COLUMBUS, OHIO (July 17, 2019) – The Public Utilities Commission of Ohio (PUCO) today adopted and modified an agreement that will require FirstEnergy’s distribution utilities to update its rates to reflect the reduction in its corporate income tax rates due to the Tax Cuts and Jobs Act (TCJA) of 2017. The agreement also authorizes FirstEnergy’s grid modernization business plan that will allow it to pursue various modernization investments in its distribution systems.
The agreement also calls for FirstEnergy to credit customers and reduce rates in light of the TCJA totaling nearly $900 million over the course of the next 25 years. Specifically, the utility will:
- Credit customers with approximately $58.5 million it has over-collected in rates since Jan. 1, 2018.
- Reduce base distribution rates by $35.1 million annually, until new distribution rates can be approved by the PUCO (FirstEnergy expected to file an application in 2024).
- Return to customers $482.8 million for normalized tax deferrals over a 25-year period.
- Return to customers $194.4 million for property non-normalized tax deferrals over a 10-year period.
- Collect from customers approximately $93.5 million for non-property, non-normalized tax deferrals over a five-year period.
The agreement further authorizes FirstEnergy’s distribution utilities to pursue various modernization investments in its distribution system, including 700,000 smart meters, distribution automation equipment, and integrated volt-VAR controls. These investments are intended to reduce length and frequency of customer outages, provide customers with access to increased data regarding their energy usage, and improve voltage management for more efficient grid operations.
Potential capital costs will be capped at $516 million. Additionally, the adopted agreement calls for FirstEnergy to credit customers with operational savings resulting from the investments.
On Jan. 10, 2018, the Commission ordered an investigation to study the impacts of the TCJA on PUCO-regulated utilities and how best to pass on the benefits to customers, and directed utilities to set aside money in excess of the reduced tax rate to later be returned to customers. The TCJA was signed into law on Dec. 22, 2017, which among other things, reduced the federal corporate income tax rate from 35 to 21 percent, effective Jan. 1, 2018.
On April 25, 2018, the Commission denied legal arguments jointly filed by Ohio’s electric distribution utilities challenging the PUCO’s January order directing utilities to set aside money in excess of the reduced corporate tax rate during the pendency of the Commission’s investigation.
On Feb. 29, 2016, FirstEnergy filed a grid modernization proposal for its Ohio operations, ranging in costs from $3.7 - $5.4 billion.
On Dec. 1, 2017, FirstEnergy filed an application with the PUCO to pursue grid modernization investments throughout its Ohio service territory.
On Nov. 11, 2018, and supplemented on Jan. 25, 2019, a settlement agreement was filed to resolve the tax and grid modernization cases. The agreement was signed by FirstEnergy, PUCO staff, Ohio Energy Group, Industrial Energy Users-Ohio, Direct Energy, Ohio Cable Telecommunications Association, Environmental Defense Fund, Ohio Hospital Association, Interstate Gas Supply, Ohio Consumers’ Counsel, Northeast Ohio Public Energy Council, and Ohio Partners for Affordable Energy.
A copy of today’s opinion and order is available on the PUCO website at PUCO.ohio.gov. Click on the link to Docketing Information System (DIS) and search for case 17-2436-EL-UNC.