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Legislative Memo

Ken Pokalsky
Vice President of Government Affairs
T 518.465.7517 x205
www.bcnys.org

BILL:

A.9710-B, Part P (Budget)

Support

SUBJECT:

Elimination of ESCO Sales Tax Exemption

 

DATE:

March 29, 2010

 

The Business Council strongly opposes this Assembly proposal to impose an estimated $150 million in new state-level taxes on energy purchases in New York State, by eliminating the current sales tax exemption for services provided by energy service corporations (ESCOs) (Note: this cost estimate is based on the state's 2009 tax expenditure report.)  If local governments follow suit, by eliminating the local sales tax exemption, the cost of this proposal could be almost double that amount.

ESCOs are businesses that provide a wide range of energy-related services to business and residential customers, including arranging both electric power and natural gas purchases.  As such, ESCOs play an important role in New York State's deregulated electric power market. 

It is hard to believe that the legislature would adopt additional energy taxes, and add further to the state's already un-competitively high energy costs.

The Public Policy Institute recently released a report showing that in 2009 state and local taxes already cost New York residents and businesses $6.4 billion a year, and represent about 26 percent of the average energy bill.

A summary of this report is attached; this full study is available on line at www.ppinys.org/reports/2010/ShortCircuitingNewYorksRecovery.pdf

Significantly, last year alone state and local government increased energy taxes by $850 million – or 15 percent - with the largest component of that increase being the seven-fold increase in the PSC Section 18-A assessment, which alone imposed $650 million in new energy costs.

In large part due to this heavy tax burden, energy prices in New York remain high despite recent reductions in fuel prices, and the resultant reduction in the wholesale cost of energy.

As example, average electric power costs for the industrial and commercial sector are about 40 percent above the national average.

At a time that the state's economy is struggle to rebound, it makes little sense to increase a significant business cost factor such as electric power and natural gas.

For these reasons, The Business Council strongly opposes A.9710-B, Part P.