5.3. ERMUSR 03-08-2005 - Laserfiche WebLink

Home Browse Search

Minnesota Municipal Uti/ities Association P'®ssti®n Statement Federal Incentives for Renewables 0 N Ul Two federal issues important to Minnesota municipal utilities should be addressed in any energy legislation passed by Congress: Tradable Tax Credit-Tax Credit Bonds. 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 while respecting the concerns, including the social and environmental concerns, of the citizens who depend on their service and ultimately control their operations. 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 coal power 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 1% of the electricity needs of the retail customers in their systems from "renewable" resources by 2005, and increase the amount by 1% each year, to 10% by 2015. An added biomass mandate is included, requiring'/2% of electric sales to come from biomass sources by 2010, and 1% 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. To address this lack of equity, the Renewable Energy Production Incentive (KEPI) program was developed. KEPI was intended to provide a comparable renewable incentive for public power systems but it has been subject to sporadic lapses in reauthorization and has been severely under-funded. This lack of certainty limits the incentives' effectiveness, and ultimately, the amount of renewable generation developed. During the last three Congressional sessions, community-owned utilities have supported legislation that would provide community-owned utilities a "tradable tax credit" which would place them in an equitable position with investor-owned utilities. Tradable tax credits would be an effective way to help diversify the nation's fuel reserves by promoting the increased development of efficient and clean energy resources -particularly in rural America. Despite strong support from House and Senate members as well as from Senate Finance Committee Chairman Grassley, the tradable tax credit concept was not able to move forward