El Paso Electric’s Texas residential customers will get an average $3 to $4 per month refund on their electric bills beginning later this year due to lower federal corporate tax rates that took effect in January, company officials reported Tuesday.
“This more than offsets the ($14.5 million) rate increase” that took effect in July, said El Paso Electric Chief Executive Officer Mary Kipp.
The new federal tax laws will take “some rate pressure off our customers,” but the new tax laws are not beneficial to the electric utility industry as they are to many other industries, Kipp said.
The new tax laws reduced the federal corporate tax rate from 35 percent to 21 percent, but it also took away “bonus depreciation” deductions that regulated electric utilities were able to use in past years to reduce federal income taxes, El Paso Electric officials said.
“This puts strains on our cash flow,” Kipp said.
Nathan Hirschi, El Paso Electric chief financial officer, said the company will return an estimated $26 million to $31 million to Texas and New Mexico customers this year for federal tax deductions the company took on power plants and other equipment in past years.
About 80 percent of that money, or about $21 million to $25 million, will go to Texas customers this year, he said.
El Paso Electric will have to refund a total of $299 million to customers over the next 30 years due to federal tax deductions it took under old corporate federal tax laws , Hirschi said.
“The bonus depreciation (deductions) allowed us to pay very little in federal taxes in the last few years,” Hirschi said. “This changes the amount of taxes we pay to the IRS.”
Company officials announced in January that it would give refunds to customers due to the reduction in federal corporate income taxes. But Tuesday was the first time company officials provided the estimated amount of the refunds.
It’s also the first time El Paso Electric officials acknowledged what El Paso city officials said last month — that the tax refunds to customers would wipe out the new electric rate increase.
The rate-case settlement between the city and utility, approved in December by the Public Utility Commission of Texas, included a provision to refund the utility’s Texas customers for the reduction in the federal income tax rate.
Company officials plan to file a refund request with the Texas commission by April, and that will have the exact refund amounts, company officials said.
It also is working with the New Mexico Public Regulation Commission to determine how refunds will be made to the company’s customers in the Las Cruces area, Hirschi and Kipp said. The company has not yet determined the refund amounts for New Mexico customers.
El Paso-area customers are likely to see the tax refunds begin by the middle of this year, utility officials have said.