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wwii ~. <br />///Vii <br />Position Statement <br />Minnesota Municipa/ Uti/ities Association <br />Federal Incentives for RenewableG~~-~ ~~'` <br />~'~ <br />W Two federal issues important to Minnesota municipal utilities should be addressed in any <br />energy legislation passed by Congress-Clean Renewable Enerev Bonds (CRF.RsI and <br />iv Renewable Energy Production Incentive (KEPI). <br />~- <br />0 <br />~ Minnesota municipal utilities have long embraced the use of renewable generation to <br />o meet the electric energy needs of the citizens of their communities. They have been <br />s motivated by the need to secure wholesale power that will result in reliable and <br />reasonably priced service to their customers. It was for that reason, more than 50 years <br />~~ ago, that municipal utilities in western Minnesota began making commitments to <br />o purchase wholesale power from federal hydroelectric dams, at a time when power from <br />conventional sources would have been less expensive and, it seemed, possibly even more <br />o reliable. It is with this same sense of responsibility that municipal utilities are <br />s approaching the effort to develop wind and other renewables in order to meet a portion of <br />Z their electricity needs. <br />Minnesota has recently enacted the most comprehensive renewable energy standard <br />(RES) law in the United States. Patterned after a comprehensive proposal developed by <br />the Minnesota Municipal Utilities Association (MMUA) and passed with the support of <br />both utilities and environmentalists, the legislation: <br />• Requires investor-owned utilities, generation & transmission cooperatives and <br />municipal power agencies to produce 7% of their electricity from renewable <br />resources by the year 2010, 12% by 2012, 17% by 2016, 20% by 2020 and 25% <br />by 2025. <br />• Connects Minnesota with neighboring states in a renewable energy credit trading <br />system so that energy from wind turbines, landfills, biomass plants and other <br />renewable sources can be shared and sited in optimal locations. <br />• Phases out the current green pricing requirement in the law, which requires <br />utilities to provide electricity from renewable sources to customers who request <br />such service. A green pricing mandate is no longer necessary, given the <br />aggressive implementation schedule of the proposed RES. <br />Power from renewable resources and advanced technologies continues to be more <br />expensive than power from traditional generation sources. Federal investment incentives <br />are needed to encourage the construction of these facilities. The federal government has <br />determined that tax policy is a viable mechanism to encourage renewable and provides <br />private developers with the Production Tax Credit (PTC), a federal tax credit for <br />electricity generated from qualifying renewable energy projects. However, investment tax <br />Minnesota Municipal Utilities Association <br />February 2008 <br />