Income Tax Footnote (Parts of It)
Due to the complex and comprehensive nature of the enacted tax law changes, and their application under GAAP, Southern Company considers all amounts recorded in the financial statements as a result of the Tax Reform Legislation to be "provisional" as discussed in SAB 118 and subject to revision. Southern Company is awaiting additional guidance from industry and income tax authorities in order to finalize its accounting. The ultimate impact of the Tax Reform Legislation on deferred income tax assets and liabilities and the related regulatory assets and liabilities cannot be determined at this time. See Note 3 under "Regulatory Matters" for additional information.
The ultimate impact of the Tax Reform Legislation on deferred income tax assets and liabilities and the related regulatory assets and liabilities cannot be determined at this time. See Note 3 under "Regulatory Matters" for additional information.
The implementation of the Tax Reform Legislation significantly reduced accumulated deferred income taxes, partially offset by bonus depreciation provisions in the Protecting Americans from Tax Hikes Act. The Tax Reform Legislation also significantly reduced tax-related regulatory assets and increased tax-related regulatory liabilities.
At December 31, 2017, the tax-related regulatory assets to be recovered from customers were $825 million. These assets are primarily attributable to tax benefits flowed through to customers in prior years, deferred taxes previously recognized at rates lower than the current enacted tax law, and taxes applicable to capitalized interest.
At December 31, 2017, the tax-related regulatory liabilities to be credited to customers were $7.3 billion. These liabilities are primarily attributable to deferred taxes previously recognized at rates higher than the current enacted tax law and to unamortized ITCs.
Note 3 Regulatory Matters (Parts of It)
Georgia Power
Rate Plans
On January 19, 2018, the Georgia PSC issued an order on the Tax Reform Legislation, which was amended on February 16, 2018 (Tax Order). In accordance with the Tax Order, Georgia Power is required to submit its analysis of the Tax Reform Legislation and related recommendations to address the related impacts on Georgia Power's cost of service and annual revenue requirements by March 6, 2018. The ultimate outcome of this matter cannot be determined at this time.
Gulf Power
Retail Base Rate Cases
The 2017 Rate Case Settlement Agreement set forth a process for addressing the revenue requirement effects of the Tax Reform Legislation through a prospective change to Gulf Power's base rates. Under the terms of the 2017 Rate Case Settlement Agreement, by March 1, 2018, Gulf Power must identify the revenue requirements impacts and defer them to a regulatory asset or regulatory liability to be considered for prospective application in a change to base rates in a limited scope proceeding before the Florida PSC. In lieu of this approach, on February 14, 2018, the parties to the 2017 Rate Case Settlement Agreement filed a new stipulation and settlement agreement (2018 Tax Reform Settlement Agreement) with the Florida PSC. If approved, the 2018 Tax Reform Settlement Agreement will result in annual reductions of $18.2 million to Gulf Power's base rates and $15.6 million to Gulf Power's environmental cost recovery rates effective beginning the first calendar month following approval.
The 2018 Tax Reform Settlement Agreement also provides for a one-time refund of $69.4 million for the retail portion of unprotected (not subject to normalization) deferred tax liabilities through Gulf Power's fuel cost recovery rate over the remainder of 2018. In addition, a limited scope proceeding to address the flow back of protected deferred tax liabilities will be initiated by May 1, 2018 and Gulf Power will record a regulatory liability for the related 2018 amounts eligible to be returned to customers consistent with IRS normalization principles. Unless otherwise agreed to by the parties to the 2018 Tax Reform Settlement Agreement, amounts recorded in this regulatory liability will be refunded to retail customers in 2019 through Gulf Power's fuel cost recovery rate.
If the 2018 Tax Reform Settlement Agreement is approved, the 2017 Rate Case Settlement Agreement will be amended to increase Gulf Power's maximum equity ratio from 52.5% to 53.5% for regulatory purposes.
The ultimate outcome of these matters cannot be determined at this time.
Mississippi Power
On February 7, 2018, Mississippi Power revised its annual projected Performance Evaluation Plan (PEP) filing for 2018 to reflect the impacts of the Tax Reform Legislation. The revised filing requests an increase of $26 million in annual revenues, based on a performance adjusted ROE of 9.33% and an increased equity ratio of 55%. The ultimate outcome of this matter cannot be determined at this time.
Base Rate Cases
On January 31, 2018, the Illinois Commerce Commission approved a $137 million increase in Nicor Gas' annual base rate revenues, including $93 million related to the recovery of investments under Nicor Gas' infrastructure program, effective February 8, 2018, based on a ROE of 9.8%.
The Illinois Commerce Commission issued an order effective January 25, 2018 that requires utilities in the state to record the impacts of the Tax Reform Legislation, including the reduction in the corporate income tax rate to 21% and the impact of excess deferred income taxes, as a regulatory liability. On February 20, 2018, the Illinois Commerce Commission granted Nicor Gas' application for rehearing to file revised base rates and tariffs, which Nicor Gas expects to file by the end of the second quarter 2018.
On December 1, 2017, Atlanta Gas Light filed its 2018 annual rate adjustment with the Georgia PSC. If approved, Atlanta Gas Light's annual base rate revenues will increase by $22 million, effective June 1, 2018. Atlanta Gas Light will file a revised rate adjustment to incorporate the effects of the Tax Reform Legislation in the first quarter 2018. The Georgia PSC is expected to rule on the revised requested increase in the second quarter 2018.
The ultimate outcome of these matters cannot be determined at this time.
