Presentation to the Public Utilities, Energy, and Technology Interim Committee on August 15, 2018

1. A Performance Audit of
State Energy Incentives
Presentation to the
Public Utilities, Energy, and
Technology Interim Committee
August 15, 2018

2. Slide 2
A Performance Audit of State Energy Incentives
Office of the Legislative Auditor General
See Chapter I, Pages 1-4 (Figure 1.1)
FOR MORE INFORMATION

3. Slide 3
A Performance Audit of State Energy Incentives
 Conventional Energy:
– Coal, Oil, Natural Gas
 Unconventional Energy:
– Oil Shale, Oil Sands, Renewable Energy (solar,
wind, geothermal)
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter I, Page 4-6

4. Chapter II
Energy Incentives Through Tax
Policies are Large and Growing
with Many Unknowns

5. Slide 5
Energy-Incentivizing Tax Credits are Substantial at
$74 Million and Still Growing
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 9-14 (Figures 2.1 & 2.2)
TAX CREDITS ‐
Grants & Loans
Other
Utility Programs
$23.1m
$9.1m
$12.4m
$14.0m
$8.2m
$6.8m
$0.5m

6. Slide 6
Energy-Incentivizing Tax Credits are Substantial at
$74 Million and Still Growing
Office of the Legislative Auditor General
See Chapter II, Pages 14-15 (Figure 2.3)
CERTIFYING
AGENCY
ENERGY
TYPE
FOR MORE INFORMATION
OIL/GAS PRODUCTION $37.1
NATURAL GAS $8.6
SOLAR $18.4
WIND $7.3
ELECTRIC $0.9
GEOTHERMAL $1.7
BIOMASS $0.05
DOGM
DAQ
None
OED
FUNDING
SOURCE
in millions of dollars
$44.2
GENERAL FUND
$29.9
EDUCATION FUND

7. Slide 7
Energy-Incentivizing Tax Credits are Substantial at
$74 Million and Still Growing
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 14-15 (Figure 2.4)
WW
EOR
RCES
NGHDV
QSP
RRES
CFV
SEVERANCE
$37.1 $10.7$26.2$74.1
$23.1
$14
$9.7
$0.1
$0.1
$0.9
$2.7
$0.4
$8.1
$8.2
$6.8
Tax
Credit
CORPORATE
INCOME
INDIVIDUAL
INCOME
TAX RETURN TYPE
TOTAL

8. Slide 8
Energy-Incentivizing Tax Credits are Substantial at
$74 Million and Still Growing
Four Additional Credits Could Exceed $97 Million:
 Alternative Energy Manufacturing
 Alternative Energy Development
$30 million in approved credits
 High Cost Infrastructure Development
$67 million in approved credit in the next seven years
 Hydrogen Fuel Production
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 16-18

9. Slide 9
Large Dollar Amounts Were Claimed Under Three Tax
Credits That May Entice Energy Programs
Three Credits May Entice Energy Projects:
 Enterprise Zone
– From 2011 to 2015, companies within the energy industry
claimed this credit for large dollar amounts
 Research Activities
 Research Equipment
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 18-20

10. Slide 10
Lack of Controls May Allow Significant Discrepancies
Between Tax Credits Earned Versus Claimed
 There may be some tax credits taken
that have not been properly certified
– Certifying agencies could provide approved
taxpayer list with identifying information
 Some energy incentives overlap,
allowing more than one incentive for the
same activity
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 20-23

11. Slide 11
Energy-Incentivizing Tax Exemptions and Deductions
Reduce the General Fund and May Exceed $200 Million
 Fourteen Sales and Use tax exemptions may have
incentivized energy
 Seven Severance tax exemptions and deductions
may have incentivized energy
– Coal exemption could be estimated at over $3 million for
2016
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter II, Pages 23-27

12. Chapter III
Grant and Loan Programs Not
Focused on Energy Provide
More Incentives Than Those
Focused on Energy

13. Slide 13
Grant and Loan Programs Not Focused on Energy
Provide More Incentives Than Those Focused on Energy
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 29-35 (Figure 3.1)
Tax Credits
GRANTS & LOANS ‐
Other Utility Programs
$49.3m
$40m
$9.3m

14. Slide 14
Grant and Loan Programs Not Focused on Energy
Provide More Incentives Than Those Focused on Energy
Two Examples:
 DEQ funded nearly $3.3 million for programs:
– The Clean Fuels and Vehicle Technology Program
– CARROT Program
 DAF funded $2.3 million for energy projects
– Installation of solar panels, replacement of diesel with electric
motors
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 33-35

15. Chapter IV
Other Programs Play a
Significant Role in
Incentivizing Energy

16. Slide 16
Utilities’ Energy-Incentivizing Programs Cost
$438.6 Million
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 41-45 (Figure 4.1)
Tax Credits Grants & Loans
OTHER ‐ $4m
UTILITY PROGRAMS ‐
(state‐regulated funds)
$438.6m
$4m
$313.2m
$125.4m

17. Slide 17
Other State Programs & Administrative
Costs Totaled About $4 Million
 UDOT’s decal program provided a
$560,000 incentive in 2016
 Nine agencies’ administrative costs
attributable to programs with energy
incentives was at least $3.4 million
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 45-49

18. Chapter V
Monitoring the Effectiveness
of Energy Incentives Needs
More Guidance

19. Slide 19
Identifying Program Intent is Critical to
Measuring Its Success
 States lack centralized energy incentive
tracking
 Programs may have multiple purposes or
energy-incentivizing is a side-effect of a
program
– Program goals may not focus on energy
incentives
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 50-53

20. Slide 20
Once Identified as Energy-Incentivizing Appropriate
Measures Can Be Created to Enable Useful Program
Evaluation
 Does the incentive:
– Accomplish its energy-incentivizing purpose?
– Generate the desired benefits for society?
– Cost exceed the benefit?
– Overlap, duplicate, or coordinate with other
energy-related benefits?
Office of the Legislative Auditor General
FOR MORE INFORMATION
See Chapter III, Pages 54-56

21. A Performance Audit of
State Energy Incentives
Presentation to the
Public Utilities, Energy, and
Technology Interim Committee
August 15, 2018