Tax Reforms To Benefit Southern Company's (SO) Customers

Power supplier Southern Company’s (NYSE:SO) subsidiary, Georgia Power’s customers are expected to gain from the federal Tax Reform Legislation passed in December 2017. The cutback in the federal corporate income tax rate to 21% from 35% is likely to result in a savings of $1.2 billion for the Georgia Power customers. The savings would take place over the next two years. Georgia Public Service Commission ("PSC") has also confirmed the benefits as part of the agreement with Georgia Power.

The legislative reform will lower the taxes by $130 million on financing costs of the company’s controversial Vogtle Plant. It would also result in $330 million of direct credits to customers over the next two years. Additionally, it will include $700 million in future benefits to be incorporated in Georgia Power's next rate case.

The lower tax rate is likely to result in a residential customer (consuming an average of 1,000 kilowatt-hours per month) to receive around $70 per month in refunds over the two-year period.

Early this year, Georgia Power announced a cost reduction of $139 million for its consumers in 2018 related to the Vogtle expansion. Effective from April, the customers will pay $2.70 less than expected per month in financing costs for the Vogtle project.

Zacks Rank and Key Picks

Southern Company carries a Zacks Rank #4 (Sell). The continued timing and cost overrun issues over two large construction projects – Vogtle and Kemper – is set to put pressure on the stocking in the coming periods.

Meanwhile, a few better-ranked electric utilities worth considering include CenterPoint Energy, Inc. (NYSE:CNP) , Dynegy Inc. (NYSE:DYN) and Exelon Corporation (NYSE:EXC) , each holding a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

CenterPoint surpassed earnings estimates in three of the last four quarters, with an average beat of 11.5%.

Dynegy expects to witness a year-over-year increase of 354.5% in its earnings in 2018.

Exelon expects to witness a year-over-year increase of 18.08% in its earnings in 2018.

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