Carbondale debates ‘climate action tax’ on utilities
Many Carbondalians want to know why current taxes, fees and programs aren’t enough to meet the town’s 2020 clean energy goals.
Residents questioned carbon tax supporters and utilities representatives during a panel discussion Monday on a proposed “climate action tax.” The proposal is included on the mailed municipal election ballot. Voting will end April 5.
Supporters counter that Carbondale must take a bold step to get stable funding for its clean energy projects – and that the utility companies’ efforts don’t go far enough.
The proposed tax would charge Carbondale utilities customers extra for their use of electricity and natural gas.
Residential customers would be charged an additional $0.008 per kilowatt hour and $0.035 per “therm” of natural gas. Commercial users would be charged an extra $0.0029 per kilowatt hour and $0.02 per therm.
Carbondale-based Clean Energy Economy for the Region (CLEER) estimates the average household would see a $5 to $7 per month increase and the average business will see a $10 to $30 increase.
If voters approve the measure, the tax would begin in July and sunset after six years.
The town estimates it can bring in $352,000 per year from the carbon tax. Boulder and Washington, D.C., have implemented similar taxes.
Carbondale’s proposal is designed with three goals in mind: to encourage residents to reduce the amount of energy they consume, pump money into clean energy projects and keep energy dollars in the local economy.
Unused utilities programs
Many residents say existing programs are far underutilized and could be tapped instead of taxing more of residents’ money.
Kelly Flenniken, Xcel Energy area manager, said her company has numerous clean energy and energy efficiency programs that few Carbondalians are taking advantage of. Only about 9 percent of residential customers are utilizing Xcel’s wind source program. None of town’s businesses use the program.
Only about 3 percent of residential Xcel customers are using the solar program. No one uses Xcel’s non-solar rewards programs, said Flenniken.
Carly West, of Black Hills Energy, which recently bought out Source Gas, said the company offers “demand side management” programs, which give residents and businesses energy audits at “dramatically decreased rates” and help finance some energy efficient upgrades.
But not passing the carbon tax doesn’t mean people would flock to those programs, said Dan Richardson, who sits on CLEER’s 2020 Technical and Financial Advisory Board and is also running for town trustee. He described utilities programs as a “drop in the bucket.”
“If we wanted to wait 30 years to address this problem, the utilities programs that are in existence might do the trick,” he said.
And drawing energy from renewable sources only fulfills one goal of the carbon tax. It does nothing to reduce the amount of energy a customer consumes and it doesn’t carry the economic benefit of keeping energy dollars in the local economy, Richardson said.
Higher rates, lower costs
The idea is to increase energy rates but decrease the overall costs, Richardson said.
This would be achieved by first getting people to reduce their energy usage, simply from the shock of paying more for those resources, he said.
Second, the money generated through this tax would go toward programs to give residents and businesses energy upgrades that would further reduce their energy consumption, Richardson added.
Essentially, supporters of the tax are betting that despite the tax they can reduce many Carbondalians’ energy consumption so much – through behavior changes or equipment upgrades – that they won’t be paying more.
But that formula won’t happen for everyone, said Richardson – only those who take initiative and tap the resources built into the program.
It’s a misconception that to retrofit your house you must reinsulate the whole thing, replace all the equipment and put $10,000 of solar on your roof, said Richardson. You can yield some pretty good savings just by doing “direct installs,” such as with more efficient lighting, shower heads or a thermostat, he said.
Carbondale has already seen its clean energy investments pay off, with about $400,000 in avoided utilities costs over the past five years, he said.
Why not use current taxes?
Utility bills are already taxed upwards of 10 percent, said Carbondale resident Roy Davidson. Why can’t the town utilize the money already tacked onto gas and electric bills?, he asks.
The climate action tax would add an administrative burden and a layer of bureaucracy without a clear understanding about how effective it would be, Davidson said.
Carbondale’s other utilities taxes pay things like utility companies’ liabilities or reimbursements to the town for the impact of utilities on town operations, Richardson explained.
The carbon tax would be “perhaps the most appropriate tax there is; we’re taxing the pollution we’re trying to avoid. You don’t get that efficiency with sales tax or property tax,” Richardson said.
He compared the town’s clean energy funding to the Roaring Fork Transportation Authority, which used to be a department of Pitkin County. At some point the county said, “OK RFTA, it’s time for you to grow wings and go off on your own.”
If the tax passes, Trustee Frosty Merriott said he’d want a request for proposals with Xcel to figure out how to get more residents and businesses to utilize their programs.
“But even then I still don’t think it solves the problem we’ve got coming down the road,” he said.
Merriott said he doesn’t want to have to tell his grandchildren that he did nothing about the impending climate crisis. “What Xcel’s doing is not going to get us there,” he said.
The town’s clean energy projects need a stable funding source, he said. In the past, they’ve been funded by mineral severance and lease money. That money is unreliable, having been cut in half in the last year, said Merriott.
Some Carbondale residents are also worried about burdening low-income families with the additional expense. Trustee Pam Zentmyer said the Board of Trustees is committed to addressing issues with “income-qualified” families, both homeowners and renters. But specific programs to that end have yet to be designed.
Some decisions that went into the tax question were intended to make it easy to administer, so the maximum amount of money collected would go to clean energy projects, not to administrative costs, Richardson said.
Therefore, the proposal was drafted at an even rate for residential customers, and a different but also even rate for commercial users.
Steve Hessl said he’s already bought into Xcel’s wind source power program. Being charged a second time through the climate action tax creates a disincentive for others to join the program, he said.
Customers in the wind source program pay a little more than 2 cents extra per kilowatt hour. Those customers, Hessl said, should be exempt from paying the carbon tax.
The carbon tax would have the effect of discouraging people from using renewable energy programs like the Xcel’s wind source program, he said.
Company representative Flenninken said that only 185 out of Xcel’s 2,007 residential customers in Carbondale were on the wind source program.
Here too, said Richardson, separating out the customers who use a renewable energy program would lead to higher administrative costs that tax supporters were trying to avoid.
Maybe there’s only 185 people now, but should there be an effort to try to increase that and not have a negative impact? asked Hessl.
“I don’t want to be in the position where I would say because of the cost I’ll stop doing wind source … because then I would be increasing my personal carbon footprint,” he said.
Boulder, Flenniken noted, exempted from the additional tax customers who volunteered for a renewable energy program. More people then started participating in those programs.
Richardson said the plan includes an “escape clause” that allows the trustees to make an exception if a resident or business can show a hardship.
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