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credits made avai8lable to privately-owned utilities and energy production companies do <br />not create incentives for publicly-owned or rural electric cooperative utilities, which <br />serve 25 percent of the nation's electricity load. With the passage of Minnesota's <br />aggressive new RES legislation, federal support for renewable development by <br />Minnesota municipal utilities is more essential than ever before. <br />Clean Renewable Energy Bonds (CREBs). To address this lack of equity, Congress <br />enacted the CREBs program in the Energy Policy Act of 2005 (EPAct 2005). CREBs is <br />a debt instrument which can be offered for qualified renewable facilities under Section 45 <br />of the tax code; the program is administered by the IRS under the supervision of the U.S. <br />Department of Treasury. Investors receive credits against their federal income tax <br />liability instead of the traditional interest that is usually paid by the issuer. The municipal <br />utility or cooperative is liable for the face value of the bond, and saves by owing no <br />interest on the bond. The federal government essentially pays the "interest" in the form of <br />tax credits. The CREBs program will provide public power systems greater certainty and <br />affordability in both planning and investing in renewable resources. <br />However, due to the statutory program cap and the Treasury allocation methodology that <br />selected smallest projects first, the awards for governmental entities were capped on $3.2 <br />million -with the vast majority of funded projects being proposed by non-utility <br />governmental entities such as schools and libraries. Consequently, the program fell short <br />of providing an effective financing tool to utility-scale investments. <br />We urge Congress to extend the CREB program beyond 2008, and ensure that all <br />qualified facilities that apply for the program receive full funding for their projects. <br />This would occur in conjunction with an extension of the production tax credit and <br />investment tax credit for the for-profit utility sector. <br />Renewable Energy Production Incentive (KEPI). The KEPI program was created by <br />the Energy Policy Act of 1992 to authorize the U.S. Department of Energy (DOE) to <br />make direct payments to publicly and cooperatively-owned electric utilities at the rate of <br />1.5 cent/kWh (indexed for inflation) for electricity generated from solar, wind, and <br />certain geothermal and biomass electric projects. KEPI has been the only incentive <br />available on the federal level for these utilities to make new investments in renewable <br />energy projects. It has been instrumental in making possible public power wind projects <br />in Minnesota. <br />Congress implemented the program with two goals in mind: 1) to assist public power <br />utilities in overcoming economic barriers to greater renewable energy use; and 2) to <br />ensure equity between investor-owned utilities that receive energy tax credits and not-for- <br />profit utilities that are unable to do so. <br />Reauthorization of the KEPI program was also achieved in EPAct 2005 and on August <br />14, 2006, DOE issued its final rule on the reauthorized KEPI program. For FY 2007, the <br />House has passed legislation that funds the KEPI program at $4.96 million, the same <br />amount requested by the Administration in its FY 2007 budget. The Senate <br />Minnesota Municipal Utilities Association <br />February 2008 <br />