[Congressional Record (Bound Edition), Volume 153 (2007), Part 8]
[Extensions of Remarks]
[Pages 11346-11347]
[From the U.S. Government Publishing Office, www.gpo.gov]




     INTRODUCTION OF BILL TO SHORTEN DEPRECIABLE LIVES OF ELECTRIC 
                          DISTRIBUTION ASSETS

                                 ______
                                 

                           HON. PHIL ENGLISH

                            of pennsylvania

                    in the house of representatives

                         Thursday, May 3, 2007

  Mr. ENGLISH of Pennsylvania. Madam Speaker, today I introduced 
legislation that would shorten the depreciable lives of electric 
distribution assets from 20 to 15 years. I feel this legislation, is 
necessary to spur investment in a time where the demand for electricity 
is at an all-time high. Despite continued energy efficiency 
improvements, electricity consumption is expected to increase 41 
percent by 2030, according to the Energy Information Administration.
  To meet this growing demand, electric companies must expand and 
upgrade the nation's electricity infrastructure. The need to expand the 
nation's distribution infrastructure will require significant 
investment. According to a recent study by the Brattle Group (``Why Are 
Electricity Prices Increasing? An Industry-Wide Perspective''), if 
recent investment trends continue, distribution investment will average 
$14 billion per year over the next 10 years. This investment is almost 
triple the projected amount of annual investment in new transmission 
capacity and is likely to exceed capital spending on generation 
capacity over the next decade as well.
  The American Council for Capital Formation released an analysis 
yesterday of the depreciation treatment of energy assets of the U.S. 
compared with 11 other countries. The analysis concluded that the U.S. 
generally has less favorable tax depreciation rules for electric 
distribution rules than a number of the U.S.'s major trading partners. 
The U.S. has slower cost recovery during the first five and ten years 
after the investment than the comparison countries. For example, U.S. 
capital cost recovery for distribution lines in the first five years is 
29.5 percent compared to 40 percent in China, 58 percent in Korea and 
50 percent in Taiwan. Nine of the countries analyzed

[[Page 11347]]

had faster cost recovery than the U.S. From a competitive standpoint, 
our depreciation rules need to be updated. My bill will begin to tackle 
part of the problem.
  Investment in electric distribution facilities--in wires, 
transformers, substations and all traditional utility distribution 
facilities--is needed, first and foremost to keep pace with growing 
customer demands. Distribution investment also is needed to replace and 
modernize our nation's aging distribution grid.
  Tax depreciation incentives for electric distribution systems also 
would help mitigate the cost of other factors affecting spending on 
distribution infrastructure. For example, some companies are being 
directed to place new and/or existing distribution lines underground, 
particularly in urban areas. Undergrounding power lines costs five to 
ten times the cost of overhead lines. In addition, large distribution 
system expenditures have been necessitated by widespread hurricane and 
storm damage experienced in 2004 and 2005, which has impacted energy 
and material costs across the Nation.
  The Brattle Group report estimates that underinvestment in 
transmission and distribution systems costs the American economy at 
least $20 billion a year--a figure certain to grow if transmission and 
distribution infrastructure investment does not keep pace with demand. 
In 2005, we reduced depreciable lives for transmission assets from 20 
to 15 years as part of the Energy Policy Act. Similarly, Congress 
should do the same for distribution assets. This action will spur 
investments needed to update the aging distribution infrastructure to a 
modern, automated, high-performance network.

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