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HB 45

RENEWABLE ENERGY PRODUCTION TAX ACT

2025 Regular Session Introduced by John Block

HB 45 would impose a 3.75% excise tax on renewable electricity production (after 2026) to fund the Severance Tax Permanent Fund, with some exemptions for govt/tribal producers.

action postponed indefinitely
#energy&naturalresources #taxation #other(gas #cigarettes #etc.)
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WeVote Research Nonpartisan
Bill Summary · HB 45

HB 45 — Renewable Energy Production Tax Act (summary)

Status: Action postponed indefinitely (as of 2025-06-03)
Introduced: 2025-01 (prefile/Jan 6, 2025); effective date in bill text: renewable-energy tax effective January 1, 2026 (applies to production after that date)
Subject areas: Energy & Natural Resources; Taxation

Purpose

HB 45 would create a new excise/severance-style tax on the production of renewable electricity in the state. The stated intent is to generate revenue for the Severance Tax Permanent Fund by taxing utility-scale (and other) renewable energy generation.

Key provisions

  • Tax base: renewable electricity production from all sources (solar, wind, hydro, geothermal, biomass, etc.).
  • Rate/formula: a tax imposed at 3.75% applied to the value of electricity using the monthly average wholesale price benchmark (specifically the average Palo Verde Nuclear Plant wholesale value for the month in which the electricity was produced).
  • Exemptions:
    • Renewable production by federal or state government entities and by Indian tribes/nations/pueblos.
    • Small-scale facilities producing less than 500 kilowatt-hours per day in excess of personal consumption.
  • Revenue distribution: proceeds would be deposited to the Severance Tax Permanent Fund; receipts would not be counted toward severance-tax bond capacity.
  • Technical changes: makes conforming amendments to the Tax Administration Act (including cross‑references tied to prior health‑care contingency language).
  • Effective date: January 1, 2026 for renewable energy produced after that date (technical amendments noted to have a separate effective date in related language).

Fiscal impact (estimates)

  • Revenue forecasts vary by agency; aggregated/average estimates reported:
    • ~ $21.4 million (FY26), $50.1 million (FY27), $50.4 million (FY28), $54.8 million (FY29) — amounts in thousands (LFC summary table).
    • Individual agency estimates diverge (TRD, EMNRD, LFC produced differing forecasts; e.g., TRD projected ~$22–48 million range in early years).
  • State revenue would be recurring if the tax remains in effect.
  • Implementation/admin costs: Taxation & Revenue Department (TRD) estimated one-time setup/implementation costs of roughly $4.2 million (majority IT contract work ~ $3.4M) and ongoing staffing costs (TRD anticipates one additional FTE plus recurring operating costs). Aggregate multi‑year administrative cost estimates in analyses totaled several million dollars.

Who would be affected

  • Primary: producers of renewable electricity (utility-scale and commercial generators); merchant energy sellers that report production.
  • Secondary: utilities and retail customers — agencies note the tax could be passed through to electricity prices, raising per‑MWh costs slightly (analysts estimated roughly $3–$4/MWh added cost in recent peak months).
  • State fiscal accounts: Severance Tax Permanent Fund would receive new recurring revenue; implementation capacity of TRD would be affected.

Policy considerations raised in analyses

  • Interaction with existing policy: TRD and others flagged potential conflict with current renewable energy incentives and tax credits (Renewable Energy Production Tax Credit, Sustainable Building Tax Credit, Advanced Energy Equipment Tax Credit, etc.), arguing the combination of incentives plus a production tax may be poor tax policy and administratively confusing.
  • Energy policy tradeoffs: EMNRD and TRD noted potential tension between taxing renewable generation and state goals for emissions reductions and renewable deployment; tax incidence could affect project economics and ratepayer costs.
  • Practical issues: use of a benchmark wholesale price (Palo Verde average) rather than contract prices may create variable effective tax rates and distortions.

Status / Timeline

  • The bill’s effective production tax date is January 1, 2026 if enacted.
  • Legislative action (per available records): on 2025-06-03 the bill’s action was postponed indefinitely (i.e., not advancing at that time).

If you want, I can:
- Produce a one‑page fact sheet comparing HB 45’s tax rate and exclusions to existing severance taxes (oil & gas) and to major renewable tax incentives; or
- Prepare a short briefing on likely impacts to a solar project developer’s pro forma (levelized cost and after‑tax revenue).

Compiled from official sources — confirm details with the bill’s official record.

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