Sen. Maria Cantwell, D-Wash., has introduced legislation that would remove the volume cap from the clean renewable energy bond program, but prohibit most governmental entities from issuing them.
The Clean Renewable Energy Investment Act, S. 3855, introduced late last month, serves as companion legislation to another bill introduced a week earlier by Rep. Jim McDermott, D-Wash. Cantwell sits on the Senate Finance Committee, while McDermott is the fourth-ranked Democrat on the House Ways and Means Committee.
Both bills have been referred to their respective taxwriting committees.
CREBs are currently capped at $2.4 billion, including $1.6 billion that was authorized by the American Recovery and Reinvestment Act.
While the measures would open the door to greater CREB issuance for public power providers and electric coops, they would block other governmental entities from issuing them.
Instead, those issuers would have to turn to another tax-advantaged financing option for renewable energy projects: qualified energy conservation bonds, congressional sources said.
Those bonds, currently capped at $3.2 billion, can be issued by state or local governments to finance “qualified conservation purposes,” a broad term that includes a variety of public projects to encourage renewable energy.
QECBs are better suited to the types of projects a governmental entity would take on, whereas CREBs were originally intended for large “utility-scale” projects, which traditionally are built by public power providers and electric coops, the congressional sources said.
Cantwell’s bill also includes a provision requiring 95% or more of the available project proceeds from a CREB deal to be spent within three years of issuance and at least 10% to be spent within six months of issuance.
The move to lift the CREB cap comes as some public-power advocates have argued the current method of allocating the limited bond authority is discouraging some issuers from participating.
The Treasury Department currently makes CREB allocations using a small-to-large formula for electric cooperatives so that smaller issuances are approved before larger ones. It uses a pro-rata methodology for public power utilities, in which all applicants receive allocations even if they are lower than requested.
That method could be discouraging larger issuers from applying for the program since they are not likely to receive all of their request, according to public power advocates.
The two bills come several months after the Hiring Incentives to Restore Employment Act, signed into law in March, allowed several types of tax-credit bonds, including CREBs to be issued as direct-pay bonds similar to Build America Bonds.
Under the direct-pay option, issuers receive 70% of the lower of the interest rate on the bonds or the tax-credit rate for municipal tax-credit bonds, which the Treasury sets daily.
