Illinois Dereg Law Allows Cities to Recover Revenues with Utility Tax

Illinois' electric deregulation law, which will go into effect August 15, includes a provision allowing 400 cities and towns in the state to recover revenues lost as a result of electric deregulation by directly taxing consumers on their electricity consumption.

The provision, which authorizes cities to tax heavy energy consumption at higher rates, will actually reduce the tax for residents and small businesses, but will drive up rates for the large industrial users who pushed for deregulation, according to Illinois Power's Regional Manager Bob Kelsheimer.

According to David Farrell of the Illinois Commerce Commission, the old utility tax will become an excise tax-. The city of Belleville, Illinois, which currently charges consumers a four percent tax on their electric bills, reported that it would stand to lose about $210,000 in utility tax revenue without the recovery provision.

Illinois Power's proposed plan, now being drafted as an ordinance by Belleville, would have large businesses make up for revenue losses. With 10 different tax categories, Belleville's heaviest user of electricity, an industrial firm, would pay about $200 a month more than the $1,400 it currently pays under the plan, while medium-sized businesses like fast-food restaurants and offices would pay about $1.20 more a month on average. Meanwhile, a typical resident with a $100 monthly electric bill would pay about a penny less a month, Kelsheimer said.

In Belleville, about half of all the utility tax revenue is paid by residential customers, Kelsheimer said, while businesses account for about 30 percent of the tax revenue and industries and institutions like schools account for the rest.

The 18 metro-east cities with a utility tax collect a combined $2.3 million in revenue from electric bills, Kelsheimer said. Belleville collects about $2.8 million a year in utility tax revenue, more than half of which comes from electricity.

Copyright (c) 1998 by the American Local Power Project