Electric Rate Hike Means Millions More in RI Tax Revenues

Electric Rate Hike Means Millions More in RI Tax Revenues

The controversial 24 percent rate hike that began to take effect this month will benefit state coffers, which stand to gain an estimated $5.1 million in tax revenues off the higher electricity bills that customers are seeing, according to data provided by a state official.

The additional revenues are thanks to the 4 percent gross earnings tax that all customers pay and a 7 percent sales tax levied on businesses who are not manufacturers, according to Paul Dion, the chief of the state Office of Revenue Analysis. In the last fiscal year, the two taxes yielded a total of $61.8 million in revenue for the state, according to official state figures. (See below slides for a breakdown of state-related costs and charges on local electric bills.)

One state rep says this is not the right time for the state to collect more revenues from customers who are hard-hit by the rate increase. “It’s … a matter of principle. The state should not be making money off this unprecedented increase,” said Blake Filippi, an independent from Block Island who is starting his freshman term in the General Assembly.

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Filippi is having legislation drafted that would exempt customers from paying the gross earnings tax and the business sales tax on the increase. Filippi said the measure would provide some immediate relief in what is a much larger problem. “I think it’s pretty obvious we kind of have an energy crisis,” he said. “When you see a 32 percent increase in the cost of electricity, it kind of makes you stop and say, ‘Wait a minute, what’s going on?’” (The 32 percent figure represents the increase compared to last year’s July to December rates.)

Filippi plans to have a bill filed by the end of this month. A spokesman for Speaker Nicholas Mattiello said he could not comment on whether the House Leadership would support the bill until it had been filed.

Five other ways state is increasing costs

Beyond taxes, there are at least five other ways—and likely more—that the state is contributing to the costs customers see on their electric bills, according to a GoLocalProv review of National Grid documents, state law, and interviews with company and state officials. (See below slides for the breakdown.)

There’s a flat 73-cent charge that funds the state’s Low-Income Home Energy Assistance Program (LIHEAP) Enhancement Plan—not to be confused with the federal LIHEAP program. The state program supplements the federal one, helping low-income residents.

There are currently at least two separate charges stemming from state mandates on renewable energy, with a possible third charge taking effect this year, thanks to a new state law. (National Grid appears to have overcharged customers on one of the renewable energy charges last year. The charge is currently listed as a credit on bills.)

Customers also pay .983 cents per kilowatt hour towards energy efficiency programs. For a typical customer, that comes out to $4.91 on their electric bills each month. The programs, which are overseen by the state and administered National Grid, offer customers loans and other incentives to make their homes or offices more energy efficient.

GoLocalProv asked a spokesman for the state Public Utilities Commission whether it considers all these other state-mandated costs that customers bear when voting on whether to approve requests for rate increases. “In general rate cases the commission does certainly weigh the impact of the various distribution rate factors,” said the spokesman, Thomas Kogut. “That said, with some other factors, including a few you have pointed out, the statutory language (like that in the LIHEAP enhancement) limits the discretionary actions of the commission.”

A spokeswoman for Governor Gina Raimondo did not respond to a request for comment.

Costs may yield benefits elsewhere

Just because the above charges are the result of state mandates does not mean that National Grid opposes them, said David Graves, a company spokesman. In fact, he said National Grid officials are “strong believers” in the need for more renewable energy. He also noted that customers ultimately can benefit from some of the charges.

“We support energy efficiency programs because they pay for themselves and more,” Graves said.

He pointed to his own home as an example. Through the state program, Graves, who is a Rhode Island resident, said he had an energy audit done on his house. That audit allowed him to secure a zero interest loan to replace the insulation in his home. So, while he pays an extra charge on his bill for the program, Graves, like over potential customers, benefits from that cost in other areas.

“It’s not a negative, it’s a positive,” Graves said. “They’ll get their money back.”

But Filippi notes that National Grid also benefits from the program, receiving a 5 percent “management incentive fee” in addition to state reimbursement for its administrative costs. Last year that incentive amounted to over $4 million for National Grid. Now, National Grid stands to make even more after the fee was increased from 4.4 percent to 5 percent, according to Filippi.

“While National Grid must be fairly compensated for its work, the arrangement must be fair and focused on what it best for ratepayers,” Filippi said.

Group says extra electric bill charges impact economy

One taxpayer advocacy group says that the state’s renewable energy mandates are having an adverse effect on the economy. The Rhode Island Center for Freedom and Prosperity issued a report in 2013 that estimated that the maintaining current renewable energy mandates will boost the cost of electricity by nearly $150 million through 2020. The same report concluded that electricity prices will go up by an additional 1.85 percent during the same period.

Mike Stenhouse, the president and CEO of the center, says the organization raised similar concerns about new renewable energy mandate that passed the General Assembly last year, known as the Distributed Growth Generation Program (another name for it is the Renewable Energy Growth Program).

Stenhouse testified against the bill at a Statehouse hearing where he says few seemed concerned about the potential impact on customers. “In that hearing I was shocked at the blatant disregard for the ratepayer, both by elected officials on the committee and by proponents of the bill. All that seemed to matter was that Rhode Island was on track to meet some arbitrary green energy target, the ratepayer was not even considered. I was scoffed at when I brought up this point in my testimony,” Stenhouse said.

Graves said National Grid supports renewable energy. He was not able to provide any informational in time for publication on what additional costs customers might see this year due to the new renewable energy program. But he said it’s important for customers to remember that renewable energy and other mandates are not the main driver of increases on their bills.

“The real villain here is the price of electricity,” Graves said. “I hate to say, that’s out of our hands.”