Higher Energy Prices in New Tax Proposals

03.04.2011
Issues & Policies

For maximum recovery power, Connecticut’s economy needs lower energy costs and greater system reliability. Two proposals in the Energy and Technology Committee, however, will throttle way back on the state’s ability to achieve those goals.

Proposed HB 5699 would impose a first-in-the-nation “windfall profits tax” on electric generators in Connecticut who earn more than 20% on equity.   

Proposed HB 6026 would punish nuclear and coal generating facilities by imposing a two-cent per-kilowatt-hour tax on their output.

Neither bill would improve Connecticut’s energy prices, business climate or consumer confidence. Nor does either bill send the right signals to the state’s energy industry or business community. 

Ironically titled An Act Providing Relief to Electricity Customers, HB 5699, along with HB 6026, would backfire by actually increasing costs on Connecticut consumers.

Electricity-generating companies, like all businesses, build all of their costs–including taxes–into their product prices.  That means a windfall profits tax or electric generator tax will increase, not reduce, the cost of electricity for customers. 

Policymakers often decry the high cost of energy in Connecticut, but many consumers in the state are already paying artificially high rates for electricity courtesy of the legislature.

Last year, lawmakers seized on the Competitive Transition Assessment (CTA) as an additional supply of funds for the state budget crisis.  The charge that was supposed to expire last Dec. 31 has been extended on CL&P consumers’ bills now, and will be on UI’s later.  Additionally, the state’s ratepayer-funded Energy Efficiency Fund was also tapped to balance last year’s budget deficit. 

Gov. Dannel Malloy is proposing that any surplus the state budget achieves this year be used to reduce these additional charge. At the same time, however, his budget proposes to implement a two-tenths on one cent per kilowatt hour tax on electricity generation.

It’s hard to see where the relief for consumers will come from in these proposals that would increase costs for Connecticut ratepayers. 

What’s more, enacting a windfall profits tax or an electric generation tax will discourage much-needed investment in Connecticut. Under such “taxing” conditions, why would energy companies want to do business here?

While the state’s electricity-generation needs are currently being met, the question is what will happen when power plants are “retired,” energy demand increases or generators decide to leave Connecticut in order to escape these new taxes.  

In these trying economic times, when elected officials are emphasizing job creation and economic recovery, these proposals will have the direct opposite effect. 

Energy consumers of all kinds in the state need lawmakers to focus on promoting policies that will reduce their energy costs and improve the reliability of the electricity system.

And that’s how our economy will grow, too. CBIA encourages lawmakers to reject Proposed HB 5699 and Proposed HB 6026.

For more information, contact CBIA’s Kevin Hennessy at 860.244.1979 or kevin.hennessy@cbia.com.

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