5.3. ERMUSR 03-14-2006 - Laserfiche WebLink

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A/1/IA/~.~I Minnesota Municipal Uti/ities Association Pasiti®n st~terne~nt Federal Incentives for Renewables Two federal issues important to Minnesota municipal utilities should be addressed in any energy legislation passed by Congress-Clean Renewable Energy Bonds (CREBs) and Renewable Energy Production Incentive (KEPI). Minnesota municipal utilities have long embraced the use of renewable generation to meet the electric energy needs of the citizens of their communities. They have been motivated by the need to secure wholesale power that will result in reliable and reasonably priced service to their customers. It was for that reason, more than 50 years ago, that municipal utilities in western Minnesota began making commitments to purchase wholesale power from federal hydroelectric dams, at a time when power from conventional sources would have been less expensive and, it seemed, possibly even more reliable. It is with this same sense of responsibility that municipal utilities are approaching the effort to develop wind and other renewables in order to meet a portion of their electricity needs. Minnesota law requires that municipal power agencies, G&T cooperatives and IOUs make a "good faith effort" to generate or procure one percent of the electricity needs of the retail customers in their systems from "renewable" resources by 2005, and to increase the amount by one percent each year, reaching 10% by 2015. An added biomass mandate is included, requiring one-half percent of electric sales to come from biomass sources by 2010, and one percent by 2015. Power from renewable resources and advanced technologies continues to be more expensive than power from traditional generation sources. Federal investment incentives are needed to encourage the construction of these facilities. The federal government has determined that tax policy is a viable mechanism to encourage renewables and provides private developers with the Production Tax Credit (PTC), a federal tax credit for electricity generated from qualifying renewable energy projects. However, investment tax credits made available to privately-owned utilities and energy production companies do not create incentives for publicly-owned or rural electric cooperative utilities, which serve 25% of the nation's electricity load. Clean Renewable Energy Bonds (CREBs). To address this lack of equity, Congress enacted the CREBs program in the Energy Policy Act of 2005 (EPAct 2005). CREBs is a debt instrument which can be offered for qualified renewable facilities under section 45 of the tax code. Investors receive credits against their federal income tax liability instead of the traditional interest that is usually paid by the issuer. The municipal utility or cooperative is liable for the face value of the bond, and saves by owing no interest on the bond. The federal government would essentially pay the "interest" in the form of tax credits. The CREBs program will provide public power systems greater certainty and