Tuesday, July 07, 2009

State employees are expendable but renewable energy tax credits are not?

Diverging slightly from my usual focus on technological developments, it seemed appropriate to comment on one of the mechanisms that our state plans to employ to deal with with current fiscal crisis. Colorado, like several other states, is suffering from a budget crisis due to drastically depressed revenues as a result of the economic recession. This has led Governor Ritter to finally declare that expanded furloughs or even layoffs of state employees may become necessary but that the generous tax credits which contribute to the revenue decline are "off the table." In this case, the particular tax credits that I find most egregious are those reducing property taxes and eliminating sales taxes on the sale of renewable energy generating equipment, notably wind turbines and solar panels.

Now, I am all for incentivizing emerging technologies but neither of these technologies can any longer be considered emerging. Moreover, the major utilities in the state have far surpassed the requirements of the renewable energy standard approved by the citizenry and expanded by the governor and legislature. With that acknowledgement, do we still need to provide generous tax credits to the favored renewable industry in light of the current fiscal crisis, especially at the expense of state employees? Where is the shared sacrifice?

Colorado's renewable energy standard also includes a 2% rate impact limitation which purports to promise ratepayers that meeting the standard will not increase their electricity costs more than 2% over what they would be if there were no reenewables on the system. Unfortunately, this promise has been subverted by convoluted language compounded by rulings which allow utilities to manipulate the calculation to achieve the desired result. Personally, I would be willing to pay more than a 2% increase to migrate more of our electrical system to renewable energy, but a promise made is a promise that should be kept. Utilities, on the other hand, are guaranteed full cost recovery and a rate of return on "prudently incurred" expenses made to comply with the renewable standard. Unfortunately, this has been extended to expenses that allow the utility to go well beyond the standard. If the cost of the aforementioned tax credits were added to the true increased cost of adding renewables to the system, the actual cost of renewable energy would go well beyond the promised 2% increase. Given all of this, I cannot see how tax credits can be off the table while layoffs of those who provide services to citizens can be on the table.

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