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Update: Illinois utilities sharing $350 million in tax savings with customers

CUB Executive Director David Kolata

CUB’s legal team and other consumer advocates were busy in the first few months of the year working to make sure Illinois utilities rightfully shared their newfound tax savings with customers. As a result, customers will see $350 million in lower rates.

Due to legislation passed in Washington late last year, the federal corporate tax rate dropped from 39 percent to 21 percent on January 1. Attorney General Lisa Madigan, the Illinois Commerce Commission (ICC) and CUB immediately began to work to ensure the resulting savings for utilities were shared with Illinois consumers.

“If the big utilities are getting a huge tax break, they need to share those savings with their customers, period,” CUB Executive Director David Kolata said. “That’s why we worked so hard on these cases, along with the ICC and Attorney General Lisa Madigan. We’re glad all the utilities eventually agreed.”

The ICC approved orders on Jan. 25 that called on the utilities to share their tax savings with customers—or prove that they shouldn’t have to. ComEd and Ameren Illinois’ electric utility filed tariffs even earlier to adjust their rates—and customers are already paying lower bills for the entire year. (See the new rates on our fact sheet, Making Sense of Your Electric Bill.)

Other utilities (Ameren Illinois [gas], Peoples Gas, North Shore Gas, Nicor Gas, and Illinois American Water) acknowledged that their rates should be reduced, but there was disagreement over when those benefits should begin.

For those utilities, the tax savings are flowing through a special rider on bills, called the Variable Income Tax Adjustment (VITA) Riders. This rider initially was created for utilities to recoup more money from consumers based on an increase to the state income tax—but because the reduction in federal income tax rate was substantially bigger than the increase in state income tax, the rider will reduce bills for consumers.

The tax savings, as approved by the ICC on April 20, will be reflected in a special VITA rider line item for those utilities. As of early May, those riders had not yet begun to appear on bills. We will alert consumers when they do.

With Aqua Illinois, the tax savings are reflected in new rates the company recently received through the ICC.

Initially, some utilities didn’t want to share as much money with customers, but consumer advocates and regulators got them to agree to calculate the tax savings beginning Jan. 25, the day the ICC called on the utilities to start keeping track of savings.

Rate cuts due customers:
Utility  Tax-related Rate Cut
ComEd $200 million
Ameren Illinois (electric) $50 million
Nicor Gas $39.132 million
Peoples Gas $30.052 million
Ameren Illinois (gas) $15.749 million
Illinois American Water $10.823 million
Aqua Illinois $4.5 million
North Shore Gas $3.36 million
Total $353.616 million