Focus on Doyle-Era Tax Being Rolled Back

By James Wigderson

Special Guest Perspective for the MacIver Institute

The Wisconsin legislature’s Joint Finance Committee (JFC) repealed at least one Doyle-era hidden tax on Wisconsinites last week. The JFC, under Republican control, undid a mandated increase in fees for renewable energy and energy efficiency programs that the JFC under Democratic control allowed six months ago.

Last December, Wisconsin’s Public Service Commission (PSC) did its best impression of the Grinch who raised energy bills. The PSC increased the mandated contributions from the state’s energy companies to renewable energy programs, especially the Focus on Energy program.

The Focus on Energy takes money from the utilities and gives money as rebates to businesses and residential homeowners who do qualifying energy efficiency or renewable energy improvements. As a memo from the Legislative Fiscal Bureau says, the program is controversial because the cost of the energy companies’ contributions to the Focus on Energy program are passed along to business and residential consumers in the form of higher energy rates.

“Through 2010, each energy utility was required to spend 1.2 percent of its annual operating revenues to fund the program; these revenues totaled $85.7 million in 2009. In December 2010, the Joint Committee on Finance approved an order by the PSC to require utilities to instead make predetermined annual contributions, starting at $120 million in 2011 and increasing to $256 million by 2014. Because these contributions are passed through to utility rate payers, concerns have been raised about the program’s benefits and costs.”

Just last week, Madison Gas and Electric Co asked for a 4.9% increase in electrical rates and 1.2% increase in natural gas rates, in part to pay for the mandate to fund statewide energy efficiency and renewable energy programs. Wisconsin Public Service Corporation of Green Bay is also asking for a rate increase, again in part because of the mandated payment for renewable energy and energy efficiency programs.

State Representative Robin Vos, co-chairman of the Joint Finance Committee, explained in an interview with the Wisconsin Radio Network how the mandated contribution from energy companies works,:

“The way Focus on Energy works, especially for residential customers, everyone in this room pays higher electricity costs so that some people can get things for free.,” said Vos. “That’s the way Focus on Energy works primarily. There are a small number of people who will get that grant and if you are lucky enough to be one of them, perhaps it is a good deal for you.”

The PSC estimated energy ratepayers would see an increase of 4.3% in their energy bills by 2014 if the increased mandated contribution from the energy companies was allowed to stand. Supporters of programs like Focus on Energy claim that energy costs will go down with the improved energy efficiency. The PSC itself estimates that energy costs will decline after 2014.

However, the Legislative Fiscal Bureau said the costs for energy consumption would go down only for those participating in the program. Ratepayers as a whole would continue to subsidize lower energy costs for some through higher rates.

Despite the redistributive nature of the program, the JFC did not kill the program entirely. Instead they left intact the increase for this year in the program while returning the program next year to funding at the level prior to last December’s increase. That means the state will still spend around $100 million of the energy ratepayers’ money annually on energy efficiency and renewable energy programs.

The legislative audit bureau is scheduled to complete an audit this fall of the Focus on Energy program. It will be interesting to see if the audit bureau is able to determine how many of the energy efficiency projects and how many of the renewable energy projects would have taken place without the subsidy from Focus on Energy, and what the return on investment of such a program actually is taking into account those factors.

Regardless, ratepayers and legislators should ask themselves if it is really in the state’s best interests to continue this hidden tax on individuals and businesses to fund energy efficiency improvements and renewable energy projects that would not have taken place without a subsidy. They should especially ask that question considering the rate hikes we can all expect as a result of the program.