Exelon (EXC) Unit To Pass TCJA Savings To Residential Users

Exelon Corporation (NYSE:EXC) announced that its subsidiary Commonwealth Edison Company (ComEd) has received necessary approval from The Illinois Commerce Commission (“ICC”) to pass on the tax savings resulting from the implementation of the Tax Cuts and Jobs Act (TCJA).

The new act became effective Jan 1, 2018 and has lowered the corporate tax rate from 35% to 21%. This led to reduction in the amount of federal income tax ComEd will pay to the government. ComEd sought approval from ICC to pass its tax savings of nearly $200 million to its residential customers in Illinois which will result in average savings of $2-$3 per month from February. Without ICC’s approval customers would not realize savings from the tax cut until 2020.

Tax Cuts – A Boon for Utilities

Utilities in some states are trying to use the tax cut to lower the bill of their customers. Utilities are passing on the benefits to their customer base either through reduction in existing electric rates or by adjusting the planned rate increases.

Passing on tax savings does not look significant when we consider a single user or a single utility, however, it is significant when we consider the nation as a whole. Already decisions have been taken to pass on more than billions of dollars in tax savings to customers and we expect this amount to increase.

Utilities like AVANGRID, Inc. (NYSE:AGR) and Pinnacle West Capital Corporation (NYSE:PNW) among others, have also expressed intention to pass on the tax savings benefits to customers. NextEra Energy (NYSE:NEE) , on the other hand, has decided to use the tax savings of nearly $1.3 billion to recoup the storm recovery expenses, without increasing the bills of its users in Florida.

Quality Service at Low Prices

The savings due to tax cuts will allow the residential customers of ComEd to enjoy safe and reliable services at a very competitive price.

Since 2001, ComEd has invested in excess of $5 billion to strengthen its electrical transmission and distributions system and has also nearly completed the installation of nearly 4 million smart meters. ComEd rates are low compared with the average electric rates in 10 largest American cities.

Thanks to the tax cuts, the user will enjoy the benefits from strengthening infrastructure of its service provider, at lower rates.

Price Movement

Exelon’s shares have returned 7.9% last year, outperforming the rally of 2.3% from the Zacks Investment Research

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Written By: Zacks Investment Research