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New York Bills Would Eliminate ESCO Sales Tax Exemption, Prohibit ESCO Service to Residential Customers

April 13, 2016

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Copyright 2010-16 EnergyChoiceMatters.com
Reporting by Paul Ring • ring@energychoicematters.com

Several bills have recently been introduced in the New York Assembly addressing ESCOs.

A9593 would repeal Section 1105-c of the tax law, which currently exempts from the state sales tax the delivery of electricity or natural gas from an ESCO

The bill's stated purposes says that such action would also eliminate school district, municipal, and county exemptions of sales tax on utility delivery service charges for electricity or gas when it is purchased from an ESCO

The bill's justification states that, "The taxpayer subsidy benefitting ESCOs and their customers has grown from $31 million/year in 2001 to $118 million in 2016."

"Instead of fostering competition, it actually distorts the competitive marketplace by favoring ESCO providers and their customers, who will see a reduction in the portion of tax on 'delivery' service when they switch to an ESCO for the purchase of the 'commodity' electricity or natural gas, permitting the ESCO to charge more for the commodity service that the utility would have charged," the bill's justification states

"This unlevel tax playing field allows ESCOs to charge more than identical service from the utility, but because of the tax break on utility delivery service, the bottom line of the ESCO customer bills can be lower. This encourages predatory and deceptive practices, in which it can be promised that the utility bill will go down (due to the tax break) while the customer is shifted to more expensive commodity service from the ESCO. This skewed taxation distorts competition and rewards arbitrage of the tax break instead of the provision of value added service from ESCOs," the bill's justification states

A9652 would limit the sale of electricity or natural gas by ESCOs to non-residential customers only.

"The advent of many poorly supervised new entities selling natural gas and electricity led to predatory, high pressure telephone and door-to door sales tactics, 'slamming', excessive charges, and other abuse of residential customers, many of whom are vulnerable, elderly, and low-income," the bill's justification states

A9652 would institute the prohibition on ESCO service to residential customers by adding text to statutes governing wheeling, such that retail wheeling or delivery may only be used to serve non-residential customers.

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