Energy Committee Update

November 14, 2013

Today, Governor Andrew M. Cuomo was presented with the final report of the New York State Tax Reform and Fairness Commission. The Commission report outlines revenue neutral policy options to modernize the current tax system with the goals of increasing its simplicity, fairness, economic competitiveness and affordability. The report can be viewed here: http://www.governor.ny.gov/assets/documents/greenislandandreportandappen....

The following items may be of particular interest to the members of the Energy Committee.

Accelerate the Phase Out of the 18‐A Surcharge:

The Temporary Utility Assessment (18‐A Surcharge) is a two percent assessment on electric, gas, water and steam utilities. The Surcharge is scheduled to be phased out over a three and one‐half year period beginning in 2014‐15. The Surcharge is passed through to utility consumers as higher rates, which is a burden on families struggling to pay high utility bills. The Commission also heard from the business community that the 18‐A Surcharge is particularly burdensome for New York businesses, especially those in energy intensive industries.  Legislation was recently adopted to phase out this Surcharge by 2017‐18. The Commission believes that, if possible, the Surcharge should be phased out more rapidly than currently scheduled. This acceleration of the phase‐out can be financed from the streamlined corporate audit procedures, which are expected to produce a comparable acceleration of revenue.

Energy Service Companies:

In 2000, New York deregulated its energy markets to encourage “retail choice.” In the deregulated market,
the Legislature exempted charges for the delivery of energy purchased from an Energy Service Company
(ESCOs) from the sales tax. In contrast, when electricity is purchased from a regulated utility, the entire
delivery charge is subject to tax.

Energy service companies, however, are now well‐established and the tax advantage that they have received is no longer necessary. The Legislature has previously repealed the exemption from the New York City sales tax base. If the exemption were eliminated statewide, it would generate an additional $60 million in State revenue and $35 million in incremental revenues for local governments.

Local Utility and Telecommunications Taxes:

Repeal Local Utility Gross Receipts Taxes (GRT) and School District Sales Taxes and Replace with an Increased State Gross Receipts Tax; or Repeal Local Gross Receipts Tax on Telecommunications and Modernize the Local Gross Receipts Tax on Utilities:

These options would not apply to New York City, which has a well‐developed administrative structure for
its utility gross receipts taxes.


Require State Assessment of all Complex Commercial, Industrial, and Utility Properties:

The State Office of Real Property Tax Services (ORPTS) currently provides assessments on special franchise properties (utility and telecommunications) on the public right of way. However, assessments on similar properties on private land and assessments on other complex properties, such as power plants, are performed locally. Valuation of such properties is complex and sometimes requires skills that can be provided more efficiently at the State level. One option that could be considered is allowing the State to provide assessments on all complex properties. This could provide some financial relief to local governments, who must secure the expertise to value complex property and who frequently must defend these assessments in court, often resulting in costly refunds. Providing a State assessment function could assist local governments and provide assessment certainty to the business community.

Utility Taxes

The Commission also recommends a study of the taxation of all utilities. Because deregulation has blurred the lines between regulated companies and other providers of utility services, the rationale for differentiating between Article 9‐A corporation franchise taxpayers and Article 9 taxpayers is becoming less apparent.