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Malloy, Lawmakers Pressured To Allow Tax To Expire

by Christine Stuart | Jan 31, 2013 3:00pm
(6) Comments | Commenting has expired
Posted to: Energy, Town News, Waterford, State Budget, Taxes

Christine Stuart photo

Sen. Andrea Stillman and lawmakers

Lawmakers from southeastern Connecticut held a press conference Thursday to call upon their colleagues and Gov. Dannel P. Malloy to make sure they keep their promise to sunset the tax on wholesale electricity generators at the end of the fiscal year.

Implemented in the 2011 budget cycle, the tax is generating about $70 million a year, and the company paying the bulk of that — about $42 million — is Dominion, which owns the Millstone Nuclear Power Plant in Waterford.

“Should policymakers decide to continue this tax — that’s certainly what we hope will not happen — its continued costs will be borne by ratepayers to the tune of $100 million in wholesale electricity prices,” Sen. Andrea Stillman, D-Waterford, said.

She said she doesn’t know if the extension of the electric generation tax is in the governor’s budget, which will be released next Wednesday.

“I would love to see the governor and the legislature live up to its promise and allow the tax to sunset,” Stillman said.

Stillman said she would consider it “a new tax,” if Malloy decided to extend it beyond July 1, 2013.

Rep. Betsy Ritter, D-Waterford, said she feels pretty confident that if the tax continues it will be passed along to ratepayers.

Already it’s had an impact on taxpayers in Waterford, who will be asked to make up for the loss in tax revenue from Dominion. As the town’s top taxpayer, the tax takes a toll on value of the nuclear plant and the difference needs to be made up by all the other residential and commercial taxpayers, Ritter explained.

Neither Stillman or Ritter, could say definitively if the tax will be passed along to electric ratepayers. They said that’s a decision for each of the electric generators to make.

“Anytime you introduce a tax on a product, that tax is ultimately borne by the consumers,” Ken Holt, spokesman for the Dominion Millstone Power Station, said. “Going forward if the tax is extended that tax is going to passed on to consumers.”

Since the tax was supposed to be temporary, Dominion decided not to pass it along to consumers, Holt said.

“At this point a promise hasn’t been broken yet,” Kevin Hennessy, director of government affairs for Dominion, said. “And we expect that it won’t be.”

According to the Edison Electric Institute, Connecticut is still paying some of the highest electricity rates in the county. An average monthly residential bill in Connecticut is about $200.59, while residents in the rest of the New England states pay an average of about $158.12 per month.

But if the tax continues it’s likely those rates could go up. That’s in spite of a recent 12 percent reduction in rates.

Last year, the two lawmakers who chaired the Energy and Technology Committee didn’t believe the Malloy administration had been completely fair in how they levied the tax on generators.

Sen. John Fonfara, D-Hartford, and former Rep. Vickie Nardello, who lost her re-election bid, thought Malloy didn’t put enough consideration into how electricity is sold on a regional basis or the difference between gas generators and nuclear generators.

Back in October, Fonfara said he knew Malloy didn’t intend to increase rates, but that he thought that a rate increase could be the consequence of the Connecticut-only tax.

Sen. Bob Duff, one of the new energy committee co-chairs, said that while he may have an opinion on the generation tax, it won’t be something his committee decides. He said it will be something for the legislature’s Finance Committee to tackle.

Dan Dolan, president of the New England Power Generators Association, has said the only reason Connecticut hasn’t seen an increase in electric rates yet is because of the historically low price of natural gas. Aside from nuclear, most of the state’s wholesale electricity generators are fueled by natural gas.

“Even though rates came down, they came down despite that tax,” Dolan has said.

Malloy has declined to address specific taxes or spending proposals that will or won’t be included in the budget to be unveiled Feb. 6.

Last Friday, Malloy was asked if he thought continuing any taxes beyond their sunset date counts as a tax increase.

“I would not consider continuing existing taxes as raising taxes,” Malloy said.

Asked if that’s what he was considering as he prepares his budget, he said he was “not eliminating that possibility.”

Malloy spokesman Andrew Doba reiterated that message.

“That said, let’s be clear — extending a tax that is set to expire is not a tax increase,” Doba said. “The fact is that generation rates have fallen 12 percent in the last two years. That means Connecticut residents are paying less for energy than they were two years ago. That means Connecticut businesses are paying less, so they can reinvest that money and create jobs.”

Oz Griebel, CEO of the MetroHartford Alliance, and Tony Sheridan, president of the Eastern Connecticut Chamber of Commerce, joined lawmakers in calling for the tax to expire at the press conference. They said the business community needs a predictable tax structure.

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(6) Comments

posted by: DrHunterSThompson | January 31, 2013  4:05pm

DrHunterSThompson

Solution: eliminate the $70M tax to the multi-billion $$ company. (More than $31 billion, to be accurate)  Then reduce the share of state aid to all those towns, especially Waterford, by a total of $70M.

Done. Next issue?

HST

posted by: dea | January 31, 2013  6:56pm

HST
How about we build a power plant in your town, then you can reap the benefits.

posted by: dano860 | January 31, 2013  9:56pm

I would take a Millstone in my town, done properly without the State robbing you, no one in town should have to pay any property tax.
What’s the difference if it’s 10 miles away or 100?  When that sucker goes the whole State is screwed.
The tax was set at .0025 cents multiplied by the net kilowatt hours.  That adds up to millions yes…but one must remember…Companies don’t pay taxes, they pass them on to the consumer.
In this case the average home owner is paying about $12.00 per month.  That’s an hours wage (after taxes) for me.
I don’t know about you but hate working for the government and getting nothing directly in return.

posted by: Noteworthy | January 31, 2013  10:17pm

Malloy should quit playing word games. Look what “shared pain” and “we cut spending” has gotten us - no shared pain, and no spending cuts. Likewise, a tax that is set to expire, is in fact, a new tax. That tax will be passed on to ratepayers which is the general public. It most certainly is a new tax to us.

Note to Doba: Businesses and individuals have saved a pittance on our utility bills. It most certainly does not overcome the $3 billion in new taxes Malloy already levied on us. There is no money to create new jobs and invest in our businesses as witness the labor department’s unemployment numbers.

posted by: richsobi | February 1, 2013  9:21am

The tax was structured wrong in the first place.  Originally is was going to hit Millstone and coal generators only.  And believe it or not, it was going to be structured in a way that the generators could not pass it on to customers.  The reason for this is that Millstone was reaping excess profits due to the manner in which they were paid for their generation due to ISO-NE/FERC rules.  A fair amount of these excess profits have disappeared with the drop in natural gas prices.  Politicians passed the tax but it was on all generation which in the long run would have driven up the market clearing price and likely been passed on to customers.

While CT’s electric prices are high there are many reasons for that including all the adders on bills.

posted by: ALD | February 1, 2013  1:11pm

“That said, let’s be clear — extending a tax that is set to expire is not a tax increase,” Doba said.

Ok I’ll agree with Doba.  Extending a tax today, on a tax that was set to expire on a certain future date, is NOT a tax increase. Once that certain date comes and goes, it IS a tax increase…..... 

We can all play games with words: like shared sacrifice, and balanced budgets. Or like: It’s not a spending problem, it’s a revenue problem caused by a poor economy.