Paterson seeks utility surtax
Proposal would add 2% to everyone’s bill
ALBANY — Gov. David A. Paterson this week rushed to protect consumers from the New York Power Authority’s plan to boost electricity rates by $10 million.
But behind closed doors, Paterson this week also is trying to impose higher surcharges on utility companies that would end up costing consumers of electricity, natural gas and telephone service at least an additional $531 million in the coming year.
If the governor’s plan succeeds—and sources Wednesday said the idea is very much alive at the budget negotiating table— industry officials predict it will add 2 percent to every utility bill across the state.
So, consumers won a minor skirmish with the Power Authority’s retreat, critics say, but they are now in line for a much larger pocketbook hit.
“It’s a lot of money, and it’s going to roll through to the utility bills. The utilities will work it into the bills either implicitly or explicitly,” said Gerald Norlander, executive director of the Public Utility Law Project, which represents the interests of low-income consumers on utility matters.
The higher costs to consumers will push more struggling people to lose utility service, at least temporarily, for failing to pay their bills, Norlander said. Last year, 300,000 such cases occurred, a record.
Jeffrey Gordon, a Paterson budget spokesman, declined to comment.
Energy companies say the costs will be passed directly along to consumers, while telephone companies were unsure precisely how much consumers would end up paying. A Verizon spokesman said half the levy would be pushed directly onto customers’ bills.
The higher costs come at a time when the federal government recently said New York has the second highest utility costs in the continental United States, and upstate companies, manufacturers in particular, say rising energy expenses make them less competitive with other states and countries.
“We understand the challenges the governor and the State Legislature face with this budget, but the timing of this type of a regressive fee increase couldn’t be worse. A spike by more than 500 percent on an essential service — heat and electric — will have a detrimental impact on customers’ bills across the state,” said Kevin Lanahan, acting executive director of the Energy Association of New York State, an industry trade group whose members include National Grid and National Fuel.
At issue is an assessment on utilities and telephone companies. It is now at one-third of one percent on the companies’ revenues. The governor wants to raise that level to one percent and then add a new, temporary one percent surcharge called the “energy and utility service conservation assessment.” It would expire in 2012.
Together, the two actions would boost the utility surcharge to six times the current level and provide Albany with an increase in revenues from about $120 million now to at least $651 million and, in one state estimate, to $727 million. Besides gas and electric utilities and telephone companies, the tax also applies to energy service companies, which sell gas and electricity.
The surcharge is mostly designed to pay for the operations of the state’s Public Service Commission, which regulates the industry. But the PSC’s proposed budget for 2009 is $82 million, far less than the higher levy will raise.
“It’s a pure revenue grab,” said Assemblyman James Hayes, R-Amherst.
Critics say the plan does not follow the consumer-protector image that Paterson sought this week with the Power Authority rate hike proposal.
“Even a minimal rate increase, as you’ve proposed, could have a negative impact on businesses and nearly 2.5 million New York residents,” Paterson wrote in a letter to the Power Authority on Monday. “By canceling any proposed rate increases, [the Power Authority] would be helping to keep down the overall electric bills for these New Yorkers.”
A day later, the Power Authority backed away from the plan.
“Not only is it inconsistent, but it’s going to be very painful for the average family and business in New York if he insists on putting this through,” Hayes said of Paterson’s seemingly contradictory positions. “It’s another slap in the face to ratepayers upstate.”
“It’s terrible. Everybody lined up against that [Power Authority] rate increase, and this one is much more costly on upstate homeowners,” State Sen. George Maziarz, R-Newfane, said.
National Grid officials have told lawmakers the higher tax will raise its surcharge payment to Albany by $96 million, to $118 million.
“We’re always concerned about an outside factor that has an impact on bills, especially now,” said Stephen Brady, a National Grid spokesman.
Brady said a residential electric consumer using 500 kilowatt- hours per month would pay $1.15 per month extra, while those with electric and natural gas service, which National Grid does not provide in the Buffalo area, would pay about $3.65 per month additional.
Telephone companies like AT&T and Verizon are expected to pay nearly $100 million if the surcharges are approved in the final budget, which lawmakers say is on track to be done by next Wednesday.
The surcharges will have a chilling effect on the push to expand broadband services in New York, said David Mancuso, an AT&T spokesman.
“It’s a distraction in our ability to roll out more broadband for more people in New York,” he said. He did not know how much of the surcharge would be passed on to consumers.
Telephone companies have a unique concern: The Paterson plan does not apply to cable TV companies, which now provide telephone services.
“It’s creating an unfair and unlevel playing field,” said John Bonomo, a spokesman at Verizon, which will see its surcharge payment go from $10 million to $65 million. He said the average consumer bill already contains 17 percent worth of government taxes, fees and surcharges.
Critics say that besides residential consumers, the tax will hit especially hard on small businesses and manufacturing companies already trying to stay ahead of the recession.
“If we care about economic recovery, we’ve got to reduce costs and remove obstacles to job creation. Ratcheting up obscene energy taxes in this economy is a huge step backward,” said Kenneth Adams, president of the Business Council of New York State.
Opponents of the tax believe there was a 50-50 chance they could defeat the plan. But on Tuesday, Paterson and legislative leaders announced the 2009 projected deficit had grown $2.2 billion, to $16.2 billion.
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