FISCAL NOTE

Date Requested: March 11, 2021
Time Requested: 11:25 AM
Agency: Tax & Revenue Department, WV State
CBD Number: Version: Bill Number: Resolution Number:
3122 Introduced HB3062
CBD Subject: Energy


FUND(S):

General Revenue Fund

Sources of Revenue:

General Fund

Legislation creates:

Decreases Existing Revenue, Increases Existing Expenses



Fiscal Note Summary


Effect this measure will have on costs and revenues of state government.


The stated purpose of this bill is to limit the number of permits to construct wind power plants, wind power farms, or “windmills” for power generally in West Virginia; to provide that for each new wind powered facility built in West Virginia; there is an offset in the amount of taxes paid by new and existing coal fired plants; and to ensure that coal remains the primary source of power in West Virginia during emergency weather events. According to our interpretation of this bill, a maximum of two wind-based power projects per year would be permitted to be approved in West Virginia. However, the Legislature would still have the discretion to modify the number of wind permits if there were to be a change in circumstance to warrant such a modification. For each new wind power plant or power project built in the State per year, there would be a corresponding 5 percent reduction in the amount of Coal Severance Tax levied on coal mines and coal plants in West Virginia. Data from the U.S Energy Information Administration does not forecast any additional wind power plants or coal fired power plants built in West Virginia beyond 2020 but does predict four more hydroelectric generators at two facilities and two more natural gas generators at one facility by 2023. There was an additional wind facility being built in Grant and Mineral counties in January 2021. Even with no plans to build additional coal fired facilities in the near future, 91 percent of State electric power generation is from coal, and roughly 70 percent of the coal used in State coal fire plants originates from West Virginia. Passage of this bill would potentially result in a not readily quantifiable loss to the General Revenue Fund in the event of new wind power projects beyond 2021. Additional administrative costs incurred by $5,000 in FY2021.



Fiscal Note Detail


Effect of Proposal Fiscal Year
2021
Increase/Decrease
(use"-")
2022
Increase/Decrease
(use"-")
Fiscal Year
(Upon Full
Implementation)
1. Estmated Total Cost 5,000 0 0
Personal Services 0 0 0
Current Expenses 0 0 0
Repairs and Alterations 0 0 0
Assets 0 0 0
Other 5,000 0 0
2. Estimated Total Revenues 0 -5,700,000 -5,700,000


Explanation of above estimates (including long-range effect):


According to our interpretation of this bill, a maximum of two wind-based power projects per year would be permitted to be approved in West Virginia. However, the Legislature would still have the discretion to modify the number of wind permits if there were to be a change in circumstance to warrant such a modification. For each new wind power plant or power project built in the State per year, there would be a corresponding 5 percent reduction in the amount of Coal Severance Tax levied on coal mines and coal plants in West Virginia. Data from the U.S Energy Information Administration does not forecast any additional wind power plants or coal fired power plants built in West Virginia beyond 2020 but does predict four more hydroelectric generators at two facilities and two more natural gas generators at one facility by 2023. There was an additional wind facility being built in Grant and Mineral counties in January 2021. Even with no plans to build additional coal fired facilities in the near future, 91 percent of State electric power generation is from coal, and roughly 70 percent of the coal used in State coal fire plants originates from West Virginia. Passage of this bill would potentially result in a not readily quantifiable loss to the General Revenue Fund in the event of new wind power projects beyond 2021. Additional administrative costs incurred by $5,000 in FY2021.



Memorandum


The stated purpose of this bill is to limit the number of permits to construct wind power plants, wind power farms, or “windmills” for power generally in West Virginia; to provide that for each new wind powered facility built in West Virginia; there is an offset in the amount of taxes paid by new and existing coal fired plants; and to ensure that coal remains the primary source of power in West Virginia during emergency weather events. The bill may have a title defect. The title of this bill refers to an offset of the amount of taxes paid by new and existing coal fire plants while the body of the bill refers to taxes levied on coal mines and coal powered plants. There is a considerable difference between taxes which have been levied and those which have been paid. The body of this bill also expands the offset in taxes beyond coal fired power plants to include coal mines. The bill is not clear as the proposed language in this bill is added to W.Va. Code §11-13A-6 which is the local Severance Tax section. The language of this bill makes no reference to local severance taxes and its effects on counties and municipalities; therefore, it is not clear why it was added to this section. This bill may also be in violation of the State’s equal protection clause. The bill does not provide a real and substantial relationship between the construction of new wind power plants or wind power projects and the resulting reduction of the Coal Severance Tax levied on coal mines and coal powered plants in West Virginia. It is also important to note that the seller of the coal mined in West Virginia pays the State Severance Tax, while the coal power plant who happens to be the purchaser of the coal pays the State Business and Occupation Tax. W.Va. Code §11-6A-5a appears to be the incorrect statute to amend. Article 6A of Chapter 11 in the West Virginia Code refers to the tax valuation of pollution control facilities. It has nothing to do with issuing permits for any type of power plant. The subject matter of the amendment is not germane to the Code section. It is also not clear which agency regulates the permits for wind-based power plants. The bill also needs to define “wind-based power plant”.



    Person submitting Fiscal Note: Mark Muchow
    Email Address: kerri.r.petry@wv.gov