How Much Tax Do You Pay on Your Energy?
"While most consumers are able to negotiate their electricity price with their suppliers under deregulation, they certainly can't negotiate their tax rate with the government," said Mr. Richard Soultanian, Co-President of independent energy consultants National Utility Service, Inc. NUS surveys electricity costs as part of its work to help organizations obtain the best utility prices.
"Things are changing in some states as they seek to become more competitive. For instance, there is currently a proposal in the New York Senate to eliminate the state's gross receipts tax on electricity and gas. Under the proposed plan, it has been estimated that residential consumers would save more than $80 a year, while industrial consumers would save an average of $4,600 a year."
Despite the proposed cut, overall prices in New York would still be comparatively high as New York City has the most expensive electricity price in the country. Tax rates for electricity in certain major cities is set forth below.
City Tax rate %
New York City: 8.25
Washington DC: 5.75
Detroit: 6.0
Chicago: 14.13
Los Angeles: 12.7
Source: National Utility Service, Inc. and state utilities.
New York City – there is a state sales tax of 4% and a city tax of 4% on the net bill. There is also a MTA surcharge of 0.25%. The average residential customer spends $1,724 per year on energy for their home, this amount includes $128 in taxes a year.
Washington DC – there is a DC sales tax of 5.75% applied to the net bill.
Detroit – a 6% state sales tax is applied.
Chicago – a franchise tax of 4.54144% is applied along with an Illinois sate sales tax 4.2% for the user model (exclusive of the franchise tax). This latter tax is calculated using a declining kWh block rate. There is also a municipal tax of 5.15% (inclusive of the franchise tax) added to the net bill.
Los Angeles – there is a city utility tax of 12.5% on the net bill. A state energy surcharge of $0.0002 per kWh is also applied. Based on this model user this comprises approximately 0.2% of a bill of $1,000.
Mr. Soultanian suggested "while you can't escape taxes, there are several things larger consumers of electricity can do to try to reduce their costs. Start by shopping around. Develop a good understanding of your energy load profile over a specific period, as daily and seasonal variations can have a major impact on power costs."
"Be careful when comparing offers. Suppliers provide prices based on different criteria. They are under no obligation to provide quotes using similar formats. Some suppliers make their contracts so complex that it is almost impossible for the average buyer to compare their prices and terms to those offered by another. Offers also need to be evaluated in their entirety, especially terms and conditions. Be wary about taking prices at face value. You could end up paying more due to accompanying terms and conditions. Also, don't risk entering into contracts that lock you out of the competitive market for extended periods. Such terms can become a cost."
"Above all, and to complete your search for the lowest price, ask an independent expert for a little comparative advice. Without expert market intelligence, you are relying on what you are being told by the retailers' marketing teams."
National Utility Service is a leading utility cost management company. It has saved more than $2 billion in electricity, gas, water, fuels and telecommunication costs for more than 750,000 locations around the globe, including more than half the Fortune 500 companies.
Contacts for Further Information:
Richard Soultanian Guy McKanna
Co-President NUS PR
1(800) 888-2190 201 391 4300