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<br />c <br /> <br />c <br /> <br />@.... <br />.--."i:; <br />7-:,":.:~'" <br /> <br />01254 ' <br /> <br />D-R-A-F-T <br /> <br />P:\User\Thomas\95Rate\BTUtax <br /> <br />Mav 13. 1993 <br /> <br />Proposed Enerav Tax <br /> <br />Issue <br /> <br />. How should the President's proposed plan for a new Energy Tax be handled <br />in the next rate process? <br /> <br />Background <br /> <br />. The President's plan for an energy tax is still changing. Listed below <br />are the basic tenets that were included in the initial proposal. <br /> <br />. The Administration's proposed energy tax plans to earn revenues of <br />approximately $49 billion over four years from national energy consumption <br />of all types. The electric utility industry energy tax is based on the <br />heat content of fuels used in the generation of energy, which is measured <br />in BTUs. The basic tax is 25.7 cents per million British Thermal Units <br />(BTU) with an additional surcharge being added to oil-based fuels in order <br />to discourage their use. Hydropower and nuclear po'"er will be charged <br />their BTU equivalents. <br /> <br />. <br /> <br />According to OMB, the hydropower heat content equivalent is equal to <br />10,315 BTU per kWh. This is the average heat rate needed to generate a <br />kWh by a fossil fuel powerplant. The average heat rate of a kWh of <br />electricity is 3,412 BTU's, regardless of the generating source. <br /> <br />. The tax will be collected at the generating agency, wholesale utility <br />level. <br /> <br />. The tax is designed to be phased in over a three yeat period, although, <br />due to the date of July 1, 1994. it will actually take four Fiscal Years. <br />The tax rate, in mills, is as follows: <br /> <br />FY 1994 - 0.88 mills/kWh <br />FY 1995 - 1.76 mills/kWh <br />FY 1996 - 2.65 millS/kWh <br />FY 1997 - 2.65 mills/kWh <br /> <br />. Based on average sales for the previous five years (FYs 1988 through <br />1992), the BTU tax for the SLCA/IP is estimated to be $19,947,000 per year <br />by FY 1997. <br /> <br />Ope ions <br /> <br />. There will be no options on how the tax is to be implemented. If Congress <br /> <br />1 <br />