1. Should the current taxation scheme for electric utilities
remain in effect if the General Assembly makes the policy decision
to allow retail competition?
It is apparent that some modification of state and
local tax codes will be required if the legislature decides to
allow retail competition. The extent of needed modifications is
less apparent. A modified gross receipts tax can be collected
at the transmission provider level. This change would address
out of state power purchases. The tax issues surrounding out of
state gas purchases should also be addressed for fairness reasons.
2. Which mechanisms are appropriate replacement mechanisms for the state gross receipts tax:
a. Corporate income tax on generation.
A corporate income tax on for-profit utilities could be one mechanism for replacing part of the state gross receipts tax. However, the state gross receipts tax can still be collected in a deregulated environment at the transmission meter level and avoid the nexus issue.b. "Declining block" consumption tax
A declining block consumption tax may be appropriate if the relative tax impact on the classes of customers remains the same. It is important that any consumption tax be "unbundled" so that the amount of the individual taxes it replaces can be identified and appropriately remitted or withheld. It continues to be the opinion of the municipal electrics that the state gross receipts tax or an equivalent can still be collected at their transmission level meters.
3. Should the "declining block" consumption tax include:
a. Local gross receipts taxes
In a deregulated environment it may be difficult, if not impossible, to base this local tax on the gross receipts of electric sales because complete information may not be available to the tax collecting entity. In our opinion, it would likely become necessary to collect this local tax based on kWhs consumed. The tax rate for this portion of the consumption tax should be unbundled so that it can be properly identified to be remitted to a locality.b. State Corporation Commission special assessment
This tax should not be included in the consumption tax. Currently, gross receipts of regulated utilities fund the utility regulatory operations of the SCC. It is not necessary or appropriate for municipal electric systems to pay for the regulatory functions of the SCC.
4. Describe the appropriate tax treatment for:
a. Investor-owned utilities
All of the electric utility operations of for-profit entities should be subject to state and federal income taxes. All electric utilities should continue to collect or provide approximately the same amount of tax revenue in the deregulated environment as they currently do.b. Electric cooperatives
It may be appropriate to set a minimum threshold for tax contributions to ensure that the state's revenue does not diminish.c. Municipal electric systems
Customer-owned municipal electric systems operate for the benefit of their customers. The consumption tax, as proposed, will substantially increase the tax burden on customers of municipal electric utilities. A continuation of some form of the current gross receipts may be more revenue neutral. However, if a consumption tax is enacted, the measure should allow municipal electric utilities the option of providing the revenue through their transmission and/or purchase power contract. Additionally, for municipalities that operate their own electric systems, the amount of the consumption tax representing the SCC Special Tax should not be collected.
5. Which state agency should administer any tax program designed
to replace the current gross receipts tax?
Virginia Department of Taxation.
6. What action should the General Assembly take to protect/preserve
the current revenues received from real property taxes on generation
facilities?
No position.
7. Who should perform assessments on property owned by suppliers
of electricity?
Local governments.
8. What assessment method should be used on property owned
by suppliers of electricity?
No position.
9. What action should the General Assembly take to protect/preserve
the current revenues received from the consumer utility tax?
The General Assembly should grant the maximum flexibility
possible to local governments to ensure that this important revenue
can still be collected. This may mean allowing localities to collect
this tax based on kWh consumed.
10. Who should collect and remit the consumer utility tax to
localities?
The local service provider.