Legislative Memos

Air and SPDES and Oil Fee Increase IPPNY Oppose Letter Senator Skelos

* Similar letters also were sent to each Legislative Leader.                                                                                                                                              

                                                       March 4, 2015

Re: Part Y of S.2008 / A.3008 – Executive’s Proposed Increase in Title V and SPDES Fees

Part X of S.2008 / A.3008 - Executive’s Proposed Increase in Major Oil Storage Facility

License Fees          

Dear Leader Skelos:

The Independent Power Producers of New York, Inc. (IPPNY) and its Members appreciate the New York State Senate’s efforts to control costs faced by the State’s businesses and residents, especially those related to energy prices here in New York, while at the same time seeking to improve the economy and to create and retain jobs. As you begin finalizing budget negotiations on the 2015-2016 State Budget, I strongly urge you to reject the Executive Budget’s proposal to increase fees for facilities (including energy facilities) that are regulated: (1) by the Operating Permit Program under Title V of the Federal Clean Air Act and by the State Pollutant Discharge Elimination System (SPDES) Program (both in Part Y of S.2008 / A.3008 - Article VII Budget Bill for Transportation, Economic Development and Environmental Conservation); as well as (2) by a license fee for major oil storage facilities (including dual-fuel power plants) under the Environmental Protection and Spill Compensation Fund (Part X of S.2008 / A.3008). Also, the Title V and SPDES proposed fee increases would take effect retroactively on January 1, 2015 in an unfair manner.

Higher Fees on Power Companies Result in Higher Costs for Energy Consumers

Increases in the cost of energy production through the imposition of higher fees translate to escalating costs for energy consumers, at a time when the State is seeking to improve its economic vitality and stabilize energy prices. Today, independent power producers already pay annual taxes of over $600 million. The associated State-mandated costs of taxes and fees for energy consumers are high, even though, as a result of the energy marketplace, wholesale electricity prices are down in general - reaching an all-time low in 2012. The main drivers of high electric bills now are the components of the bills not subject to competitive forces – fees, taxes, and delivery charges, which comprise up to 70 percent of the total bill.

Companies Would Pay More, Even Though Emissions are Down

The Title V fee increase proposal would have the perverse outcome of penalizing power plant owners for reducing their emissions by forcing them to pay higher associated fees. The Title V fees are calculated based upon the amount of emissions that a facility produces; as a result, the more companies reduce their emissions, the less revenue is produced by the fees, and the more these companies now would be forced to pay for the great result of reduced emissions!

Notably, in terms of the primary power plant emissions regulated pursuant to the Title V program, from 2000 through 2013, the sulfur dioxide emission rate has dropped 94 percent, and the emission rate for nitrogen oxides declined by 81 percent, according to the report, Power Trends 2014: Evolution of the Grid, published by the New York Independent System Operator.

Title V Air Permit Fees Already Are Higher Than EPA’s Level and Would Be Increased More

In addition to power plant owners, Title V permits are held by a variety of entities, such as large apartment buildings, hospitals, colleges and universities, wastewater treatment plants, and other businesses. The Executive’s budget language would force all permit holders to pay a new annual base fee of $2,500, in addition to an increase of existing fees. Also, the proposal would ratchet-up annually both the base fee and per ton fees according to increases in the Consumer Price Index.

Existing fees range from $45 per ton to $65 per ton, and the bulk of these fees already are higher than the minimum level of $48.27 per ton required by the United States Environmental Protection Agency (EPA). The Executive would increase these fees respectively to a range of $60 per ton to as much as $90 per ton. For example, an affected company would be forced to pay a total of over $1 million for its impacted facilities; this company already pays in excess of $792,000 and would incur more than a $329,000 cost increase.

Title V Fee Increase On Top of SPDES and Oil Storage Fee Increases, Already High RGGI Costs and Property Taxes

The proposed Title V fee increase should not be considered individually in a vacuum. The same power plants owners that would face these escalating fees also would pay higher fees under the SPDES Program, given that the Executive’s budget language also would increase those fees from $50,000 to $58,000. The proposed Title V and SPDES permit fee increases also would have a compounding effect on owners of dual-fuel power plants, who would incur increased license fees for their major oil storage facilities of up to 9.5 cents per barrel transferred. These raised fees would exacerbate competitive disadvantages, such as high property taxes, faced by the impacted companies. Furthermore, many companies own multiple affected facilities. As an example, an affected company would pay a total amount of $348,000 in SPDES permit fees, and these costs would be compounded by the $207,000 in additional Title V fees the company would be paying on top of the over $464,000 in Title V fees it already incurs.

Furthermore, these power plant owners already are paying rising costs under the Regional Greenhouse Gas Initiative (RGGI). Allowance auction clearing prices have escalated since the lower RGGI emissions cap took effect in January of 2014. The December 3, 2014 auction price was $5.21 per ton, which is the highest price to date; in comparison, the price was $1.86 per ton in December of 2010. New York has raised over $728 million from power plants owners that are forced to buy RGGI allowances to comply with the program’s emission reduction requirements.

The increased SPDES Program fees would affect all other types of permit holders, including municipal facilities, private/commercial/institutional (P/C/I) facilities, and industrial facilities. The budget language also would increase SPDES fees further based on the Consumer Price Index. These other permit holders also are energy consumers, further compounding the impact upon them. The financial impact especially is harmful when coupled with the large costs that result from other existing and upcoming requirements such as the EPA’s proposed Clean Power Plan and from the New York State Public Service Commission’s proposed $5 billion Clean Energy Fund.

DEC Has Not Demonstrated the Need for Increased Fees

At the January 28, 2015 Joint Budget Hearing on Environmental Conservation, the New York State Department of Environmental Conservation’s (DEC) Commissioner Joseph Martens said he knows air emissions are down. For both the Title V and SPDES programs, he said no backlog exists in the review of permits and there is no lack of compliance. The Legislature correctly decided against prior proposals to increase fees, concluding that the DEC has sufficient ability and resources to review these permits. This year, New York State’s budget surplus should help the Legislature draw the same conclusion.

For the increased license fees for major oil storage facilities, affected companies under existing law are those that receive their petroleum (such as fuel oil and kerosene for dual-fuel power plants, which use those fuels when the demand for or price of natural gas is high and when natural gas is needed by energy consumers) from vessels that are watercraft (such as barges) and that are used as a means of commercial transportation of petroleum upon the water; yet, the Executive’s budget language is intended to address safety concerns about the transportation of oil by trains over land through New York State.

Conclusion

The Legislature has consistently and wisely decided that raising fees would yield unacceptably high costs for New Yorkers. IPPNY urges you to reject these costly fee proposals again this year, in order to avoid increasing costs for energy production and the associated larger burden on energy consumers.

Thank you for your consideration. If you have any questions or need additional information, please feel free to contact me. 

                                                                       Sincerely,

                                                                      Gavin J. Donohue

                                                                      President & CEO

Cc:       Senator John A. DeFrancisco, Chairman of the Senate Finance Committee

Senator Thomas F. O'Mara, Chairman of the Senate Committee on Environmental Conservation

Senator Joseph A. Griffo, Chairman of the Senate Committee on Energy and Telecommunications