The New York State Public Service Commission (PSC) should eliminate a controversial state surcharge on energy because a new state mandate requiring customers to buy renewable power addresses the original intent of the energy charge, The Business Council has told the PSC.

“In 1998, the system benefit charge (SBC) was implemented to provide funding for energy efficiency programs—and to spur the development of renewable energy sources,” Anne Van Buren, the Council’s director of energy and telecommunications, wrote in a March 4 letter to
Jacklyn Brilling, secretary of the PSC. The letter was submitted in response to the PSC’s request for comments on the future of the SBC.

“Since then, however, the Commission has adopted an entirely different approach to the development of renewable energy—the renewable portfolio standard (RPS), a mandatory purchase quota requiring that renewables comprise 25 percent of electricity sources by 2013,” the letter continued.

The PSC imposed the current system benefit charge over strong objections from New York’s business community in January of 2001. Business had argued that the $78 million tax should be restructured and reduced or eliminated for business ratepayers. Instead, the PSC increased it to $150 million. The current SBC is due to expire at the end of this year.

New York is already the nation’s second most energy-efficient state as measured by energy consumption per capita, and there are other taxpayer-funded government programs available to finance energy-efficiency programs, Van Buren noted. The New York Power Authority (NYPA) commits $100 million a year to such programs, and the Long Island Power Authority (LIPA) is conducting a 10-year, $355 million Clean Energy Initiative, which includes numerous energy efficiency, renewable and low-income programs. And Con Edison’s pending rate proposal calls for at least $120 million annually on energy efficiency programs.

The letter also reviewed long-standing Business Council concerns about the effect of the SBC on individuals businesses and the state’s economy.

“Yes, the state, with PSC leadership, has addressed some important policy issues, such as gross receipts tax repeal,” the letter said. “However, for the vast majority of our manufacturing and other energy-intensive members, electric power costs remain a significant competitiveness issue. Policy initiatives such as the SBC and the RPS add to these anticompetitive cost factors.”

In fact, New York’s high energy costs “are also a significant burden to our state’s economic growth. This has been documented by many sources, including our own research, business surveys, and the 2002 State Energy Plan,” which acknowledged that energy cost and availability is an important factor in companies’ site-selection decision, the letter said.

The letter noted that the Public Policy Institute’s Just the Facts compendium of data on competitiveness factors in New York State has shown that New Yorkers now endure the nation’s second-highest average retail price of electricity.

“New York State, and particularly the upstate region, have lagged far behind the nation’s rate of job growth for decades. The existing SBC pushes up energy costs enough to contribute to that problem; making it still higher would only make this situation worse,” the letter said.

The letter also said:

• If the state wishes to fund or encourage energy-efficiency programs, it should do so through tax credits.
  
  
• If the PSC does choose to preserve the SBC over the objections of businesses and taxpayers, it should reduce the surcharge for all ratepayers and eliminate it entireley for sectors of the economy that are especially vulnerable to high energy costs.
  
  
• The state should exempt beneficiaries of reduced-rate power under economic-development programs from the SBC.

“It is obviously inconsistent for one arm of the state government to marshal its resources and arrange for low-cost power to be delivered as an incentive for a needed employer to locate or expand in New York—and then for another branch of the same government to come around from behind and slap the employer with an SBC surcharge.”