Moody's Sets out Impacts to Utilities from Federal Tax Cuts

As Governors, Legislators and regulators look to cut utility rates to reflect the federal tax cut, Moody’s makes these points about the impact of federal tax cuts on utilities:

• tax reform is credit negative for utilities
• creates a short term cash flow problem
• will dilute a utility’s ratio of cash flow before changes in working capital to debt by approximately 150 to 250 basis points on average

What other impacts will the federal tax c uts have on unitlities?

• 24 states are conducting regulatory proceedings on the impact of accumulated deferred income taxes from past years
• The Brattle Group says “Returning tax savings to customers does not poses a “threat to the fundamental value” of a utility and will not necessarily affect “book return on equity or the present value of future cash flows, but it does create a near-term cash flow problem,”

Utility Dive | For utilities, the new corporate tax cuts are a double-edged sword