Reid Bill Would Expand QECB Program

WASHINGTON — Senate Majority Leader Harry Reid has introduced legislation that would expand the qualified energy conservation tax-credit bond program to include water conservation bonds, as well as increase the total bond authority for QECBs to $4 billion.

The bill also would establish a safe harbor under which arbitrage rules would not apply to prepayments a water or sewer utility makes for certain electricity supply contracts.

The Nevada Democrat introduced the Water Efficiency and Conservation Investment Act of 2009 last week, and it has been referred to the Senate Finance Committee.

Rep. Shelley Berkley, D-Nev., a member of the Ways and Means Committee, is expected to introduce companion legislation in the House.

“Providing tax credits and other incentives to encourage water conservation is one of the best ways to reward families and businesses for helping to save one of our most precious resources,” she said in a recent statement.

Reid’s legislation would allow certain water facility projects to piggyback onto the QECB program, which was expanded to 3.2 billion of bond authority by the American Recovery and Reinvestment Act. Reid’s bill would further grow the program by adding another $800 million in authority.

At least 20% of that total would have to be used for qualified conservation purposes, which would include capital expenditures incurred to reduce energy consumption in public buildings by at least 20%, green community programs, mass commuting facilities, and rural electricity development from renewable resources.

The bonds could be issued to finance either qualified energy or qualified water conservation projects. Water projects that could be financed would include any project that: reduces water consumption at a public facility by at least 30%; the investigation, design, or construction of groundwater remediation; desalination or recycling facilities; or any projects that reduce the amount of water lost in a water distribution system, such as the detection and repair of leaks.

The measure also would carve out a safe harbor for prepayments for qualified electricity supply contracts so that they would not be considered an “investment-type property” or subject to arbitrage rules and restrictions.

Any contract a water or sewer utility enters into with an electricity provider would fall under the safe harbor, provided that at least 75% of the prepayment made to the provider goes toward the acquisition, construction, or improvement of a qualified renewable energy facility. The generating facility must basically operate solely for the water facility, producing no more than 10% in excess of the total kilowatt hours expected to be used by the facility.

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