Statements on Introduced Bills and Joint Resolutions

Floor Speech

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By Ms. CANTWELL (for herself, Mr. Nelson of Nebraska, Mrs. Murray, and Mr. Sanders):

S. 3855. A bill to amend the Internal Revenue Code of 1986 to repeal the limitation on the issuance of new clean renewable energy bonds and to terminate eligibility of governmental bodies to issue such bonds, and for other purposes; to the Committee on Finance.

Ms. CANTWELL. Mr. President, today I am introducing legislation that will unleash a wave of investment in clean renewable energy. The Clean Renewable Energy Investment Act of 2010 will remove the arbitrary cap on the amount of Clean Renewable Energy Bonds that can be issued by our Nation's consumer-owned public power providers and cooperative electric companies. This legislation will generate significant private investment in renewable energy projects that will create thousands of jobs nationwide.

Congress first created Clean Renewable Energy Bonds, or ``CREBs'' in 2005 in an attempt to parallel the tax incentive offered by the Section 45 tax credit for electricity produced from renewable resources. However, the incentives for consumer-owned utilities have never been truly comparable to the subsidy we provide to for-profit, investor-owned utilities because unlike the section 45 tax credit, CREBs have always been subject to an overall cap on the amount of bonds that can be issued nationwide.

Since consumer-owned utilities operate on a not-for-profit basis and incur no Federal income tax liability, traditional production tax credits otherwise available to for-profit utilities simply do not work--because there is no Federal tax liability to offset with the credit. Yet the nearly 3,000 public power utilities and rural electric cooperatives collectively serve 25 percent of the Nation's electricity customers. These utilities are often ideally situated in terms of both geography and size to integrate clean and renewable technologies into their systems.

The original CREB program has been extended twice and was modified in the Emergency Economic Stabilization Act of 2008 to make it more workable for public power and more attractive to institutional investors. The Emergency Economic Stabilization Act and the American Recovery and Reinvestment Act of 2009 provided for an additional $2.4 billion in CREB funding split equally between public power providers, rural electric cooperatives, and other governmental bodies. In March 2010, Congress passed another very useful modification to the CREB program by giving issuers of CREBs the option to issue the bonds as ``direct-pay bonds'', similar to the structure of Build America Bonds.

In the last round of CREBs, the demand for projects significantly exceeded the availability of the limited $800 million for each category of issuer. Public power and electric cooperative utilities have billions of dollars in projects awaiting these incentives--with some even having the potential to use $800 million for a single project if given the opportunity.

This means we have an opportunity to unleash a wave of investments in clean energy. In Washington State, 50 percent of customers are served by public power providers. Nationwide, public power and cooperatives serve one in four electricity customers. Yet, if we look back over the history of the Section 45 tax credit and CREBs, Congress typically shortchanges the consumer-owned sector. Looking at the Joint Committee on Taxations estimates of the cost of all the major energy tax legislation since 2005, the resources allocated to CREBs have been roughly \1/10\ of the cost of extending or expanding, section 45.

My legislation would correct this inconsistency in our energy policy by removing the arbitrary cap on the volume of CREBs that can be issued, and would instead sunset the CREB program at the end of 2013, which is consistent with the expiration of most components of the section 45 credit.

It would also remove the ``governmental bodies'' category from eligibility for the bonds. The CREB program was originally developed for utility-scale projects and this amendment reflects that intent and puts the program in line with the Production Tax Credit for investor-owned utilities. Since passage of the American Recovery and Reinvestment Act, Governmental bodies now have their own bond program. They are eligible for the new Qualified Energy Conservation Bonds, QECBs, which is a more suitable program for these entities as they can finance both renewable and energy efficiency projects with QECBs. Under this legislation, Tribal utilities would remain eligible issuers of CREBs.

In addition, the bill clarifies that any reimbursement with bond proceeds is governed by the reimbursement rules applicable to tax-exempt bonds. It is widely recognized in the public finance community that the existing wording in Section 54A(d)(2)(D) is at best unclear, and at worst incorrect. State and local government issuers of bonds are familiar with the reimbursement rules applicable to tax-exempt bonds and there is no tax policy reason to have two sets of reimbursement rules.

Finally, the bill insures that any new CREBs allocated before the date of enactment of this bill are not affected by any of these amendments. The intent is to ensure that the ``government bodies'' category is still able to issue previously allocated CREBs and will not be retroactively cut out of the program.

This bill is good energy policy because it will lead to the development of thousands of megawatts of renewable power. It is good tax policy because it maintains the integrity of the CREBs program, and it is overall good public policy because it provides parity between investor-owned and consumer-owned utilities.

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