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explore an efficiency electricity tax, based on either the amount of nitrogen oxide generated per megawatt hours or on BTUs/kilowatt. In this way, electricity would be taxed according to its efficiency (and by extension cleanliness) and would be based on the unit of electricity used and its pollution, not upon the value or price of the electricity. Currently, the Public Utility Commission is exploring a generator dispatch fee paid by the utility based upon NOx emissions rate and the total megawatt hours to fund fuel cell development and clean energy. 29

An efficiency fee could be charged to Texas utilities to raise monies both for the fuel cell development program as well as funds for the Texas Emissions Reduction Program. The fee could be based on PUC’s proposed generator dispatch fee in order to raise sufficient funds for both programs. One proposed fee would charge $0.30 per pound of NOx per megawatt hour multiplied by the total megawatt hours generated by the utility. Based upon generation data from 2000, this efficiency tax would generate about $170 million per year (see Table 10), or nearly $350 million over the biennium. In actuality, the proposal would generate slightly more since the estimates do not include smaller cooperatives and municipal sources, as well as cogeneration plants. Alternatively, the tax could be charged directly to the retail consumer, based upon the NOx emissions rate (lbs emitted/MWHs) times the number of megawatt hours utilized by the customer. This would give consumers an incentive to choose power from electric power generators that emit less pollution.

If assessed to utility customers, this new energy efficiency fee would result in only a very minimum additional monthly utility bill. Based on 2003 residential rates for an average use of 1,000 kilowatt hours per month, customers in Texas would pay an average of 65 cents more per month. Table 11 shows what customers of major utilities in Texas would pay per month based upon this average.

29 Public Utility Commission of Texas, Staff White Paper on Stationary Fuel Cells for Power Generation, May 6, 2002. Under the PUC proposal for fuel cell development, the highest proposed dispatch fee assessment rate for fuel cell development would occur in the years of greatest total program cost. In these high cost years, power plants with a NOx emissions rate of zero would pay between zero and $0.21 cents per megawatt hour, a power plant with a moderately low NOx emissions rate of 2 lb./MWh would pay between $0.31 to $0.37 cents per megawatt hour, and a power plant with a high emissions rate of 3.5 lb/MWh would pay between $0.49 cents and $0.55 cents per megawatt hour. Our proposal is to simplify these rates to $0.30 per pound of NOx per Megawatt hour and apply it beginning in 2004 to generate monies for both the fuel cell development program and the Texas Emissions Reduction Program. See PUC, Table 5, page 13.

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