The fight over ROFR or Right of First Refusal at the State Capitol in Oklahoma just became a hardball game, and it’s resulted in something of a firestorm for the state’s renewable energy industry.
House Speaker Charles McCall, reportedly “furious” over the opposition by NextEra Energy to a possible ROFR bill in the legislature responded last week with what appeared to be an income tax relief bill, but in actuality was a major new tax hike on renewable energy in Oklahoma.
His introduction of HB2950’s Committee amendment sent shockwaves among the state’s wind and solar power community.
“It’s extremely onerous and a terrible idea,” said Mark Yates, a former vice president of Advanced Power Alliance and now with CornerStone Government Affairs. The APA is a regional trade association representing the vast majority of renewable investment across Texas, Oklahoma, Kansas, Missouri, and Nebraska. NextEra is among its dozens of energy members.
“It sends a message to the U.S. that we don’t want to see the deployment of capital for renewable energy in Oklahoma,” he told OK Energy Today. “He’s not consulted with anyone in the industry–pretty amazing. It’s extremely detrimental to the state’s growth.”
McCall’s committee amendment was introduced and rushed through the House Rules Committee on a 7-2 vote. Rep. Andy Fugate, one of the two legislators who voted against the measure, said he was unaware it was a tax hike on renewable energy until interviewed by OK Energy Today.
“I looked quickly at the bill—my focus was on the tax cut.”
He explained he voted against it because of the large number of bills the committee had in front of it.
In looking at McCall’s bill, on the surface it appears to be a proposed cut of income tax rates for Oklahomans. But deep into the bill on page 11, is a proposed ‘New Law” calling for a levy of one dollar per megawatt-hour of electricity “produced by a renewable power business within the state.”
Here’s how it was described in a fiscal impact statement:
“The proposed committee substitute for HB2950 provides a .25 percent personal income tax cut for all brackets, lowering the top marginal rate from 4.75 percent to 4.50 percent effective tax
year 2024.
The measure also establishes a $1 per megawatt-hour tax on electricity produced by renewable power businesses and outlines the reporting requirements for remitting taxes and reporting on
electricity production. Tax remittance is due monthly, whereas the electricity production report is required annually.
Collections from the renewable electricity production tax will be deposited into the General Revenue Fund.
Fiscal Analysis
The measure is currently under review and impact information will be completed.
Prepared By: House Fiscal Staff”
It’s a direct blow to NextEra, a major wind farm operator in the state, and a firm that stood up to legislative leaders as they promoted a bill to create the Right of First Refusal for utilities wanting to build major electric transmission lines in the state. With ROFR, utilities could refuse competitive bidding and pass along the costs to ratepayers. Consumer groups and NextEra opposed ROFR and refused to budge during private negotiations held at the capitol over the past several months.
It’s reported McCall was so angry he announced in a House GOP caucus last week he “was coming after NextEra.” And he did, with his HB 2950 amendment. It’s believed McCall will present the measure to the House this week, maybe as early as Tuesday.
NextEra made its opposition known last fall when company Vice President Matt Pawlowski, who is also Executive Director of NextEra Energy Resources LLC, told a State Senate interim study hearing, “ROFR will increase rates in Oklahoma,” adding that “it’s critical that Oklahoma lgislators put Oklahoma customers first.”
Anpther ROFR opponent testified before the same hearing. Josiah Neeley with R-Street Institutes called it a “bad move for Oklahoma,” saying “when you eliminate competition, you raise costs.”
But the House Speaker faces at least one major challenge in his efforts to put a bulls eye on the back of NextEra along with every other wind and solar farm operator in the state.
He has to face the legal question of the impact of state law that arose from the 1992 statewide vote on State Question 640. The citizen-initiated ballot measure was approved by a 56% margin and created the existing law that required any legislation intended to raise revenue for the support of the state government be submitted to a vote of the people before it could become effective unless it was approved by a three-fourths, or 75 percent, supermajority vote of the Legislature.
The Speaker reportedly contends it is not a tax hike and is “tax neutral” because of the income tax hike he is proposing. Others disagree and say it is clearly a tax hike and will need 75% approval in the legislature.
Mark Yates says “it is a tax increase” and suggested if McCall is able to rush the measure through the legislature, it will end up before the State Supreme Court.
This isn’t the first ROFR fight for NextEra. It lost a lawsuit in Texas in 2020 after the state created a Right of First Refusal law. But NextEra won on appeal in the 5th Circuit Court of Appeals where the court ruled that the Texas ROFR law “violates the dormant Commerce Clause.”
Studies have shown that ROFR battles develop in wind power states because of the need for major transmission lines to carry electricity to areas that need the power.
The Iowa Supreme Court ruled last year against a law giving incumbent utilities a right-of-first-refusal for building transmission lines in the state.
It said the ROFR law was “quintessentially crony capitalism,” and would lead to higher costs for ratepayers.
President Biden’s Inflation Reduction Act is reported to be fueling efforts in states to create right of first refusal. Oklahoma isn’t alone. Others have been introduced in the past year in Indiana, Missouri, Kansas, Montana and Mississippi.
Below is how the House Rules Committee voted on the measure.
Rules Committee
2023-24
HB2950 Revenue and taxation; individual income
McCall tax; tax rates; effective date.
DO PASS AS AMENDED BY CS PASSED
YEAS: 7 RCS# 82
NAYS: 2 2/22/2024
C/P : 0 09:13:52 AM
YEAS: 7
Bashore Echols Hill McDugle
Osburn Pfeiffer West (T)
NAYS: 2
Fugate Swope
CONSTITUTIONAL PRIVILEGE: 0
