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Energy Electric Utilities

Energy Newsletter

A Quarterly Review of Energy Policy and Activities in the State Legislatures

October 2005
Vol. 1, No. 3

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States React to Rising Gasoline Prices
Price Gouging
NCSL Creates Hurricane Web Site
Using Distributed Generation to Support Energy Security
The Effects on Oil and Natural Gas Markets
Voluntary Transportation Initiatives
NCSL Advisory Council on Energy Meeting
Electricity Infrastructure

Upcoming Events

States React to Rising Gasoline Prices

In the wake of Hurricane Katrina, gasoline prices rose across the country.  Severe damage to the oil infrastructure along the Gulf Coast decreased production and supply.  Concerns about limited supply caused prices to increase dramatically, to as much as $6 in some areas.  States quickly took action, attempting to lower record prices for consumers.

On September 2, Georgia Governor Sonny Perdue signed an executive order to eliminate the state’s motor fuel sales tax from the cost of gasoline.  Georgia's state motor fuel tax consists of a $.075 per gallon excise tax and a 4 percent sales tax on each $1 spent on gasoline.  The cut was in effect for one month, ending on October 1. 

This type of immediate remedy to consumer complaints about pump prices also can have a downside.  In most cases, a state’s excise tax on gasoline is the primary source of transportation funding.  Critics worry that a cut that affects the excise tax will reduce the state’s transportation funding.  However, in Georgia, the governor said the state could afford to provide the tax relief since high oil prices even before the hurricane allowed the state to collect more than it had originally budgeted. 

In addition, Governor Perdue cancelled school for two days in anticipation of Hurricane Rita’s effects on the state’s gasoline supply.

A bill allowing the governor to lift the state’s 6 percent sales tax on gasoline and diesel fuel during an emergency passed the Michigan House on September 6.  The bill, which then went to the Senate, would allow the governor to issue an executive order to remove the sales tax for a period of time.  About 75 percent of the sales tax revenue goes to the state's school aid K-12 public education budget. 

On September 20, the New York Senate passed a cut in the sales tax on gasoline.  Under the plan, the state and localities would charge sales tax only on the first $2 of a gallon of gas. A subsidy for home-heating bills also was part of the bill.

Agriculture Commissioner Gus Douglass plans to allow employees who are not needed in the office to serve the public five days per week to start working four 10-hour days.

In 2002, Hawaii passed a bill that allows the public utilities commission to set a cap on wholesale gasoline prices each week.  That provision became effective on September 1, 2005.  The cap does not guarantee lower prices at the pump; it guarantees only that Hawaii wholesale prices will be tied to average wholesale prices in three U.S. markets.

Other states are considering suspending the gasoline tax for a set amount of time, repealing the gas tax in an emergency, or repealing recently increased gasoline taxes.

For more information, contact Kate Burke at (303) 856-1404 or Christie Rewey at (303) 856-1512.

Price Gouging

Recent gasoline price increases caused many states to turn to their price gouging laws. Most price gouging laws prevent essential commodities from being sold at exorbitant prices. To view state statutes on price gouging, visit our Web site: http://ww.ncsl.org/programs/esnr/energy2.htm

NCSL Creates Hurricane Web Site

After Hurricane Katrina, NCSL developed a Web site to serve as a resource guide for state legislators and legislative staff as they tackle the policy challenges associated with a natural disaster of this magnitude. The Web site address is: http://www.ncsl.org/programs/press/2005/katrina.htm

Using Distributed Generation to Support Energy Security

America’s energy framework is vulnerable to attack and natural disaster. Distributed generation (DG)—generation at or near the end-user site—can act as a critical component of a secure and reliable energy infrastructure. DG technologies—wind, solar, fuel cells, microturbines, diesel—save energy; offer reliable, high-quality power; and reduce emissions (when clean DG technologies are incorporated). Technical, regulatory and financial barriers hinder the ease of use of distributed generation. Many states—such as California, Connecticut and Texas—are overcoming the barriers through legislation.

The National Council on Electricity Policy recently met to discuss distributed generation barriers, trends and technologies. The presentations and discussion from that meeting can be accessed at: http://www.ncouncil.org/dgforum.html

The Effects on Oil and Natural Gas Markets

The U.S. Department of Energy’s statistical agency, the Energy Information Administration, announced that, after Hurricane Katrina, this winter’s natural gas prices for the Midwest are expected to increase by as much as 71 percent. Heating oil prices in the Northeast could rise by 31 percent. Rising prices, expected even before the hurricane, mean consumers will be spending a larger portion of their household budgets on natural gas costs. Fifty-two percent of heated U.S. homes use natural gas. State budgets also will feel the effects.

• Connecticut lawmakers on October 25 passed an energy assistance bill to establish a sales tax holiday from Nov. 25 to April 1, 2006, on weatherizing products, energy-efficient home heating equipment and windows. Meeting in special session, they set aside $23.8 million to expand a state energy assistance program, providing an additional $200 per family.
• Texas issued a moratorium on electricity rate adjustments. 
• Montana Governor Schweitzer proposed using an additional $9 million in state taxpayers’ money to help the poor pay their heating bills.
• Pennsylvania is stressing conservation and has scheduled workshops to help municipal governments reduce their energy costs by providing strategies to reduce those costs.
• New York Governor Pataki released a nine-point strategic energy action plan to provide relief for home heating oil consumers.
• In October, New Mexico Governor Bill Richardson called a special legislative session to address high energy prices. The package of legislation includes a proposed $100 million refund to natural gas customers. Other proposed items include an extra $20 million for low-income consumers, an emergency anti-price gouging act, and a relief fund to help with higher motor fuel prices.
• In the Idaho Panhandle, voters will decide November 1 whether Kellogg becomes the latest Idaho school district to switch to using wood fuel to heat classrooms to avoid rising natural gas prices. A $9.5 million bond includes funding for a biomass system that burns wood chips, spindly trees and fibrous organic debris to boil water for steam heating in school buildings.

Short-term measures can include energy efficiency, utility payment plans, and low-income assistance. Energy efficiency efforts through the use of programmable thermostats, lower settings on water heaters and better insulation, for example, all help. A federal tax code provides up to $1,000 in tax credits to homeowners who replace old furnaces or old windows with newer more energy-efficient models in 2006 and 2007. 

Budget payment plans—also known as level payment plans—are available through most utilities. They offer a payment option that provides bill predictability throughout the year.

Low-income customers often are hardest hit.  The American Gas Association (AGA) recently released a study, The Growing Need to Help Low-Income Energy Consumers: Government, Charitable and Utility Programs, that contrasts the levels of available energy assistance from government, fuel funds and utilities with the rising numbers of households in economic difficulties.  The AGA study documents such trends such as the following.

• More households have incomes near the poverty line now than in 1981 when LIHEAP was created, and the consumer price index shows an 81 percent increase from 1981 to 2005.
• Energy prices increased dramatically during the same period.
• Funding for federal home energy assistance has only increased by only 4 percent.
• The program serves only 13 percent of 33 million eligible families.

3 From 2001 to 2004, utility assistance programs grew by 50 percent and utility energy efficiency programs grew by 35 percent, but the $4 billion in total assistance (LIHEAP + utility programs + state programs + fuel funds) is enough to help only one in four families.

Voluntary Transportation Initiatives

Many state and local governments and transit agencies have active trip-reduction and ridesharing incentives with the goals of improving air quality and decreasing gridlock. The federal government’s "Commuter Choice" Program allows employers to pay for employees’ costs of commuting to work via an alternative to the single-occupant vehicle. This provision of the Internal Revenue Code allows employers to deduct the costs as business expenses. States can supplement this: Maryland has a $30 per month transit tax credit to supplement the $100 per month federal benefit. In another bid to encourage alternative commuting practices, Commuter Choice allows employers to set up programs that let employees cash in the value of employer-provided parking and receive either the taxable value of the parking or a tax-free transit benefit.

Washington state law requires employers to create commute trip reduction programs. The Washington State Ferry system, supported in part by sales tax and motor vehicle registration fees, allows registered carpools and vanpools to receive choice loading positions on some of its ferries. Hawaii’s BONUS ("Bus On Us") program encourages employers to distribute bus passes or transit voucher benefits to their employees.

California’s Transit Incentive Program encourages ridesharing in two ways. Employees who use public transit can receive passes that are discounted by up to $65 per month. Commuters who use a vanpool can receive subsidies up to the same amount. Those who choose to walk or bike also may be eligible for financial incentives.

NCSL Advisory Council on Energy Meeting

The NCSL Advisory Council on Energy (ACE) met September 26-27 in Tucson, Arizona. The council consists of state legislators; legislative staff; and representatives from federal agencies, environmental organizations, the private sector and professional organizations. The unique combination of state legislative, nonprofit and private sector input allows NCSL’s ACE to give a well-informed perspective on the activities in which the NCSL Energy Program is now or should be engaged. At the most recent meeting, the group focused on advances in coal technologies—from more-efficient coal combustion to gasification. The group then suggested ways that NCSL might be able to assist state legislatures with these issues. Several expert presenters briefed the group. Presentations from the meeting are available on the NCSL Web site at http://www.ncsl.org/programs/energy/acesept05.htm

Electricity Infrastructure

A properly functioning power system depends upon a reliable network of transmission lines. These lines are vulnerable to disasters such as Hurricane Katrina. More than a month after the storm hit the Gulf Coast, about two-thirds of the city of New Orleans remained without power. It will take several months and millions of dollars to rebuild transmission lines in the hurricane-hit areas. State policymakers may be curious about their options for speeding reconstruction of this vital infrastructure and about seeking long-term ways to modernize and strengthen the grid.

In 2005, a number of states were examining their policies that affect the building of transmission. As noted in the previous edition of this newsletter, Kansas, North Dakota and South Dakota have established financing authorities for building electricity transmission. In 2005, the North Dakota legislature waived the mandate for Public Service Commission approval for power plants the produce up to 100,000 kW. The state also reduced the fee that transmission builders pay when they apply for a siting permit.

South Dakota provided tax refunds for construction of large-scale power plants. A 2005 Wisconsin law requires state agencies to coordinate their regulatory processes for approving transmission lines and to use preexisting rights of way for lines.

Upcoming Events

November

December

APPA Policymarkers Workshop: Governing in a Changing Marketplace
January 25 - 27, 2006
Wyndham Harbour Island Hotel, Tampa, Florida

ENERGY NEWSLETTER Published quarterly by the National Conference of State Legislatures, 7700 East First Place, Denver, Colorado 80230, (303) 364-7700. FAX: (303) 364-7800 William T. Pound, Executive Director Funding support for this publication is provided by the U.S. Department of Energy. Any opinions, findings or conclusions in this publication are those of NCSL staff and do not necessarily reflect the views and policies of the U.S. Department of Energy. NCSL ENERGY PROGRAM The NCSL Energy Program focuses on a number of issues and answers information requests dealing with state actions on energy policies, new energy technologies, potential effects of federal energy regulation on states, upcoming NCSL meetings on energy issues, NCSL publications on key issues, and legislation. Contributors to this issue: Kate Burke, Christie Rewey Layout and design: Alise Garcia.

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