Benton, Franklin PUD leaders oppose carbon tax initiative

Initiative 732 would put a tax on carbon emissions, encouraging wind and other carbon-free electricity production.
Initiative 732 would put a tax on carbon emissions, encouraging wind and other carbon-free electricity production. Tri-City Herald file

The Benton PUD Commission came out Tuesday morning in opposition to the carbon tax initiative that will be on the November ballot in Washington state, with the Franklin PUD passing a similar resolution hours later.

Initiative 732 would create an escalating tax on carbon emissions, including on the portion of the electricity used by PUD customers that is generated by fossil fuels.

The tax would start at $15 per metric ton beginning in July 2017, jump to $25 per metric ton the next year and then escalate at a rate of 3.5 percent plus inflation annually to up to $100 per metric ton.

Supporters of the initiative say the tax on carbon, including at the gas pump, would be offset with tax breaks.

Tax breaks would include a 1 percent reduction in the sales tax, a reduction on the business and occupation tax on manufacturing and a payment of up to $1,500 per year to low-income families through the working families sales tax exemption.

The Benton PUD Commission heard comments pro and con at a public hearing Tuesday, including a PUD staff report that recommended opposing the initiative.

The tax is estimated to cost Benton PUD customers $4.3 million in 2017 and $7.3 million in 2018 with annual increases after that of about $500,000 per year.

The increased estimates are based on an average water year. Much of the Benton PUD electricity comes from hydropower.

The Franklin PUD estimates the tax could cost its customers between $1.9 million and $3.2 million annually when fully implemented. There also would be staff costs for additional administrative and reporting requirements.

It’s a very big cost for our customers with negligible benefits.

Lori Sanders, Benton PUD Commissioner

“Thanks to our abundant hydropower, wind, solar and nuclear, our electrical sector is already 90 percent carbon free,” said Lori Sanders, Benton PUD Commission president, in a statement after the hearing.

Franklin PUD has a similar mix that is about 90 percent carbon free.

“With the upcoming retirement of coal, this initiative does not appear to add any additional reduction of carbon,” Sanders said. “It’s a very big cost for our customers with negligible benefits.”

Regional coal-fired power plants producing 2,000 megawatts already are scheduled to be shut down over the next decade. Natural-gas fired plants, a lower-carbon alternative, will still be needed and subject to the carbon tax to back up intermittent wind and solar resources, Benton PUD staff said.

Roger Wright, president of the Franklin PUD Commission, said he saw no clear path that would guarantee a reduction in carbon emissions because of the tax.

Greg Rock, a member of the Carbon Washington executive committee, said if the initiative does not pass, utilities may face requirements to increase the renewable resources, such as wind and solar, in their portfolios.

The sales tax break to Benton County would be about $36 million a year, putting money in the PUD customers’ pockets while fighting climate change, he said.

The initiative would work somewhat like a “sin tax,” increasing taxes on carbon emissions linked to climate change but reducing taxes on other spending that helps the economy, he said.

It would make our tax code more fair to low- and middle-income families.

Shirley Lucas, Richland resident

Carbon plans will be put in place sooner or later, said Lora Rathbone, of Richland, during the public hearing. The initiative has the benefit of reducing the sales tax to help low-income residents while addressing climate change, she said.

It would be selfish and short-sighted not to put more resources into carbon emission reduction, she said.

Not addressing climate change would be far more costly to the region than the proposed carbon tax, said Steven Ghan, a scientist at Pacific Northwest National Laboratory. Mid-Columbia farms and orchards depend on irrigation water from mountain snow pack dependent on cold, wet winters.

Initiative 732 is the country’s first and only carbon tax initiative. It could set the example for the nation, Ghan said.

Carbon taxes on gasoline, which other speakers said already has unreasonable taxes, would lead to more electric vehicles, he said.

For the Benton PUD Commission, the fatal flaw in the initiative is the way it would tax the market purchases the utility makes, including during times of peak use, PUD officials said.

Those purchases, which make up about 15 percent of the PUD’s electricity, would be taxed as if they came from a coal-fired generation plant because they include an often unknown mix of sources that could include hydro power, wind, solar natural gas or coal.

Carbon taxes have been imposed within the European Union, resulting in dramatic increases in electricity prices, Benton PUD staff said.

A $100 electric bill in the Tri-Cities would cost $570 in Germany, according to the staff. Carbon emissions in those countries decreased, but at the same time they increased eight times that in developing countries.

The German tax is not a fair comparison, because that country’s tax structure is very different, Rock said.

Annette Cary: 509-582-1533, @HanfordNews