***This is a MUST READ blog post from Amy Oliver over on our Energy Policy blog. Article re-posted entirely below:
A bill to repeal Colorado’s “phantom carbon tax” was heard today in the Republican-controlled House Agriculture, Livestock, and Natural Resources Committee. It’s the second time in as many years that State Representative Spencer Swalm (R-Centennial) has sponsored the pro-ratepayer legislation. Both times it was heard in the House Ag Committee. Last year, we documented how some Republicans in the committee voted to keep the carbon tax in tact, which is de facto support for the theory of man-made global warming.
The usual suspects, including Xcel Energy, the Colorado Department of Public Health and Environment (CDPHE), and the Public Utilities Commission (PUC), lined up against relief for ratepayers this year.
Fortunately for ratepayers, the Independence Institute stood by their side and against corporate welfare. As I stated in my testimony in support of HB 1172:
It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes.
The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders. (Full testimony is below)
Conventional political wisdom suggests that most Democrats would support carbon taxes while most Republicans would oppose them, especially in an election year, and that a party-line vote would have moved this bill out of committee. But after close to two hours of testimony, no vote was taken. Vice-Chairman Randy Baumgardner laid over HB 1172 until a later date. Colorado ratepayers will have to wait a little longer to see which lawmakers have the courage to provide relief from needlessly high electric rates.
Two members of the committee were absent from today’s hearing, Republican Chair Jerry Sonnenberg and Democrat Wes McKinley, which didn’t shift the balance of power. The bill still should have moved out of committee on a 6-5 vote, unless someone doesn’t want this bill to go to the floor of the House for an open debate.
So the real question is how will the House Ag Committee vote on HB 1172? Will some Republicans turn their backs on ratepayers and throw their support behind carbon taxes, the theory of man-made global warming, and corporate subsidies as they did last year? And if some do, which ones?
Republicans members of the House Agriculture, Livestock, and Natural Resources Committee:
- Jerry Sonnenberg, Chair
- Randy Baumgardner, Vice-Chair
- J. Paul Brown
- Don Coram
- Marsha Looper
- Ray Scott
- Glenn Vaad
Democrat members include:
- Randy Fischer
- Matt Jones
- Wes McKinley
- Su Ryden
- Edward Vigil
- Roger Wilson
Any guesses on how the vote will go?
Testimony on behalf of
HB 1172 No Imputed Carbon Tax
February 8, 2012
House Agriculture, Livestock and Natural Resource Committee
Mr. Chairman and Members of the Committee:
My name is Amy Oliver Cooke. I write on and direct the energy policy center for the Independence Institute, 727 E. 16th Ave, Denver, CO 80203
Thank you for allowing me the opportunity to testify today on behalf of HB 1172.
At the Independence Institute, we are agnostic on energy resources. It is our strong belief that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups.
HB 1172 is simple in nature, unless a carbon tax is passed at the federal level, ratepayers should not be disadvantaged financially by paying the phantom carbon tax to an Investor Owned Utility such as Xcel Energy.
We haven’t been able to find any other state that has a carbon tax in statute. Colorado’s is based in HB08-1164, which says the Public Utilities Commission:
may give consideration to the likelihood of new environmental regulation and the risk of higher future costs associated with the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.
HB 1172 would change the wording ever so slightly to the PUC
may give consideration to the existence of new environmental regulation and the costs imposed by current federal law or regulation on the emission of greenhouse gases such as carbon dioxide when it considers utility proposals to acquire resources.
When the 2008 bill passed, Colorado Conservation Voters explained it HB 1164 this way:
By giving the PUC the ability to use carbon as a value in resource planning decisions, HB 1164 represented the first time that the Colorado General Assembly took a substantive step forwards in giving regulators the tools they need to explicitly address global warming.
Three current members of this committee (Reps. Sonnenberg, Vaad, and Looper) voted against that bill in 2008. I commend them for doing so. It is a selective, regressive tax – selective on resource (coal) and selective on customers (IOUs such as Xcel Energy), although pass through costs affect almost everyone in the state.
To tax or not to tax?
While it’s prudent for the PUC to consider the risks of Congress passing a cap-and-trade scheme that would put a price on carbon, it is, in equal measure, rash to include the cost of a federal carbon tax in resource planning that covers a time frame in which these costs don’t exist.
To its credit, the PUC staff registered second thoughts about the application of a carbon tax. Alluding to the $20 ton carbon tax during hearings for Xcel’s 2010 renewable energy compliance plan, PUC staff witness William Dalton expressed concern about “including costs that do not exist.”
Even Xcel Energy doesn’t believe that a carbon tax will be passed at the federal level any time soon.
As early as June 2010, Xcel petitioned the PUC for permission to renege on a commitment to build a 250 megawatt solar thermal power plant due to “changed circumstances,” among which the utility cited “the expectation that carbon legislation won’t be enacted for several years,” which would, “erode the economics of solar thermal” [Direct Testimony James F Hill, Xcel Witness, 4 June 2010, Docket 10A-377E]
In the 2012 Renewable Energy Compliance Plan, In Section 7 — Retail Rate Impact and Budget, Xcel acknowledges that I was correct in February 2011 when I testified in front of this committee on HB 1240, there would be no national carbon tax in the near future:
The carbon assumptions approved by the Commission in Docket No. 07A-447E assumed carbon regulation would be enacted in 2010; such regulation was not enacted and the prospects for near term carbon regulation appear to be slim.
Because Xcel assumes there will be no carbon tax in the near future, it presents a cost model that excludes the carbon tax and another model that does include the tax but not until 2014:
Due to the uncertainties related to the timing associated with possible carbon emission regulation, the Company did not include any carbon cost imputations in the model runs and other calculations set forth on Table 7-3. However, as discussed later, Public Service also presents with this Compliance Plan, as Table 7-4, a sensitivity case that assumes the same carbon imputation costs ($20 per ton, escalating at 7% annually) as approved in the 2007 Colorado Resource Plan but on a delayed implementation schedule of 2014.
The cost differences are substantial.
Colorado Legislative Council Staff wrote in the fiscal note for HB 1164, “the bill will not affect state or local revenue or expenditures, and is assessed as having no fiscal impact.” But including a non-existent $20 per ton carbon tax that adds millions of dollars to the cost of otherwise inexpensive fuels such as coal, has an impact on ratepayers. Currently, according to DOE statistics Colorado has the highest electric costs of any neighboring state, second highest in the Rocky Mountain West.
It’s true that the carbon tax is not a line item on a ratepayer’s bill, but is in included in the modeling of costs for resource acquisition. Costs dictate rates. The higher the costs, the higher the rates. The higher the rates, the more Xcel Energy makes. The “phantom carbon tax,” as we call it, increases costs and therefore rates. Xcel customers pay Xcel for a tax that doesn’t exist. It is a redistribution of wealth from ratepayers to shareholders.
If the state legislature wants to tax Coloradans to pay for global warming, they should make their case to voters — all voters – and not just penalize Xcel Energy ratepayers, who have no other place to go, no recourse.
As I stated at the beginning it is the strong belief of the Independence Institute that the choice of energy resources should come from the demands of the free market, and not from the preferences of policymakers, lobbyists, or special interest groups and we believe that HB 1172 is consistent with that principle.