Electricity is a crucial commodity that we all take for granted. It powers our lives, businesses, medical services and entertainment. Government action that will result in an increase in the cost of electricity should be extensively scrutinized. Marginal increases in taxes, fees and assessment on electricity manifest themselves in a cumulative way as increases in the cost of food, heating, taxes, and production.
Already this year this legislative body has advanced an increased upon electricity by $236M this year. The Business Council opposes this additional $146M annual energy tax (over ten years $1.46B). There is no agreement that this solar assessment will replace current or future solar or renewable assessments developed by the Public Service Commission. This assessment is not codifying current practice it is a new tax.
Currently, various New York State entities collect and spend $1.4 billion per year on renewables and energy efficiency. New York needs to be spending the current fees and assessments in a wiser manner not adding new assessments. Contrary to other's claims, this legislation will not replace or supplant or ban current assessments.
New York State thus far has failed to build an integrated state approach to clean energy investment and innovation that hold taxpayers harmless while encouraging more vibrant private market activity in clean energy. This legislation will do nothing to coordinate the state approach to renewables and energy efficiency.
A 2010 report by the Public Policy Institute (PPI), the research affiliate of The Business Council of New York State, entitled "Short-Circuiting New York's Recovery-How Energy Taxes Contribute to High Electric Rates in New York," demonstrates that State and local gross receipt taxes, sales taxes, assessments, income taxes, taxes on capital and, above all, property taxes help make New York's electricity prices the third highest in the US.
These staggering energy taxes create a host of negative consequences. Energy is one of the major cost factors that make New York State one of the least favorable locations in which to start or locate a business. As a result, New York loses essential jobs, opportunities for entrepreneurship and the ability to attract major new investments.
Some have argued that New York needs to keep pace with the surrounding states. They say look to New Jersey or even Europe, they have so much solar installed. New Jersey has paid a significant price to have the second most installed PV. The Center for Energy, Economic and Environmental Policy and the Rutgers Economic Advisory Service concluded that the State program will cost 3,637 jobs and $451M in State GDP. The majority of the new solar employment is projected to go away when the "goal" has been reached.
Germany, which once prided itself on being the "photovoltaic world champion," has cut its solar subsidies. Germans using generous subsidies doubled projected solar installations, resulting in a $260 hike in the average consumer's annual power bill. Additionally, at night and on some cloudy days, Germany must import considerable amounts of electricity from nuclear power plants in France and the Czech Republic.
The German experience is not unusual — France, Italy, Spain and the United Kingdom are also reducing their subsidies to control unsustainable costs.
Renewable Portfolio Standard (RPS)
As a national leader in renewable energy, New York has already made a significant commitment to the development of renewable energy. Current New York policies require that 30 percent of the state's electricity come from renewable sources by 2015.
It may be easy for some to forget but New York State already has an aggressive goal of obtaining 30 percent of its electricity from renewable sources by 2015. New York ratepayers have committed to pay $2.998 billion to obtain this goal through the establishment of the Renewable Portfolio Standard (RPS). All forms of renewable generation — wind, solar, hydroelectric, biomass, tidal/ocean and fuel cell generation — currently compete fairly for the RPS funds.
The State should instead look to adopt and promote solar in a manner that is both flexible and responsive. The current suite of PV incentive policies has created a stable and growing PV market in New York. By developing a comprehensive and steady PV incentive funding strategy, New York has avoided the boom and bust market cycles that have created uncertainty on other places.
The RPS is supported by collection from utility customers. 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.
The Business Council supports the manufacturing tax credit and other similar efforts to expand solar energy production in the state while keeping costs under control to protect the ratepayer. The Business Council support efforts designed to quadruple annual development of solar by 2013. This provision is vitally important to ensure that New York manufactures have an opportunity to capitalize locally on the solar manufacturing.
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 currently 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.