Duke Energy Corp. DUK will pass on an amount of $142 million in annual tax savings to the electric bills of its Indiana-based customers, if the proposed settlement with consumer groups is approved by Indiana Utility Regulatory Commission. The Tax Cuts and Jobs Act — amended in late 2017 — came into effect on Jan 1, 2018 and has clearly led to this entire bill reduction.
Details of Tax Savings
The company’s customers, particularly residing in Indiana, would save approximately $142 million in annual tax on their electric bills. The company is expected to reach an agreement to impart the tax savings to its consumers via a slashed electric rate over the next two years. The new Federal Tax Laws will lower the overall customer’s electricity bill.
After considering the effect of lower tax rate, reduction in base rate and refunds of accumulated deferred taxes, the company will witness an average rate reduction of 5.6% by 2020 with most savings beginning in 2018. The actual amount of tax saving will tend to vary according to the different customer class. An average residential customer with consumption of 1,000 kilowatt hours (KWh) of electricity per month will save approximately $7.33 on the monthly electric bill from the downward revision in electricity rates.
Benefits of the Tax Reform
The latest tax reform has resulted in lower accrued tax expenses for the utilities and lately, various companies are passing on this benefit to their customers, decreasing utility rates and bills. Duke Energy is also no exception on this front and has probably curbed its electricity charges to reward its customers with tax savings.
Also, in recent times, we witnessed some other utilities having directed the federal tax savings to reduce bills for customers. These are Avangrid, Inc. AGR, NextEra Energy, Inc. NEE and WGL Holdings Inc .
Notably, this rate reduction is in line with the company’s earlier-made recommendation on the fourth-quarter earnings call. It made clear about using lower tax rates to curtail utility rates for customers in the near-term as well as aid in offsetting the future rate increases.
In the last three months, shares of Duke Energy have outperformed the industry it belongs to. The stock has moved 2.3% up compared with the broader industry’s increase of 0.4%.
Duke Energy currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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