FISCAL NOTE



FUND(S):

General Revenue Fund, West Virginia Infrastructure Fund, Electric Retail Ratepayer Relief Fund, Crossed County Transmission Line Fund

Sources of Revenue:

General Fund,Special Fund

Legislation creates:

A New Fund



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to enact a business and occupation tax on the activity of transmitting electricity through certain long distance, extra-high voltage electric transmission lines; to dedicate the proceeds of the tax to relief for electric retail ratepayers, counties containing or crossed by long distance, extra-high voltage electric transmission lines and the West Virginia Infrastructure and Jobs Development Council; to provide for the distribution of tax proceeds; and to require applicants seeking to construct a high voltage transmission line over four hundred fifty kilovolts to study the feasibility of retensioning, double-circuiting or reconductoring existing transmission lines so as to maximize their transmission capacity without substantially impairing the reliability of the existing system. As written this bill would impose a Business and Occupation Tax on the transmission of electricity through an electric transmission line that was constructed at the direction of a Regional Transmission Organization or Independent System Operator pursuant to authority granted by the Federal Energy Regulatory Commission; has a voltage carrying capacity of at least 450 kilovolts; and, was designed and constructed to transmit electricity over a total distance of 50 miles within this State. The tax would be equal to the multiplicative product of the miles of extra high-voltage line in West Virginia, the tax rate of $750 per mile per voltage carrying capacity, and the voltage carrying capacity of the line (set at 500 kilovolts). Revenue attributable to the tax is split into thirds, with one-third deposited into the Electric Retail Ratepayer Relief Fund and used by the Public Service Commission to proportionally reduce the rates of all electric customers in the State, one-third deposited into the Crossed County Transmission Line Fund and distributed to counties based upon the proportion of miles of extra high voltage line in the county compared to total State miles of extra high voltage line, and the remaining one-third to the West Virginia Infrastructure Fund. Based upon our interpretation of this bill, the tax would only apply to new high-voltage electric transmission lines. The proposed Trans-Allegheny Interstate Line (TrAIL) and proposed Potomac-Appalachian Transmission Highline (PATH) have projected in-service dates of mid-2011 and mid-2013, respectively. If these projected completion dates are met, additional revenue attributable to this bill would be roughly $41 million to $45 million in fiscal years 2012 and 2013 and roughly $128.9 million to $136.5 million per year thereafter. Each of the three designated funds would receive roughly $13.8 million to $15 million in fiscal years 2012 and 2013. Once both lines are in service, roughly $45.5 million per year would be available to each of the three designated funds. Additional administrative costs to the State Tax Department associated with this bill would be minimal.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2009
Increase/Decrease
(use"-")
2010
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 0 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 0 0 0
2. Estimated Total Revenues 0 0 136,500,000


Explanation of above estimates (including long-range effect):


Passage of this bill would impose a Business and Occupation Tax on the transmission of electricity through an electric transmission line that was constructed at the direction of a Regional Transmission Organization or Independent System Operator pursuant to authority granted by the Federal Energy Regulatory Commission; has a voltage carrying capacity of at least 450 kilovolts; and, was designed and constructed to transmit electricity over a total distance of 50 miles within this State. The tax would be equal to the multiplicative product of the miles of extra high-voltage line in West Virginia, the tax rate of $750 per mile per voltage carrying capacity, and the voltage carrying capacity of the line (set at 500 kilovolts). Revenue attributable to the tax is split into thirds, with one-third deposited into the Electric Retail Ratepayer Relief Fund and used by the Public Service Commission to proportionally reduce the rates of all electric customers in the State, one-third deposited into the Crossed County Transmission Line Fund and distributed to counties based upon the proportion of miles of extra high voltage line in the county compared to total State miles of extra high voltage line, and the remaining one-third to the West Virginia Infrastructure Fund. Based upon our interpretation of this bill, the tax would only apply to new high-voltage electric transmission lines. The proposed Trans-Allegheny Interstate Line (TrAIL) and proposed Potomac-Appalachian Transmission Highline (PATH) have projected in-service dates of mid-2011 and mid-2013, respectively. If these projected completion dates are met, additional revenue attributable to this bill would be roughly $41 million to $45 million in fiscal years 2012 and 2013 and roughly $128.9 million to $136.5 million per year thereafter. Each of the three designated funds would receive roughly $13.8 million to $15 million in fiscal years 2012 and 2013. Once both lines are in service, roughly $45.5 million per year would be available to each of the three designated funds. Additional administrative costs to the State Tax Department associated with this bill would be minimal.



Memorandum


The stated purpose of this bill is to enact a business and occupation tax on the activity of transmitting electricity through certain long distance, extra-high voltage electric transmission lines; to dedicate the proceeds of the tax to relief for electric retail ratepayers, counties containing or crossed by long distance, extra-high voltage electric transmission lines and the West Virginia Infrastructure and Jobs Development Council; to provide for the distribution of tax proceeds; and to require applicants seeking to construct a high voltage transmission line over four hundred fifty kilovolts to study the feasibility of retensioning, double-circuiting or reconductoring existing transmission lines so as to maximize their transmission capacity without substantially impairing the reliability of the existing system. As written, a Business and Occupation tax would be levied on an interstate electricity transmission line based on the miles that go through West Virginia. The ratepayers in every state through which the line passes, including West Virginia, would pay a rate on power purchases that includes the imbedded costs of any taxes imposed on the line in any state. That is, the West Virginia transmission line tax would be paid indirectly by West Virginians and ratepayers in other states through the power purchase rates. The bill provides that a portion of the tax proceeds be used for the purpose of “proportionately reducing the rates of all retail electric customers in West Virginia.” This provision could possibly be interpreted to be in violation of the Commerce Clause of the United States Constitution. Additionally, the provision may be in violation of 15 U.S.C. 389, which states that “no state, or political subdivision thereof, may impose or assess a tax on or with respect to the generation or transmission of electricity which discriminates against out-of-State manufacturers, producers, wholesalers, retailers, or consumers of that electricity.” The bill, as written, requires the State Tax Commissioner to review and approve the budgeted use of funds distributed to counties. Review and approvals of budgets of local governments are conducted by the Office of the Chief Inspector. While the Office of Chief Inspector was once under the direction of the State Tax Commissioner, the office is now under the authority of the State Auditor. Thus, the budget review and approval functions assigned to the State Tax Commissioner should instead be assigned to the State Auditor.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kpetry@tax.state.wv.us