A committee of the Denver City Council has advanced a proposal to impose an excise tax on the electricity and natural gas usage of industrial and commercial customers.
The Finance and Governance Committee advanced the bill, 19-0803, with a vote of 4-3 on Aug. 13, one day after more than two dozen business groups and utility Xcel Energy Inc. in a joint letter urged the city council to slow down and hold a more deliberative process on the proposal.
"We strongly support efforts to address climate change and our collective groups have been working positively on a number of recent climate issues in the city," the letter said. "However, we believe this significant and costly proposal should at the very minimum undergo a full and transparent city council process to ensure it is adequately analyzed before being referred to Denver voters."
The city council simultaneously is considering creating an Office of Climate Action, Sustainability, and Resiliency, which would be funded by the proposed energy tax and would be responsible for doling out the tax revenues for initiatives such as electric vehicle infrastructure, climate change adaptation, workforce development programs or incentives for homeowners to take energy efficiency measures or invest in solar panels or battery storage.
But the proposed tax would have to be approved by voters in the elections to be held Nov. 5. Assuming the city council moves ahead with a vote this month, the tax proposal likely will pass given that it is co-sponsored by more than half of the council members. But Denver Mayor Michael Hancock, who reportedly also asked the council to pump the brakes on a decision, still could veto the measure and potentially block it from getting on the ballot. The council took up the tax proposal after a citizen-organized effort failed to meet the signature deadline to get the tax proposal on the November ballot, according to Denver-based news organization Westword.
If voters pass the measure, Xcel would charge a tax of 0.60 cents/kWh to its industrial and commercial customers beginning on July 1, 2020. And natural gas utilities would charge commercial customers a tax of 3 cents/thermal unit and industrial consumers 1.5 cents/thermal unit. While the gas-related tax would not expire, the one on electricity usage would end when Xcel's power supplies achieve a 70% renewables threshold. Xcel in 2018 announced it will slash its carbon emissions 80% by 2030 from 2005 levels, and the utility aims to completely eliminate carbon emissions from its supplies by 2050.
Councilmember Jolon Clark at the Aug. 13 meeting indicated that the tax could generate $35 million annually. However, the proposed new climate and resiliency office would be able to grant specific businesses financial hardship exceptions to allow them to receive a full or partial tax rebate. Also, businesses enrolled in a 100% renewable electricity program would be exempt from the tax, Clark said.
Clark explained that the tax targets commercial and industrial customers because they pay Xcel Energy lower rates than residential users. In addition, "commercial and industrial buildings do account for the bigger share" of emissions in the city, he said. Clark estimated that under the tax, small businesses would pay an additional $167 per year for gas and $81 more per year for electricity.
If the tax is enacted, Denver would not be the first city to create a tax tied to climate change. The City of Boulder, Colo., has charged residents and businesses extra for their electricity consumption under a "climate-action plan" tax since 2007. Also, Seattle Mayor Jenny Durkan reportedly has proposed legislation to the city council to tax home heating oil supplies beginning in July 2020.