Utility customers could be forced to cover for corporate taxes

A member of the California Public Utilities Commission, Timothy Simon, wants to allow utilities to structure themselves as partnerships, a seemingly arcane move that could have a nasty impact on ratepayers. As David Cay Johnston explains at tax.com, utility customers would be on the hook for a corporate income tax that is not applicable.

The industry persuaded regulators that including the corporate income tax in setting rates was fair because there was an actual corporate income tax on the holding company, regardless of whether its losses in other unrelated businesses might be offsets that resulted in no taxes going to the government. Simon's alternative decision acknowledges a previous commission decision that "an allowance for tax expense is only a just and reasonable charge when there is likely to be an actual tax expense by the utility." But Simon wants to go much further. He wants to impose on consumers the corporate income tax even when the utility is organized as a partnership, which by law is exempt from the corporate income tax.

Johnston says that the California PUC, which at one time skewed its decisions toward consumers, is more industry focused these days.