AGENDA ITEM 6
July 30, 2013
Hearing
MEMORANDUM
TO:
County Council
FROM: .... Michael Faden, Senior Legislative Attorney
~
~tLeslie
Rubin, Legislative Analyst, Office of Legislative Oversight
SUBJECT:
Hearing:
Expedited
Bill
22-13, Taxation
Energy Sources
Fuel Energy Tax - Renewable
Expedited Bill 22-13, Taxation - Fuel Energy Tax - Renewable Energy Sources,
sponsored by the Council President at the request of the County Executive, was introduced on
July 9, 2013. A Government Operations and Fiscal Policy/Transportation, Infrastructure,
Energy, and Environment Committee worksession will be scheduled for a later date.
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
©IO-II),
which includes solar and wind power, biomass, and geothermal energy, among
other sources.
The OMB fiscal impact statement (see ©6-9) estimated an annual revenue loss of $108,500
in the near term, which 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.
This packet contains:
Expedited
Bill
22-13
Legislative Request Report
Memo from County Executive
Fiscal and Economic Impact Statements
Md. Code Public Utilities Article §7-701
F:\LAW\BILLS\1322 Taxation - Fuel Energy Tax\Hearing Memo. Doc
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Expedited Bill No.
:.22=--..!.:13~
________
Concerning: Taxation - Fuel Energy Tax
Revised: 7-1-13
Draft No. _1_
Introduced:
July 9, 2013
Expires:
January 9, 2015
Enacted: _ _ _ _ _ _ _ _ __
Executive: _ _ _ _ _ _ _ __
Effective: _ _ _ _ _ _ _ _ __
Sunset Date:
-!..!.~~
_ _ _ _ __
Ch. _ _, Laws of Mont. Co. _ __
COUNTY COUNCIL
FOR MONTGOMERY COUNTY, MARYLAND
By: Council President at the Request ofthe County Executive
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.
Added to existing law by original bill.
Deletedfrom existing law by original bill.
Added
by
amendment.
Deletedfrom existing law or the bill by amendment.
Existing law unaffected 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)
2
3
4
Fuel-energy tax.
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.
5
6
7
ill
The County Council must set the rates for various forms
and energy by
£!
resolution adopted
of fuel
8
9
[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
10
11
12
13
14
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.
15
16
17
18
19
ill
The
tax does not apply to the transmission or distribution of
20
21
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
22
23
24
25
26
o
F:\Law\8i11s\1322 Taxation - Fuel Energy Tax\8ill.Doc
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Expedited Bill 22-13
27
28
system. The rates of tax apply to the quantities measured at the
point of delivery for final consumption in the County.
29
30
31
32
ill
The tax does not
mmlY
to energy that is generated from
~
renewable source in the County and delivered to or used
Qy
an
end user in the County.
Renewable source means
~
"Tier
1
renewable source" as defined in Section
7-7010)
of the Public
Utilities Article of the Maryland Code or any successor
prOVISIOn.
33
34
..
35
36
37
38
*
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.
39
40
(b)
Approved:
This Act applies to energy delivered before or after this Act takes effect.
41
42
43
Nancy Navarro, President, County Council
Date
44
45
Approved:
Isiah Leggett, County Executive
Date
46
This is a correct copy o/Council action.
47
Linda M. Lauer, Clerk ofthe Council
Date
F:\Law\Bills\1322 Taxation - Fuel Energy Tax\BiII.Doc
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LEGISLATIVE REQUEST REPORT
Expedited Bill 22-13
Taxation - Fuel Energy Tax
DESCRIPTION:
PROBLEM:
Renewable Energy Sources
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 IMP ACT:
ECONOMIC
IMPACT:
EVALUATION:
EXPERIENCE
ELSEWHERE:
SOURCE OF
INFORMATION:
APPLICATION
WITIDN
MUNICIP ALITIES:
PENALTIES:
None.
F:\Law\BilIs\1322 Taxation· Fuel Energy Tax\Lrr.Doc
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i-;f.;
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OFFICE OF THE COUNTY EXECUTIVE
ROCKVILLE, MARYLAND 20850
.
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~'~l~
Isiah Leggett
County Executive
073040
MEMORANDUM
, "7"'
~<
. --.;'1
. ,'0
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 bill 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(l} 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 Environmental Protection
Jennifer Hughes, Director, Department of Management and Budget
montgomeryCOuntymd.gov/311·'
..,
.,ii.1:~
.
240-713-3556 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
Date
Office of Management and Budget
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· ofclean 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 ofthe 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
10f2
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Economic Impact Statement
Bill xx-13, Fuel Energy Tax
• While the stimulation in investment for solar panels may 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.
If
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
Page20f2
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§
7-701
PuBLIC UTILITIES
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
(ii) a plant that is cultivated exclusively for purposes of being used at a
Tier 1 renewable source or a Tier 2 renewable source to
prod~ce
electricity.
(2) "Qualifying biomass" includes biomass listed in paragraph (1) of this
subsectionthatjs used for co-firing, subject to
§
7-704(d) of this subtitle.
(3) "Qualifying biomass" does not ;nclude: ..
CD
unsegregated solid waste or postconsumer wastepaper; or
(ii) an invasive exotic plant species.
(i)
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 Tier 2 renewable source that
is located:
(1)
in the PJM region; or
. (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
PJMregion..· .
(j)
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) of this subtit1e.
(k)
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 renewable source for the person's .own use.
(k-1)
Solar water heating system.
-
(1) "Solar water heating system" means
a system that:
. (i)
is comprised of glazed liquid-type fiat-plate or tubular solar collec­
tOrs as defined and certified to the OG-100 standard of the Solar Ratings and
Certification Corporation;
(ii) 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.
(l)
Tier
1
renewable source.
-
"Tier 1 renewable source" means one or more
of the following types of energy sources:
(1) solar eJ;lergy, 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;
. 1
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2012
s;
)r
SUPPLEMENT
§
7-701
a
is
1S
~y
it
01
le
io
in
2
a
(6) ocean, including energy from waves, tides, currents, and thermal
differences;
(7) a fuel cell that produces electricity from a Tier 1 reI}.ewable 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 Commission;
(9) poultry litter-to-energy;
(10) waste-to-energy; and
(11)
refuse-derived fuel.
(m)
Tier
2
renewable source;
- "Ti.er 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.)
Effect of amendments.
Section 2, chs. 125 and 126, Acts 2008,
~ffec­
tive January 1, 2011, made 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). .
,
Chapter 65, Acts 2011, enacted April 12,
2011, and effective from date of enactment,
substituted "subsection" for "section" in (h)(2).
Chapter 519, Acts 2011, effective October
i,
2011, added (1)(10) and (1)(11); rewrote (m); and
made related changes.
Chapters 407 and 408, Acts 2011, effective
January 1, 2012, made identical changes. Each
reenacted (a) without change; added (k-l); and
in
(1)(1)
added "en:ergy, including energy from
photovoltaic technologies and solar water heat­
ing systems,"
Chapters 556 and 557, Acts 2012, effective
October 1, 2012, made identical changes. Each
reenacted (a) without change; added (c-l); and
in 0)(5) added "including energy generated
through geothermal exchange from or thermal
energy avoided by, groundwater or a shallow
ground source."
Editor's note.
Section 4, ch. 65, Acts 2011, provides that
"the provisions of this Act are intended solely to
correct technical errors in the law
and
there is
no intent to revive or otherwise affect law that
is the subject of other acts, whether those acts
were signed by the Governor prior to or after
the signing of this Act."
.
.
Section 2, chs. 407 and 408, Acts 2011, pro­
vides that "this Act shall apply only to solar
water heating systems that are commissioned
on or after June 1, 2011."
.
Section 3, chs. 407 and 408, Acts 2011, pro­
vides that the acts shall take effect January 1,
W~.
.
.
Chapters 407, 408, and 519, Acts 2011, all
amended
(1).
None of the chapters referred to
the
oth~rs,
and effect has been given to all, as
they amended different portions of
(1).
"Section 2, chs. 556 and 557, Acts 2012, pro­
vides that "this Act shall apply only
to
geother­
mal heating and cooling systems that are com­
missioned on or after January 1, 2013."
Bill review letter. - Chapters 556 and 557,
Acts 2012 (S.B. 652 and RB. 1186), effective
October 1, 2012, was approved for constitution­
ality and legal sufficiency, even though a sever­
able portion may violate the Commerce Clause
ofthe United States Constitution. The bills add
geothermal heating and cooling pumps that
must be connected to the distribution grid serv­
. ing Maryland as RPS resources that qualify for
REC credits. A Commerce Clause issue is
raised because the bills appear to prohibit cer­
tain types of out-of-state geothermal heating
and cooling systems that are not connected
to
the distribution grid serving Maryland from
qualifYing forREC credits. Even though the
size of the impact of this limitation upon inter­
state commerce could .be minimal, it is possible
a court would find that the bills,
in
part, violate
the Commerce Clause. (Letter of Attorney Gen­
eral dated May 10, 2012.)
University of Baltimore Law Forum. ­
For an article, "Protecting Maryland's Environ­
ment: A Holistic Solution," see 40 U. BaIt. L. F.
205 (2010).
a
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ld
19
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ld
a
49