Tobacco tax, net metering bills win committee approval

CHEYENNE — The Wyoming Legislature’s House Revenue Committee advanced a bill Tuesday that would increase the state’s tobacco tax by 24 cents per pack of cigarettes, a proposal that would mark the first tax hike on cigarettes and other tobacco products since 2003.

If approved by the full Legislature later this year, the bill would raise the tax on cigarette packs from 60 cents to 84 cents per pack, and it would increase the tax on moist tobacco snuff from 60 cents to 72 cents per ounce.

During the meeting, the legislation, which was expected to raise roughly $6 million annually for the state’s general fund, had the support of several health officials, who argued in favor of the potential benefits that could come with the tax increase.

Brittany Wardle, community prevention project director for Cheyenne Regional Medical Center, told lawmakers that the health care costs associated with smoking total more than $250 million in Wyoming, and she was optimistic that a tax increase would lead to less smoking among low-income residents.

“Nationally, for every 10% increase in cigarette prices, we see reductions in youth smoking by 7% and total cigarette consumption by 4%,” Wardle said.

Wardle also noted the public has shown some willingness to increase Wyoming’s tobacco tax, with a 2017 survey of state residents finding 53% of respondents were in favor of boosting the state’s tobacco tax rate, which currently ranks among the bottom 10 states in the country.

However, not every person who testified was in favor of the proposal. The Wyoming Taxpayers Association was opposed to the bill, with Executive Director Ashley Harpstreith arguing the tax was “inherently regressive” and would only be felt by the roughly 18% of adults who smoke in Wyoming.

Mark Larson, executive vice director of the Wyoming Petroleum Marketers Association and Convenience Store Association, argued the proposal would further skew the playing field against his members, many of which compete against unaudited sales made on the Wind River Reservation.

Larson also noted the tobacco tax increase could impact the level of cross-border sales in Wyoming, arguing that keeping the state’s current rate could drive up sales in response to other states, including Colorado, raising their taxes on cigarettes.

“If we go to the 84 cents, it is going to adjust behavior,” Larson said. “I’m fearful that we’re going to be pushing sales to the internet, (and) we’re going to be pushing sales into Nebraska and Idaho.”

However, with Utah, Montana and South Dakota all having cigarette taxes far higher than the 84-cent proposal for Wyoming, lawmakers on the committee argued the state had the capacity for the increase without losing business.

While explaining his “yes” vote, Rep. Tim Hallinan, R-Gillette, also noted the bill had the support of both the Wyoming Association of Municipalities and the Wyoming County Commissioners Association.

“This would give (cities and counties) an increase in their income – a significant increase, but not a massive increase – and they’re in favor of it,” Hallinan said. “I think we have a lot of reasons to support this bill, and I can’t think of any reason not to support it.”

Others on the committee worried about the bill’s impacts on civic freedoms. Rep. Mark Jennings, R-Sheridan, who voted against the increase, questioned the use of tax policy to encourage particular behavior.

“When we’ve finally stomped out the last usage of tobacco, are we going toward soda? Are we thinking about alcohol?” Jennings asked.

His question drew a response from committee chairman Rep. Steve Harshman, R-Casper, who said his colleague’s point was an important one to keep in mind.

“It’s the whole deal of your freedom ends where my nose begins,” Harshman said. “You have the freedom to smoke, but does that mean the rest of us lose freedom because we have to pay for it? I think this is the debate we always have.”

The committee ultimately approved the tax increase by a 6-3 vote. At the end of the meeting, Harshman said he was unsure whether the bill will be considered during lawmakers’ eight-day virtual session, set to begin next Wednesday, or during the in-person portion of the Legislature’s session, tentatively set to begin March 1.

A bill that critics argued could reduce the compensation paid to residents for the excess energy produced on their rooftop solar installations was advanced by a separate legislative committee Tuesday.

The proposal, which was advanced unanimously by a Senate committee, could bring a substantial change to the process of net metering, the billing mechanism through which owners of solar panels are reimbursed for excess electricity they feed back into the broader utility grid.

The bill would require the Wyoming Public Service Commission to replace the state’s existing setup by establishing a regulatory system for residential solar power generation in a way that “prevents subsidization of customer generators compared to other customers of the electric utility.”

Before lawmakers advanced the bill, they accepted several amendments based on public testimony provided during the meeting. Lawmakers got rid of the bill’s first section, which would have eliminated the existing net metering statutes later this year, after several members of the public noted the language would create legal uncertainty until the Public Service Commission establishes the new system.

Bryce Freeman, administrator for the state’s Office of Consumer Advocate, which represents the interests of Wyoming utility customers in ratemaking processes, said the bill would allow the Public Service Commission to examine whether solar panel owners should still be compensated at existing retail rates, with similar studies already underway in about a dozen states.

“Based on my research, there’s a number of ways that you can go about designing a system that’s fair to both the self-generating customers and those that don’t have self-generation, and we would be looking in any proceedings before the commission to find out about all those things that might work in Wyoming,” Freeman said. “I’m generally pleased with the bill the way it is, and I would pledge my expertise and support to help the committee with this problem in any way that I can.”

Electric companies Black Hills Energy and Rocky Mountain Power, as well as the Wyoming Rural Electric Association, supported the proposal.

“Ultimately, by approving this bill, the Legislature is not putting their thumb on the scale and directing it one way or the other,” Rocky Mountain Power Vice President of Government Affairs Jon Cox said in testimony. “Rather, they’re directing the PSC to create a system or create a process that does not have subsidization.”

However, the committee also heard from several Wyoming residents with solar panel systems already in place, many of whom argued the legislation would create uncertainty for those hoping to invest in solar energy. Monika Leininger, an organizer for the Powder River Basin Resource Council, noted lawmakers’ concerns about cost shifting, which occurs when one group of ratepayers passes expenses on to another group, have not resulted in any major studies.

“We’ve never chosen to formally study the issue, and therefore we do not know the impact on non-solar ratepayers in the state,” Leininger said. “This bill concludes that there’s an impact prematurely before any study. We do know that the number of net-metered systems is small, and that these systems have negligible costs on other utility customers.”

“This cost shifting is not tangible today … and certainly no reason to overhaul this regulatory system that has worked well to provide certainty for customers and businesses,” Leininger continued. “What is tangible today is the jobs created by the industry and the small businesses that provide these cost-saving opportunities to other Wyoming people and businesses that depend on it.”

Lander resident Scott Kane, who owns a solar panel contracting company in the state, told lawmakers that rooftop installations benefit the state “by driving economic development, private investment and by reducing the carbon intensity of our electric generation sector.”

“I encourage this committee to discontinue efforts that may result in the reduction of the compensation for net excess generation,” Kane said.

Others argued the legislation would hamper local governments’ efforts to expand their use of solar and other nonrenewable energies. Paul Weaver, a city councilman in Laramie, said rooftop solar projects are a valuable options for local governments tasked with finding cost-saving measures, adding the bill “could have a negative impact on achieving those savings for residents, city governments and, clearly, particular local partners.”

“There likely is a role for legislation, but I want to echo some of the previous views and ask the committee to consider a deeper examination before a bill is passed. Gather some more information and find ways to get some answers without impacting the ability of the cities and towns,” Weaver said.

The legislation also drew testimony from a legislator who wasn’t on the Senate committee. Rep. Jim Roscoe, I-Wilson, joined the meeting to tell his colleagues that he was struggling to see how the bill would help Wyoming citizens.

“This bill would just take us backward, so I really don’t see the reason for it,” Roscoe said. “Putting a bill in front of the (Public Service Commission) now … it just doesn’t seem necessary at all.”

In response to testimony, lawmakers ultimately got rid of the bill’s first section, which would’ve created a period of uncertainty between the repeal of existing statues this year and the deadline for the Public Service Commission’s study six months later. Another amendment giving more time to the Public Service Commission, requiring the completion of its work by April 2022 instead of January 2022, was also adopted, and the newly developed system would only apply to net metering systems that become operations on or after July 1, 2022.

The Senate Corporations, Elections and Political Subdivisions Committee approved the legislation by a 5-0 vote.