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Xcel Energy Property Taxes Soar 131.6 Percent Since Minnesota Began Mandating Renewable Energy – Ratepayers are Stuck with the Bill

We at American Experiment often write about how wind and solar energy cause nearly every aspect of the energy grid to be more expensive, but one aspect of this story we have not yet covered is the role wind and solar play on increasing property taxes.

Property taxes constitute approximately 6 percent of your electric bill, as utility companies are allowed to pass these expenses directly on to their consumers. As property taxes rise, so does the amount you pay for electricity each month. As renewable energy sources increase on the grid, so do the property tax expenses that ratepayers are stuck paying for.

For example, Xcel Energy has seen its property tax expenses skyrocket by 131.6 percent since the passage of the Next Generation Energy Act (NGEA) in 2007, which required Minnesota to derive significant portions of its electricity from renewable energy sources.

In 2018, Xcel expects to pay a whopping $183 million in electricity-related property taxes, compared to the period from 2001 to 2007 where property tax expenses decreased 10 percent from $88 million to $79 million.

According to Xcel’s most recent rate case filing, the company’s property tax increases were “driven by the investment” undertaken by the company since the passage of the NGEA. The filing states:

“While multiple factors drive our overall request, our capital investments in transmission, distribution and generation is by far the largest component. We are continuing to invest in our system to maintain the health of our assets and to preserve our ability to provide safe, reliable and clean energy to our customers”

This means Xcel’s increasing property tax expenses are the result of the company building more infrastructure like wind and solar facilities, the transmission lines needed to transport the electricity generated by them, natural gas plants to balance for when wind and solar aren’t producing electricity, and its nuclear plant upgrades in order to meet Minnesota’s mandated Renewable Energy Standard (RES) and carbon dioxide emission requirements.

Six percent may not seem like it makes much impact on your electric rates, but increasing property taxes represent only a fraction of the additional costs that renewable energy sources impose onto the energy grid – which are often difficult to calculate or hidden by federal subsidies.

In fact, the impact of renewable energy mandates on our electric bills would be even more apparent if wind and solar did not receive special tax treatment reducing the amount of property taxes paid on these facilities.

Unlike all other power plants — and your property taxes, for that matter — wind and solar facilities do not pay property taxes based on the cost of the asset. Instead, these facilities pay a “production energy tax” determined by how much electricity they produce.  Because they only pay property taxes on land, these facilities pay far less on property taxes than other power sources.

Instead, much of the increased property tax expense stems from investing in the transmission infrastructure required to make renewable energy viable on the energy grid and decrease carbon emissions.

For example, the transmission lines associated with the CAPX2020 project designed to update the transmission system to incorporate more renewable energy increased Xcel’s annual property taxes by $25 million. This increase alone accounts for 57 percent of Xcel’s increasing property taxes between 2010 and 2014.

Other investments have also led to increasing property taxes for Xcel. Most notable have been upgrades to existing nuclear, coal and natural gas plants, as well as building more natural gas plants to provide electricity when the wind isn’t blowing, or the sun isn’t shining.

Minnesota lawmakers are contemplating a 50 percent renewable standard by 2030, which would no doubt continue the massive investments in renewable energy, transmission lines, and natural gas generation. This would continue to make Minnesota’s energy system increasingly more expensive, including the property tax expenses built into our electricity rates.

Any cost analysis of a 50 percent renewable energy standard should include the projected increase in property tax costs, as well as other imposed costs of renewable energy. Otherwise, policymakers will be making important decisions with incomplete information.

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