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Legislative Hot Spots: From Texas to Ohio, New Jersey to Minnesota, Electric Restructuring Games Begin

Fortnightly Magazine - February 15 1997

The state has a 4-percent machinery tax, the highest personal property tax of any industry there. The tax brings in close to $200 million annually. The Department of Public Service has been helping the Department of Revenue study the problem. A report was to be filed with the Legislature Jan. 15.

Last year, a potential cogenerator received a tax exemption from the legislature based on unit efficiency. The utilities took issue and Legislature promised to hear their claims.

Several proposals have been made to solve the overall tax problem, including a 6-percent energy tax for generators, including municipals and co-ops.

Jennings says he proposes to remove machinery tax and replace it with a retail meter tax. So if deregulation comes, power pumped in from out of state will be taxed similar to local energy.

Property taxes paid by power stations to local municipalities will be another issue. Jennings says that with deregulation, those plants need to be competitive with out-of-state generators, which can be done through a diminished tax.

ôThose local units of government who have relied heavily on the taxesùthose power stations will shut downö if thereÆs no change, he says. ôAnd theyÆll have no taxes. So is half the pie that youÆve enjoyed for a long time better than no pie?ö

MinnesotaÆs legislative session started Jan. 7. It runs through mid-May.

New Jersey:

Taxes, Then Energy Master Plan Face Lame Duck Legislature

This year is the ôSuper Bowlö of state politics in New Jersey. Every seatùthat of its governor, assemblymen, senatorsùis up for grabs. This doesnÆt bode well for burning political debate on electric restructuring.

ôIn an election year, stranded costs could be a tough issue,ö says a legislative observer.

But deregulation has been rumbling around the Board of Public Utilities for years, even if, as Assemblyman Richard H. Bagger (R) says, ôThere has been in the New Jersey legislature no discussion of industry restructuring at all.ö

A BPU draft report to be released for comment before the start of this yearÆs legislative session is guaranteed to kick off some action. The BPU expects to make final changes to its Energy Master Plan by March.

The plan will be used as a platform for legislative recommendations. The recommendations would be the first concrete suggestions since a few half-hearted restructuring bills died in committee last year. (One, a pro-consumer bill introduced by Assemblyman Neil Cohen (D), would have required the BPU to provide equal access to market rates for consumers and fair competition for electricity generators.)

The Master Plan brought together 30 business, environmental, utility, consumer and other groups. When finishedùit was due in October 1996ùit will address asset divestiture, stranded costs, independent system operators and retail wheeling, among other topics.

According to various sources, one element involves retail versus wholesale competition. Some percentage of stranded investment will be funded through a transmission charge that everyone will pay, regardless of who generates the electricity. New JerseyÆs treasurer has talked about using state-bonding to fund the charge. It would be a transitional cost.

But the slipperiest banana peel New Jersey faces during