Energy tax increase to fall on homes, businesses equally
Tax hike will go into effect May 20
Montgomery County residents and businesses will pay an equal share of an energy tax increase expected to take effect Thursday.
Two council committees agreed Monday on a 50-50 split for the increase, but will keep the base rate the same which charges businesses about three times more than residential customers.
County Executive Isiah Leggett (D) has proposed the increase to raise $21.4 million for fiscal 2010, which ends June 30, and $133 million for the next fiscal year.
Council members did not discuss what the increase should be, but based on one possible formula, businesses that purchase 1 million kilowatt hours a month, would see their monthly electricity bills increase from $13,843 to $23,852.
Residential customers using about 1,000 kilowatt hours per month what Pepco describes as an average user would see their energy taxes increase from $5 to $15, according to council data.
Council members also supported calculating the energy tax rates at a higher level that would raise $21.4 million in fiscal 2010 if applied from May 20 to July 1, then reducing the rates on July 1 to cover the necessary revenue.
Members are expected to decide how much revenue they will collect from the increased tax Wednesday, which will determine the new tax rate, said Council President Nancy M. Floreen (D-At large) of Garrett Park.
In Montgomery County, the energy tax now is about 0.5 cents per kilowatt hour used for residential customers. Nonresidential customers, such as businesses and government, pay 1.3 cents per kilowatt hour.
In his fiscal 2011 budget proposal, Leggett proposed doubling the energy tax for all customers in order to help fill a $1 billion budget shortfall.
Under his proposal, the county could collect $265 million in energy tax revenue in fiscal 2011 a $133 million increase.
Leggett also proposed a sunset for the tax increase in 2012, which the council committees voted Monday to recommend to the full council.
Pepco customers will see an increase in energy costs on their next bills, Pepco spokesman Charles L. Washington Jr. said during the council committee meeting Monday.
"We're in a box. We need the revenue," said Councilman George L. Leventhal (D-At large) of Takoma Park. "We're faced with a lot of really hard choices."
Montgomery County's business community has lobbied hard against Leggett's original proposal, saying it was unfair to businesses, some of which reported that their energy taxes would increase by as much as $500,000.
Council members said Monday that the 50-50 split represented a large concession to county businesses or those that might consider moving into the county.
However, the business community could still have a "huge challenge to overcome" if the council looks to collect as much in energy taxes as Leggett proposed, said Lisa M. Fadden, vice president of public affairs for the county Chamber of Commerce.
"At this point we have to raise this revenue," Floreen said. "We have no choice."