The American Public Power Association and two other groups are urging Obama administration officials to authorize more funds for clean renewable energy bonds, which can be issued as direct-pay as well as tax-credit bonds.
“As we enter 2011, the CREB program is out of funding,” the APPA, the National Rural Electric Cooperative Association, and the National Hydropower Association said in a two-page letter sent last week to Treasury Secretary Timothy Geithner. “Therefore, we are requesting that the administration’s [fiscal 2012] budget recommend significant funding for the program.”
President Obama’s budget request is expected to be released after Feb. 14. That’s later than usual because the Senate did not confirm Jacob Lew as director of the Office of Management and Budget until Nov. 18, 2010, even though he previously held the position from 1998 to 2001.
CREBs can be issued by state and local governments, public power providers, and rural electric cooperatives to finance wind, geothermal, solar energy, hydropower, landfill gas, and other renewable energy facilities.
They were created as tax-credit bonds in 2005. However, Congress gave issuers the option of structuring CREBs as direct-pay rather than tax-credit bonds in March 2010 so that issuers would receive federal subsidy payments from the Treasury in lieu of bondholders receiving tax credits. Issuers of direct-pay CREBs receive subsidy payments equal to 70% of their interest costs.
“Congress has made significant improvements to the CREB program by providing a direct-payment option so that the bond issuer can receive an interest subsidy directly from” the Treasury Department, the groups told Geithner. “This remains an important feature given a lack of demand for tax credits. With this feature, demand for the CREB program is strong, demonstrated by the fact that the funding provided under the stimulus and other bills has been oversubscribed.”
Congress initially authorized $800 million for CREBs and then added $1.6 billion more under the American Recovery and Reinvestment Act of 2009.
The Internal Revenue Service solicited applications for the total $2.4 billion of authorized CREBs in April 2009, with allocations to be divided into thirds between governmental entities, public power providers, and cooperative electric companies. CREBs can be issued for three years after being allocated.
The IRS received 997 applications requesting almost $3.07 billion of CREBs be allocated for governmental projects, but was only able to allocate $800 million to 739 projects using a smallest-to-largest project methodology, according to the IRS website.
It received 38 applications requesting almost $1.45 million of the bonds to be allocated to public-power providers’ projects, but was only able to allocate $800 million to 35 projects using a pro-rata methodology.
Applications fell short for electricity cooperative projects. The agency received only 31 applications requesting more than $609 million of CREBs for the projects and allocated the full amount.
During the fall, the IRS asked for applications for the remaining $190.8 million of CREBs available for such projects. The applications were to have been submitted to the IRS by Nov. 1. The agency has not yet announced the results from that solicitation process.
