On Wednesday, January 24, 2018, the New Mexico Public Regulation Commission (PRC) issued an “Order Commencing Review of the Effects of the Federal Tax Cuts and Jobs Act of 2017 (TCJA) on Regulated New Mexico Utilities.” The Commission recognizes that the TCJA may have a major effect on the earnings and overall financial condition of utilities operating in the State of New Mexico, with the federal tax rate for utility companies being reduced from 35% to 21%. The Commission acknowledges that the exact consequences of the TCJA are unknown, and that any mechanism to accommodate changes in the tax law must be fair in balancing the interests of consumers and investors.
As such, the Commission has directed its staff to investigate the impact of the TCJA on regulated utilities. In doing so, the staff of the PRC has been directed to send a letter on or before February 2, 2018 to all regulated utilities that are subject to the TCJA. The regulated utilities to receive the letter shall be investor-owned utilities, rural electric cooperatives, natural gas utilities, water utilities, telecommunications entities, and motor carriers. The letter requires a response date of Friday, February 23, 2018. Based on a 12-month period of time to be determined by staff for particular industries, the response is to determine what the impact will be to the New Mexico utility’s financial operations, and what the utility proposes to do with the realized tax rate reduction savings. If the utility believes that the TCJA corporate tax reductions have no impact on that utility, the utility shall state this in its response to the staff’s letter. In its order, the Commission states that no person or entity may become a party to the proceeding, subject to further order of the Commission. Docket No. 18-00016-UT has been assigned to the proceeding.
New Mexico was the first state in the U.S. whose residents will see the direct impact of the TCJA. In its most recent rate case (Docket No. 16-00276-UT), a provision contained in a Stipulation Settlement had anticipated the benefit of a potential rate reduction due to the TCJA. That provision was agreed to between the state’s largest utility Public Service Company of New Mexico, the PRC staff, the Attorney General’s Office and numerous public and private entities. The result was that a projected 9% rate increase spread over two years was reduced to just over 1% for each of the next two years with no new rate increase until 2020. The PNM rate increase that goes into effect in February 2018 will mean about a .46 cent increase in the average customer’s utility bill.