[Congressional Record Volume 151, Number 54 (Thursday, April 28, 2005)]
[Senate]
[Pages S4573-S4574]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Baucus, Mr. Bunning, Mr. 
        Bingaman, Mr. Conrad, Mr. Hagel, Mr. Coleman, Mr. Johnson, and 
        Mr. Nelson of Nebraska):
  S. 962. A bill to amend the Internal Revenue Code of 1986 to allow a 
credit to holders of qualified bonds issued to finance certain energy 
projects, and for other purposes; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, the capital cost to install new 
renewable generation capacity is three to ten

[[Page S4574]]

times more expensive than the cost to install conventional gas 
generation. Given these costs, Federal production tax credits have been 
available over the past decade to investor-owned utilities and private 
developers for renewable generation from wind, closed loop biomass and 
poultry waste. I worked in the JOBs bill last year to extend these tax 
incentives and expand them to additional resources, such as open loop 
biomass, animal waste nutrients, landfill gas, municipal solid waste, 
solar, geothermal and small hydro irrigation systems. I also fought to 
extend these incentives to electric cooperatives and public power 
systems, and today am releasing a new proposal, ``Clean Energy Bonds,'' 
that provides them with an important financing tool.
  Tax incentives for renewable and clean coal generation will be an 
important part of a balanced energy bill that the Senate will soon 
assemble. Such incentives enhance energy security by providing for 
diverse fuel choices, provide options in the face of high prices of oil 
and gas, and are a key component of ensuring that utilities can meet 
clean air requirements and climate change goals. The Administration has 
asserted that incentives for renewable generation are necessary for a 
balanced energy bill. And, all electricity generators recently agreed 
in a MOU with the Department of Energy on voluntary goals that address 
climate change and support President Bush in his efforts to reduce the 
greenhouse gas (GHG) emission intensity of the U.S. economy. As part of 
the MOU, the Department of Energy and all signatories agreed to promote 
policies that ``provide investment stimulus on an equitable basis to 
all segments of the power sector in order to accelerate use of existing 
GHG-reducing technologies. . . .''
  As the MOU recognizes, electric cooperatives and public power systems 
need access to incentives in order to provide the latest clean 
technologies and renewable generation to their communities, just as the 
private sector does. Many of these utilities are ideally located to 
take advantage of opportunities to generate from these primarily rural 
resources. These utilities cannot, however, offset the high cost of 
these resources through the conventional tax incentives Congress has 
provided to the private sector. Without these incentives, such 
generation is simply unaffordable for the consumers they serve.
  Electric cooperatives and public power systems are not-for-profit, 
and therefore do not pay federal income tax. Not-for-profit utilities 
do not pay shareholders. Cooperatives return revenues above cost of 
service to their members, and public power systems use their revenue to 
reduce rates or reinvest in utility infrastructure. Traditional tax 
incentives do not work for not-for-profit utilities as they have no 
federally taxable income to offset. In order for Congress to fully 
realize the benefits of tax incentives that are designed to make 
renewable energy economic, an incentive tailored to the unique 
characteristics of not-for-profit utilities is required. All three 
utility sectors must be able to participate in incentives in order for 
emerging technologies to fully realize their potential and become 
economic.
  Clean energy bonds can provide electric cooperatives and public power 
systems with an incentive comparable to the production tax credits that 
are available for the private sector. The bill would make technologies 
that are eligible for the production tax credit under section 45 
eligible for the bond.
  Under the bill, the electric cooperative, cooperative lender or 
municipal utility (``issuer'') would issue the clean energy bond. With 
a conventional bond, the issuer must pay interest to the bondholder. 
But with a clean energy bond, the Federal Government pays a tax credit 
to the bondholder in lieu of the issuer paying interest to the 
bondholder. Treasury sets the rate of the credit in an amount that 
permits the issuance of the tax credit bond without discount and 
without interest cost to the issuer. The bondholder can deduct the 
amount of the tax credit from their total income tax liability. The 
bonds are taxable, so if the credit is worth $100 and the bondholder is 
in the 35 percent bracket, the bondholder would deduct $65 from their 
tax liability.
  Public power systems have long used bonds to finance projects for 
infrastructure improvements and upgrades. By creating familiar 
financial instruments for public power systems and electric 
cooperatives to use, the bond market will have the faith and 
understanding to purchase these financial products because of the 
longstanding success of municipal bonds.
  The Clean Energy Bonds Act of 2005 will become an important part of a 
balanced energy bill. I urge my colleagues to cosponsor this bill that 
is needed to push renewable generation options further than production 
tax credits alone.
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