Energy expert admits utility deregulation will require major state tax overhaul to prevent harm to communities

by | Mar 8, 2019

During a hearing with budget experts from Governor Ron DeSantis‘s office and the Florida legislature, an energy market expert acknowledged that Florida lawmakers would be required to restructure Florida’s tax code, in the event that a complex utility deregulation scheme passes, so it won’t gut state and local government operating revenue.

But the expert, Jon Wellinghoff, appeared to make the admission without the knowledge of a complicating factor within Florida’s constitution, which was amended last November to make it much more difficult for state lawmakers to raise taxes and fees. Amendment 5, which passed with the support of 65 percent of Florida voters, requires a two-thirds vote from both the Florida House and Senate in order to raise taxes or fees, or in order to pass a new tax.

With Amendment 5 now enshrined in the state constitution, voters may have to choose between the current tax structure or deregulating Florida’s energy utilities, which could have a devastating impact on local communities who would struggle to fund services, including police and fire protection. Only a supermajority of lawmakers would be able to make the change, but first they’d have to agree on a fix. Deregulating Florida’s public utilities is projected to have a significantly negative impact, in the hundreds of millions of dollars, on local property taxes currently paid on facilites owned by the utilities.

Oblivious to the amendment, Wellinghoff expressed confidence that the legislature would find a fix if voters adopt the complex deregulation scheme being pushed by a group called Citizens for Energy Choice. Wellinghoff acknowledged that Citizens for Energy Choice paid him to testify in favor of the scheme. The special interest group has ties to a natural gas company seeking to expand its market share in Florida, and is expected to spend millions of dollars convincing Floridians to vote in favor of deregulating Florida’s utility companies.

“The legislature will take care of this,” Wellinghoff said. “It’s part of the legislature’s duty when this amendment is passed, to ensure that these fees and taxes are in fact made whole for state and local governments.”

But Julia Dietz, representing the office of Governor Ron DeSantis, was unmoved by Wellinghoff’s comments, seeking further explanation on how the proposal would address the potential tax problems.

“Is there anything in the actual constitutional amendment that guarantees that those losses will be taken care of?” Dietz asked.

“It’s completely silent on those lost revenues,” Wellinghoff admitted.

Other witnesses took direct exception to Wellinghoff’s testimony. Joe Gibbons, board member for Floridians for Affordable and Reliable Electric, took a direct shot at Wellinghoff and Citizens for Energy Choice.

“Let’s start with the obvious reason to oppose this scheme: the financial hit to Florida,” Gibbons said. “Realizing this loss will result in either higher taxes, reduced services to economically challenged communities, fixed income, low income, and people of color.”

Gibbons further testified that the only reason Citizen’s for Energy Choice is actually pushing the deregulation scheme is because the group’s backers want to make money, not to lower costs for consumers. He pointed to some of the disastrous results in other states that have tried similar deregulation schemes.

“Scrapping the state’s energy regulation schemes hasn’t worked out as promised,” said Gibbons. “In many states, choice has led to chaos. Deregulation has been in place in Massachusetts 20 years, and the signs of buyers remorse are everywhere.”

Gibbons cited a study by the state’s attorney general which found that nine out of ten families that switched power companies in the search for savings actually paid more.  Massachusetts’ attorney general is leading the charge to scrap that state’s deregulation scheme. Other deregulated states are also considering similar plans.






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