American Public Power Association President and CEO Joy Ditto on July 24 sent a letter to congressional leaders in which she outlined APPA’s priorities for legislation responding to the COVID-19 pandemic including direct aid in the form of a forgivable loan for public power utilities that have been negatively impacted due to COVID-19.
“Public power utilities’ top priority during the pandemic has been securing the physical, logistical, and financial resources to continue to operate while keeping their workers and customers safe,” wrote Ditto in her letter to Senate Majority Leader Mitch McConnell, R-Ky., Senate Minority Leader Chuck Schumer, D-N.Y., House Speaker Nancy Pelosi, D-Calif., and House Minority Leader Kevin McCarthy, R-Calif.
However, these utilities are facing a decline in revenue in 2020 of as much as $5 billion (an approximately 6% decline from 2019), she noted. “In part this is due to a decline in commercial and industrial power use and in part due to an increasing number of customers who are unable to pay their bills,” Ditto said.
However, as governmental entities, public power utilities are the only type of utility categorically excluded from the keystone relief provided by the $659 billion Paycheck Protection Program (PPP).
Likewise, public power utilities are required to provide emergency paid sick leave and paid family leave under the Families First Coronavirus Response Act, “but – again – as governmental entities are the only type of utility categorically excluded from receiving the $105 billion in payroll tax credits Congress authorized to offset the cost of these new federally-mandated benefits,” wrote Ditto.
She told the congressional leaders that a forgivable loan program could help public power utilities bridge this financial gap while helping customers.
“Specifically, we support a loan program where loans issued would be forgivable to the extent that proceeds were used to provide assistance to customers unable to pay their bills as a result of the pandemic. This will help public power utilities keep operating while providing relief to customers who need it most.”
Additionally, as a loan forgiveness program rather than a grant, this program would only provide relief to the extent needed, thereby preserving scarce resources, the APPA President and CEO said.
Ditto noted that some provisions of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) have been helpful to public power customers and we strongly encourage continued support. For example, Congress appropriated an additional $900 million for the Low-Income Home Energy Assistance Program (LIHEAP), which benefits electric power and gas utility customers.
However, the National Energy Assistance Directors Association estimates that demand for LIHEAP will more than triple as a result of the pandemic and that another $4.3 billion supplemental appropriation for the program is needed. Likewise, under Treasury guidance, some states, counties, and localities are using Coronavirus Relief Funds to finance utility customer assistance programs. “Again, while this is helpful at the margin, it is not particularly common and unlikely to provide the level of assistance needed by Americans who are out of work and unable to pay their bills,” Ditto noted.
Letter also focuses on small issuers, tax-exempt advance refunding bonds
APPA also appreciates the creation of the Municipal Liquidity Facility at the Federal Reserve. However, to date this has been limited to short-term debt and used only as a lender of last resort. As a result, only one entity, the State of Illinois, has made use of the facility.
To help with longer-term financing and to broaden the benefit, Ditto urged the congressional leaders to include in COVID response legislation the provisions of H.R. 3967, the Municipal Bond Market Support Act.
This bipartisan bill would expand the number of smaller issuers that banks – historically smaller local banks – are encouraged to lend to by increasing the small issuer exception from $10 million to $30 million.
“We also ask you to include legislation to reinstate the ability issue tax-exempt advance refunding bonds as proposed in H.R. 2772, the Investing in Our Communities Act, and S. 4129, Lifting Our Communities through Advance Liquidity for Infrastructure (LOCAL Infrastructure) Act,” wrote Ditto.
Tax-exempt advance refunding bonds saved public power utilities more than $600 million from 2013 to 2017 (the last year tax-exempt advance refunding was allowed) – savings passed onto utility customers or reinvested – and could provide needed financial relief today and in the future, she said in the letter.
Meanwhile, Ditto noted APPA understands that there is a growing interest in making a variety of tax credits, including energy related tax credits, “refundable.”
“If Congress does take this step, we strongly encourage you to ensure that public power utilities could also qualify.”
Congress has sought for years to create financial incentives for key investments. “Providing these incentives through the tax code, though, excludes the tax-exempt entities which serve nearly 30 percent of the nation’s electric utility customers. Allowing these tax credits to be ‘monetized’ by making them refundable could ensure that they work for any project owners with low to no tax liability.”
APPA appreciates the emergency supplemental appropriation provided under the CARES Act to the nation’s Power Marketing Administrations, the Army Corps of Engineers, and Bureau of Reclamation hydropower programs, Ditto told the congressional leaders.
“The CARES Act, however, failed to amend current law, which requires that these emergency appropriations be recovered with rate increases by electric customers. APPA believes that Congress should explicitly state that CARES Act emergency funds may not be recovered in rates from customers of the Federal Power Program. Now is not the time to raise rates charged to federal hydropower customers.”