled financial review in 2021.