Brian Bishop: Rhode Island Energy Policy: The Gift That Keeps on Taking
Wednesday, June 11, 2014
Guest MINDSETTER™ Brian Bishop
The compromise of the General Assembly to raise the gas tax and some fees as an alternative to tolling the Sakonnet Bridge is a bittersweet disappointment to those who fight tax increases but agree that East Bay residents were being singled out in the toll policy.
Still, a 1¢ increase in the gas tax, on a commodity that costs $4, is a quarter of one percent and can’t compare to the costs legislators are willing to heap on our electric bills. Without thinking twice, they add penny after penny to a commodity that costs about 15¢ (including both energy and distribution costs) which represents a 6% increase each time, and they just keep doing it.
Thanks to the legacy of our previous governor and the czar-like machinations of the “Office of Energy Resources” (OER) we face an increase of more than a penny if Deepwater Wind starts generating.
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But not to be outdone, the Chafee administration appears to have its own goals to ladle even more costs on our electric bill. And the House, inexplicably, seems poised to go along -- despite these policies being fundamentally opposed to a better business climate in Rhode Island, the new Speaker’s priority.
General Assembly Threatens Hidden Electricity Tax
The worst of these, H-7727 and companion bill S-2690, may already have been passed by the time you read this. This expansion of the “Distributed Generation Program” provides for an unwarranted doubling of qualifying electric costs. Net Metering is bad enough, delivering 15¢ a kwh (energy cost alone) to small renewable projects, when large generators who supply most of our power get well under a dime on average. But the solar pricing limit under distributed generation is almost double that expensive net metering, around 27¢.
Those are Deepwater prices. We know a lot of water has gone over the dam since the inception of this session, but the House kicked off 2014 with an economic workshop in which two invited experts urged the cancellation of the Deepwater project. John Kennedy, Senior Vice President for CVS Caremark did so implicitly, placing the cost of energy on par with taxes and regulation in determining the company’s expansion plans. Aaron M. Renn, former RI policy wonk and Urbanophile, was more direct, urging the state explicitly to rethink the Deepwater Wind plan.
A more salutary concern for energy infrastructure constraints is the basis for H-7991, which is up for consideration in the House Corporations Committee this week, its sudden reappearance a potential sign of legislative grease. But the bill itself is entirely a creature of the unaccountable OER and has not been seriously vetted. It’s most detestable provisions reverse decades of careful building of electric markets in New England separate from distribution companies, instead placing future supply decisions back in the hands of National Grid.
There isn’t anything inherently evil about big utilities, but there is something distressingly wrong when any utility becomes a sponge for momentary priorities popular with the legislature, so long as they get a piece. Grid is in line for a literal piece of Deepwater and the Distributed Generation racket. Jerry Elmer of the Conservation Law Foundation called this ‘aligning Grid’s interests with those of the environmental community’. That can be said more directly, it is a
bribe to take the environmentalists side over ratepayers.
In the case of H-7991, Grid is given the power to choose transmission infrastructure proposals that would be paid for by ratepayers, that’s you and me. One of those proposals would almost surely come from the Northeast Energy Link in which National Grid is a partner. And parallel legislation in Massachusetts promises residuals to the distribution company, suggesting that National Grid will be revving up the siphon on our wallets one way or another, or both.
Double Charging Industrial Consumers Harms Economy
To make matters worse, the bill provides for the recovery of the costs from all “distribution customers” which means you pay it whether you buy your power from Grid’s standard offers or not. These are power price hedging investments and belong on the energy cost side of the bill, not the distribution cost. Large industrial and commercial consumers buy their power directly from generators and already pay a price in those private contracts to insure power delivery despite transmission constraints. To allocate Grid’s hedging costs to such businesses would mean they are paying them twice, once again increasing the cost of doing business in RI.
Indeed these bilateral contracts that represent the preponderance of our electric market are a significant argument that this bill is premature. Its proponents from a consortium of New England states commissioned a pricing study that assumed 50% of our power trades in the auction markets where prices tend to spike in the winter when natural gas is in short supply. The actual figure for power bought on the auction is around 10% in Rhode Island, meaning the study overstates putative benefits by as much as 5 times. This is important, as the bill attempts to target competitive investments that will actually lower electric consumers monthly bills. But if you overestimate how much costs will be lowered, then you will overspend on infrastructure.
The OER contends that the auction results predict what our contract costs will be in out years, so the gains to consumers will be seen in the future. An easy metric to test this representation is National Grid contracts for “Standard Offer” power -- because the terms are public. There had been a close relationship between median auction pricing and standard offer contracts. But, as more and more power is secured ahead of time, as a hedge against high auction prices, this relationship is much diminished. Auction price spikes this winter resulted in a January to March median price of 41¢ per kwh, over 4 times the current contract price. You can see why policymakers might have been worried.
But contracts offered for next winter, after these events, show an average winter premium of about 20% over last year, not the 300% the OER would have us imagine if the auction market predicted the contract market. Their studies are fundamentally flawed, as has been the vetting of this legislation dependent upon them.
If Electric Rates Matter . . . Electric Rates Matter
So we face an increase of about 2¢ in winter months (customers actually see that ironed out with rates set for 6 months at a time). If that is deemed to be a competitive risk for our economy, why aren’t Deepwater and Distributed Generation, which each threaten similar increases year round, seen as the risks to our economy they are?
And why doesn’t anyone stop to ask why the distribution portion of the bill is so high?! We live in a densely populated state with customers relatively close together, yet there are western and southern states where the entire distribution and energy costs together are less than our distribution cost alone. If every penny counts, why are we increasing distribution costs with laws that constantly augment National Grid’s share instead of demanding efficiencies from them?
There is Time to Get This Right
Further, the markets committee of the Independent Systems Operator, ISO-NE, has changed its rules to more severely penalize generators who take capacity payments but are offline during shortage events. They have also instituted incentives for winter fuel storage programs. While their duty is to insure system reliability against brownouts, these measures will lessen winter price spikes. And the new “Algonquin Incremental Market Project” (AIM) increasing gas pipeline capacity comes online in 2 years and mitigates costs well for 5 years after that.
The visionary aspect of H-7991 is that it looks 7 or 8 years down the line and attempts to provide for residential electric consumers to invest in competitive infrastructure that will keep energy prices less costly and more stable throughout the year when demand is predicted to outpace what the AIM can provide.
But for this very reason, since the bill is not aimed at next year’s electric market, we should not allow the misconception that auction results measure future prices to rush us into a poorly thought out solution that hands unwarranted discretion to National Grid. We should observe the effects of changes to ISO-NE markets made in response to last winter’s events and much more seriously vet this concept before adopting it.
It is a shame that the legislature that claims our business environment is most important to them seems ready, once more, to do such great harm to it. One can only hope they come to their senses.
Brian Bishop is a board member of OSTPA, a taxpayer advocacy organization in Rhode Island.
Related Slideshow: RI Communities with the Highest Tax Rates #39 - #1
How do the taxes in your community compare to other cities and towns in Rhode Island?
GoLocalProv has ranked communities from the least to the highest taxed on the basis of their tax rates, using newly released data from the state Division of Municipal Finance. The below slides list the tax rate per $1,000 in value for homes, commercial property, personal property, and motor vehicles for the 2014 fiscal year, which began last July and ends next June.
Along with the rates are examples of what taxes might cost a typical resident in each city or town. For residential taxes, this calculation is based on the current statewide median price for a single family home, which is $240,000. For communities with them, homestead exemptions are factored in using the latest available figures. For motor vehicles, the example used is a 2008 Honda Accord, valued at the maximum retail price of $15,150. The total cost of home and car taxes is then represented as a percentage of the median income for that community, offering a rough measure of how affordable taxes are for those residents as compared with the taxes in another city or town.
Data sources: the Rhode Island Division of Municipal Finance, the Rhode Island Association of Realtors, the Rhode Island League of Cities and Towns, the National Automobile Dealers Association, and the U.S. Census Bureau.
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#39 New Shoreham
FY 2014 Tax Rates Per $1,000 in Value
Residential: $5.21
Commercial: $5.21
Personal Property: $5.21
Motor Vehicle: $9.75
Tax Cost for Residents
For a single family home valued at $240,000: $1,000.32
For 2008 Honda Accord: $147.71
Total Taxes as % Median Income: $1.29%
Note: Real property is assessed at 80 percent of value. This is reflected in the community's ranking.
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#38 Little Compton
FY 2014 Tax Rates Per $1,000 in Value
Residential: $5.38
Commercial: $5.38
Personal Property: $10.76
Motor Vehicle: $13.90
Tax Cost for Residents
For a single family home valued at $240,000: $1,291.20
For 2008 Honda Accord: $210.59
Total Taxes as % Median Income: 1.56%
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#37 Jamestown
FY 2014 Tax Rates Per $1,000 in Value
Residential: $8.75
Commercial: $8.75
Personal Property: $8.75
Motor Vehicle: $14.42
Tax Cost for Residents
For a single family home valued at $240,000: $2,100.00
For 2008 Honda Accord: $218.46
Total Taxes as % Median Income: $2.84%
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#36 Charlestown
FY 2014 Tax Rates Per $1,000 in Value
Residential: $9.46
Commercial: $9.46
Personal Property: $9.46
Motor Vehicle: $13.08
Tax Cost for Residents
For a single family home valued at $240,000: $2,270.40
For 2008 Honda Accord: $198.16
Total Taxes as % Median Income: 3.56%
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#35 Narragansett
FY 2014 Tax Rates Per $1,000 in Value
Residential: $9.80
Commercial: $14.68
Personal Property: $14.68
Motor Vehicle: $16.46
Tax Cost for Residents
For a single family home valued at $240,000: $2,352.00
For 2008 Honda Accord: $249.37
Total Taxes as % Median Income: 4.06%
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#34 Bristol
FY 2014 Tax Rates Per $1,000 in Value
Residential: $12.80
Commercial: $12.80
Personal Property: $12.80
Motor Vehicle: $17.35
Tax Cost for Residents
For a single family home valued at $240,000: $3,072.00
For 2008 Honda Accord: $262.85
Total Taxes as % Median Income: 5.18%
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#33 Portsmouth
FY 2014 Tax Rates Per $1,000 in Value
Residential: $14.53
Commercial: $14.53
Personal Property: $14.53
Motor Vehicle: $22.50
Tax Cost for Residents
For a single family home valued at $240,000: $3,487.20
For 2008 Honda Accord: $238.61
Total Taxes as % Median Income: 4.87%
Note: Motor vehicles are assessed at 70 percent of value. This is reflected in the community's ranking.
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#32 Westerly
FY 2014 Tax Rates Per $1,000 in Value
Residential: $10.53
Commercial: $10.53
Personal Property: $10.53
Motor Vehicle: $29.67
Tax Cost for Residents
For a single family home valued at $240,000: $2,527.20
For 2008 Honda Accord: $449.50
Total Taxes as % Median Income: 4.93%
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#31 South Kingstown
FY 2014 Tax Rates Per $1,000 in Value
Residential: $15.47
Commercial: $15.47
Personal Property: $15.47
Motor Vehicle: $18.71
Tax Cost for Residents
For a single family home valued at $240,000: $3,712.80
For 2008 Honda Accord: $283.46
Total Taxes as % Median Income: 5.39%
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#30 Newport
FY 2014 Tax Rates Per $1,000 in Value
Residential: $11.71
Commercial: $16.23
Personal Property: $16.23
Motor Vehicle: $23.45
Tax Cost for Residents
For a single family home valued at $240,000: $2,810.40
For 2008 Honda Accord: $355.27
Total Taxes as % Median Income: 5.45%
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#29 Middletown
FY 2014 Tax Rates Per $1,000 in Value
Residential: $15.71
Commercial: $20.87
Personal Property: $15.71
Motor Vehicle: $16.05
Tax Cost for Residents
For a single family home valued at $240,000: $3,770.40
For 2008 Honda Accord: $243.16
Total Taxes as % Median Income: 5.58%
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#28 Exeter
FY 2014 Tax Rates Per $1,000 in Value
Residential: $14.72
Commercial: $14.72
Personal Property: $14.72
Motor Vehicle: $32.59
Tax Cost for Residents
For a single family home valued at $240,000: $3,532.80
For 2008 Honda Accord: $493.74
Total Taxes as % Median Income: 3.93%
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#27 Tiverton
FY 2014 Tax Rates Per $1,000 in Value
Residential: $19.37
Commercial: $19.37
Personal Property: $19.37
Motor Vehicle: $19.14
Tax Cost for Residents
For a single family home valued at $240,000: $4,648.80
For 2008 Honda Accord: $289.97
Total Taxes as % Median Income: 7.75%
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#26 Richmond
FY 2014 Tax Rates Per $1,000 in Value
Residential: $19.76
Commercial: $19.76
Personal Property: $19.76
Motor Vehicle: $22.64
Tax Cost for Residents
For a single family home valued at $240,000: $4,742.40
For 2008 Honda Accord: $274.40
Total Taxes as % Median Income: 6.33%
Note: Motor vehicles are assessed at 80 percent of value. This is reflected in the community's ranking.
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#25 North Kingstown
FY 2014 Tax Rates Per $1,000 in Value
Residential: $18.80
Commercial: $18.80
Personal Property: $18.80
Motor Vehicle: $22.04
Tax Cost for Residents
For a single family home valued at $240,000: $4,512.00
For 2008 Honda Accord: $333.91
Total Taxes as % Median Income: 6.18%
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#24 Coventry
FY 2014 Tax Rates Per $1,000 in Value
Residential: $18.66
Commercial: $22.49
Personal Property: $18.66
Motor Vehicle: $18.75
Tax Cost for Residents
For a single family home valued at $240,000: $4,478.40
For 2008 Honda Accord: $284.06
Total Taxes as % Median Income: 7.11%
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#23 Cumberland
FY 2014 Tax Rates Per $1,000 in Value
Residential: $15.78
Commercial: $15.78
Personal Property: $28.86
Motor Vehicle: $19.87
Tax Cost for Residents
For a single family home valued at $240,000: $3,787.20
For 2008 Honda Accord: $301.03
Total Taxes as % Median Income: 5.62%
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#22 Hopkinton
FY 2014 Tax Rates Per $1,000 in Value
Residential: $19.77
Commercial: $19.77
Personal Property: $19.77
Motor Vehicle: $21.18
Tax Cost for Residents
For a single family home valued at $240,000: $4,744.80
For 2008 Honda Accord: $320.88
Total Taxes as % Median Income: 7.80%
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#21 Warren
FY 2014 Tax Rates Per $1,000 in Value
Residential: $18.67
Commercial: $18.67
Personal Property: $18.67
Motor Vehicle: $26.00
Tax Cost for Residents
For a single family home valued at $240,000: $4,480.80
For 2008 Honda Accord: $393.90
Total Taxes as % Median Income: 9.15%
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#20 East Greenwich
FY 2014 Tax Rates Per $1,000 in Value
Residential: $22.90
Commercial: $22.90
Personal Property: $22.90
Motor Vehicle: $22.88
Tax Cost for Residents
For a single family home valued at $240,000: $5,496.00
For 2008 Honda Accord: $346.63
Total Taxes as % Median Income: 6.05%
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#19 Burrillville
FY 2014 Tax Rates Per $1,000 in Value
Residential: $18.58
Commercial: $18.58
Personal Property: $18.58
Motor Vehicle: $40.00
Tax Cost for Residents
For a single family home valued at $240,000: $4,459.20
For 2008 Honda Accord: $606.00
Total Taxes as % Median Income: 7.35%
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#18 Barrington
FY 2014 Tax Rates Per $1,000 in Value
Residential: $18.20
Commercial: $18.20
Personal Property: $18.20
Motor Vehicle: $42.00
Tax Cost for Residents
For a single family home valued at $240,000: $4,368.00
For 2008 Honda Accord: $636.30
Total Taxes as % Median Income: 5.07%
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#17 West Greenwich
FY 2014 Tax Rates Per $1,000 in Value
Residential: $22.55
Commercial: $22.55
Personal Property: $33.85
Motor Vehicle: $19.02
Tax Cost for Residents
For a single family home valued at $240,000: $4,600.20
For 2008 Honda Accord: $288.15
Total Taxes as % Median Income: 5.81%
Note: Does not include rate for vacant land which is $16.07. Has homestead exemption.
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#16 Foster
FY 2014 Tax Rates Per $1,000 in Value
Residential: $20.40
Commercial: $20.40
Personal Property: $28.03
Motor Vehicle: $36.95
Tax Cost for Residents
For a single family home valued at $240,000: $4,896.00
For 2008 Honda Accord: $559.79
Total Taxes as % Median Income: 7.00%
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#15 Scituate
FY 2014 Tax Rates Per $1,000 in Value
Residential: $33.37
Commercial: $43.20
Personal Property: $39.75
Motor Vehicle: $30.20
Tax Cost for Residents
For a single family home valued at $240,000: $4,484.40
For 2008 Honda Accord: $434.65
Total Taxes as % Median Income: 6.01%
Note: Real property is assessed at only 50 percent of value and motor vehicles are assessed at 95 percent of value. This is reflected in the community's ranking.
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#14 Glocester
FY 2014 Tax Rates Per $1,000 in Value
Residential: $21.24
Commercial: $24.14
Personal Property: $42.29
Motor Vehicle: $24.37
Tax Cost for Residents
For a single family home valued at $240,000: $5,097.60
For 2008 Honda Accord: $369.21
Total Taxes as % Median Income: 7.10%
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#13 North Smithfield
FY 2014 Tax Rates Per $1,000 in Value
Residential: $15.86
Commercial: $17.57
Personal Property: $42.75
Motor Vehicle: $37.62
Tax Cost for Residents
For a single family home valued at $240,000: $3,806.40
For 2008 Honda Accord: $569.94
Total Taxes as % Median Income: 5.54%
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#12 Lincoln
FY 2014 Tax Rates Per $1,000 in Value
Residential: $23.49
Commercial: $26.85
Personal Property: $36.89
Motor Vehicle: $30.66
Tax Cost for Residents
For a single family home valued at $240,000: $3,664.44
For 2008 Honda Accord: $464.50
Total Taxes as % Median Income: 5.57%
Note: Has homestead exemption.
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#11 Warwick
FY 2014 Tax Rates Per $1,000 in Value
Residential: $19.79
Commercial: $29.68
Personal Property: $39.58
Motor Vehicle: $34.60
Tax Cost for Residents
For a single family home valued at $240,000: $4,749.60
For 2008 Honda Accord: $524.19
Total Taxes as % Median Income: 8.79%
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#10 West Warwick
FY 2014 Tax Rates Per $1,000 in Value
Residential Rates:
-
For apartments with 6+ units: $35.26
-
For two to five family buildings: $35.26
-
For single family homes: $24.67
Commercial: $29.98
Personal Property: $39.00
Motor Vehicle: $28.47
Tax Cost for Residents
For a single family home valued at $240,000: $5,920.80
For 2008 Honda Accord: $431.32
Total Taxes as % Median Income: 12.70%
Note: For ranking purposes, the average of the three residential rates was used.
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#9 Cranston
FY 2014 Tax Rates Per $1,000 in Value
Residential: $22.84
Commercial: $34.26
Personal Property: $34.26
Motor Vehicle: $42.44
Tax Cost for Residents
For a single family home valued at $240,000: $5,481.60
For 2008 Honda Accord: $642.97
Total Taxes as % Median Income: 10.48%
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#8 Smithfield
FY 2014 Tax Rates Per $1,000 in Value
Residential: $17.52
Commercial: $17.52
Personal Property: $61.06
Motor Vehicle: $39.00
Tax Cost for Residents
For a single family home valued at $240,000: $4,204.80
For 2008 Honda Accord: $590.85
Total Taxes as % Median Income: 6.54%
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#7 East Providence
FY 2014 Tax Rates Per $1,000 in Value
Residential: $22.78
Commercial: $25.21
Personal Property: $56.25
Motor Vehicle: $37.10
Tax Cost for Residents
For a single family home valued at $240,000: $4,647.12
For 2008 Honda Accord: $562.07
Total Taxes as % Median Income: 10.54%
Note: Rates are for FY 2013. Has homestead exemption.
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#6 Johnston
FY 2014 Tax Rates Per $1,000 in Value
Residential: $28.75
Commercial: $28.75
Personal Property: $59.22
Motor Vehicle: $41.46
Tax Cost for Residents
For a single family home valued at $240,000: $5,520.00
For 2008 Honda Accord: $628.12
Total Taxes as % Median Income: 11.20%
Note: Has homestead exemption.
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#5 Pawtucket
FY 2014 Tax Rates Per $1,000 in Value
Residential: $23.06
Commercial: $30.88
Personal Property: $52.09
Motor Vehicle: $53.30
Tax Cost for Residents
For a single family home valued at $240,000: $5,534.40
For 2008 Honda Accord: $807.50
Total Taxes as % Median Income: 16.00%
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#4 North Providence
FY 2014 Tax Rates Per $1,000 in Value
Residential: $24.29
Commercial: $31.03
Personal Property: $69.41
Motor Vehicle: $41.95
Tax Cost for Residents
For a single family home valued at $240,000: $4,663.68
For 2008 Honda Accord: $635.54
Total Taxes as % Median Income: 10.55%
Note: Has homestead exemption.
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#3 Woonsocket
FY 2014 Tax Rates Per $1,000 in Value
Residential: $34.56
Commercial: $39.81
Personal Property: $46.58
Motor Vehicle: $46.58
Tax Cost for Residents
For a single family home valued at $240,000: $4,976.64
For 2008 Honda Accord: $705.69
Total Taxes as % Median Income: 14.45%
Note: Has homestead exemption.
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#2 Providence
FY 2014 Tax Rates Per $1,000 in Value
Residential Rates:
-
For owner-occupied residential property: $19.25
-
For non-owner-occupied residential property: $33.75
Commercial: $36.75
Personal Property: $55.80
Motor Vehicle: $60.00
Tax Cost for Residents
For a single family home valued at $240,000: $4,620.00
For 2008 Honda Accord: $909.00
Total Taxes as % Median Income: 14.21%
Note: For ranking purposes, the average of the two residential rates was used.
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#1 Central Falls
FY 2014 Tax Rates Per $1,000 in Value
Residential: $25.72
Commercial: $37.06
Personal Property: $73.11
Motor Vehicle: $48.65
Tax Cost for Residents
For a single family home valued at $240,000: $4,728.36
For 2008 Honda Accord: $737.05
Total Taxes as % Median Income: 14.43%
Note: Has homestead exemption.
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