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LG&E’s Parent Company Paid No Federal Taxes Last Year

Ryan Van Velzer

In a year when Kentuckians struggled to pay their utilities bills because of a global pandemic, Louisville Gas and Electric’s parent company paid nothing in federal taxes.

PPL reported around $900 million in pre-tax income last year and was one of 55 U.S. corporations that paid nothing in federal corporate income taxes, according to a report co-authored by Matt Gardner of the Institute on Taxation and Economic Policy. 

Instead of paying tax at 21%, which is the federal statutory rate, they reported zero and actually got about $9 million back essentially as a tax rebate, Gardner said. 

“The bottom line is it means PPL made close to $900 million before taxes last year and didn’t pay a dime of federal income tax on it,” Gardner said. 

A spokesperson for PPL said the company has invested in modernizing infrastructure and improved reliability, noting LG&E has reduced the number of power outages customers in Kentucky face by about 40% over the past decade. 

The news was shocking, but not surprising to Cherry Russell, who owes more than $2,300 in unpaid utility bills. 

 “A lot of this stuff is so mentally disturbing,” Russell said. “Physically and mentally it drains you, to see what the upper hand can do to the underdogs.” 

Russell used to work as a certified nursing assistant until the pandemic hit and job became too risky for her health. She lost her home last June and has moved between shelters and staying with family. 

Russell is one of nearly 30,000 LG&E customers who have had trouble paying their utility bills because of the pandemic, and have been enrolled in a payment plan. People leaned on family and friends, maxed out credit cards and used stimulus funds just to keep up with their bills, said Housing and Homeless Coalition of Kentucky executive director Adrienne Bush.

“It’s been a struggle, obviously, for low-income Kentuckians,” Bush said. “Those are the folks who are more likely to work service sector jobs and are more subject to reduced hours and layoffs.”

LG&E has already disconnected around 4,000 commercial or industrial customers. Disconnections for residential customers are set to resume in June, and as of late April another 52,000 customers are eligible for disconnection, said LG&E spokeswoman Liz Pratt.

“As mentioned, we are encouraging those customers who receive a disconnection notice to contact us right away,” Pratt said. “we can help them set up payment arrangements that best meet their needs and help connect them to available financial assistance in their local area.”

Russell said she’s enrolled in a payment plan with LG&E, but there’s no way she can begin to pay anything back.  

“Realistically, no, no, there’s no way, absolutely no way,” Russell said. “Because a person like me, I’m scared to death, I’m thinking I’m going to go to jail. Oh lord, let me not…I’ve got pay, you’ve got to, but baby, the upper class they can get away with anything and do anything and it’s OK.”

PPL’s Tax Rate

PPL was just one of several utilities that topped the list of corporations that paid no federal corporate income tax last. American Electric Power and Duke Energy, which also do business in Kentucky, also didn’t pay any money in federal taxes either.   

Like many other utilities, PPL avoided paying taxes, in part, because of a tax reduction technique known as depreciation. 

The goal of depreciation is to encourage companies to invest in building infrastructure, said Gardner of the Institute on Taxation and Economic Policy, a nonpartisan tax policy organization. 

The problem, Gardner said, is that depreciation doesn’t care what you spend the money on —  whether that’s extending the life of a coal power plant or investing in renewable energy, for example. And, critically, depreciation doesn’t take into consideration whether companies would have spent that money anyways, Gardner said. 

“These companies have a fiduciary duty to keep this infrastructure functional, modern and to move it into the 21st century so the notion that they need tax breaks to do it seems a little ludicrous on its face,” Gardner said. 

PPL Communications Director Ryan Hill said the use of bonus depreciation in prior years created net operating losses that PPL was able to carry forward for tax purposes and use to reduce its taxable income.

“A significant portion of these prior infrastructure investments was eligible for bonus depreciation,” Hill said. “This depreciation essentially allows a company to take a current deduction for capital expenditures rather than depreciate the assets over time for tax purposes.” 

 Hill said the company expects it will pay more in taxes next year. 

Proposed Rate Increase

For the third time in four years, LG&E is in front of Kentucky utility regulators this week asking to raise rates. LG&E customers with both electricity and gas can still expect to see their bill increase by about $96 a year for the first year, and about $137 every year after that. 

Under the agreement, LG&E won’t change the current residential basic service charges, and agrees to not raise base rates again for at least four years. LG&E also agreed to increase contributions to assist low-income customers.

If approved by the Public Service Commission, the new rates will take effect July 1.

Low-income workers, who already don’t have the margins to take on additional expenses, will be further burdened by any increase in rates, said Bush with the Housing and Homeless Coalition of Kentucky. 

“Our social safety net is just not strong enough to consistently meet the demands of shareholder profits,” she said. 

All over the state, people have been posting in mutual aid groups about mounting utility bills as old unpaid charges stack on top of new ones under LG&E payment plans, Bush said.

“But if they couldn’t afford their utility payments to begin with, if it was already unaffordable then it doesn’t really help to stretch it out over time,” Bush said.

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