State officials say they have launched a two-pronged effort to ensure that savings reaped by Maine utilities from the recently implemented corporate tax cut will be passed on to customers as soon as possible in the form of lower rates.

Still, it will likely take several months for ratepayers in Maine to see any reductions to their electric, water and gas bills, and the amount of those reductions is still unknown.

Unlike other for-profit businesses in the state, regulated utilities are not allowed to simply pocket the excess cash they generate from the corporate tax rate reduction from 35 percent to 21 percent, according to regulators.

The Maine Public Utilities Commission initiated a process this week to determine the impact of the tax cut on the “justness and reasonableness” of rates for each of Maine’s major utilities. At the same time, the state Office of the Public Advocate has signed onto a multistate request for a similar assessment by the Federal Energy Regulatory Commission at the federal level.

“We think it’s important that there be what’s known as a true-up, immediately,” said Maine Public Advocate Barry Hobbins, referring to the accounting principle of reconciling two values such as costs and revenues.


While Hobbins focuses his efforts on federal regulators, Maine PUC Administrative Director Harry Lanphear is pushing for a similar reconciliation at the state level. The PUC and FERC each regulate different aspects of public utilities’ operations.

“We’re going to look at any utility that is impacted by this tax reduction,” Lanphear said.

The PUC has issued “notices of investigation” to five Maine utilities informing them about the upcoming process of assessing their rates under the tax cut, he said. Those utilities are Central Maine Power Co., Maine Water Co., Maine Natural Gas, Summit Natural Gas of Maine and Bangor Natural Gas.

Two other utilities, Emera Maine and Unitil Corp., did not receive notices of investigation because their rates are currently up for renewal, and the tax reduction will be factored into their new rates through the normal rate-setting process, Lanphear said.

CMP spokeswoman Gail Rice said the electric utility supports the actions of the PUC and Public Advocate.

“To the extent that these tax cuts reduce our costs, we support passing them along to our customers,” Rice said.

At this point, CMP does not yet have a sense of how significant its savings will be from the tax cut, she said.

The power transmission company is also assessing the cost of the Halloween wind storm, which knocked power out to 400,000 customers. Those costs will also affect consumer rates in the future.

According to a tax policy brief by the Penn Wharton Budget Model at the University of Pennsylvania, utilities nationwide are expected to see their effective corporate tax rates fall from an average of 28.8 percent to 15.6 percent in 2018 as a result of the Tax Cuts and Jobs Act, saving the industry as a whole about $1.1 billion.


Industrywide savings are expected to peak at $5.2 billion in 2020 before reversing course and ultimately causing utilities to pay higher taxes in 2023 than they would have under the previous rules, according to the budget model.

Over the long term, Penn Wharton economists actually expect corporate taxes paid by capital-intensive industries such as utilities to go up – not down – as a result of the law’s gradual phase-out of certain deductions such as depreciation for capital expenditures. Still, utilities nationwide are expected to save a total of $11.9 billion on their taxes from now until the end of 2022, just before the phase-out begins.

To whatever extent Maine utilities achieve tax savings, consumers should be the beneficiaries, said Maine Water President Richard Knowlton.

“The Public Advocate has said that any savings in (corporate) income taxes should flow to customers and not to our shareholders, and we agree with that,” Knowlton said.

Hobbins said it’s important to push for reconciliation of utility rates as soon as possible, because it is unclear whether any rate changes resulting from the tax cut could be made retroactive to the beginning of the year.

The request letter to FERC that Hobbins signed also garnered signatures from officials in several other states including Massachusetts, California, Texas and New York. The letter was part of a coordinated effort led by Massachusetts Attorney General Maura Healey, Hobbins said.

There are formulas that regulators could apply to determine how the lower tax rate should impact rates at each utility, he said, but the process is likely to take months.

“I’m being cautiously optimistic that it would be by the fall,” Hobbins said. “It should be sooner.”

J. Craig Anderson can be contacted at 791-6390 or at:

[email protected]

Twitter: jcraiganderson

This story was updated at 10 a.m. Jan. 13 to include information about the impact of the October wind storm on CMP rates.

Only subscribers are eligible to post comments. Please subscribe or to participate in the conversation. Here’s why.

Use the form below to reset your password. When you've submitted your account email, we will send an email with a reset code.

filed under: