Friday, January 29, 2010

Utility Regulatory Assessments: The Time Has Come to Include VoIP and Wireless

The state budget crunch now facing New York has led Governor Paterson to propose draconian measures that would cut important services and programs for the poor. For example, he has proposed delaying welfare grant increases (which had been delayed for 19 years) in order to save $18 million.

Meanwhile, tax and assessment anomalies and loopholes in the utility industry abound. See New York City Closes ESCO Electric Service Sales Tax Loophole; Will Other Localities and New York State be Next?, PULP Network, January 22, 2010. A common characteristic is the uneven treatment of competitive service providers, with traditional providers shouldering the major tax and assessment responsibilities while newer providers escape them.

In addition to the ESCO sales tax loophole discussed last week, which is costing the state $158 million a year, uneven treatment of wireless and VoIP (cable) phone services is another expensive loophole. In a white paper on utility regulatory assessments, to be posted soon, PULP estimates that closing the telecom provider loopholes and setting assessments at the same level as gas and electric service would net approximately $76 to $167 million more revenue, depending on whether 1% or 2% assessment levels were adopted. Energy utilities are currently assessed, on a temporary basis, at 2%.

Equalization of the assessments would further the goal of fair competition and avoid uneconomic bypass and favoritism toward some market participants. Simultaneously, the PSC could be required to exercise "terms and conditions" jurisdiction over these providers to protect consumers.

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