NGI The Weekly Gas Market Report
New York state’s senate majority revealed a proposal recently toeliminate the gross receipts tax (GRT) on gas and electricity. Theproposal will be included in the senate majority’s tax reductionplan for the 2000 session, which will convene in January. JosephBruno, the senate majority leader, announced the proposal in aspeech before the New York State Economic Development Council lastweek.
Currently, the GRT is a 3.25 cent surcharge for every dollar acustomer spends on a gas and electricity bill from a utility. Thereis no GRT on bills from marketers. The state government has beenreducing the tax for the past few years, but the senate majorityproposal is the first attempt to totally get rid of it.
If the tax is eliminated industrial customers could save anaverage of $4,600/year. Residential customers using 750 kW/monthwould save an estimated $50/year. The average residential gascustomer would save $33/year. The New York Public ServiceCommission said these numbers “caused no objections.”
While lower energy costs would be enjoyed by many, Tim Merrill,a consultant with Competitive Energy Strategies, said there is alarge potential downside as well. “Elimination of the GRT wouldtake away a major economic driver for customer choice. It is hardenough to get customers to switch away from a utility as it is. Oneof the things marketers can say is ‘If you join us, you won’t bepaying that tax.'”
Even with the GRT in place, marketers have had a tough timegetting customers to switch in New York. An EIA restructuring studyperformed last May said less than 2% of the state’s gas customerswere participating in customer choice. Statewide choice wasratified in 1997.
Bruno, however, stressed the tax’s overall effects. “The GRT isa hidden tax on consumers and business owners, but its effects arequite clear: higher utility costs that make it more expensive tolive and create jobs in New York state. Coupled with ongoing stateinitiatives to encourage competition and lower utility costs,elimination of the GRT will provide real savings and help bring ourutility costs more closely in line with those of other states.”
Supporting Bruno’s claim that the GRT elimination aids customerchoice is the path Pennsylvania took in its deregulation efforts.Only after then Gov. Tom Ridge included the GRT elimination did aderegulation bill come together. Many in the state legislature pointedto the tax reduction as a key issue that worked in deregulation’sfavor (see Daily GPI, June 28).
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