Punitive and arbitrary tax sends a troubling message

 by Dan Dolan

The Vermont House of Representatives is poised to pass a bill imposing a 120 percent tax increase on a single Vermont company. Not only is this tax unduly punitive and arbitrary, but it sends a troubling message to the rest of Vermont businesses.

This proposed tax on Entergy’s Vermont Yankee power plant punishes a single company for manufacturing a product and attempting to sell it in the marketplace. It is the equivalent of taxing a paper mill for each ream it manufactures or a carmaker for every vehicle rolling off its assembly line.

Connecticut imposed a generator tax last year when the state was struggling to meet significant budget shortfalls. The New England Independent System Operator, the regional system operator of the New England electric grid, conducted a study of the impact of this tax on regional wholesale electric prices and found the Connecticut tax would increase the price of electricity across the region by at least $58 million.

Just like Connecticut, Vermont is part of the regional New England electricity market. Each day generators compete against each other to bid the amount of electricity they can provide, and at what price, to best serve consumer demand. Only the cheapest power that can be procured to meet demand in a day is selected and gets paid to run.

Like any manufacturer, generators pass costs of doing business through in these daily bids. Costs like this kind of manufacturing tax have the potential to create upward pressure on electricity prices for New England consumers and create real risks for companies that could be targeted. At a time when the economy is in a tenuous recovery and consumer dollars are stretched thin, policy-makers should not be pulling in the welcome mat for investment. Creating an anti-business reputation makes it harder to retain and attract any businesses to the state, jeopardizing future economic development and job creation.

The proposed bill seeks to tax electricity to fund a political wish-list of programs – education, clean energy and economic development in a single Vermont county. Each of these initiatives is worthwhile, but arbitrarily placing this burden on a single company in a single industry is simply bad policy.

Addressing today’s economic challenges while meeting laudable goals is not an enviable task. Legislators must rely on caution and prudence in adopting any new tax. The true impacts of a new tax on consumers in Vermont and throughout New England must be considered.

Vermont should learn from the mistakes of Connecticut and not pass this 120% tax increase. Consumers in Vermont and throughout New England should not be put at risk to bear the burden of these types of unnecessary cost increases.

As developers look to where to put capital investment dollars, whether for renewable generation or environmental improvements to conventional technologies, they look for a business climate and regulatory structure that is transparent, stable and fair. This proposal is arbitrary and punishes a company for doing business in Vermont. Today it is Entergy, what company will policymakers target next?


Dan Dolan


New England Power Generators Association