Kansas Gas Service must return all dollars saved from a federal tax cut to its customers, the company's regulator ruled Monday, which will amount to a one-time refund of $22.78 for residential customers.
When the Tax Cut and Jobs Act went into effect in January 2018, companies nationwide saw their federal tax rates fall from 35 percent to 21 percent. For KGS, that meant a savings of $17.4 million, which the company set aside as instructed by its regulator, the Kansas Corporation Commission.
Westar and other utilities returned those dollars to consumers, but Kansas Gas attorneys argued that KCC allowed them an option of not returning that money.
On Monday, in brief special meeting, the three KCC commissioners voted unanimously those dollars must be returned.
In its June 2018 rate case, KGS had asked to keep the tax savings to offset its cost of service, pointing to a line in the original KCC order to set the money aside that said if a utility showed increases in its cost of service have "more than offset" the decrease in its income taxes, the commission would consider on a case-by-case basis whether the tax dollars should be refunded to consumers.
The intention was, the KCC said, "not to materially impact the utility's 'profitability,' but rather to ensure the utility neither positively nor negatively was impacted by the passage of federal income tax reform."
KGS argued, according to KCC documents, that the company had seen cost of service increase more than the decrease in taxes, and that it wasn't earning its authorized rate of return.
But KCC staff person Justin Grady argued in testimony, saying, "The only way to ensure that the deferred tax savings do not inure to the benefit of KGS's shareholders is to credit all of the tax benefits to KGS customers. Otherwise, when KGS's tax liability dramatically declined on January 1, 2018, the benefit of that reduction in income tax expense would flow directly to KGS's shareholders."
KGS spokeswoman Dawn Tripp said the refund would be issued to customers "as soon as administratively feasible."