PG&E is getting what could be a $195.5 million windfall this year.
That’s due to the corporate income tax rate being dropped from 35 percent to 21 percent. In fairness, the $195.5 million windfall is a simplistic number and assumes PG&E nets $1.39 billion as they did in the last fiscal year as well as the for-profit utility not taking advantage of tax credits and loopholes that most of their residential customers can only dream of enjoying.
A number of utilities in other states have made it known they are working toward “sharing” that windfall with ratepayers. First of all, it isn’t a “windfall” as if it were extra money that is falling into their laps. Utilities are highly regulated and guaranteed a specific profit regardless of how badly they perform or if their board of directors buy themselves corporate jets and give the head honchos $1 million plus bonuses when they are teetering on bankruptcy while gouging ratepayers as PG&E did.
Speaking of PG&E you haven’t heard a peep out of them about lowering your rates now that they are getting a 14 percent cut in their federal tax rate. You’d think they’d be pounding the drum about how they are looking forward to returning their federal tax windfall to ratepayers even if they don’t have the details yet.
This is the same company that trips over itself to send out press releases bragging how much property tax they pay in each county they operate within as if it is a sign of their generosity. Their property taxes are factored into the rates they charges us that the California Public Utilities Commission approves and then once they add that to other operating expenses they pencil in 10.5 percent of that total for PG&E’s guaranteed minimum profit.
Since federal taxes are operating expenses PG&E may simply assume they get to keep the money. That’s what the CPUC allows them to do with the portion of rate increases set aside for legal settlements. If over a multi-year period PG&E doesn’t need to spend all of that money they are allowed to keep it.
To be clear, PG&E hasn’t said that is what they will do in this case. Considering their track record with fancy accounting such as selling all of their assets to a holding company they created during the brief period they were granted to fleece ratepayers that some politely called deregulation and then essentially charging customers for those assets again that they already paid for, the safe bet is PG&E lawyers are working around the clock so the utility doesn’t have to part with a single penny.
PG&E, by the way, did not pay federal taxes from 2009 to 2011when they had a collective profit of $4.85 billion in profit thanks to more than $1 billion in federal tax credits.
The federal tax credits were for accelerated depreciation so PG&E could plow money back into infrastructure to enhance safety and service without requiring them to use profits like any other business. You might want to ask the people of Sonoma and Napa counties how effective the federal tax credits were on that score.
PG&E, if you haven’t figured by now, despite having one of the biggest and oldest hydroelectric energy portfolios that would typically mean lower energy costs instead has some of the highest rates in the nation. And while other power firms that rely more on other sources of power have been lowering or keeping rates steady, PG&E has been doing what it does best — jacking up rates.
At the end of 2015, the typical PG&E household customer was paying $137.66 a month on average for electricity and natural gas. Due to rate increases that go into effect this month that figure is now up to $152.50 a month.
PG&E has 5.2 million household customers. Realizing they have business, industrial, government and agricultural customers that pay a lot more than residents, for illustration purposes let’s take the $195.5 million windfall and see what it would mean on a yearly basis for a residential customer. Given they have 5.2 million residential customers that translates into $37.59 annually per customer disregarding non-household ratepayers and assuming PG&E isn’t exploiting tax credits and loopholes. Keep in mind this is not a one-time “windfall” but a permanent 14 percent reduction of their federal tax liability.
This is also a good time to point out how PG&E’s rate of return can exceed the CPUC’s guaranteed 10.5 percent. Rates approved through the end of 2016 all factored in the 35 percent federal tax rate. That means tax credits and accounting loopholes courtesy of the federal tax code puts more money back in PG&E’s pocket with no requirement to pay for the working stiffs that keep the system going or to make infrastructure improvements.
That’s how they can fatten their bottom line for stockholders and fork over six figure bonuses to executives while going back to the CPUC with hat in hand arguing they need more money to replace aging infrastructure or to ask for ratepayers regardless of whether they own an electric car to cover the cost of electrical car charging stations so they can make even more money.
PG&E may fumble now and then and blow up a neighborhood, create impromptu eternal flames that pop up through street pavement, kill a customer or two, and even be under suspicion of less than stellar power line maintenance that toasts large swaths of its service territory.
But they are experts at squeezing every last penny they can from customer’s wallets. The federal tax “windfall” will be no different.
This column is the opinion of executive editor, Dennis Wyatt, and does not necessarily represent the opinion of The Bulletin or Morris Newspaper Corp. of CA. He can be contacted at email@example.com or 209.249.3519.