Agenda Item 5A
July 29,2014
Action
MEMORANDUM
TO:
FROM: -
County Council
L
I
Michael Faden, Senior Legislative Attorney
V
Leslie Rubin, Legislative Analyst, Office of Legislative Oversight
Action:
Expedited Bill 22-13, Taxation - Fuel Energy Tax - Renewable Energy
Sources
SUBJECT:
Government Operations and
Fiscal Policy
CommitteefTransportation,
Infrastructure, Energy, and Environment Committee recommendation: enact with
amendments.
Expedited Bill 22-13, Taxation - Fuel Energy Tax - Renewable Energy Sources,
sponsored by the Council President (at the request of the County Executive) and Councilmember
Leventhal, was introduced on July 9, 2013. A public hearing was held on July 30 (see testimony,
©12-14).
Bill 22-13 would exempt from. the County fuel-energy tax any energy produced and
delivered in the County and generated from a renewable energy source. A renewable energy source
is defined by reference to the definition of a "Tier 1 renewable source" in the state Public Utilities
law (see ©1O-11), which includes solar and wind power, biomass, and geothermal energy, among
other sources.
Fiscal impact
The OMB fiscal impact statement estimated an annual revenue loss of
$108,500 in the near term, although this appears to be based only on energy generated by solar
electric systems. This number could rise substantially as more homeowners and businesses install
various forms of renewable energy sources.
Committee worksessions
The Government Operations and Fiscal Policy Committee and
Transportation, Infrastructure, Energy, and Environment Committee held ajoint worksession on this
Bill on January 23. The joint Committee recommended enactment of this Bill with one amendment,
originally proposed by Pepco (see ©3, lines 28-31), to clarify that electricity which goes through the
utility's meters would
be
taxed. The Transportation, Infrastructure, Energy, and Environment
Committee held a second worksession on July 21 and recommended a further amendment (see
©3, lines 33-36), which is summarized below.
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Issues/Committee recommendations
1) Should this exemption be broadened to include aU energy produced from renewable
sources?
Before this Bill could proceed to Council action, Committee Chair Berliner asked the
Executive branch to answer questions posed by Councilmember Leventhal and himself about
whether this Bill should be broadened to exempt from the fuel/energy tax all energy generated from
renewable sources, instead of only the self·generated renewable energy that this Bill would exempt.
At the hearing Councilmember Leventhal, who signed on as a co·sponsor of this Bill,
noted that the now·unfunded County Clean Energy Rewards program was adopted because, at
the time, the Council was advised that
it
could not effectively exempt all energy from renewable
sources from the fuel·energy tax because of the utilities' inability to calculate which energy
supplied to each consumer is derived from renewable sources. Stan Edwards of the County
Department of Environmental Protection (DEP) responded that the proposed exemption in this
Bill is limited to on-site, self-generated "behind the meter" production that is not currently taxed
because it is not measured, rather than all energy produced from renewable sources.
Councilmembers Leventhal and Berliner questioned whether the proposed exemption
could now feasibly be expanded to all renewable energy, produced on-site and off-site. Assistant
Chief Administrative Officer Bonnie Kirkland submitted a memo (see ©15-16) concluding that
"the County Executive does not believe additional exemptions from the fuel energy tax are ready
for implementation in FY15." Executive staff estimated a potential fuel-energy tax revenue loss
from $13 million to $25.8 million if a tax exemption were expanded to all energy from
renewable sources.
Committee recommendation: At the July 21 Transportation, Infrastructure, Energy,
and Environment Committee worksession, Committee members expressed strong interest in a
goal of exempting from the fuel/energy tax all energy from renewable sources. The Committee
requested, and Executive branch staff confirmed that they would provide, a report by February
15, 2015, addressing how the County could effectively achieve this goal and the benefits and
costs of doing so.
2) Should this exemption be limited to electricity consumed on the site where it is
generated?
As introduced, Bill 22-13 would exempt from the County fuel-energy tax energy generated
from a renewable source (as defined in
§
7-701(1) of the Maryland Public Utility Article) if:
• the energy is generated in the County, and
• the energy is delivered to or used by an end user in the County. See ©3, lines 32-34.
The Executive's fiscal and economic impact statements (see ©6-9) note that the Bill's
purpose is to exempt from the fuel-energy tax those residential and commercial energy providers
2
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who generate energy, for their own or others' use, by installing certain renewable energy sources,
such as solar photovoltaic panels. When a business or residence generates more electricity
than
it
uses, the excess power is sent through the electrical grid and distributed to other customers.
If that excess power is later delivered to or used by an end user in the County, Bill 22-13,
read literally, would exempt that electricity from the
tax.
However, electricity distributors such as
Pepco note that they cannot trace the end user of any electricity produced by a specific source, and
thus cannot determine whether that end user is located in the County, and concomitantly they cannot
trace the actual source of any particular electricity consumed by an end user. Under the current
County law (see ©2-3, lines 27-28), the fueVenergy
tax
is applied to quantities of energy measured
at the point of delivery for final consumption in the County.
Pepco suggested an amendment to
clarify
how to measure which electricity is taxed, using
the "net metering" concept, by inserting the following sentence on ©3, line 28-31:
For an electric company Cas defined in state law), the rates of
tax
apply to the net
consumption that is used to calculate each consumer bill.
Consistent with the original intent of this Bill, this amendment would effectively exempt "behind
the meter" electricity from the fuel-energy tax. Executive branch
staff
and the County Attorney
confmned that this amendment is consistent with, and does not change their interpretation of,
current County law.
GOff&E recommendation: approve this amendment.
T&E
recommendation:
To make this Bill internally consistent the T&E Committee
recommended a further amendment suggested by DEP
staff
on ©3, lines 32-34:
The tax does not
!!J2Qly
to energy that is generated from
~
renewable source in the County
and [[delivered to or used
Qy
an end user in the County]] either used on the site where it
is generated or subject to a net energy metering agreement Cas dermed in state law) with a
public utility.
3) Should this exemption be limited to power produced by residential and other small
producers?
Bill 22-13 as introduced was drafted broadly enough to exempt a large commercial
producer of renewable energy located in the County from the fuel-energy tax, at least for the
energy that producer uses itself on site. One speaker at the hearing (see Breiner testimony, ©14)
noted that the exemption in this Bill could benefit, for example, the Town of Poolesville if it
goes ahead with plans to lease a large solar array to provide power for town government users.
I
Depending on the degree of future development of on-site solar and wind power sources in the
County, especially by large non-residential users such as shopping centers, the fuel-energy
revenue loss (and the incentive for renewable energy use) could be substantial.
IIfboth amendments recommended in Issue 2 are adopted, electricity produced by an off-site solar array such as the
one this testimony referred to likely would not be exempt from the fueVenergy tax unless it were subject to a net
energy metering agreement.
3
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Executive branch staff believe that, if this scenario comes to pass (and they would not be
averse to it happening), any revenue loss would
be
both manageable and outweighed by the
positive environmental effects. They do not recommend limiting this exemption to residential or
other small producers. Neither Committee discussed this issue.
This packet contains:
Expedited Bill 22-13 with Committee amendments
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statements
Md. Code Public Utilities Article
§7-701
Hearing testimony
Memo from Assistant Chief Administrative Officer
State law on net energy metering
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Circle
#
1
4
5
6
10
12
15
17
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Expedited Bill No. ..,,22"-.-1.!.,>:3'-----_ _ __
Conceming: Taxation - Fuel Energy Tax
Revised: 7-23-14
Draft No. _3_
Introduced:
July 9,2013
Expires:
January 9, 2015
Enacted: ____________
Executive: _ _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ __
Sunset Date:
-,N~o:::!:n!7e-:--:--:::-
_ _ __
Ch.
Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the request ofthe County Executive and Councilmember Leventhal
AN EXPEDITED ACT
to:
(1)
exempt energy that is generated from certain renewable energy sources from the fuel
energy tax; and
(2)
generally amend County law regarding the fuel energy tax.
By amending
Montgomery County Code
Chapter 52, Taxation
Section 52-14
Boldface
Underlining
[Single boldface brackets]
Double underlining
[[Double boldface brackets]]
.,.
.,.
.,.
Heading or defined term.
Addedto existing law by original bill.
Deletedfrom existing law by original bill.
Added by amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unqffocted by bill.
The County Council for Montgomery County, Maryland approves the following Act:
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Expedited Bill 22-13
1
Sec.
1.
Section 52-14 is amended as follows:
52-14.
(a)
Fuel-energy tax.
2
3
ill
A
tax
is levied and imposed on every person transmitting,
distributing, manufacturing, producing, or supplying electricity,
gas, steam, coal, fuel oil, or liquefied petroleum gas in the
County.
4
5
6
7
8
9
10
11
12
ill
The County Council must set the rates for various
and energy by
~
forms of fuel
resolution adopted [according to the
requirements of] under Section S2-17(c). The Council may, from
time to time, revise, amend, increase, or decrease the rates,
including [establishing] setting different rates for fuel or energy
delivered for different categories of final consumption, such as
residential or agricultural use.
[The rates] Each rate must be
13
14
15
16
based on a weight or other unit of measure regularly used [by
such persons] in the conduct of [their] business. The rate for each
form of fuel or energy should impose an equal or substantially
equal
tax
on the equivalent energy content of each form of fuel or
energy for a particular category ofuse.
17
18
19
20
21
ill
The
tax
does not apply to the transmission or distribution of
electricity, gas, steam, coal, fuel oil, or liquefied petroleum gas in
interstate commerce through the County if the tax would exceed
the taxing power of the County under the United States
Constitution. The tax does not apply to fuel or energy converted
to another form of energy that will be subject to a
tax
under this
Section. The
tax
must not be imposed at more than one point in
the transmission, distribution, manufacture, production, or supply
system. The rates of
tax
apply to the quantities measured at the
22
23
24
25
26
27
o
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Expedited Bill 22-13
28
29
30
point of delivery for final consumption in the County.
electric company (as defined in state law), the rates of tax apply
to the net consumption that is used to calculate each consumer
bilL
(±)
31
32
33
34
The tax does not
illm.lY
to energy that is generated from
f!
renewable source in the County and [[delivered to or used
Qy
an
end user in the County]] either used on the site where it is
generated or subject to a net energy metering agreement (as
defined in state law) with a public utility. Renewable source
means.f! "Tier
1
renewable source" as defined in Section 7-701(1)
of the Public Utilities Article of the Maryland Code or any
successor provision.
35
36
37
38
39
40
41
42
*
Sec. 2.
(a)
*
*
Expedited effective date; applicability.
The Council declares that this legislation is necessary for the immediate
protection of the public interest. This Act takes effect on the date when
it becomes law.
43
44
45
(b)
Approved:
This Act applies to energy delivered before or after this Act takes effect.
46
47
48
Craig
L.
Rice, President, County Council
Date
49
50
Approved:
Isiah Leggett, County Executive
Date
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LEGISLATIVE REQUEST REPORT
Expedited Bill 22-13
Taxation - Fuel Energy Tax - Renewable Energy Sources
DESCRIPTION:
PROBLEM:
Bill 22-13 will create an exemption from the fuel energy tax for
energy that is generated from a renewable energy source.
The current version of the fuel energy tax imposes the tax on all
energy that is generated, manufactured or supplied from a renewable
energy source.
To exempt energy from the fuel energy tax that is generated from a
renewable energy source.
Department of Environmental Protection and Department of Finance.
To
be
requested.
To
be
requested.
To be requested.
To be requested.
Bob Hoyt, Department of Environmental Protection
Applicable.
GOALS AND
OBJECTIVES:
COORDINATION:
FISCAL IMPACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITHIN
MUNICIPALITIES:
PENALTIES:
None.
F;\Law\BiIIs\1322 Taxation - Fuel Energy Tax\Lrr.Doc
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c·.:.
t-:v
,I;t)
.i.....
L
OFFICE OF TIlE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 201150
'·2
'.
..
:.:-:
'\
Isiah Leggett
County Executive
073040
MEMORANDUM
\"n
o
June
21,2013
TO:
FROM:
RE:
Nancy Navarro, Council President
Isiah Leggett. County Executive
~~~
.................-.....
Proposed Legislation - Fuel Energy Tax Exemption for Renewable Energy
Sources
I am transmitting for Council introduction a bill that creates an exemption from
the County's fuel energy tax for energy that is generated from a renewable energy source
provided the energy is generated within the boundaries of the County and is used by an end user
in the County. I am also attaching the Legislation Request Report and Fiscal and Economic
Impact Statements for the bill.
The bi1l will create an exemption from the fuel energy tax for energy that is
created by a renewable energy source. The renewable energy sources are defined in Section 7­
701
(1)
of the Public Utilities Article, which include among other things, electricity that is created
by solar energy.
I would appreciate your consideration of this bill and
if
you have any questions or
need additional infonnation, do not hesitate to contact Bob Hoyt, Director, Department of
Environmental Protection, at
240-777-7781.
Attachments: (4)
c:
Joseph Beach, Director, Department of Finance
Marc Hansen, County Attorney
Bob Hoyt, Director. Department of Environmenta1 Protection
Jennifer Hughes, Director, Department of Management and Budget
montgomerycountymd.gov/311
240-773-3556 TTY
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Fiscal Impact Statement
Council Bill xx-13, Taxation - Fuel Energy Tax
1. Legislation Summary.
The legislation exempts from the fuel energy tax energy that is generated from a renewable
energy source. The legislation would exempt solar electricity from the fuel tax.
2.
An
estimate of changes in County revenues and expenditures regardless of whether the
revenues or expenditures are assumed in the recommended or approved budget.
Includes source of information, assumptions, and methodologies used.
The Bill does not have an expenditure impact. Currently, the County does not collect the fuel
energy tax on energy generated by solar electricity systems. The County Attorney, however,
has determined that electricity generated by solar systems is subject to the tax. Based on
currently available industry data, the best estimate is that $108,500 in fuel energy tax revenue
would be exempt under this Bill. Since the solar industry continues to expand, the tax
exemption could increase over time.
3. Revenue and expenditure estimates covering at least the next 6 fiscal years.
Revenues for the next six fiscal years are difficult to project, given that solar energy
generation is a relatively small segment of energy generation in the County. Assuming
annual growth of 10 percent, uncollected fuel energy tax revenue is estimated to be $837,170
over six years.
4. An actuarial analysis through the entire amortization period for each bill that would
affect retiree pension or group insurance costs.
This legislation does not affect retiree pension or group insurance costs.
5. Later actions that may affect future revenue and expenditures
if
the bill authorizes
future spending.
The legislation does not authorize future spending.
6. An estimate of the staff time needed to implement the bill.
There is no additional staff time needed to implement the bill.
7. An explanation
of how
the addition
of new staff responsibilities
would affect other
duties .
.
The legislation does not establish new staff responsibilities.
8.
An
estimate of costs when an additional appropriation is needed.
Not applicable.
9. A description of any variable that could affect revenue and cost estimates.
A key variable would be the, number of solar electricity systems installed in the County. The
estimate is based on Maryland Energy Administration data indicating 6500 kW of solar
capacity in 2012. Growth in solar electricity capacity will result in increased fuel energy tax
exemptions.
1
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10. Ranges
of revenue
or expenditures that are uncertain or difficult to project.
See item number 9 above.
11.
If
a bill is likely to have no fIScal impact, why that is the case.
See numbers 2 and 3 above.
12. Other fiscal impacts or comments.
Not applicable.
13. The following contributed to and concurred with this analysis:
Erika Lopez-Finn, Office of Management and Budget;
Robert Hagedoom, Department of Finance;
David Platt, Department of Finance
Jennifer A.
Office of Management and Budget
hi1.­
Hu~r
Date
2
(j)
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Economic Impact Statement
Bill xx-13, Fuel Energy Tax
Background:
This
legislation would create an exemption from the fuel energy
tax
for energy that is
generated from a renewable energy sources located within the County, primarily solar
photovoltaic panels,
and
generally amend County law regarding the fuel energy
tax
1. The sources of information, assumptions, and methodologies used.
• Maryland Energy Administration (MEA) solar grant database and Montgomery
County Department of Environmental Protection (DEP) data on large systems
being installed.
• DEP estimates that as of2013 current installed solar panel capacity is 6,500
kilowatts (kW),ofwhich approximately 5,500 kW
is
residential and 1,000 kW
is
commercial.. A precise forecast of additional installed capacity is difficult;
although it is expected to increase through 2016, when current federal incentives
are due to expire. Other sources' of clean energy subject to the exemption are
minor compared to solar.
2. A description of any variable that could affect the economic impact estimates.
• The amount ofadditional capacity from the installation of solar panels.
• The price of electricity from energy distributors to residential and commercial
customers.
• The County's
tax
rate for electricity usage by residential and commercial
customers.
3. The Bill's positive or negative effect,
if
any on employment, spending, saving,
investment, incomes, and property values in the County.
• The legislation may stimulate investment for solar panels by residential and
commercial users because it clarifies the imposition of the County's energy
tax
on
the generation of electricity from solar panels. The Bill exempts the generation of
electricity from solar panels from the.County's energy
tax.
That exemption
would decrease energy expenses and increase incomes for both residential and
commercial users of solar panels all other things being equal.
• With the exemption from the County's energy
tax,
the demand for solar panels
could increase all other things being equal. Such an increase in demand would
benefit local supply and construction companies and increase business income.
Page 1 of2
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Economic Impact Statement
Bill xx-13, Fuel Energy Tax
• While the stimulation in investment for solar panels fIl8.y have an economic
impact attributed to the exemption,
the
total
impact on the County's economy
through employment, spending, investment, incomes, and property values may be
modest.
4. H a Bill is likely to have no economic impact,' why is that the case?
• The Bill could have
a
modest positive economic impact.
5. The following contributed
to
and concurred
with
this analysis:
David Platt and
Mike Coveyou, Finance
Page 2 of2
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§
7-701
PuBLICUTILlTIES
(3) the Commission approves under § 7-704.1 of
this
subtitle.
(1)
Qualifying biomass.
-
(1) "Qualifying biomass" means a nonhazardous,
organic material that is available on a renewable or recurring basis, and is:
(i) waste material that
is
segregated from inorganic waste material and
is derived from sources including:
1. except for old growth timber, any of the following forest-related
resources:
A. niill residue, except sawdust and wood shavings;
B.
precommercial soft wood
thinnjng;
C. slash;
D. brush; or
E. yard waste;
2.
a pallet, crate, or dunnage;
3. agriCUltural and silvicultural sources, including tz:ee crops, vine­
yard materials, grain, legumes, sugar, and other crop by-products or residues;
or
4. gas produced from the anaerobic decomposition of animal waste or
poultry waste; or
(li)
a plant that is cultivated exclusively for purposes of being used at a
Tier 1 renewable source or a Tier 2 renewable source to produce electricity.
(2) "Qualifying biomass" includes biomass listed in paragraph (1) of this
subsection that is used for co-firing, subject to §7-704(d) of this subtitle.
(3) "Qualifying biomass" does not include:
(i) unsegregated solid waste or postconsumer wastepaper; or
(ll)
an invasive exotic plant species.
(m)
Thermal biomass system.
-
"Thermal biomass system" means a system
that:
(1) uses:
(i)
primarily animal manure, including poultry litter, and associated
bedding to generate thermal energy; aIld
(li)
food waste or qualifying biomass for the remainder of the feedstock;
. (2) is used in the State; and
(3) complies with all applicable State and federal statutes and regula­
tions, as determined by the appropriate regulatory authority.
(n)
Renewable energy credit.
-
"Renewable energy credit" or "credit" means
a credit equal to the generation attributes of 1 megawatt-hour of electricity
that
is
derived from a Tier 1 renewable source or a Tiet 2 renewable source that
is located:
(1)
in the PJM region;
(2) outside the area described in item
(1)
of
this
subsection but in a control
area that is adjacent to the PJM region,
if
the electricity is delivered into the
PJM region; or
(3) on the outer continental shelf of the Atlantic Ocean in an area that:
(i)
the United States Department of the Interior designates for leasing
after coordination and consultation with the State in accordance with § 388(a)
of the Energy Policy Act of 2005; and
(in
is between 10 and 30 miles off the coast of the State.
66
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2013 SUPPLEMENT
(0)
§
7-701
Renewable energy portfolio standard.
'-
"Renewable energy portfolio
standard" or "standard" means the percentage of electricity sales at retail in
the State that
is
to be derived from Tier 1 renewable sources and Tier 2
renewable sources in accordance with § 7-703(b) oftbis subtitle.
(p)
Renewable on-site generator:
-
"Renewable on-site generator" means a
person who generates electricity on site from a Tier 1 renewable source or a
Tier, 2
ren~wable
source for the person's own use.
(q)
Solar water heating system.
-
(1) "Solar water heating system" means
a system that:
(i)
consists of glazed liquid":type flat-plate or tubular solar collectors or
concentrating solar thermal collectors
as
defined and certified to the OG-IOO
standard of the Solar
Ratings
aiid Certification Corporation;
(ll)
generates energy using solar radiation for the .purpose of heating
water; and
,
(iii)
does not feed electricity back to the electric grid.
(2) "Solar water heating system" does not include a system that generates
energy using solar' radiation for the sole purpose of heating' a hot tub· or
swimming pool.
(r)
Tier
1
renewable source.
-
"Tier 1 renewable source" means one or more
of the following types of energy sources:
(1) solar energy, including energy from photovoltaic technologies and
solar water heating systems;
(2) wind;
,
(3) qualifying biomass;
.
,
(4)
methane from the anaerobic decomposition of organic materials in a
landfill or wastewater treatment plant;
(5) geothermal, including energy generated through geothermal exchange
from or thermal energy avoided by, groundwater or a shallow ground source;
, (6) ocean, inCluding energy from waves, tides, currents, and thermal
differences;
(7) a fuel cell that produces electricity from a Tier 1 renewable source
under item (3) or (4) of
this
subsection;
(8) a small hydroelectric power plant of less than 30 megawatts in
capacity that
is
licensed or exempt from licensing by the Federal. Energy
Regulatory C o m m i s s i o n ; '
.
(9) poultry litter-to-energy;
(10) waste-tO-energy;
(11) refuse-derived fuel; and
(12) thermal energy from a thermal biomass system.
'(s)
Tier
2
renewable source.
-
"Tier 2 renewable source" means hydroelec­
tric power other than pump storage generation. (2004, ch. 487, § 1; ch. 488,
§ 1; 2005,ch. 266;2007, chs. 119, 120;2008,ch. 125,§ 2;ch. 126, § 2;chs.127,
128,135, 136; 2011, chs. 65,407,408, 519;2012,chs. 556, 557, 635j2013,ch.
3, § 1; chs. 341, 342.)
Effect of amendments.
Section 2,
cbS.
125 and 126,
Acts
2008, effec­
tive January 1, 2011,
ma.de
identical changes.
Each reenacted (a) without change; and deleted
"or
in
a state
that
is
adjacent
to
the
PJM.
region" at
the
end
of
(i)(1).
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Testimony on Behalf of County Executive Isiah Leggett
Regarding Expedited
Bill 22-13,
Fuel Energy Tax - Renewable Energy Resources
Stan Edwards, Chief
Division of Environmental Policy
&
Compliance
Department of Environmental Protection
July 30, 2013
Good afternoon. My name is Stan Edwards. I am the Chief of the Division of Environmental Policy and
Compliance in the Department of Environmental Protection. I am testifying on behalf of the County
Executive in support of Expedited Bill 22-13, Fuel Energy Tax - Renewable Energy Resources.
Under current law, the fuel-energy tax applies to all electricity that is delivered for final consumption in
the County, and the tax is imposed on persons who distribute, produce, transmit, manufacture or supply
electricity in the County. When the tax was adopted in 1971, electricity subject to taxation was generated
by large, fossil fuel-based power plants and distributed to users in the County by regulated public utilities.
To a large extent, this remains true today. However, with the advent of new technologies and financing
mechanisms for solar photovoltaic systems, a number of homes and businesses in the County are now
generating electricity on-site, supplementing the power delivered by their utilities. Because this on-site
power does not come through the utility grid, it has not historically been taxed.
However, based on a recent review of the fuel-energy tax law by the Office of the County Attorney, it
was determined that electricity generated by such systems is subject to the tax. Although electricity
produced by these systems does not come through the utility grid, which is the only current mechanism
for imposing the tax, current law does not expressly exempt this method of electricity production from
taxation.
To our knowledge, when the fuel-energy tax was created in 1971, its applicability to on-site solar
generated electricity was not considered by the County Council -- and the County has never collected
revenues on this kind of electricity. Applying the fuel-energy tax to this kind of solar generated
electricity would raise several issues. First, imposition of the tax could dramatically decrease demand for
solar, which is contrary to previous County policy positions encouraging such systems. The solar
industry has been marketing systems assuming the tax does not apply, since it has never been charged.
This has been a significant incentive to install solar, including systems on County facilities.
Second, since these systems are "off the grid," collection of the tax would require the filing of some form
of tax return and tax remittance to the County. Enforcement would require development of a system to
track solar installations and confirm their generating capacity. While collection of the tax might result in
additional revenue to the County, currently estimated to be $100,000 to $200,000, much if not all of this
would be spent to collect, verify, and enforce the tax.
Exempting on-site solar systems from the tax would encourage continued expansion of solar systems in
the County. Such systems benefit the environment by reducing greenhouse gas emissions and local
criteria air pollutants, create jobs for local companies and reduce the strain on the utility grid, which is a
priority in the region. Larger solar systems combined with new storage technologies may allow some
organizations to minimize the risk of power failures. Finally, solar energy may provide more predictable
energy costs for businesses and individuals.
I urge you to support Expedited Bill 35-12 and would be happy to address any questions the Council may
have about the bill.
@
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/
')
~pepco
A PHI
Company
Jerry
Pasternak
Vice President Pepco Region - Maryland
Maryland Affairs
701 Ninth Street,
~
Washington, DC 20068
202-872-2524 Phone
July 30, 2013
The Honorable Nancy Navarro
President, Montgomery County Council
100 Maryland Avenue
Rockville, Maryland 20850
Re: Expedited Bi1122-13, Taxation - Fuel Energy Tax - Renewable Energy Sources
Dear President Navarro:
The Potomac Electric Power Company (Pepco) submits the following comments on
Expedited Bill 22-13, Taxation - Fuel Energy Tax - Renewable Energy Sources.
At Pepco, environmental stewardship and sustainability
are
fundamental principles that
guide our business and enable our success, both for today and into the future. We are
committed not only to delivering safe and reliable electricity, but also to helping the
jurisdictions we serve become models of innovative environmental policies and practices.
Renewable energy, such as wind and solar, has the potential to provide us with cleaner air,
a more diverse energy portfolio, and less dependence on foreign fossil fuels. Many of our
customers generate their own electricity using "green" or renewable resources, such as
solar panels. We partner with customers who want to install renewable-powered
generators through our Green Power Connection
TM,
a team of specialists dedicated to
working with customers to ensure safety and compatibility of their systems with ours, as
well as the installation of a net energy capable meter.
We support the intent of this bill to encourage generation and consumption of rertewable
energy by lowering its cost through fuel-energy tax relief. We have been working with
both Executive and Council staff on how to best implement that laudable goal, and we look
forward to continuing that dialogue so that we can agree on amended language that
establishes a mechanism to implement the goal in a manner that addresses our concerns.
Lastly, given the County's fuel-energy tax, we support the dedicated use of those revenues
on energy-related matters, rather than on General Fund expenditures. Incentivizing county
residents to generate and consume renewable energy is one such measure and a step in the
right direction.
Sincerely,
~ternak
~W
@
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Testimony of Joyce Breiner
Public Hearing - Expedited Bill 22-13, Taxation - Fuel Energy Tax - Renewable Energy
Sources
July 30, 2013
Council President Berliner and members of the County Council, thank you for the
opportunity to testify in favor of the proposed Expedited Bill 22-13, Taxation - Fuel
Energy Tax - Renewable Energy Sources.
In Feb 2013, my husband and I had a 12.48 kW residential solar system installed on our
home by Standard Solar whose headquarters is in Rockville. As of yesterday, we have
produced 7,506 kWh of electricity and currently carry a credit with the electric utility of
980 kWh. In addition to being on target to produce 95% or more of our home's annual
electricity needs, the sola r system meets most of our transportation fuel needs as well,
in the form of electricity for our two electric ca rs.
We chose Standard Solar, in part, because they are a local company with local jobs we
could support.
Promoting distributed renewable energy sources is the name of the game in this time of
increased awareness of the urgent need to do what individuals can do to address
climate change. This bill does that.
With fiscal budgets still tight, one of the most effective and advantageous things the
county government can do to promote this effort is to refrain from taxing residents,
businesses and local governments who take these bold moves toward renewables.
As you may know, the Town of Poolesville is also negotiating the lease of a 1.1 mWh
solar array to produce enough energy to cover the town government's 6 largest electric
bills. Passing Bill 22-13 would benefit my town and its citizens as well.
To address the climate change issue, individuals, towns, and governments from the
county to the national level all need to step up to the plate. Our children and
grandchildren will one day be asking what we did when we understood the challenges
of climate change. The passing of this bill will be one of the many things we hopefully
will be able to pOint to having accomplished.
Please pass this bill without delay. Thank you.
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OFFICES OF THE COUNTY EXECUTIVE
Isiah
Leggett
County
Executive
Timothy L. Firestine
ChiefAdministrative Officer
MEMORANDUM
July 18, 2014
TO:
FROM:
SUBJECT:
Roger Berliner, Chair
'Transportation
&
En . onment Committee
' hief Administrative Officer
' Expedited Bi1122-13: Taxation - Fuel Energy Tax - Renewable Energy Sources
In
the Transportation and Environment Committee's meeting of
January
23,2014
on the subject legislation you asked whether it would be a feasible and effective incentive for
consumers
to
choose "clean" electricity ifthe County exempted such consumers
from
the fuel
energy
tax.
There are a number of operational and fiscal issues associated with this proposal,
discussed below.
Operational Challenges:
As
you are aware, the County fuel energy
tax,
authorized under Section 52-14 of
-the..Count¥-Code.applies to-"evet:¥-person
transmitting,-distributing~--l11anufactucingrproducing;­
or supplying electricity ... in the County." This excise
tax
applies to electricity generators and is
passed through to end users based on the amount of electricity they use. To implement an
exemption from the pass through cost ofthe
tax,
the utility would need to know
if
the end user
has
selected an alternative clean electricity provider.
A utility like PEPCO knows which customers have selected an alternative
electricity provider, but they do not have any infonnation on whether the alternative product is
clean electricity., Approximately 30% ofPEPCO's over 300,000 residential customers and 45%
ofthe nearly 27,000 commercial customers use an alternative provider.
In order to pass through the energy
tax
exemption to residential and commercial
customers, it would be necessary for PEPCO and other utilities subject to the fuel energy
tax
to
collect additional information from customers and revamp their billing systems
and
procedures.
Depending on whether this required any changes to prevailing tariffs, this may also require
authorization from the Public Service Commission.
101 Monroe Street • Rockville. Maryland 20850
240-777-2500 • 240-777-2544 TTY • 240-777-2518 FAX
www.montgomerycountymd.gov
_1.11.
_773-....
nv
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Roger Berliner
July 18,2014
Page 2
Fiscal Impact
Given the large proportion of residential and commercial customers who have
switched to alternative providers, the triple digit growth in this market over the past five years
and the assumed predisposition of these customers to select
clean
energy providers, the fiscal
impact ofthe proposed exemption in just one year could be
quite
substantial. Using data on the
different types of electric customers, their typical electricity consumption patterns, and historical
energy
tax
revenues, the table below shows a reasonable estimated range of lost tax revenues if a
full exemption from the
tax
was
provided:
Customer
Type
Residential
Non-Residential
Low
Estimate
%.Clean
lostReven~e
10%
$6;600,000
10%
'$4!OOO~OOO
$1~800,OOO
High Estimate
"Clean
.lost
~e"enu.e
$13,200,000
$8,000,000
20%
20%
.10%
2%
Small
Medium
Large
Total
~R
I
$3;60
3
$600,000
....
.L~'~OO,OOO
$1,200,000
$25,800,000
In
light ofthe considerable operational and fiscal issues that need to be addressed,
the
County Executive does not believe additional exemptions from the fuel energy
tax
are ready
for implementation
in
FYIS and urges the Committee and Council to approve Expedited Bill
22­
13Jnif$
c~ntlom:t~We
are available to
<ii§'~!lS.~th~~.issu~~
inffiQI!!_.d!!tail at the
Committ~~~
earliest convenience.
cc:
Timothy
L.
Firestine, Chief Administrative Officer
Jennifer Hughes, Director, Office of Management and Budget
Joseph F. Beach, Director, Department ofFinance
David Dise, Director, Department of General Services
Robert Hoyt, Director, Department of Environmental Protection
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2013 SUPPLEMENT
§
7-306
including the combined use from all individually leased or owned units and all
common areas.
(b)
Authorization of use, requirements.
- The .Commission may authorize
the use of a master meter in a residential multiple occupancy building for
heating, ventilation, and
air
conditioning services without requiring individual
metering or sUbmetering for heating, ventilation, and
air
conditioning services
as provided under
§
7-303 or
§
7-304.of this subtitle
if:
.
(1)
the utility bill for heating, ventilation, and
air
conditioning services for
each individually leased or owned occupancy unit
is
included in the rent for
that u n i t ; ·
.
(2) the Commission
is
satisfied that the use of the master meter for
heating, ventilation, and
air
conditioning services
will
result in a net savings
of energy over the energy savings that would result from individual metering
or submetering for heating, ventilation,and
air
conditioning services; and
(3) each individually leased or owned occupancy unit:
(i) has individual metered service for other energy services; and
(li)
directly receives the. utility bill for the other energy services.
(c)
Review ofproposed aUocation of expenses.
- Before authorizing the use
of a master meter for heating, ventilation, and
air
conditioning services, the
Commission may review the proposed allocation of heating, ventilation, and
air
conditioning system expenses among individual units and common areas
served by the master meter.
(d)
Inspection and testing.
-
In
accordance with
§
7-301
ofthis subtitle, an
electric company or a gas coinpany may inspect and test a master meter
authorized for use by the Commission under this section.
(2010,
chs.
314, 315;
2012,chs.282,283')
Effect
of amendments. - Chapters
282
and
283,
Acts
2012,
effective
October 1, 2012,
made identical
changes.
Ea~
reenacted the
section without change.
Editor's note. -
Section
2,
cbs.
314
and
315,
Acts
2010, as
amended
by
cbs.
282
and
283,
Acts
2012,
provides that
"this
Act
shall
take effect
July
1, 2010."
Chapters
282
and
283,
Acts
2012,
deleted the
prior abrogation of
amendment..
§
7-306. Net energy metering.
(a)
Definitions.
-
(1)
In
this section the following words have the meanings .
indicated.
(2) "Biomass" means "qualified biomass" as defined in
§
7-701 ofthis title.
(3) "Closed conduit hydro" means a hydroelectric generating facility that:
(i)
generates electricity within existing piping or limited adjacent
piping of a potable water supply system;
(li)
is owned or operated by a municipal corporation or public water
authority; and
(iii)
is
designed to produce less energy than
is
consumed to operate the
water supply system.
(4) "Eligible customer-generator" means a customer that owns and oper­
ates, leases and 'operates, or contracts with a third party that owns and
operates a biomass, micro combined heat and power, solar, fuel cell, wind, or
closed conduit hydro electric generating facility that:
49
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§
7-306
PUBLIC UTILITIES
(i)
is located on the customer's premises or contiguous property;
(ll).
is interconnected and operated in parallel with an electric compa­
ny's transmission and distribution facilities; and
(iii)
is intended primarily to offset all or part of the customer's own
electricity requirements .
. (5) "Fuel cell" means an electric generating facility that:
(i) includes integrated power plant systems containing a stack, tubular
array, or other fimctionally similar configuration used to eleCtrochemically
convert fuel to electric energy; and
(li)
may include:
1.
an inverter and fuel processing system; and·
2. other plant equipment to support the plant's operation or its
energy conversion, including heat recovery equipment.
(6) ."Micro combined heat and power" means the simultaneous or sequen­
tial production ofuseful thermal energy and electrical or mechanical power not
exceeding 30 kilowatts.
(7) "Net energy metering" means measurement of the difference between
the electricity that is supplied by an electric company and the electricity that
is generateo. by an eligible customer-generator and fed back to the electric grid
over the eligible customer-generator's
billi:i:tg'p~riod.
.
(8) "Net excess geileration" means the amount ofthe electricity generated
by an eligible customer-generator that is in excess'bfthe electricity consumed
by the eligible customer-generator and that results in a negative kilowatt-hour
reading at the end of the eligible customer-generator's. billing cycle.
(b)
Legislative intent.
-
The General Assembly
:finds
and declares that a
program to provide net energy metering for eligible customer-generators
is
a
means to encourage private investment in renewable energy resources, stim­
-ulate in-State economic growth,. enhance continued diversification of the
. State's energy resource
mix,
and reduce costs of interconnection and adminis­
tration.
.
(c)
Meter requirement.
- An
electric company serving an eligible customer­
.generator shall ensure that the meter installed for net energy metering is
Capable of measuring the flow of electricity in two directions.
(d)
Standard contract or tariff; eligibility.
The Commission shall require
electric utilities to develop a standard contract or tarifffor net energy metering
and make it available to eligible customer-generators on a first-come, first­
served basis until the rated generating capacity owned and operated by eligible
customer-generators in the State reaches 1,500
mega~atts.
(e)
Terms of contract or tariff; prohibited charges.
-
(1) A net energy
metering contract or
tariff
shall be identical, in energy rates, rate structure,
and monthly charges, to the contract or tariff that the customer would
be
assigned
if
the customer were not an eligible customer-generator.
(2)
CD
A net energy metering contract or tariff may not include charges
that would raise the eligible customer-generator's minimum monthly charge
above that of customers of the rate class to which the eligible customer­
generator would otherwise be assigned.
(li)
Charges prohibited by this paragraph include new or additional
50
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2013
SUPPLE:MENT
§
7·306
demand charges, standby charges, customer charges, and minimum monthly
charges.
(f)
Calculation.
-
(1) The electric company shall calculate net energy
metering
in
accordance with
this
subsection.
(2) Net energy produced or consumed on a regular basis shall be mea­
sured
in
accordance with standard metering practices.
(3)
If
electricity supplied by the grid exceeds electricity generated by the
eligible customer-generator during a month, the eligible customer-generator
shall
be
billed for the net energy supplied
in
accordance with subsection (e) of
this section.
.
(4)
If
electricity generated by the eligible customer-generator exceeds the
. electricity supplied by the grid, the eligible customer-generator shall be billed
'only customer charges for that month
in
accordance with subsection (e) of this
section.
,
(5)
(i)
An
eligible customer-generator under paragraph
(4)
of th,issubsec­
tion may accrue net excess generation for a period:
1. not to exceed 12 months;
and
2. that ends with the billing cycle that is complete immediately prior
to the end of April of each year.
(li)
The electric company shall carry forward net excess generation
until:
1. the eligible customer-generator's consumption of electricity from
the grid eliminates the net excess generation; or
2. the accrual period under subparagraph
(i)
of this paragraph
expires.
(iii)
1. The dollar value of net excess generation shall
be
equal to the
generation or commodity portion of the rate that the eligible customer­
generator would have been charged by the electric company averaged over the
previous 12-month
~riod
ending with the billing cycle that is complete
immediately prior to the end of April multiplied by the number of kilowatt­
hOurs of net excess generation.
2. For customers served by an electricity supplier, the dollar value of
the net excess generation shall
be
equal to the generation or commodity rate
that the customer, would have been charged by the electricity supplier
multiplied by the number of kilowatt-hours of net excess generation.
(6)
(i)
On or before 30 days after the billing cycle that is complete
immediately prior to the end of April of each year, the electric company shall
pay each eligible customer-generator for the dollar value of any accrued net
excess generation remaining at the end
of
the previous 12-month period ending
with the billing cycle that is complete immediately prior to the end of April.
(ii)
Within
15 days after the date the eligible customer-generator closes
the eligible customer-generator's account, the electric company shall pay the
eligible customer-generator for the dollar value of any accrued net excess
generation remaining at the time the eligible customer-generator closes the
account.
(7)
(i)
Notwithstanding paragraphs (5) and
(6)
of this subsection, an
eligible customer-generator served by an electric cooperative that serves a
51
@)
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§
1-306
PuBLIC UrILITIES
population of less than 250,000
in
its distribution territory may choose to be
paid for the dollar value of net excess generation remaining at the end of each
month instead of at the end of the accrual period specified under paragraph
(5)(i) of this subsection.
.
(ii)
If
an eligible customer-generator chooses .to be paid for the dollar
value of net excess generation remaining at the end of each month:
. ' 1.
the customer-generator may accrue net excess generation on a
monthly basis;
2. the dollar value ofthe net excess generation shall be equal to the
generation or commodity portion of the rate that the eligible customer­
generator would have been charged by the electric company for the previous
month; and
'
3. on or before 30 days after the end of each month, the electric
cooperative shall pay the eligible customer-generator for the dollar value ofnet
excess generation remaining at the end of the previous month.
(g)
Metering and credit for production in excess of consumption.
-:.
(1)
The
generating capacity of an electric generating system' used by an eligible
customer-generator for net metering may not exceed 2 megawatts.
(2)
An
electric generating system used by an eligible customer-generator
for net metering shall meet all applicable safety and performance standards
established by the National Electrical Code, the Institute of Electrical and
Electronics Engineers, and Underwriters Laboratories.
(3) The Commission may adopt by regulation additional control and
testing requiremElnts for eligible customer-generators that the Commission
determines are necessary to protect public safety and system reliability.
. (4)
An
electric company may not require an eligible customer-generator
whose electric generating system meets the standards of paragraphs (2) and
(3) of this subsection to:
(i) install additional controls;
(ii)
perform or pay for additional tests; or
(iii)
purchase additional liability insurance.
(5)
An
eligible customer-generator or the eligiblecustomer-generator's
assignee shall own and have title to all renewable energy attributes or
renewable. energy credits associated with any electricity produced by its
electric generating system.
(h)
Reports.
- On or before September 1 of each year, the Commission shall
report to the General Assembly,
in
accordance with § 2-1246 of the State
Government Article, on the status of the net metering program under
this
section, including:
(1)
the amount of capacity of electric generating facilities owned and
operated by eligible customer-generators in the State' by type of energy
resource;
(2) based on the need to encourage a diversification of the State's energy
resource
mix
to ensure reliability, whether the rated generating capacity limit
in subsection (d) of this section should be altered; and
(3) other pertinent information.
(An.
Code 1957,
art.
78, § 54M; 1998, ch.
8,§ 2; 1999, ch. 535; 2004, ch. 542j 2005,ch. 266; 2006, chs. 121, 122j2007,ch.
52