Bonds and Financing

Resolutions adopted on grid costs, pole attachments at Legislative Rally

The American Public Power Association’s members on Feb. 26 approved several new policy resolutions that highlight the Association’s concerns about rising transmission costs, its opposition to efforts by the Federal Communications Commission to regulate public power pole attachments and the Association’s push for certain improvements to tax exempt financing.

The resolutions were approved by the Association’s Legislative & Resolutions Committee at its 2019 Legislative Rally in Washington, D.C. The Legislative Rally, which began on Feb. 25 and ended on Feb. 27, provides Association members a key opportunity to help public power communities make their voices heard in the nation’s capital.

The resolutions approved by Association members included, among other things, resolutions related to wildfire mitigation and hydropower offsets.

With respect to wildfire mitigation, the Association supports adequate funding for wildfire suppression to ensure that existing forest management programs, including fire and vegetation management practices, have the resources to be implemented effectively as well as to promote forest health and reduce wildfire risk.

On hydropower offsets, the Association urges the Bureau of Reclamation to take prompt and timely action to ensure full crediting to Central Valley Project power customers for overcharges made by the agency for costs associated with the Central Valley Project Improvement Act. The Central Valley Project is a California federal water management project with more than 2,000 megawatts of hydroelectric capacity.

Other approved resolutions addressed pole attachments, bond modernization and transmission rates.

At a briefing with reporters on Feb. 26, Sue Kelly, President and CEO of the Association, offered additional details on the approved resolutions.

Commenting on the transmission rates resolution, she noted that “especially in RTO regions, transmission rates have been rising rapidly in recent years. Some members have had their transmission rates more than double in seven years, when their loads have not risen that much at all, so this is starting to become very onerous and concerning to our members.”

The resolution asks FERC to: (1) enforce planning procedures for transmission investment, (2) to ensure that these facilities are needed and are cost effective; (3) to make sure that the rate of return on equity that is allowed for these facilities is reasonable; and (4) that any incentive rates are no more than what is necessary to get that transmission infrastructure funded.

“We’d like to see a more rigorous enforcement of the transmission planning process requirements of Order 1000 and Order 890 and that there be a demonstrated need for incentives and that they should not be granted for past conduct to motivate future activity,” Kelly told reporters. Also, FERC should renew its effort to evaluate the status of competitive transmission development under Order 1000, she said.

Delia Patterson, Senior Vice President, Advocacy & Communications and General Counsel, at the Association said that “I would definitely like to see more transparency” in the transmission planning process. She highlighted a Brattle Group study that showed that “nearly half of the transmission projects in ISOs and RTOs are not subject to the full planning process.”

Public power would like to be able to participate as stakeholders in what are referred to as supplemental transmission projects, Patterson said. “More and more projects are falling into this supplemental basket.” She said that if there was more transparency, “we would be able at least to understand what the rationale is behind most of these projects.”

In another resolution, the Association opposes actions taken by the Federal Communications Commission in its September 26, 2018, report and order to regulate public power pole attachments in contravention of the clear language in section 224 of the Communications Act that precludes the FCC from doing so.

Kelly noted that the Association has taken action in the courts in opposition to the FCC report and order and that Rep. Anna Eshoo, D-Calif., has introduced legislation to nullify the FCC report and order. The Association and 133 public power utilities and associations on March 1 sent a letter to Eshoo supporting the bill.

With respect to the bond modernization resolution, Kelly pointed out that “this is a perennial issue for us. Tax exempt bonds are the primary financing tool that are used by public power utilities to finance new infrastructure, so we care truly, madly, deeply about tax exempt financing.”

She noted that one of the figures cited when the resolution was discussed is that “there will probably be $50 billion in the next ten years expended by public power utilities for new infrastructure.”

The Association is very pleased that at the end of 2017, tax-exempt financing was retained in that year’s tax reform. “However, at this point, we would like to see certain improvements to tax exempt financing,” Kelly said. “One would be to return our ability to do what’s known as advance refundings.”

Also, the Association would like to see Congress increase the $10 million small issuer exception, “which is very important to some of our smaller members.” In addition, the public power group wants Congress to end the sequestration of tax credit payments for Build America Bonds, as well as repeal a new tax on advanced refunding bonds.

Desmarie Waterhouse, Vice President, Government Relations and Counsel at the Association, noted at the press briefing that the Association circulated action alerts for officials with member utilities to highlight during their visits with House members.

Specifically, utility officials were urged to ask House members to join the Municipal Finance Caucus and co-sponsor Rep. Eshoo’s FCC-related legislation.

Waterhouse said that the Association has identified six national priorities for 2019: (1) Infrastructure (2) Modernizing municipal bonds; (3) Grid security; (4) Protecting the federal power program; (5) Making wholesale electricity markets work; and (6) Climate change.

With respect to infrastructure, Waterhouse said that the Association is focused on removing barriers to infrastructure investment.

She noted that in 2018, there was some discussion about pursuing infrastructure legislation. There are some energy priorities “that we would like to see addressed in an energy title to infrastructure legislation.”

That would include hydropower licensing and relicensing reform legislation that has been approved in prior sessions of Congress, but not enacted into law. The aim is to make the process more workable for public power entities that either want to construct a new hydropower facility or relicense an existing facility, Waterhouse told reporters. The Association would also like to see an improvement to the permitting process for interstate natural gas pipelines.

As for protecting the federal power program, Waterhouse noted that many public power utilities get their power from PMAs or TVA and that there have been proposals by President Trump in his previous budget proposals to divest the transmission assets of the PMAs and TVA, as well as to move the rates that the PMAs charge from cost-based rates to market-based rates.

“We obviously don’t know yet what the president’s budget is going to propose for 2020, but this is something that we would strongly oppose if it were to be in his budget proposal,” Waterhouse said.

Meanwhile, Rep. Greg Walden, R-Ore., received the Association’s Public Service Award at the Legislative Rally.

The Association noted that during his tenure as chairman of the House Energy and Commerce Committee, Walden demonstrated a deep understanding of the value that public power utilities bring to their communities. Walden “understands firsthand how important hydropower has been to the Pacific Northwest’s economy and its citizens,” the Association said.