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.

LNG Averts 'Panic Premium' in Winter Prices

New Yorkers pay double the price of natural gas than New England consumers. Reuters reports LNG imports played crucial role in lower prices

By Richard Thomas

A recent Reuters articleoutlines the critical role liquefied natural gas (LNG) imports played in helping New England avert “panic premium” prices similar to what consumers experienced during last year’s polar vortex. The fall in oil prices also provided much needed relief, allowing dual fuel units to switch to oil to keep the grid reliable.

Reuters reported that ISO New England said, “79 oil and dual-fuel units able to burn both gas and oil bought about 4.5 million barrels of oil. In addition, six gas units bought fuel from LNG terminals that bring gas in from overseas as part of the current winter reliability program.”

Thomson Reuters Analytics found that LNG Imports into the Algonquin-hub quadrupled, bringing the price of natural gas down to an average of $17.73 per million British thermal units (MMBtu) from $22.50 MMBtu last February, a 21 percent decrease. The savings are welcome news to ratepayers who are buried in mountains of snow during one of the coldest winters on record.

Ignoring the benefits of LNG would be a major economic and environmental mistake for New York. The natural gas price difference between New York and New England this winter offers a striking contrast. For example, the Boston region has access to LNG, and Long Island/New York City does not. According to the U.S. Energy Information Administration (EIA), the price of natural gas on Transco-6 hub serving New York spiked to $38.15 MMBtu on Wednesday, February 18, 2015, which is double New England’s average of $17.73 MMBtu. (See above EIA images on natural gas prices across regions.) This translates into New Yorkers paying more for a product that is essentially cheaper in a similar region.

Opponents to projects like Port Ambrose, a deep-water natural gas import terminal 18.5 miles off the coast of Long Beach, offer no credible alternative to powering or heating our homes during harsh winter weather. The silent majority of ratepayers cannot afford to continue paying double the price for natural gas because a vocal minority is holding progress hostage. The fact is Port Ambrose will reduce the price of natural gas in downstate New York by tapping into existing pipelines on the seafloor, creating over $300 million in annual savings for consumers, hundreds of jobs for the local economy, and a resilient energy infrastructure.

In terms of the environment, though natural gas is a fossil fuel, it is the cleanest between oil and coal. Given pipeline constraints headed into the northeast, the New York Independent System Operator recently ordered power plants on Long Island and New York City to prepare to switch to oil when electric prices eclipsed $1,000 per megawatt hour on February 19, 2015.

These issues should not be overlooked or underestimated as hundreds of thousands of New Yorkers struggle with respiratory challenges daily. And our modern/mobile lives depend upon the reliable flow of electricity. The bottom line is New York needs to address its energy challenges to benefit all consumers. Moving forward with Port Ambrose is among the right choices for New York’s economy and environment.

To read the Reuters article click here.

To read the US EIA update on northeast demand for and prices of natural gas, click here.

Rich Thomas

Richard Thomas is Executive Director with the New York Affordable Reliable Electricity Alliance.