Rep. Jim McDermott has introduced legislation that would allow for an unlimited amount of clean renewable energy bonds to be issued through 2013, but would revoke the ability of state and local governmental entities to issue them, leaving only public power providers, electric cooperatives, and tribal utilities as CREBs issuers.
CREB issuance currently is capped at $2.4 billion.
The Washington congressman, who is the fourth-highest ranking Democrat on the House Ways and Means Committee, introduced the bill Sept. 14. It has since been referred to that committee. Sen. Maria Cantwell, D-Wash., is expected to introduce companion legislation in the near future, according to her spokesman.
McDermott’s bill would prevent governmental entities from issuing CREBs because they have another tax-advantaged financing option for renewable energy projects: qualified energy conservation bonds.
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 reducing energy consumption of public buildings by at least 20%, implementing green community programs, and developing research facilities exploring renewable fuel technologies, mass commuting facilities, or public education campaigns devoted to energy efficiency.
QECBs are better suited to the types of projects a governmental entity takes on, whereas CREBs were originally intended for large “utility-scale” projects, which traditionally are built by public power providers and electric coops, according to a McDermott staffer.
McDermott’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 — smaller issuances are approved before larger ones — and 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.
“Uncapping that program will make it much more user friendly for our members,” said Nick Braden, vice president of communications for the American Public Power Association. “There’s a huge appetite amongst our members.”
McDermott’s legislation comes 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.
