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For Release — March 9, 2015

Business leaders call for bold action on energy costs

ALBANY, N.Y.—Saying the time for bold action to reduce high energy costs in New York State is at hand, business leaders from across the state today called on the Governor and the state Legislature to take immediate action to reduce energy taxes that add as much as 67 percent to industrial electric delivery charges in parts of Upstate New York.

In the past two sessions, the Legislature and the Governor have taken steps to reduce the Public Service Law § 18-a(6) Temporary State Energy and Utility Service Conservation Assessment (Temporary Assessment). Two years ago, at the urging of the Senate Majority, the temporary assessment was reduced. Last year at the urging of the New York State Tax Relief Commission, Governor Cuomo advanced a proposal to reduce this “temporary” temporary assessment by $200 million. This year it is time to end the tax once and for all.

Furthermore buried in the 2015-2016 proposed state budget are a number of additional items that will put pressure upon energy consumers and producers. In negotiating a final state budget, the Administration and legislature has several opportunities to reduce the state’s energy tax burden, by rejecting proposals that will add to energy costs.

These provisions include:

New Yorkers already pay some of the highest energy bills in the nation. The surcharge increases the already high burden on families struggling to pay high utility bills. The 18-A Surcharge is particularly burdensome for New York businesses, especially those in energy intensive industries.

The 18-a Surcharge is imposed based on volumes of electricity and natural gas purchased and, therefore, has a particularly large impact on energy-intensive manufacturers. The current Surcharge adds significant costs to the products produced in New York and makes it more difficult for New York manufacturers to compete domestically and in the global market.

An analysis of private sector employment in New York State by The Public Policy Institute (PPI found jobs in the manufacturing sector declined by more than 40 percent during the period from November 2008 and November 2014.

Most recently a 2014 European Commission staff report on the link between energy prices, energy efficiency and industrial competitiveness (as measured by extra-EU exports), confirmed the obvious high energy costs had an adverse effect on the energy intensive sectors. Specifically the report “shows that the increasing electricity costs had a negative impact on export competitiveness. Moreover, the high heterogeneity within sectors suggests that energy-intensive industries are most heavily affected. The results show that, since energy savings in most cases were not large enough to fully compensate for energy price increases, energy represents a growing share of total production costs. Therefore caution is called for when adopting policies that determine a further increase of energy prices, since this creates a real burden that some European firms cannot fully compensate for.”1

Eliminating the next two years of the 18-a Temporary Assessment will reduce energy taxes by $173 million in state fiscal year 2016 and $126 million in state fiscal year 2017 providing a critical cost relief that will help retain good paying manufacturing jobs by helping to make the State’s economy more competitive.

HIDDEN TAXES AS A PERCENTAGE OF MONTHLY INDUSTRIAL ELECTRIC DELIVERY BILLS
(JANUARY 2013)
INDUSTRIAL SIZE RANGE
Small Industrial 500 KW 14% to 33%
Medium Industrial 2,000 KW 17% to 41%
Large Industrial 10,000 KW 23% to 67%
Surcharge, System Benefits Charge, Renewable Portfolio Charge and Local Taxes

1 Energy Prices and Costs Report” SWD(2014) 19 final http://ec.europa.eu/energy/doc/2030/20140122_swd_prices.pdf