Bonnifield & Bayles: FERC Follows Up on Tax Reform Response

Energy attorneys Richard Bonnifield and Jessica Bayles contributed an article to POWER magazine titled “FERC Follows Up on Tax Reform Response,” published December 10, 2018. The article discusses several recent steps taken by the Federal Energy Regulatory Commission (FERC) to ensure that the benefit of the reduction in the corporate federal income tax (FIT) in the Tax Cuts and Jobs Act, which was sign into law by President Trump in December 2017, is passed on to consumers.

Among the steps taken by FERC are:

• Issuance of a policy statement addressing the treatment of Accumulated Deferred Income Taxes (ADIT), which are collected from consumers by public utilities, natural gas pipelines, and oil pipelines in anticipation of paying federal taxes but now may be considered in excess due to the reduction of the corporate FIT.
• Issuance of a Notice of Proposed Rulemaking to revise rates for public utility transmission providers to take into account the impact on ADIT of changes in federal taxation.
• Taking action on a number of other items related to changes in the tax code, from approving several interstate natural gas pipeline rate reduction filings, to issuing more than 40 orders directed at public utilities whose transmission tariffs previously referenced the higher tax rate.

The authors conclude: “Since the Tax Act took effect on January 1, 2018, the Commission has moved expeditiously to assess its impacts on FERC-jurisdictional rates and to implement the changes needed to ensure that ratepayers receive the benefits of the reduced corporate FIT on a timely basis. The Commission’s actions in November have advanced that cause.”