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

Fortnightly Magazine - February 15 1997

this legislative calendar is energy tax reform.

Gov. Christine Todd Whitman (R), state Treasurer Brian W. Clymer and BPU President Herbert H. Tate were working with leaders in the Assembly and Senate to overhaul the tax system.

The three administrative offices have proposed repealing New JerseyÆs 13-percent utility (gross receipts) tax, replacing it with a 6-percent sales tax on all retail energy sales. Currently, in New Jersey, only natural gas is sold retail through nonutilities. The proposal also would slap the 9-percent corporate business tax on utility profits.

The two new taxes would together make up half of the more than $900 million raised by gross-receipts tax. Some 70Êpercent of that figure is used for municipal aid. The proposal would phase in over 7Êyears; utilities have protested that is too long.

There may be a ôgrandfatheringö of existing generators, and independent power producers might not be taxed under the changes.

The governor wants the measures passed in the first quarter so tax payments arrive by July 1, which would be in time for the stateÆs fiscal year.

Bagger, who sponsored the flex-rate and alternative rate-making bill that became law in 1995, says restructuring legislation wonÆt come without energy tax reform. During 1997, he says heÆll be meeting with legislators to sketch a proposal for industry restructuring.

ôIÆd be surprised if it were to pass during 1997, but we just canÆt let time go by here,ö Bagger says. ôWeÆve got to start the debate so that maybe, realistically, we pass the energy tax reform in æ97 and pass a major industry restructuring bill during 1998ùin early 1998.ö

Ohio:

The Buckeye Two-Step: Taxes First

Electric restructuring in Ohio promises to go nowhere unless legislators first discover a way to fill the hole created if utilities were taxed at the same rate as other businesses.

Some have projected a gap in public school financing of $150Êmillion. That could devastate schools where power plants operate.

ôItÆs just a huge number,ö says Rep. Priscilla D. Mead (R), 1996 vice chair of the HouseÆs Public Utilities Committee and its expected 1997 chair. ôIÆve heard numbers bigger than that.ö

Utilities donÆt want to leave schools hurting. And since property tax is geographic, there is disparity in funding. In northern Ohio, by the nuclear plants, there are modern school facilities, which is not the case elsewhere in the state.

At the end of last year, the state was awaiting an Ohio Supreme Court decision regarding the constitutionality of state school financing.

ôTherefore the Legislature has been loathe to touch the issue until there is some response from the court,ö Mead says.

She expects the first six months of the 1997 session to be spent on school financing, fundamental to deregulation. Debaters also will examine stranded investments and costs.

Once a tax solution emerges, legislators will move on to restructuring. Already, parties are choosing sides.

The speaker of the House has two yearsÆ tenure and thereÆs an incoming senate president. They were to meet with the governor early in the year to mold a legislative strategy to deal with restructuring. They