This weekend it was reported that State lawmakers are in talks over draft legislation which would establish a carbon fee on imported power, a statutory solar program, an amend net metering program, sales tax credits for solar installations, and assistance for energy efficiency. It would also endorse an increase in RGGI assessments, and provide assistance to localities significantly affected by the closure of power generation facilities.
The Business Council opposes the plan as represented by LBD 12159-03-2. The current draft has the potential to increase energy assessments by a least $140M annually (Solar a minimum $40M, RGGI $100M), and the final cost of this legislation could be significantly higher.
No Rate Relief
This legislation will not result in a reduction in wholesale energy rates for New York State business and residential customers. Instead, several parts of the legislation will directly or indirectly increase rates on all customers.
New Yorkers pay among the highest electric costs in the nation, with a quarter of power costs attributed to state and local taxes, fees and assessments. High rates erode the competitiveness of our business environment and placed a significant burden on residents. Residential electricity rates alone were 61 percent above the national average in 2009 and second highest among the 13 most comparable states. Commercial rates were the highest among the same comparable states, and 65 percent above the national average.
The following table provides the retail electric bill impact of certain public benefit and environmental programs in New York.
A recently released AARP survey shows that close to half of the state's residents say it is difficult to pay their utility bills. The survey found that overall concerns of increased utilities costs run high — with 53 percent of New York residents being extremely or very concerned about their heating/cooling bills increasing and nearly two-thirds stating that in the past two years their utilities bills had increased.
Our members regularly site energy costs as a major competitiveness issue in New York State.
As such, any increase in customers' costs should clearly be carefully reviewed, and compared against any expected consumer benefits
The Business Council supported Governor Cuomo's "New York Sun" program in part because of its use of existing alternative energy resources. The bill draft would propose using existing resources but would also enable additional assessments on electric customers.
The Renewable Portfolio Standard (RPS) is supported by collection from utility customers. The RPS cannot support its current goals and support the proposed n additional $108M commitment to its solar program (over $1B for the life of the program).
In 2012 RPS collections were $203M, in 2013 collection will increase to $243M. After 2013, the PSC will review the RPS, but the RPS collections are projected to increase in 2015 to $321M, even without increased collections to cover solar.
The table below depicts the current ratepayer supported public policy programs. The costs of the programs are already projected to reach an annual cost of nearly $1 billion by 2015.
Generation of power from solar remains very expensive - while sunlight is free, solar panels and installation are not. New Yorkers should look to Germany, which once prided itself on being the photovoltaic world champion. Germany has cut its solar subsidies. The generous subsidies doubled projected solar installations, resulting in a $260 hike in the average consumer's annual power bill. The German experience is not unusual. France, Italy, Spain and the United Kingdom are also reducing their subsidies to control unsustainable costs.
As a national leader in renewable energy, New York has already made a significant financial commitment to support its RPS goal of 30 percent of the state's electricity coming from renewable sources by 2015. New York needs to meets its targets with a diverse portfolio of energy generation technologies, including wind, solar, biomass and hydropower.
Unfortunately, subsidizing solar installation does not lead to long term job creation at levels that other economic development programs are asked to obtain. As example, the state's Excelsior Jobs Program expects at least $10 private sector dollars for every $1 of state assistance. This solar proposal does not require any job commitment or investment pledge from the solar installation companies.
The bill draft bill would impose a fee upon electric power imported from other states to mirror the current cost of carbon dioxide emission allowance required to be purchased by generators located within RGGI states. Additionally, the bill draft would support an increase in the cost of the RGGI program, and would allocate the additional proceeds to programs that will not reduce the wholesale cost of energy in the State.
Large employers in the RGGI states already face severe competitive pressures due to energy prices that afford other regions, and nations, a significant competitive advantage. Accordingly, any measure, such as RGGI, that will further exacerbate the competitive imbalance by increasing energy rates must be scrutinized carefully.
It remains unclear what effect the imposition of a new fee on imported power will have on energy rates. What is very clear is the new fee will not reduce energy cost for New York residents.
Alteration to the RGGI cap will increase the cost of the program. RGGI was intended to reduce CO2 emissions in the participating states, but practically has become a carbon tax. Reduction in CO2 in the RGGI states have outpaced RGGI because a decline in the economy, shale gas production, and the economics of energy generation from coal. Reducing the RGGI CO2 cap should not be indorsed in a hastily drafted bill but should be reviewed during the RGGI review process.
The legislation proposes to expend more resources on energy efficiency. Per capita energy consumption in New York is among the lowest in the Nation. The State and public utilities expend significant resources upon efficiency measures. In June 23, 2008, the Public Service Commission established the New York Energy Efficiency Portfolio Standard (EEPS) proceeding. As part of a statewide program to reduce New Yorkers' electricity usage 15% of forecast levels by the year 2015, with comparable results in natural gas conservation, the Commission established interim targets and funding through the year 2011.
The legislation would provide state aid to municipalities should a power plant close. Forty percent of the additional revenue from the emissions auctions would be earmarked for communities that are "substantially adversely impacted by the loss of property tax revenues" or a payment in lieu of taxes agreement "due to the closing of a major electric generating facility." The Business Council is concerned that steps will not be taken to provide a long term path to the economic viability of diverse energy portfolio.
The majority of New Yorker businesses and residents are concerned about their energy rates. Some have claimed that New York customers care more about subsidizing solar installation than their own out of pocket costs. If this was true more customers would choose to pay a premium and support green power. Only approximately, 60,000 customers of the 8 million instate ratepayers current elect to purchase more expensive "green power from their utility It is clear when customers are provided an opportunity they will continue to choose lower electric rates.
Based on the concerns discussed above, The Business Council believes this legislation will result in increased energy assessments and increased energy costs, with proceeds from increased assessments going to purposes of questionable value and/or that are already receiving considerable state support.
For these reasons, we oppose the policy initiatives contained in this draft legislation.