Daily Archives: February 10, 2015

Maybe now Kevin Jones can find himself a new hobby

Yesterday, the Federal Trade Commission gave a light wrist-slap to Green Mountain Power, telling GMP to “be more clear” in how it advertises renewable electricity while closing the books on a complaint of deceptive marketing.

The allegation had come from the usually reliable folks at the Vermont Law School, and in particular the unreliable Kevin Jones, who’s had a bee in his bonnet for years about Vermont’s SPEED program, which allows utilities to sell renewable energy credits out of state. Jones’ complaint is that selling RECs is basically a shell game, allowing Vermont utilities AND the out-of-state REC buyers to both claim they’re producing “green energy.”

Technically true, but with a couple of giant caveats.

SPEED was designed to encourage development of renewables at a time when they were not financially competitive. Vermont utilities could build renewables and recoup some of their costs through the sale of RECs, thus cushioning the blow to ratepayers. And it was designed from the beginning to be a temporary program; it will expire in 2017, and the legislature is crafting its replacement this year. SPEED is going away on schedule, having achieved its mission.

Jones also ignores the fact that, whether or not RECs were sold, their sale allowed us to adopt renewables more quickly than we could have otherwise. Real power was generated, and it reduced the overall need for fossil fuels.

The complaint also seems to rely on a misperception of electricity generation and consumption. Power enters the grid from all kinds of sources, is distributed through the grid, and consumed — all in real time. Unless you live off the grid, there’s no telling where your electricity comes from at any given moment. GMP can promote its commitment to renewables, but it cannot promise you that your power comes from the solar farm down the road, a hydroelectric dam in northern Quebec, a fossil fuel-burning plant in Massachusetts, or the big nukes at Seabrook. That’s true with our without SPEED.

I wrote about this a couple months ago and you can read more there, so I won’t belabor the point here. Suffice it to say I’m glad to see the FTC close this case. And once the legislature passes the next iteration of power regulation, I wish Mr. Jones luck in finding a new binky.

 

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The Phil Scott Policy Engine gets off to a slow start

In a little-noticed press release, Phil Scott’s Economy Pitch project announced three bills “aimed at growing the state’s economy.”

Little-noticed because of the odd and counterproductive timing: the release was issued on Friday afternoon, the traditional dumping ground for bad news you hope will go uncovered. Well, this one surely went uncovered.

But also little-noticed because the three bills are completely underwhelming in scope. Even if they all sailed through the Legislature, they’d have a negligible effect on the course of Vermont’s economy.

One could charitably assume that the Scott Gang is tactically aiming low: introduce some small incremental ideas first, and get to the real meat later on. After all, the Economy Pitch series is still ongoing: there was a meeting last night in Rutland, and another is coming up next week somewhere in Franklin County. (Location TBA.”) More ideas could emerge. But if that’s the case, don’t oversell.

On the other hand, one could less charitably conclude that this whole project is nothing but classic Phil Scott centrist incrementalism, and that a cattle call for business owners is unlikely to produce anything terribly visionary.

The three bills, and try not to laugh:

— H. 80 would declare a state sales tax holiday on August 29 and 30. Oh, Lord, this again? A sales tax holiday is like a waffles-and-Coke breakfast: a short-term burst followed by an equivalent decline. Sales tax holidays do nothing to grow an economy. All they do is concentrate consumer purchasing into a couple of days.

Well, business purchasing as well. Indeed, I suspect that businesses are best poised to take advantage of a sales tax holiday; they can easily schedule their purchases to take advantage.

— H. 83 would establish a brand marketing effort under the rubric “Vermont: Innovative By Nature.” This would be a combined effort aimed at both economic development and tourism, which is kind of a misfit. How does “Innovative By Nature” appeal to potential tourists?

Beyond that, the bigger problem is the inherent limitation of marketing. You can’t put lipstick on a pig and call it a supermodel. It’s fine and dandy to tout Vermont’s advantages, and we do have quite a few; but a marketing campaign in and of itself will have, at best, a limited long-term effect. It’s far better to address the underlying problems. But that’d cost real money. A marketing campaign is cheap by comparison.

Still, it’s a strange approach for a guy who sympathizes with the struggles and complaints of Vermont’s business community. A marketing campaign does nothing to improve Vermont’s business climate, and I’d think the business community would realize that immediately.

— H. 146 would exempt “software as a service from Vermont’s sales tax.” The so-called Cloud Tax is said to create “an image that Vermont is not a business-friendly place for the technology sector.” Hey, wait — didn’t I read somewhere that Vermont is Innovative By Nature, an excellent place for a high-tech startup?

Mixed messages, people.

Repealing the software tax may or may not be a good idea, but it shouldn’t be done for the alleged, and amorphous, benefit of enhancing Vermont’s “image.” This is a big step with growing ramifications. It should be considered as part of a thorough re-examination of the sales tax in light of changing technology, not as a short-term move to enhance our “image.” (Of course, the urgency behind this move has nothing to do with growing Vermont jobs; it’s all about  Amazon.com’s attempt to bully us into surrendering more of our taxing authority.)

Software used to be a commodity, a tangible item subject to sales tax. Now, increasingly, it’s cloud-based. Should it be taxed? Maybe yes, maybe no. But if we exempt it, we’re closing off a large and growing source of revenue. Is that what we want to do?

Similar questions abound. Vermont already loses an unquantifiable, but significant, amount of revenue thanks to Internet retail. Now, more and more “products” are intangible in the same way as cloud-based software: e-books, audio content, subscription access to news content. Are you actually “buying” anything when the products are intangible and/or access is limited in scope or duration?

Our tax code contains many references to “downloads.” That term is almost an anachronism, and its application to cloud-based content is questionable. Example: At a recent hearing of the House Ways and Means Committee, no one knew whether digital “newspaper subscriptions” were subject to sales tax, or whether newspapers are collecting and paying the tax. I’m sure someone knows, but nobody in that room did, and they’re the ones pondering changes to the tax code.

Enough of that. Color me underwhelmed with the initial product of the Economy Pitch. If there were any creative, original, or far-reaching ideas broached at the first session, they didn’t make it into proposed legislation. We can hope for better things from future pitch sessions.