At the tail end of the Wyoming Legislature’s revenue meeting in Pinedale last week, lawmakers revived the recurrent call to solve the energy-dependent state’s impending financial woes and enact a state tax — this time on electricity generation.
Championed by Sen. Cale Case, the Republican co-chairman of the Joint Revenue Committee, the production tax could provide a much-needed alternate revenue source for the cash hungry state, proponents said. The proposal’s details have yet to be ironed out. Legislators moved to have the Legislative Service Office draft a bill for consideration.
But the renewed possibility of an electricity tax spawned heated concern among the state’s utility companies and independent power producers. Many say the tax would hike costs for consumers or deter renewable energy investment in the state.
Case said while the idea to institute a tax on power generation is not new, the state’s fiscal outlook is becoming increasingly dire and an electricity tax warrants serious consideration.
“Wyoming is in a very difficult situation with respect to revenue,” Case said.
Case underlined the existence of taxes on electricity generation, distribution and consumption already in place in several other states, even some outside the Western grid. The longer Wyoming sits on the issue, the more it will miss out on additional revenue, he said.
“If you look at other states, there are a lot of states that tax electricity,” Case said. “It’s not such a radical thing.”
The committee also heard lengthy presentations from experts and stakeholders on a possible tax hikes for wind during July’s meeting in Cheyenne. The committee nibbled at the idea of considering a tax during the last Joint Revenue Committee meeting, but ultimately requested additional research on the possibility. No public comments were accepted on the issue during the Sept. 19 committee meeting.
“It’s a really tough question and it will take good, objective analysis,” said Rob Godby, a University of Wyoming economist. “We can’t afford to get it wrong. Of course, we should consider energy taxes, as we should consider all other taxes. But we have to consider them really carefully with respect to all the facts.”
Energy producers respond
For many of the electricity providers operating in the Equality State, alarm bells started to ring at the slightest whiff of another energy tax.
The possibility of a higher wind generation tax arguably drudged up the most concern. The state’s regulatory uncertainty and existing wind generation taxes may already be hindering wind development in the state, several developers said.
In Wyoming, once wind facilities have been up and running for three years, the state levies a $1 per megawatt wind generation tax, in addition to sales and property taxes. Lawmakers instituted the wind generation tax in 2012. The revenue committee has repeatedly raised the possibility of boosting the tax, but none of the attempts have been successful.
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Raising the tax to $4 would bring the state an additional $1.9 billion. But that assumes the higher costs do not repel developers, the Center for Energy Economics and Public Policy found.
The Power Company of Wyoming is developing a colossal wind farm south of Rawlins called the Chokecherry and Sierra Madre Wind Energy Project. Once completed, the wind farm is expected to provide 2,500 to 3,000 megawatts of energy, doubling the state’s wind energy production. A new transmission line, TransWest Express, will funnel energy to consumers throughout the Rocky Mountain region.
As an independent power producer, Power Company of Wyoming must compete against other renewable generators in the Western market, explained Kara Choquette, communications director at Power Company of Wyoming.
“If we have a cost increase, that risks our product being more expensive and therefore not selected,” she added.
Wyoming ranks fourth when it comes to the lowest cost for wind development in the West, trailing behind New Mexico, Montana and Colorado, according to the Center for Energy Economics and Public Policy.
“We should absolutely increase the wind tax,” Case told the Star-Tribune. “I don’t think Wyoming gets enough economic benefit from it and we suffer the costs.” Wind energy has upfront benefits for the state, but those benefits dry up after construction completes, he reasoned.
But wind advocates, like Choquette, point out how a tax on wind already exists, and any additional funds could deter future wind farms, or even ground the ones in process.
PacifiCorp, which operates in six states, recently purchased two wind projects located near Medicine Bow in Carbon County from a private renewable energy developer earlier this year as part of its Energy Vision 2020, an initiative to transition the company toward more renewable energy and lower costs for consumers. Utility companies, including PacifiCorp await the full draft of the bill.
“Rocky Mountain Power will work with legislators and other stakeholders on this issue with our top priority being to make sure that energy prices remain affordable for our Wyoming customers,” said Jon Cox, vice president of government affairs at PacifiCorp, the state’s largest utility company.
“It’s really critical for people to understand that the market does not have to buy renewable energy in Wyoming,” Choquette said. “We tell them why they should and here are all the wonderful attributes associated with Wyoming renewable resources, but there’s no mandate to choose Wyoming.”
To Godby, the economist, “the devil is in the details,” including the size of the tax, when it comes to the bill being drafted.
“Any choice involves assessing trade offs,” he added. “What do you gain and what do you lose?”