Electricity Tax

Background

Opponents claim that renewable energy damages the economy by increasing electric rates. They estimate the damage by treating electric-bill increases as tax increases. While their cost estimates for renewables are dubious, electricity is a necessity and the consumer can consider his electric bill as a tax. I have applied this reasoning to Ohio. The result is unexpected and has implications for public discussions of alternative energy, not only here, but in other states.

In One Pocket Out the Other

The average Ohio family has seen their state income tax significantly since 2008 (a). At the same time their electric bill has risen by about $300 per year. The break-even point between tax relief and electricity inflation is an income of about $42,000. A family making less than $42,000 has had less tax relief than electric bill increase. The opposite is true for incomes greater than $42,000 (b).
The Renewable Energy Debate

The average cost to an Ohioan for renewable energy is about 70¢ per month (c). So renewables, at $8.40 per year are contributing virtually nothing to the $300 price rise – a fact little known to consumers. Opponents of renewable energy call renewable energy ‘expensive’ and pushed for the cost of satisfying our law to be printed on consumers’ bills. They succeeded, but this seems a poor strategy. The cost of satisfying our renewable energy law will be included in bills starting in In March, 2016 and I doubt that seeing an added 70¢ will raise a great uproar.

Notes

(a) I chose 2008 because Ohio’s alternative energy law took effect at the beginning of 2009.
(b) A list of web sites that can be used to make the estimate for other stares, is given at the end of this posting.
(c) See the IEU-Ohio web site http://www.ieu-ohio.org/mandate-cost-calculator.aspx. Actually the cost is for renewable energy certificates. However, the cost of renewables is near enough to that of conventional technologies that the added cost would be small if actual electricity generation costs were charged.

Web Sites

Total Residential Consumption for each state: Google “ Electricity Data Browser – Energy Information Administration” Under “Change Data Set” Choose “Retail Sales of electricity”
Number of households for each state: U.S. Census Bureau, QuickFacts United States http://www.census.gov/quickfacts/table/PST045215/00
Average residential electric rates doe each state: Google “Electricity Data Browser – Energy Information Administration” Under “View a Pre-Generated Report” Choose Item 5.1 “Retail sales …”
State income tax tables: http://www.halfpricesoft.com/state-tax-table-2015.asp

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