Utilities pay the lowest effective tax rates of any industry, even though they collect money from ratepayers to cover their tax bills. Customers end up paying twice — once as ratepayers through the taxes included in their bills and a second time as taxpayers when they have to make up for public service funding gaps because utilities are not paying their fair share of taxes.
That’s the conclusion of a new report from the Institute on Policy Studies.
For companies in other industries, income taxes are paid mostly by shareholders. Regulated utilities, however, are allowed to collect money for income taxes from customers, through higher rates for electricity and natural gas. But because utilities take advantage of generous tax breaks, they perpetually delay paying those taxes and use the money for other things.
Public Utility Commission Statistics Books, 2007 – 2014
Over time, the amount of these collected but unpaid taxes has grown and grown. In 2007 investor-owned utilities had around $4 billion in accumulated deferred income taxes, but by the end of 2014 the amount had more than doubled to $9 billion. Electric utilities had $7.5 billion in collected-but-not-paid income taxes in 2014, including $5.13 billion for Pacific Power and $916 million for PGE. Investor-owned natural gas utilities had $1.44 billion in collected-but-not-paid income taxes in 2014, including $808 million for Avista and $500 million for NW Natural. ¹
Utilities don’t need to collect more money from customers to pay taxes. Utilities need to pay the taxes they have already collected.
1. Public Utility Commission, 2014 Oregon Utility Statistics