Thursday, March 18, 2010

Consistent and Persistent

In recent weeks, PULP has received telephone calls and e-mails from different utilities asking us to join them in opposing the Governor’s proposed increases to the Gross Receipts Tax (“GRT”) from one percent to three percent. Their reasoning is that PULP represents the interests of utility consumers, especially low income consumers, and any increases in taxes would be detrimental to all New York families struggling to make ends meet in this tough economic climate. While on the surface, their analysis – that PULP would serve as a valuable partner in their quest and would add a strategic consumer advocate to their utility coalition – may have made sense, PULP’s very existence relies on being consistent and persistent.

Let me explain.

The vast majority of PULP’s funding comes from the New York State Budget as part of the allocation of monies for civil legal services. Every year, we remind our friends in the state legislature about the important role PULP plays in assisting families in keeping their lights, heat, and telephone service on. We are involved in NYS Public Service Commission (“PSC”) > proceedings, often taking a position that is not represented by anyone else – that of the state’s residential utility consumers who pay the bills. We represent individual utility customers in PSC complaint hearings and in state and federal courts, without compensation. PULP provides expert advice to lawmakers and members of the press who are looking for independent views and information on utility and energy issues. PULP provides all of this and more on a shoestring budget that has not increased at all in 10 years. We even had to cut funding to our pension plan last year in order to make ends meet and have eliminated all but the most essential travel, such as when we represented a disabled woman in a utility complaint hearing at the PSC’s New York City office.

We do seek grant and other opportunities at every turn, but this has become a tough road, especially during this Great Recession. Simply stated, without state tax revenue and other special revenue items in the state budget, there would be no funding for PULP. All of the vital work we perform would cease.

In our meetings over the past few weeks with state legislators and the Governor’s office about budget and funding matters, we emphasized over and over again the irrationality of the state’s tax regime on utilities. For example:

Why do customers of Energy Service Companies (“ESCOs”) enjoy a sales tax break on their utility delivery service when they buy the electricity or natural gas commodity portion of service from an ESCO? Based on the source (last year’s Division of the Budget's Tax Expenditures Report or this year’s report), this results in a loss to the state of between $50 and $150 million a year, plus millions more to municipalities and school districts across the state.

Why do Voice over Internet Protocol (“VoIP”) and wireless providers not pay regulatory assessments to the PSC when they have taken half of the market in NY and the landline telephone providers are on the hook annually for one-third of one percent of their intrastate revenues? If assessed at the same level, VoIP and wireless providers would bring an additional $15 million to the state every year. If this assessment was increased to the 2% levy placed on electric and natural gas utilities and applied to all voice providers, an additional $182 million a year would be generated .

* Why do VoIP and wireless providers not pay local GRT assessments? This change would generate nearly $114 million a year, based on PULP’s analysis.

Are taxes and assessments on utility consumers are too high? Perhaps some tax rates could be decreased if there were more equal taxation across an entire market of entities providing similar services in a similar manner. In other words, if customers of distribution utilities and ESCOs the same taxes on the same services (both delivery and commodity), the tax rate might be cut significantly and still provide more needed revenues for NY. The same can be said for landline, VoIP, and wireless providers.

In a time when the state is seriously considering shuttering state parks and laying off public school teachers, to allow a tax system to continue which perpetuates the uncompetitive balance of utility markets and permits carriers to “compete” based on tax breaks and not on service quality or product offerings, is both illogical and fundamentally flawed. PULP has consistently and persistently said fix this by leveling the playing field.

While we’re on the topic, the time has come to subject VoIP and wireless providers to the same service quality requirements and consumer protections as the traditional phone companies. With the significant and growing reliance on these services as replacements for plain old telephone service, unless these steps are taken, the PSC will have jurisdiction over less than half the market it supposedly has the power to protect.

As for the GRT, it might appear to be a regressive tax when it is applied to residential customers because it hits rich and poor in equal doses, and takes a larger percentage cut of the income of lower income households. On the other hand, it is also a tax that can not be easily avoided, and which must be paid by businesses.

Interestingly, the same utility and business groups arguing against the GRT by invoking how paying it will harm the poor play another tune when they are selling utility rate increases or business group proposals to shift rate burdens from businesses to residential customers, or reallocate the benefits of low-cost hydro power, as they frequently urge in utility rate cases.

If the GRT tax also applied to all providers of similar services, rates could be reduced while leveling the competitive playing field without causing a chain reaction of damage to those in need.
Equalized tax assessments for all providers of similar services! PULP has been both persistent with this mantra and consistent with whomever asks our opinion. The days of “Don't tax you and don't tax me. Tax that man behind the tree," a phrase attributed to the late Senator Russell Long should be long over.

Lou Manuta

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