Most
households are paying a tax that nobody talks about. Though far less
exciting than today’s presidential campaign, this issue may affect
most families.
If
you get this tax bill, you pay it once a month. The best part about
it, at least for the legislators who have created it, is that the
“taxpayer” is never told about it. It is a secret tax, but the
penalty for failure to pay it is so powerful that people comply. If
not, their electricity may be cut off.
Every
electric bill includes a number of charges that cover neither the
power nor the wires. These charges have been levied by legislatures
to pay for their policies, but without the usual need to raise taxes.
Some
of these charges have been around for a long time, like the cost of
paying for utility regulation. But new charges are being added from
time to time when legislators decide to adopt a new public policy.
Regulators themselves may be required by law to add on such charges.
Controversial
as he may be, Gov. Paul LePage has been consistent in arguing for
efforts to reduce Maine’s electric rates, among the highest in the
country. In his abbreviated, written “State of the State”
message to the Legislature and not the usual formal speech, he
devoted a major part of it to this issue.
LePage
focused on power supply that causes high electric rates. He wrote
that companies considering investment in Maine back off when they
learn about the cost of electricity. He might also have mentioned
the adders to electric rates, many of which, unlike power supply, are
under state control.
The
broadest effect of this hidden tax is on customers struggling to make
ends meet. The Legislature seems to pay little attention to the rate
impacts on ordinary customers of its energy policies. Perhaps each
time a charge is added, it is considered too small to have much of an
effect. But the small charges, federal and state, add up.
The
U.S. Supreme Court decided in January that the Federal Energy
Regulatory Commission can regulate “demand response” – the
temporary shutdown of generators to reduce the need for higher cost
power. The idle generators will usually be paid the same as the rate
paid for the most expensive power used. This applies in most states.
In
the end, that may save customers money by avoiding the use of higher
cost power. But underlying the policy is the fact that all
generators are paid, not the price they offer to the market, but the
price charged by the most expensive power used. Using the actual
cost of power supply, as was formerly the rule in New England, is
gone.
To
encourage renewable power, the Maine Public Utilities Commission
requires that utilities buy from higher cost renewable power
generators. Solar power, subsidized at above-market prices, could be
added soon. The higher cost is passed on to customers.
Then,
there’s the famous typographical error. In 2013, the Legislature
passed a major energy policy bill that included a $3 per month boost
to electric bills to pay for increased energy efficiency. But,
thanks to a typo, the bill would produce $38 million less than
expected.
The
PUC was asked to correct the error in line with legislative intent.
Not surprisingly, it said it must do what the law says and not what
might have been meant. So, back it went to the Legislature who got
into a fight with LePage over fixing the error.
Almost
overlooked in meeting the need to do more to promote efficiency and
potentially reduce costs was the fact that the $38 million would be
collected from electricity customers. Fixing the error involved a
rate increase, but almost no attention was paid to that aspect of the
matter.
If
no other reform were possible, the add-on charges should be shown on
the electric bill as they are on most phone bills. In that way, the
Legislature would have to take some responsibility for policies that
raise costs.
This
is not exclusively a Maine problem, though the state provides a good
example. Thanks to FERC requirements and other states’ rules, it
happens elsewhere.
States
should fund desirable energy policies. But they should not hide
their cost. Beyond requiring bills to show the added costs,
legislatures should fund their energy programs, like other policies
they adopt, through taxation not utility rates.
Instead
of hidden charges, even for good reason, tax-financed measures could
force legislators to make better, more public decisions.
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