Washington, D.C., August 12, 2022 — The American Public Power Association (APPA) applauds House passage of the Inflation Reduction Act (IRA) and the benefits it will provide to millions of utility customers nationwide served by not-for-profit, community-owned public power utilities.
“In addition to extending and expanding a variety of critical energy tax incentives, this piece of legislation will ensure that all utilities can benefit from these incentives, which encourage the critical energy investments they need to continue to use cleaner generating technologies,” said APPA President & CEO Joy Ditto. “In the end, this makes these incentives fairer and more effective.”
The Joint Committee on Taxation estimates the value of energy-related tax incentives to be worth $25 billion in 2022 alone. However, because public power utilities are exempt from tax, they have not been able to take advantage of these incentives for projects they own. Rural electric cooperatives face a similar challenge. As a result, using the tax code to incentivize energy investments has excluded utilities serving nearly 30 percent of all retail utility customers in the United States.
Instead, to take advantage of these energy tax incentives, tax-exempt, community-owned utilities have had to enter power purchase agreements with third party developers – who often themselves would enlist a tax equity partner to monetize energy tax credits. The result has been profound. For example, recent surveys of public power utilities showed they own just two percent of the non-hydropower renewable energy used to serve their customers: the remaining 98 percent had to be secured through power purchase agreements.
The IRA corrects this by allowing tax-exempt entities to claim energy tax credits directly. APPA has long supported this approach, which will lead to lower costs, local jobs, and more equitable energy service for all customers.
Power purchase agreements will continue to be useful tools and many public power utilities will continue to use them to secure access to energy facilities. But having the option to own and operate their own facilities means public power utilities can make the best choices on behalf of the more than 49 million Americans and thousands of businesses they directly serve.
Efforts to ensure that community-owned utilities can benefit from energy tax incentives have enjoyed bipartisan and bicameral support from many Members of Congress, and we greatly appreciate the work of all the Members and staff with whom we have worked on this issue for years.
APPA is particularly appreciative of the efforts of House Ways and Means Committee Chairman Richard Neal, Select Revenue Subcommittee Chairman Mike Thompson, Senate Finance Committee Chairman Ron Wyden, and Energy Subcommittee Chairman Michael Bennett. Finance Committee Member Maria Cantwell and Ways and Means Committee Member Earl Blumenauer were also steadfast champions.
While Senate Energy and Natural Resources Committee Chairman Joe Manchin is not a member of the Finance Committee, his understanding of the positive energy policy implications of creating this comparable incentive for public power and rural electric cooperatives was critical to passage of this provision. Senator Manchin also championed important work toward legislation to speed up siting and permitting of energy infrastructure, which is much needed given the need to maintain reliable and affordable electricity as we continue our evolution to cleaner technologies.