***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. 16^th 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.

History

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.

Conclusion

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.

I remarked the other day that Amy Oliver and Michael Sandoval of our Energy Policy Center have been doing some fantastic work lately. Not sure why energy policy doesn’t get as much play as other policy areas but I certainly think energy is sexy. Their latest article scrutinizes the Obama administration’s love affair with China. The relationship is not simply a trade friendly “I give you something, you give me something” type of deal. It has more to do with China’s rare earth minerals and the ability of said minerals to produce “renewable” energy – which Amy and Michael once again prove is anything but green (and often times deadly).

We just released a new Issue Paper that tackles the perennial question: how much are we taxed here in Colorado? Many on the Left presume it’s not enough. When our researcher Anthony Gonzalez really dug into it and looked at the whole picture (state AND local taxation), Colorado it turns out sits right in the middle of the nation at 26th. Take a look at our first Issue Paper of 2012, How Colorado’s Tax Burdens Rank Nationally.

In his latest blog post, our Constitutional scholar Rob Natelson shares his thoughts on the recently signed into law National Defense Authorization Act (NDAA). Many believe the NDAA codifies the Executive Branch’s ability to indefinitely detain American citizens without trial. What does Rob think? Check it out here.

Keep your eyes on this developing story: Democratic lawmakers are putting RTD’s toes to the fire on building out the Northwest corridor. RTD made a promise many years ago and the folks up in the Longmont area have been paying for a rail system that has yet to be delivered. How long can RTD hold out? How long will the Northwest corridor take it? Time will tell…

Finally, there is a really cool economics fundamentals class being held at our building this Saturday the 11th. I encourage all of you to take a look at the details here. For those still not on Facebook, here is some information:

Are you a liberty activist who loves free markets, capitalism and limited government – but have a difficult time describing its myriad benefits and merits when talking with others?

Then this is the educational training course for you!

Liberty on the Rocks is looking for leaders in the liberty movement (current or future) who are interested in obtaining insights into the basic fundamental principles of free market economics by attending a half-day educational course in Denver. **Tickets to attend are $10**

On Saturday, February 11th from 1:30-6:30pm, Liberty on the Rocks will present an exclusive hands-on, discussion and activity-driven economics session. During this half-day course, attendees will learn and/or better understand:

-The role economics plays in the advancement of liberty

-How to make the case for freedom from an economic and philosophical perspective

-How prices work in a market place

-Different ways of looking at public policy from an economic perspective

-The essential arguments for why socialism can’t work

RSVP today by purchasing tickets at: http://denver.libertyontherocks.org/economic-freedom-session/

Email Amanda Muell for even more info.

When we embarked on our Citizens’ Budget project two years ago, we wanted it to be a big deal. It had to be, it was an enormous undertaking. We wanted to leave no stone unturned in our quest for a fiscally sound Colorado state budget. The project ended up requiring months of time from our most dedicated researchers and writers. In the end, we had a 170 page document that touched on all areas of our budget and offered sound solutions to our most urgent needs. Additionally, we made a 6-page executive summary of our findings for those who don’t want the big kahuna.

When the Citizens’ Budget first dropped, we found it was extremely popular with the Tea Party and limited government crowd. We ordered hundreds of physical copies and could hardly keep those puppies in stock! But when it came to our state legislature, there was hardly a peep. 2011 came and went and we wondered why no legislators jumped on any of our suggestions. Yeah, some of them are politically unpopular, but many of them are not. What gives?

But now in 2012 some brave state legislators have taken up the cause for fiscal responsibility! For a great overview of 3 bills working their way through the legislature thanks to our project, look no further than Wayne Laugesen’s editorial in today’s Colorado Springs Gazette. Wayne praises our Citizens’ Budget and goes on to explain how our suggestions to shore up the Public Employees Retirement Association (PERA) made their way into 3 bills thus far.

The first is a bill carried by Rep. Chris Holbert of Parker. The bill “would cap the health benefit for early retirees at $230 a month and eliminate health care payments for retirees who have reached the age of eligibility for Medicare.” Secondly, we have Senate Bill 119 carried by Sen. Tim Neville of Littleton. His bill “would force the board of directors of PERA to adjust benefits in order to “maintain the long-term actuarial soundness of each trust fund.” Our Fiscal Policy Center director and lead author of the Citizens’ Budget Penn Pfiffner gives a great explanation of exactly what that means,

“Today, the PERA board tells state government to get the money it needs. This bill says they have to adjust benefits accordingly. Once taxpayers have made their contribution, it will be up to PERA to make it work. We would no longer be responsible for how PERA handles the money.

Finally we have a Senate Bill 82 carried by Sen. Ted Harvey of Highlands Ranch. His bill “would increase the age at which new public employees would be eligible for retirement benefits.” For example, today some new hires can plan on retiring at 58 years old thanks to PERA. Sen. Harvey’s bill would increase the age to 68 – the same as Social Security.

It’s exciting to see that the tremendous work our research team did two years ago is bearing fruit in 2012. We encourage all legislators to read their copy of our Citizens’ Budget (yes, you have one. If you can’t find yours, contact us immediately!) and take on the challenge to strike at the heart of our continued budget deficits. What’s the heart of our budget issues? As Penn Pfiffner says, “it’s a structural problem.” In other words, it’s time we discard all the accounting gimmicks we have to use each year to balance the budget. If the Citizens’ Budget were in charge, we wouldn’t need any tricks to fix a deficit because there wouldn’t be a deficit year after year.

Read more about the Citizens’ Budget project here.

“Hey Jon, what’s going on with energy policy these days?

Oh hey there! I’m glad you asked. Our Energy Policy Center director Amy Oliver has been hitting the energy and environment issues hard lately. You should take a look at our Energy Policy Center’s webpage to stay on top of Amy and Michael Sandoval’s work. For example, when President Obama came to town to talk about his “comprehensive” view of energy, Amy and Michael put together a nice article translating his rhetoric into real life language – that real people speak! Additionally, Amy sat down with my main minion Justin Longo to discuss Obama’s energy policies and figure out how his “green” energy favoritism gets twisted into an “all of the above” approach he claims to have. You can hear Amy translate and discuss Obama’s energy policies here on iVoices.org.

Let’s bring energy policy even closer to home shall we? Amy and Michael also tackled the upcoming energy legislation before our Colorado representatives in this year’s legislative session. What’s some of the good? What’s some of the bad? And you know there’s going to be some downright ugly when it comes to energy policy in Colorado… so what’s that all about this year? Amy gives a run down of some of the more important legislation in this iVoices.org podcast with Justin. You might be surprised at how great some of the good stuff is. (Hint: Rep. Spencer Swalm is on an energy tear this year!) Likewise, the bad will bad and the ugly… expensive.

Today the Denver Post editorialized favorably on a legislative proposal to modestly rein in run-away tax incentives (read corporate welfare) in Colorado’s “enterprise zones.”

A better policy change might just be to get rid of enterprise zones altogether. Much to his credit, my former state representative Joel Judd (A Democrat from House District 4 in northwest Denver) tried to do just that a couple years ago and met with bi-partisan opposition. Judd was quoted in a recent Post series on enterprise zones: “In effect, it’s the state general fund paying for a local developer’s curbs and gutters, and that’s just not the intent.”

The following op-ed, written in 2010 by former Independence Institute intern Jacob Zax, makes the case for a free-enterprise friendly tax and regulatory environment throughout the state, rather than in specially designated “zones.”

Every year, Colorado extends around sixty million dollars in targeted tax credits to businesses operating in specially designated regions called enterprise zones. Politicians, enabled by business interests, encourage enterprise zones as a way to promote economic growth by encouraging businesses to locate in underdeveloped areas and hire more workers. Although targeted enterprise zones might have been worth trying, they are not working well in Colorado. Statistical analysis demonstrates that enterprise zones have a minimal effect on employment, businesses, and the larger economy, and instead mostly benefit private property owners.

So why don’t lawmakers pursue equitable policies to help make the entire state of Colorado, rather than “specially designated regions,” an enterprise zone?

A 2005 report by the state of Minnesota that reviewed both the economic theory and empirical evidence on enterprise zones states, “Most of the more sophisticated studies (conducted on the subject) show no increases in employment or per capita income.”

How is it possible that considerable tax credits designed to encourage hiring are so ineffective?

The surprisingly trivial influence of enterprise zones on employment is the result of tax credits that reward the use of capital. Businesses in the special zones get tax credits for hiring workers; but they often use that money to buy more machinery in order to replace other workers. The net result is a negligible increase in employment. In the United Kingdom, the first country to implement enterprise zones and the model for current systems, a government-commissioned study published in 1987 determined that the 300 million pounds spent on enterprise zones from 1981-1986 produced an embarrassing net total of just 13,000 jobs. A 1989 Congressional Quarterly report concluded that each new job cost the United Kingdom 250,000 dollars.

Furthermore, the few employees that are hired because of enterprise zone credits don’t necessarily receive higher wages. Businesses profit from the subsidies regardless of the new worker’s salaries; because of the competitive nature of the labor market, prospective employees will always end up working for whatever is the normal wage rate that is paid outside the enterprise zone.

But if employees and the public aren’t profiting from enterprise zones who is? Surprisingly, it’s not businesses. It’s private land owners.

When an enterprise zone is established, property values within the area skyrocket. Previously unappealing lots suddenly attract serious interest because businesses are willing to pay a premium to relocate into the area and take advantage of the tax credits. Furthermore, because the benefits are solely predicated on location, all companies, including those already doing business in Colorado, are eligible and, therefore, interested in relocating into the zone.

The resulting demand for limited space creates the ultimate sellers’ market as businesses bid against one another for space. In the end, businesses are willing to pay so much to move into the region that the tax credits they eventually receive barely offset the initial cost of procuring the property.

In other words, businesses are not the ultimate beneficiaries of enterprise zones. By providing region-limited tax credits, the government is effectively giving a boost to some private landowners to the detriment of other landowners.

In a July speech at the Rocky Mountain soda company, Denver mayor and democratic gubernatorial candidate John Hickenlooper stated that he was “absolutely interested” in strengthening and expanding the use of enterprise zones in Colorado.

In his speech Mr. Hickenlooper also said on the issue of enterprise zones: “This is the 21st century, the key to all of these issues is how you measure them.”

But by almost every statistical and empirical measure, enterprise zones have failed. In the 2010 Colorado legislative session, State Representative Joel Judd (D, Denver) proposed a bill that would have eliminated enterprise zones in Colorado. The measure was largely condemned by politicians of both parties, including Don Marostica, the state’s economic development director, who opposed the measure by arguing that subsidies bring businesses to Colorado.

While that is probably true, it ignores the point that Coloradans do not profit from the relocation of those businesses. There are no long term benefits from the slight increase in jobs, and businesses fail to realize greater profits which might strengthen to the larger economy.

So should the government be funneling close to 60 million dollars a year in tax credits based solely on geography towards private land owners?

Considering the current budget deficit, the Colorado Legislature cannot afford to waste more money either maintaining or expanding enterprise zones, but rather should concentrate on fostering a business-friendly tax and regulatory environment throughout the state.

Our good friends over at Americans for Prosperity (AFP) have a great new project called Monkey Wrenching America. I encourage you to check it out, as it’s the first effort I’ve seen focused entirely on exposing the professional “green” energy agenda. Many groups are taking up the cause of free markets in energy. AFP however is going to tackle exposing the well-paid left-wing groups who use the media, the court of public opinion, actual courts, and the hammer of government to destroy our already beaten down domestic “dirty” energy industries. Here’s how AFP describes their project against monkeying with our energy industry:

Monkey-Wrenching America was created to document the danger professional green extremists pose to America’s economy, limited government ideals and freedom-oriented way of life. The economic, fiscal, judicial and human costs of green monkey-wrenching activities aren’t as well-documented as they should be, because the establishment media becomes an unabashed cheerleader where the environmental movement is concerned. This website, and the stories and reports it hosts, will help document these excesses and bring some balance and reason to the public debate about environmental issues.

Be sure to check out their Wall of Shame. It’s going to be a great way to document the special interest groups who oppose low energy costs.

Have no fear Hollywood! Your favorite Colorado legislator Tom Massey is back again with another movie-making corporate welfare bill. You may remember him from a gem of a bill last session that would have implemented a 10 cent movie ticket tax at your local theater in order to subsidize movie production in Colorado. Thankfully it failed, even after the tax was re-written to be a “voluntary” donation. The Reason Foundation’s Harris Kenny wrote an op-ed for us outlining the bad economics regarding movie production subsidies. Yes, subsidies for Hollywood might attract some movie-making in Colorado. However, that is not the full story. To see the big picture, you have to ask, “at what cost?” Harris shows that the cost of handouts are much larger than any benefit movie production might bring.

I learned this morning in the Chieftan that despite his lack of success in subsidizing Hollywood movie producers at rates higher than New Mexico and Utah for the past 7 years, he is determined to shake some more pennies from Colorado taxpayers before he gives his final farewell. Details of what Rep. Massey is cooking up are uncertain, but we do know that he’s been working with Governor Hickenlooper on his master plan. With Hick’s blessing, there’s no telling what corporate welfare scheme they’ll be able to sell to the public.

Be sure and tune in to the Independence Institute’s public affairs TV show Devil’s Advocate this Friday night. It’s the usual half-hour of public affairs excellence, but in two segments. First I am joined by Colorado State Senator Scott Renfroe (R-Greeley) to discuss his bill to ban red-light cameras in Colorado. Then former Colorado Senate Majority Leader Ken Gordon sits down to give his take on the current state of politics in Colorado. That’s Friday, January 27 at 8:30 p.m. on Colorado Public Television 12. Re-broadcast Monday at 1:30 p.m.

Since my late night radio show on 850 KOA ended last week, I’ve been bombarded with the most heart warming messages from fans on my blog, on my Facebook wall (both of them), via Twitter, on YouTube, in person, and through email. It’s sometimes difficult for me to fully understand the kind of impact my radio show and commentary has had on people over the years, so all this outpouring of love from you guys means a whole lot. I cannot thank you enough for your support.

Getting all this love the past week from so many people from all over the country got me thinking: I wonder what someone on the Left thinks about me leaving nightly radio… hmmmm… and then the phone rang. It was Jason Salzman. He wanted some commentary from me on leaving my nightly radio spot for his blog, The Big Media Blog. We chatted for awhile and in no time, I got to read his latest blog post about me. I’m glad he will miss me. And I’m glad he decided to publish some of the best material I gave him. Thanks for giving us the Left’s perspective Jason.

However, I wonder if most people on the Left believe I was “advancing evil” every night like Jason does.

Whether you think my ideas are evil or not, you can still listen to me spew something on the radio on a weekly basis. I have a new time slot, this time on 630 KHOW. That’s right, you didn’t get rid of me yet! I’ll be on KHOW from 5 to 8pm every Sunday, with appearances on both KOA and KHOW as a fill-in host when needed. Which means now I’ve got a regular gig AND I’ll be coming out of the bullpen in relief. And don’t forget about my Public Television channel 12 show, Devils Advocate!

Thanks again to everyone who left me encouraging messages. It means a lot. For those on Left who thought I’d go away quietly. Sorry. I’m still here.