5.3. ERMUSR 03-08-2005 - Laserfiche WebLink

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in the 108th Congress. As opposition to the tradable tax credit is unlikely to subside in the 109th Congress, APPA, NRECA and other supporters of the concept were urged by both Senate Finance Committee staff and the White House to develop a different approach. APPA and NRECA have developed the "tax credit bond" which would allow not-for-profit utilities to issue interest free debt for the development of qualified renewable energy facilities. Tax credit bonds would provide public power systems greater certainty and affordability in both planning and investing in renewable resources. In essence, the tax credit bond 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. Projects receiving funding under the Renewable Energy Production Incentive (KEPI) program would not be eligible for tax credit bond financing. Renewable Energy Production Incentive (KEPI). The KEPI program was created by the Energy Policy Act of 1992 to authorize the U.S. Department of Energy (DOE) to make direct payments to publicly- and cooperatively-owned electric utilities at the rate of 1.5 cent/kWh (indexed for inflation) for electricity generated from solar, wind, and certain geothermal and biomass electric projects. KEPI has been the only incentive available on the federal level for these utilities to make new investments in renewable energy projects. It has been instrumental in making possible public power wind projects in Minnesota. Congress implemented the program with two goals in mind: 1) to assist public power utilities in overcoming economic barriers to greater renewable energy use; and 2) to ensure equity between investor-owned utilities that receive energy tax credits and not-for- profit utilities that are unable to do so. In recent years, funds have not kept pace with energy growth, and this has resulted in many projects receiving only partial payments for energy produced. For example, since 1995, while Tier 1 projects (wind, solar, geothermal and closed-loop biomass) have received full payments, Tier 2 (landfill to energy) projects have received insufficient payments. Also, although Congress allocated $5 million for the KEPI program in the Energy and Water Development Appropriations Bill last year, this money is being used to fund current and under-funded prior year projects through FY05. Reauthorization of KEPI will again promote the development of new renewable energy facilities by publicly-owned electric utilities. During the 108th Congress, non-controversial, bi-partisan legislation was introduced that would have reauthorized and reformed the KEPI program for another 10 years and would have directed DOE to allocate 60 percent of appropriated funds to Tier 1 projects and the remaining 40 percent to Tier 2 projects during funding shortfall years. This legislation was included in last year's comprehensive energy bill. The 109th Congress should pass astand-alone KEPI reauthorization bill and allocate $13 million for KEPI for FY2006. Minnesota Municipal Utilities Association February 2005