Monday, March 9, 2015

New Yorkers Pay Too Much In Utility Taxes

New York AREA released an issue brief, "The Hidden Taxes in New Yorks' Electric Bills," at an Albany media event with the Business Council of New York State (BCNYS) and the Independent Power Producers of New York. The issue brief details the amount of electricity taxes collected annually by the Empire State and how they harm consumers and small businesses the most.

A big reason is the spate of direct and hidden electricity taxes which account for 25 percent or so of a typical utility bill. Last week, the U.S. Energy Information Administration reported that New York residents pay the third highest average retail price for electricity. At 19.26 cents per kilowatt hour, New York residents pay 58 percent more than the national average.

Few taxes are as regressive as those on electricity usage. Electricity is vital to everyone’s quality of life and living without it is life threatening. Poor New Yorkers on a limited income are most disproportionately impacted by these taxes.

Using data from various government agencies, the New York Affordable Reliable Electricity Alliance very conservatively estimates that New Yorkers pay at least $1.6 billion annually in electricity taxes, or approximately $75 every year for every man, woman, and child in our state. 

At the state level, utilities are taxed on both net income and 2 percent of gross receipts from residential distribution, providing the state with two bites at the tax apple. Reducing energy taxes should start with the repeal of the gross receipts tax (GRT), as this will benefit all New Yorkers. This is the single most direct step state government can take to reduce the cost of energy for New York consumers, as every residential utility customer pays this 2 percent tax. 

The GRT has proven lucrative to the State of New York, and last year was no exception, with the state reporting $162 million [ iv ] in revenue from this tax.  The 18-a surcharge is a prime example of how an electricity tax can quickly get out of control. Its original purpose was to fund the operations of the New York Public Service Commission at a 0.33 percent cost to ratepayers. At the height of the financial crisis, it quintupled to 2 percent on all electricity bills to plug Albany’s budget gaps.

Conclusion and Recommendations

With New Yorkers’ electricity rates and taxes high, particularly because of the frigid and brutal winter, several steps should be taken immediately.

• The Gross Receipts Tax should be cut by at least 50 percent this year and repealed next year.

• The 18-a assessment should be permanently capped at a rate not to exceed 0.33 percent.

• The Public Service Commission should only support new generation and transmission projects that are market competitive and fully disclose the taxpayer subsidies that have financed and are financing various energy projects.

About the Authors: 

Jerry Kremer
Rich Thomas

Arthur “Jerry” Kremer, former chairman of the New York Assembly Ways and Means Committee, is chairman and Richard Thomas is Executive Director of the New York Affordable Reliable Electricity Alliance (New York AREA). Founded in November 2003, New York AREA is a diverse group of more than 150 business, labor, and community groups whose mission and purpose is to ensure an ample and reliable electricity supply and economic prosperity for years to come.

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