Bonds and Financing

Ditto details Association’s legislative and regulatory priorities for 2020

The American Public Power Association has a full plate in 2020 when it comes to regulatory and legislative issues of importance to public power, Joy Ditto, the Association’s new president and CEO, said on Jan. 23. Those issues include keeping transmission costs at a reasonable level, maintaining the municipal exemption for pole attachments and reinstating the ability to issue tax-exempt advance refunding bonds.

Ditto, who took the reins as the Association’s President and CEO on Jan. 13, outlined the public power group’s areas of focus this year in remarks made at the United States Energy Association’s State of the Energy Industry Forum in Washington, D.C.

Climate change

When it comes to climate change, Congress should “weigh in and then the Environmental Protection Agency should implement that policy, rather than trying to reconfigure the existing Clean Air Act,” Ditto said in describing the Association’s position on this issue.

She pointed out that public power has made great strides in reducing carbon dioxide emissions. From 2005 to 2017, public power utilities cut CO2 emissions by 33 percent from 2005 levels.

Tax issues

Ditto also noted that public power wants to make sure that it is not put at a competitive disadvantage when it comes to incentives offered by the federal government for things like clean energy or electric vehicles.

Oftentimes, these incentives come in the form of tax incentives, Ditto noted, but because public power utilities are not-for-profit, the question that needs to be addressed is how do those utilities derive an incentive for their customers. “It’s basically a parity issue,” she said.

“Whenever we see those types of incentives put forward we want a comparable way, whether it be through a grant, whether it be through another type of tax mechanism,” Ditto told attendees at the USEA event. There are a number of bills pending in Congress that would provide comparable incentives to public power, she noted.

Another tax-related issue of significant importance to public power involves tax-exempt advance refunding bonds.

At the end of 2017, President Trump signed into law a measure, H.R. 1, which retained the current-law tax exemption for municipal bonds but prohibited the issuance of tax-exempt advance refunding bonds and tax credit bonds after Dec. 31, 2017.

The Association this year will continue to push for the reestablishment of the advance refunding mechanism going forward, Ditto said.

Tax-exempt advance refunding has historically been an important tool in reducing financing costs. In the five years prior to their repeal by the Tax Cuts and Jobs Act of 2017, tax-exempt advance refunding bonds provided net present value savings of at least $600 million to public power utilities.

House Municipal Finance Caucus Chairmen Dutch Ruppersberger, D-Md., and Steve Stivers, R-Ohio, last year introduced legislation to reinstate the ability to issue tax-exempt advance refunding bonds.

Grid security

Turning to grid security, Ditto said that “it’s a huge focus for the industry to ensure that the grid is safe from physical and cybersecurity threats.”

Public power has been “a strong partner with the federal government, as well as with our brethren rural cooperatives and investor-owned utilities in ensuring that we address this risk” in a serious manner and encouraging members to “address it seriously as well.”

There is a bill pending in Congress that would permanently fund activities related to grid security for electric utilities into the future through the Department of Energy, “which is a great goal,” Ditto said.

In the interim, the Association has been able to secure grants from the Department of Energy that the Association has been deploying to educate its members, and, in particular, its smaller member utilities.

While these smaller members may not be subject directly to bulk power system electric reliability standards and cybersecurity standards, the Association’s work with them has helped to educate those utilities on their cybersecurity maturity and ways that they can protect themselves and manage this risk going forward.

Ditto also pointed out that public power benefits from its participation in the Electricity Subsector Coordinating Council (ESCC). The ESCC serves as the principal liaison between the federal government and the electric power industry and is comprised of the CEOs that represent all segments of the industry, including investor-owned electric companies, electric cooperatives, and public power utilities in the U.S. and Canada.

Association will continue to resist push to divest PMAs, TVA assets

In 2020, the Association will strongly resist any efforts to divest the transmission assets held by the Tennessee Valley Authority and three of the Power Marketing Administrations: Southwestern Power Administration, Western Area Power Administration, and Bonneville Power Administration.

Ditto said such proposals are “a solution in search of a problem.”

The PMAs provide millions of Americans served by not-for-profit public power and rural electric cooperative utilities with cost-based hydroelectric power produced at federal dams. PMA rates are set to cover all generation and transmission costs, as well as repayment, with interest, of the federal investment in these hydropower projects. None of the costs are borne by taxpayers. 

Similarly, TVA provides affordable electric power to more than nine million people in seven states at no cost to taxpayers.

As part of his $4.5 trillion budget proposal for fiscal year (FY) 2020, President Trump again proposed selling federal PMA and TVA transmission assets.

Pole attachments

The Association this year will also make it a priority to continue to oppose proposals that would remove public power’s exemption from the Federal Communications Commission’s pole attachment policies, Ditto noted.

A report and order adopted by the FCC in 2018 may result in FCC pole attachment oversight and regulation of public power utilities, despite the explicit exemption for public power in Section 224 of the Communications Act.

The Association, on Nov. 15, 2018 filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit challenging the FCC report and order. The Association said the FCC has “improperly asserted regulatory authority and jurisdiction over the control and use of public power utility facilities.”

Rep. Anna Eshoo, D-Calif., in early 2019 introduced legislation that would, among other things, overturn the FCC order.

Transmission

Noting that public power utilities are transmission dependent for the most part, “we really do need to have costs at the transmission level be reasonable, which is really what the law says,” Ditto said.

The Association will continue to keep a close eye on this issue and aggressively weigh in when it sees proposals that would increase transmission rates beyond reasonable rates.

The Federal Energy Regulatory Commission in March 2019 issued two notices of inquiry, one in which the Commission sought comments on possible changes to its electric transmission incentives policy, and one in which FERC is examining whether, and if so how, to revise its policies on determining the ROE used in setting rates charged by utilities it regulates (Docket Nos. PL19-3, PL19-4).

In August, the Association signed on to a letter sent to FERC Commissioners by more than 40 entities that said the Commission should strive to ensure that transmission costs remain at a reasonable level for consumers as it weighs possible changes to its transmission incentives and ROE policies.

Wholesale markets

In the area of wholesale markets, Ditto noted the Association recently sought rehearing of a FERC order that directed PJM to expand its current minimum offer price rule to address state-subsidized electric generation resources, with certain exemptions.

The Association, along with American Municipal Power and the Public Power Association of New Jersey, said in the rehearing request that the order will expose public power utilities and their customers to the risk of having to pay twice for new capacity resources, without providing them any effective way to mitigate that risk.

“It’s going to be hugely problematic for us, so we’ll continue to fight that and it’s disappointing,” Ditto said in reference to the FERC order.

Ditto previously served as president and CEO of UTC

Prior to being named president and CEO of the Association, Ditto was the president and CEO of the Utilities Technology Council, a global trade association representing electric, gas, and water utilities on their mission-critical information and communications technologies.

Before joining UTC, Ditto was with the Association for 15 years, rounding out her tenure as the senior vice president for legislative and political affairs.

Legislative Rally scheduled for Feb. 24-26

The Association’s Legislative Rally will take place from Feb 24-26 in Washington, D.C. Additional information about the rally is available on the Association’s website at: https://www.publicpower.org/event/legislative-rally.