APPA Urges Senate Committee To Remove or Boost CREB Cap

The American Public Power Association is urging the Senate Finance Committee to either remove or significantly increase the $800 million cap on clean renewable energy bonds and ease other tax law restrictions in any tax legislation that accompanies climate and energy bills.

In a letter sent last week to Sens. Max Baucus, D-Mont., and Charles Grassley, R-Iowa, the committee's chairman and ranking Republican, APPA said that as Congress develops new climate legislation emphasizing more expensive clean-energy investments, public power should be treated equally to investor-owned utilities. Investor-owned utilities can take advantage of unlimited production tax credits for such investments, but those tax credits are useless for publicly owned, nonprofit utilities, the group said.

"Congress has consistently provided privately owned electric companies with tax-code based incentives for certain clean energy or innovative technology investments," wrote Mark Crisson, president and chief executive officer of APPA, which represents more than 2,000 publicly owned electric utility systems. "Not-for-profit public power utilities and rural electric cooperatives, which together serve 25% of America's electric consumers, have sought and will continue to seek comparable incentives for this type of development."

One way to equalize the public and private sectors would be to increase or remove the CREB cap, the group said. The taxable tax-credit CREB program has proven relatively unpopular since it was created by the Energy Policy Act of 2005. Less than $100 million of CREBs have been issued, according to Thomson Reuters.

But the low issuance level is not due to lack of interest, APPA claimed. Instead, it is because the $800 million allocated across the country causes the amount available to each issuer to be unreasonably small in comparison with each issuer's needs.

A higher or uncapped allocation level would "create a more liquid CREBs market that would attract a greater number of investors," APPA said.

Additionally, it wants lawmakers to allow 25% of electricity produced by public utilities to be used for private purposes. That amount was allowed before the Tax Reform Act of 1986 lowered it to 10%, a limit that APPA said "can hamper" the ability of public power utilities to sell a portion of their output and can keep municipal governments from building infrastructure that has some amount of private use.

Public power systems also are subject to a $15 million limit on private use per project and per bond issue - so that if a utility does more than one bond issue per project, the entire project is subject to the $15 million limit. That limit is redundant on top of the 10% private-use cap and should be eliminated, the group said.

Finally, APPA is pushing for federal guarantees of tax-exempt bonds issued by public power utilities. The Internal Revenue Code prohibits such guarantees, but if the committee amended the code it could reduce borrowing costs for state and local governments and public power utilities who no longer benefit from municipal bond insurance, according to the group.

"This form of guarantee could be very significant in helping promote capital-intensive [or] high-risk projects," Crisson said.

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