The newly passed tax law could save Americans billions of dollars on their utility bills.
On Tuesday, Pepco, which provides power to nearly 300,000 customers in Washington, D.C., said it would cut rates beginning in the current quarter.
Other utilities might be forced to follow suit. In much of the country, investor-owned utilities have a monopoly on providing electricity and gas to homes and businesses. State regulators allow them to charge rates high enough to recoup their costs — including the cost of paying taxes — and to provide a guaranteed return to their shareholders. Those regulators periodically scrutinize rates to ensure that they are reasonable. When taxes go down, so should customers’ utility bills.
State regulators across the country have said they will make sure that actually happens. And in a letter to the Federal Energy Regulatory Commission on Tuesday, the attorneys general of several states, including Massachusetts, Texas and New York, asked the agency to act as well.
The savings will be modest for most Americans, perhaps a few dollars off the average family’s monthly electric bill. But multiplied across tens of millions of households, the savings will be significant.
Economists at the Penn Wharton Budget Model at the University of Pennsylvania estimated that the new law would reduce the industry’s federal tax bill by $1 billion this year. In 2021, the savings would grow to $5 billion. The Penn economists projected that the law would yield a reduction of about 0.5 percent in electricity prices.
That doesn’t mean customers should expect every dollar in tax savings to show up as savings in their monthly bills. Some states may allow utilities to use part of their savings to fund infrastructure upgrades or to offset future rate increases. And utilities may challenge regulators’ findings about how much they have saved as a result of the tax bill.This article originally appeared in The New York Times.