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PA Tax Change Could Spark Gas Deregulation

PA Tax Change Could Spark Gas Deregulation

Pennsylvania Rep. Frank Tulli, one of the sponsors of a state natural gas deregulation bill that stalled last year, said the legislation once again is on the fast track now that Gov. Tom Ridge has proposed eliminating the 5% gross receipts tax levied on the state's residential gas users.

Dealing with the potential loss of $120 million/year in gross receipts taxes collected by utilities once competition begins won't be that difficult now that the state has $200-$300 million revenue surplus, Tulli said in an interview with NGI. "The governor is a very smart guy. He waited until this budget season and on Tuesday he's going to be delivering the budget message to the joint house and senate and he is going to recommend that we eliminate the gross receipts tax on natural gas and then use that as a springboard to pass the natural gas legislation.

"We have the opportunity now in the first half of this year to be the first state to have deregulated electricity and natural gas in a rather complete way," he noted.

Columbia Gas of Pennsylvania CEO Gary J. Robinson praised the governor's proposal. "As a leading proponent of the deregulation of the natural-gas industry in Pennsylvania, we believe that Gov. [Tom] Ridge's proposal is a major step toward giving our customers the economic democracy they want," Robinson said. "Elimination of the gross receipts tax will remove one of the major obstacles to the passage of a deregulation bill that will increase competition, leading to a host of new energy services and pricing options for commonwealth residents."

Collaborative discussions between industry stakeholders on the legislation stalled last fall on the tax issue, said Tulli, but will start again at Pennsylvania Public Utility Commission offices this Friday. "We are going to start with introducing the bill as it was and have the collaborative look it over and come up with consensus legislation. Then we'll go to the legislature with our product and let them deliberate on it.

"We don't have unanimity on getting this done this way so I'm sure there will be those who will oppose it. Some LDCs want to get out of the merchant function and others don't want to; they want to have an option," he said. There still are many contentious issues to be ironed out, also including whether to have mandatory assignment of upstream pipeline capacity to competing suppliers. Nevertheless, Tulli said he's confident it can be done. He predicted passage of the bill by the end of the session on June 30.

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