Date Requested:February 10, 2012
Time Requested:01:43 PM
Agency: State Tax Department
CBD Number: Version: Bill Number: Resolution Number:
2012R1591 Amendment HB4249
CBD Subject: UTILITY RATES
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
Neither Program nor Fund

Fiscal Note Summary

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

    This bill proposes revisions regarding reduced electricity and gas rates for low-income residential customers and proposes revisions to two tax credits (i.e., the Industrial Expansion and Revitalization Tax Credit and the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers).
    
    As written, this bill would extend the period during which gas and electric utilities must offer special reduced rates from the winter heating billing months of December, January, February, March, and April to the entire year. The bill would also require the utilities to extend the special reduced rates to residential utility customers receiving Social Security Disability Insurance (SSDI). Additionally, the bill updates the names of two of the programs that would qualify recipient residential utility customers for the special reduced rates. And for those residential utility customers receiving assistance from the Supplemental Nutrition Assistance Program (SNAP - formerly the Food Stamp program), the reduced rates would be available to all SNAP households, not just those of recipients 60 years of age or older. The special reduced rates offered by the gas and electric utilities to their eligible customers are 20 percent less than the rates that would be applied if the customer did not qualify for the program. The gas and electric utilities offering the special reduced rates are granted an existing tax credit in the amount certified by the Public Service Commission as the revenue deficiency attributable to providing the special reduced rates. Additionally, the bill proposes changes to W. Va. Code §11-13F-4 (i.e., the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers) to allow utilities to claim the credit on estimated tax payments in the year in which the customers of the utility receive the benefit and to place a termination date of December 31, 2012 for a provision limiting the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers to 100 percent of a utility’s certified deficiency.
    
    Proposed changes to W. Va. Code §§11-13D-3 and 11-13D-3a add provisos indicating that the credit provided for in W. Va. Code §24-2-2a and W. Va. Code §24-2A, respectively, may reduce the Business and Occupation Tax to zero. Additionally, the bill deletes obsolete language in W. Va. Code §11-13D-3.
    
    Based upon information provided by the Consumer Advocate Division of the Public Service Commission, the extension of the special reduced rates to residential customers receiving Social Security Disability Insurance and to all recipients of the Supplemental Nutrition Assistance Program and extending the offering of the reduced rates year round would increase the discounts offered by gas and electric utilities by roughly $23.6 million per year. The increase in discounts of roughly $23.6 million would provide the gas and electric utilities offering the reduced rates with additional tax credits of $23.6 million per year. Similarly, the application of the credit against a utility’s Business and Occupation Tax liability will result in a reduction in the General Revenue Fund of roughly $23.6 million per year following a reduction of roughly $33.4 million in FY2013 ($23.6 million related to revenue deficiencies in calendar year 2012 and roughly $9.8 million attributable to the timing change allowing application of the credit to estimated payments).
    
    Assuming the proposed changes to W. Va. Code §§11-13D-3 and 11-13D-3a refer to the Industrial Expansion and Revitalization Credit in W. Va. Code §11-13D and not the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers from W. Va. Code referenced in W. Va. Code §24-2-2a and W. Va. Code §24-2A, the provisos allowing the credit to reduce the Business and Occupation Tax to zero could result in a significant future reduction in the General Revenue Fund as electric power plants are forced to make additional investments in pollution abatement equipment per mandates by the US Environmental Protection Agency.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill would be minimal. The Public Service Commission may incur some additional administrative costs due to passage of this bill.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2012
Increase/Decrease
(use"-")
2013
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 -23,600,000 -23,600,000
3. Explanation of above estimates (including long-range effect):
    Passage of this bill would extend the period during which gas and electric utilities must offer special reduced rates from the winter heating billing months of December, January, February, March, and April to the entire year. The bill would also require the utilities to extend the special reduced rates to residential utility customers receiving Social Security Disability Insurance (SSDI). Additionally, the bill updates the names of two of the programs that would qualify recipient residential utility customers for the special reduced rates. And for those residential utility customers receiving assistance from the Supplemental Nutrition Assistance Program (SNAP - formerly the Food Stamp program), the reduced rates would be available to all SNAP households, not just those of recipients 60 years of age or older. The special reduced rates offered by the gas and electric utilities to their eligible customers are 20 percent less than the rates that would be applied if the customer did not qualify for the program. The gas and electric utilities offering the special reduced rates are granted an existing tax credit in the amount certified by the Public Service Commission as the revenue deficiency attributable to providing the special reduced rates. Additionally, the bill proposes changes to W. Va. Code §11-13F-4 (i.e., the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers) to allow utilities to claim the credit on estimated tax payments in the year in which the customers of the utility receive the benefit and to place a termination date of December 31, 2012 for a provision limiting the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers to 100 percent of a utility’s certified deficiency.
    
    Proposed changes to W. Va. Code §§11-13D-3 and 11-13D-3a add provisos indicating that the credit provided for in W. Va. Code §24-2-2a and W. Va. Code §24-2A, respectively, may reduce the Business and Occupation Tax to zero. Additionally, the bill deletes obsolete language in W. Va. Code §11-13D-3.
    
    Based upon information provided by the Consumer Advocate Division of the Public Service Commission, the extension of the special reduced rates to residential customers receiving Social Security Disability Insurance and to all recipients of the Supplemental Nutrition Assistance Program and extending the offering of the reduced rates year round would increase the discounts offered by gas and electric utilities by roughly $23.6 million per year. The increase in discounts of roughly $23.6 million would provide the gas and electric utilities offering the reduced rates with additional tax credits of $23.6 million per year. Similarly, the application of the credit against a utility’s Business and Occupation Tax liability will result in a reduction in the General Revenue Fund of roughly $23.6 million per year following a reduction of roughly $33.4 million in FY2013 ($23.6 million related to revenue deficiencies in calendar year 2012 and roughly $9.8 million attributable to the timing change allowing application of the credit to estimated payments).
    
    Assuming the proposed changes to W. Va. Code §§11-13D-3 and 11-13D-3a refer to the Industrial Expansion and Revitalization Credit in W. Va. Code §11-13D and not the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers from W. Va. Code referenced in W. Va. Code §24-2-2a and W. Va. Code §24-2A, the provisos allowing the credit to reduce the Business and Occupation Tax to zero could result in a significant future reduction in the General Revenue Fund as electric power plants are forced to make additional investments in pollution abatement equipment per mandates by the US Environmental Protection Agency.
    
    The number of additional utility customers that would receive the special reduced rates due to passage of this bill, as determined by the Consumer Advocate Division of the Public Service Commission would be 51,043.
    
    Additional administrative costs to the State Tax Department associated with passage of this bill will be minimal. The Public Service Commission may incur some additional administrative costs due to passage of this bill.


Memorandum
Person submitting Fiscal Note:
Mark Muchow
Email Address:
kerri.r.petry@wv.gov
    This bill proposes revisions regarding reduced electricity and gas rates for low-income residential customers and proposes revisions to two tax credits (i.e., the Industrial Expansion and Revitalization Tax Credit and the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers).
    
    Pursuant to legislation enacted in 2011, the title of W. Va. Code §11-13F is “BUSINESS AND OCCUPATION TAX CREDIT FOR REDUCING ELECTRIC, NATURAL GAS OR WATER UTILITY RATES FOR LOW-INCOME RESIDENTIAL CUSTOMERS.” As written, the bill revises the title to “BUSINESS AND OCCUPATION TAX CREDIT FOR REDUCING ELECTRIC AND NATURAL GAS UTILITY RATES FOR LOW-INCOME RESIDENTIAL CUSTOMERS” without using the normal strikethrough and underlining convention for changes.
    
    As written, this bill enumerates five programs that would qualify the recipient for the reduced rates. This is an increase from the four programs that previously qualified a recipient. However, revised language in W. Va. Code §24-2a-1(c) only references four of the programs.
    
    The proposed changes to W. Va. Code §§11-13D-3 and 11-13D-3a refer to the Tax Credit for Reducing Electric and Natural Gas Utility Rates for Low-Income Residential Customers from W. Va. Code §24-2-2a and W. Va. Code §24-2A. It is not clear is this was the intent or if the reference should be to the Industrial Expansion and Revitalization Credit in W. Va. Code §11-13D. Additionally, W. Va. Code §24-2-2a does not appear to exist.