Date Requested:February 27, 2013
Time Requested:11:19 AM
Agency: State Tax & Revenue Department
CBD Number: Version: Bill Number: Resolution Number:
2013R1029 Introduced HB2118
CBD Subject: SMALL RENEWABLE ENERGY PROJECTS
FUND(S)
General Revenue Fund
Sources of Revenue
General Fund
Legislation creates:
A New Program,Neither Program nor Fund

Fiscal Note Summary

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

     The purpose of this bill is to create the West Virginia Renewable Energy Act. The bill makes legislative findings and defines terms. The bill provides a maximum $2,000 investment cost recovery incentive for customer-generated electricity from renewable energy systems, but exempts electric and gas companies from qualifying for that incentive. The bill also provides a $25,000 maximum tax credit for electric light and power companies that purchase customer-generated electricity. The bill requires reports be made to the Legislature. The bill also provides that no incentives may be taken after June 30, 2022, and credits may not be taken after June 30, 2023. The bill also provides that customers who generate electricity from renewable sources may sell electricity to electric light and power companies
    
     According to our interpretation the bill creates a tax credit for power generation companies to be claimed against their Corporation Net Income Tax liability. The credit can be taken in an amount equal to the investment cost recovery incentive payments made in any fiscal year as outlined in the bill. The credit for any one fiscal year cannot exceed twenty-five one-hundredths of one percent of the businesses' taxable power sales or $25,000, whichever is greater.
    
     Projects that would qualify for the renewable energy cost recovery incentive include: solar, biomass, geothermal, wind, and hydroelectric. The incentive is limited to small generation projects as the eligible electric production does not include that from companies with at least one thousand megawatt hours of annual sales or a gas distribution business. The incentive is equal to the kilowatts generated multiplied by an economic development factor that varies depending on how the electricity was produced. The bill further provides for the resale of the generated electricity to power companies. In 2010, approximately 3.3% of all electricity generated in WV came from renewable sources. According to the Division of Energy, West Virginia currently has 69 commercial and residential solar installations. If each system were to reach the $2,000 per household maximum the costs would reach $138,000. Going forward this number could increase significantly with the extension of the Federal Residential Renewable Energy Tax Credit that can be coupled with other incentives to reduce the payback period of renewable energy production systems. Furthermore, data on other qualifying energy production is not readily available. As such the aggregate costs associated with the passage of these incentives cannot be estimated at this time.
    
     Additional administrative costs to the State Tax Department could be significant. The bill provides for an application process as well as a provision to report on the effectiveness of the bill, regarding the total number of renewable energy projects by type, as well as any potential jobs impacts.

Fiscal Note Detail
Over-all effect
Effect of Proposal Fiscal Year
2013
Increase/Decrease
(use"-")
2014
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 0
3. Explanation of above estimates (including long-range effect):
     According to our interpretation the bill creates a tax credit for power generation companies to be claimed against their Corporation Net Income Tax liability. The credit can be taken in an amount equal to the investment cost recovery incentive payments made in any fiscal year as outlined in the bill. The credit for any one fiscal year cannot exceed twenty-five one-hundredths of one percent of the businesses' taxable power sales or $25,000, whichever is greater.
    
     Projects that would qualify for the renewable energy cost recovery incentive include: solar, biomass, geothermal, wind, and hydroelectric. The incentive is limited to small generation projects as the eligible electric production does not include that from companies with at least one thousand megawatt hours of annual sales or a gas distribution business. The incentive is equal to the kilowatts generated multiplied by an economic development factor that varies depending on how the electricity was produced. The bill further provides for the resale of the generated electricity to power companies. In 2010, approximately 3.3% of all electricity generated in WV came from renewable sources. According to the Division of Energy, West Virginia currently has 69 commercial and residential solar installations. If each system were to reach the $2,000 per household maximum the costs would reach $138,000. Going forward this number could increase significantly with the extension of the Federal Residential Renewable Energy Tax Credit that can be coupled with other incentives to reduce the payback period of renewable energy production systems. Furthermore, data on other qualifying energy production is not readily available. As such the aggregate costs associated with the passage of these incentives cannot be estimated at this time.
    
     Additional administrative costs to the State Tax Department could be significant. The bill provides for an application process as well as a provision to report on the effectiveness of the bill, regarding the total number of renewable energy projects by type, as well as any potential jobs impacts.


Memorandum
Person submitting Fiscal Note:
Mark B. Muchow
Email Address:
Roger.D.Cox@wv.gov