Invenergy S.B. 441 –Implications for Wind Energy West Virginia Wind Working Group – September 18, 2007

Invenergy 2 Senate Bill 441: Background  May 2001 Legislation B&O Taxes  Set “capacity factor” for wind at 5% Property Taxes  In West Virginia, pollution control equipment is taxed at salvage value – 5% of appraised value.  Classified wind turbines and towers as pollution control equipment.  Resulted in most of a wind project being valued at “salvage value”  2006 Sessions  Governor’s Tax Modernization Project

Invenergy 3 Business & Occupation Taxes  Applies to Industries Regulated by PSC  Based on nameplate capacity  Base rate of $22.78 per kilowatt  Note: $20.70 rate for coal plants using desulfurization technology  Adjusted by legislated “capacity factor” FuelOld CFNew CF Coal 40%40% Wind 5%12% Peaker5%5%

Invenergy 4 Governor’s Original B&O Tax Proposal  Raise B&O Taxable Capacity Factor for wind (and only wind) to 20% Four times the effective B&O tax burden $170,000 in additional taxes per 100 MW Would have resulted in wind paying  50% more per MWh produced than coal-fired electricity and  300% more per MWh than gas-peaker fired electricity.

Invenergy 5 B&O Taxes under Senate Bill 441

Invenergy 6 B&O Taxes under Senate Bill 441

Invenergy 7 Property Tax (Old System)  Pollution Control /Salvage Value (as % of Capital Cost) Coal = 33% Wind = 85%  Appraised Value (as % of Capital Cost) Coal = 69% Wind = 19%  Assessed Value (60% of Appraised Value) Coal = 41% Wind = 12%  Property Tax Burden (per MWh generated) Coal = $1.96 Wind = $1.65

Invenergy 8 Governor’s Property Tax Proposal  Eliminate classification of wind turbines as pollution control equipment Raises property tax burden to more than five times then current payments Increases annual property tax burden approximately $2,000,000 per 100 MW (20-year average) Results in wind paying  50% more than coal per dollar of capital cost  400% of what coal pays per MWh produced

Invenergy 9 Gov’s Proposal Would Have Made WV Uncompetitive with Neighboring States

Invenergy 10 Property Taxes Under S.B. 441  Capped percentage of wind facility assigned salvage value at 79%  Impact varies depending on percent of facility costs originally eligible for salvage valuation  Should result in wind paying more property taxes per MWh than coal

Invenergy 11 Property Taxes Under S.B. 441

Invenergy 12 Property Taxes Under S.B. 441