Renewable Fuels Standard: Just a Big Tax Increase

By August 6, 2007Energy, Taxation

In adopting a federal mandate requiring utilities to produce 15 percent of their electricity via renewable sources by the year, House members voted to raise the cost of electricity to their constituents; areas that cannot meet that 15 percent standard will be forced to buy credits from the federal government to make up for falling short in that goal. (The Senate did not have any such requirement.) Opponents — Democrats and Republicans alike — from states like Florida, Oklahoma and Texas described the provision as a giant tax increase on electricity.

Rep. Cliff Stearns (R-FL) noted that all the Public Service Commissions from the southern states were on record opposing the Udall amendment. Why? From The Congressional Record:

According to the U.S. Energy Information Administration, renewable resources currently account for only 3 percent of Florida’s total electric generation. More than one-third of this power is generated from municipal solid waste, but municipal solid waste does not fully qualify as renewable under this RPS proposal. In fact, the majority of renewables currently used in Florida do not qualify under this proposal. Even if all existing renewable resources were included in the RPS, Florida would still have difficulty meeting the requirements given our limited availability of solar, landfill gas and virtually no wind power in the State.

And because Florida lacks the renewable resources as defined in this RPS proposal, this mandate would force electric utility companies to purchase renewable energy credits to meet the federal requirements. Since most of these credits would be purchased from the government and would not be based on actual renewable generation, it would essentially amount to an energy tax on all Floridians and anyone who lives in the Southeast. If Congress enacts a 15 percent RPS, this tax would cost Florida ratepayers billions of dollars and greatly increase the average annual energy cost to residential customers. In a report released by the Department of Energy in June 2007, the proposed RPS would cause residential customers to spend $7.2 billion more for electricity.

A $7.2 billion tax increase, and that’s just on the citizens of Florida!

We’ve downloaded the Congressional Record debate on the Udall amendment as a .pdf file here. The NAM’s joint news release with the Edison Electric Institute can be read here.

P.S. One of the reasons Florida gets hit especially hard is that most of its electricity is provided by investor-owned utilities. Rural electric cooperatives and municipal utilities were exempted from the requirement because…well, just because.

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