Consumers' Power Rates Should Drop Due to Tax Changes
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December 18, 2013

Changes to state taxes that affect utilities should result in lower power rates for consumers, North Carolina Attorney General Cooper told the Utilities Commission in a filing this week.

"Overall lower taxes paid by utilities ought to mean lower bills for their customers," Cooper said. "We're asking the Utilities Commission to make sure that's the case."

Increases in certain taxes paid by utilities should be more than made up for by reductions in other taxes, and the savings should be passed along to utility customers, Cooper argued in comments filed by the North Carolina Attorney General's Office late Monday.

Legislative changes that take effect  January 1, 2014 will: reduce the state income tax rate; repeal the gross receipt taxes paid by electric, water and sewer utilities; increase the effective tax rate paid on sales of electricity from 3 percent to 7 percent; and require electric, gas, water and sewer utility corporations to pay corporate franchise taxes.

The changes mean that North Carolina consumers will see sales tax charges on their utility bills for the first time.

State law directs the Commission to make changes in utility rates to reflect some, but not all, of the tax changes.  Cooper wants the Commission to use its authority to make sure all tax changes are applied in a way that results in lower rates for consumers.

"It would seem inequitable, for example, to increase customer rates for the corporate franchise tax that will apply to certain utilities given that this increase will be offset by the reduction in the income tax paid by those utilities," Cooper said in the filing.

Cooper urged the Commission to utilize "any tax reductions as benefits to consumers in the form of rate decreases so that utility rates for consumers are set as low as possible."

In separate matters before the Commission, Cooper is currently fighting utility rate increases by Duke Energy, Progress Energy, and Dominion Power, the three main providers of electricity to North Carolina homes and businesses.