A “broken promise” by Gov. Dannel Malloy has left Millstone Power Station “disappointed” and possibly on the hook for $42 million more in taxes next year.
In 2011, the state legislature placed a $2.50 per megawatt production tax on all electricity produced in Connecticut, with the exception of renewable energy like solar and wind. The cost per year to Millstone was $42 million, but Malloy promised it would be a two-year tax and it would expire on July 1, 2013, according to Millstone spokesman Ken Holt.
Millstone agreed not to pass the tax onto ratepayers and absorb the $82 million in extra taxes over the past two years, believing the governor would live up to his word and push to sunset it on July of this year, Holt said. But on Wednesday, Malloy released his budget proposal for the 2013-14 and 2014-15 fiscal years, and included in the proposal was an extension of the production tax.
“We are disappointed with the governor’s decision to break his promise,” Holt said. “When he introduced the tax, it was a temporary measure to help the state through a crisis.”
Holt said Millstone will no longer absorb the tax and it will pass it onto ratepayers. That will mean higher electricity rates to Connecticut families, he said.
“Customers will end up carrying the burden of this tax,” Holt said. “This will ultimately hurt Connecticut families that already pay the highest electric rates in the continental United States.”
In his speech Wednesday, Malloy said his proposed budget “continues aggressive efforts to lower energy costs for families and businesses.” Yet Holt said that the extension of this tax will increase the cost of energy to Connecticut families and businesses.
The proposal still needs to be approved by the state legislature. The office of State Sen. Andrea Stillman, D-Waterford, said she will fight against the extension of the tax.
Dominion, which owns Millstone Power Station, has long-term contracts with the providers it sells its electricity to. If Dominion wants to pass on this tax to ratepayers, those contracts would have to be renegotiated.
If this tax is extended, Dominion will renegotiate those contracts and it will pass on those costs, Holt said. Holt said “contracts can be changed” and will be changed because Millstone will not absorb another $42 million in lost revenue to taxes.
“Forty-two million dollars a year is a lot of tax to eat,” he said.
Waterford First Selectman Dan Steward said he is against the extension and would consider going to Hartford and lobbying against the tax. He said the governor should have followed through with his promise.
“When you make a promise, you should do everything you can to adhere to it,” Steward said.
Waterford Tax Assessor Mike Bekech said the extension of the tax could have an impact on the assessment of Millstone, which makes up roughly 30 percent of the town’s grand list. Bekech said it would depend on if Millstone can pass the tax on to ratepayers or not, but income derived from a commercial property is one of the key components to assessing its value.
Meanwhile Holt said the extension of the tax, at least at this time, would not force Millstone to lay off employees of shut down the plant. He also said the tax, which is a production tax, is unlike any tax Dominion has ever dealt with before. Holt said most other taxes are a sales tax on the sale of energy, not just a flat fee on the amount of energy produced, regardless of the how much it sells for or if it is sold at all.
A Wednesday afternoon phone call and an email by Patch to Andrew Doba, Malloy’s director of communications, was not returned.