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FirstEnergy (FE) to Pass Tax Savings, Reduce Utility Bills
FirstEnergy Corporation’s (FE - Free Report) Ohio utilities filed an agreement to pass a $900 million annual Tax Cuts and Jobs Act (TCJA) savings to customers. The agreement also includes a plan to invest more than $500 million over three years for the modernization purpose.
Customers Poised to Benefit
If approved by the commission, customers will get 100% benefit of the tax savings. Residential customers using 1,000 kilowatt hours of electricity will have immediate reduction of $3.90 in their monthly bills and will continue benefited in the next 25 years.
While planned investment will strengthen the electric distribution systems, upgraded equipments will provide real-time voltage controls. The company also plans to install 700,000 smart meters. All these initiatives will be beneficial to the customers.
Our View
Utility companies are generally regulated in nature. The infrastructures are aging day by day and require regular investments to continue the flow of service. Regular investments involve large amount of funding. To upgrade and strengthen infrastructure, a company is required to apply for rate hike to commissions. Customers carry the burden of these rate hikes with higher bills.
TCJA has provided the opportunity to lower the burden of the customers by reducing bills. In 2018, few big electric utilities like NextEra Energy, Inc. (NEE - Free Report) , Duke Energy Corp. (DUK - Free Report) and Exelon Corp. (EXC - Free Report) passed their tax benefits to customers.
Price Movement
Shares of FirstEnergy have gained 11.0% in the past year, against the industry’s decline of 4.3%.
Zacks Rank & Key Pick
FirstEnergy currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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