Ditto Calls For House To Keep Direct Pay Energy Tax Credits In Build Back Better Act

by Paul Ciampoli
APPA News Director
November 16, 2021

The House of Representatives should keep the provisions of the Growing Renewable Energy and Efficiency Now Act in H.R. 5376, the Build Back Better Act, Joy Ditto, President and CEO of the American Public Power Association (APPA), said in a Nov. 15 letter to Rep. Michael Thompson, D-Calif., Chairman of the House Subcommittee on Select Revenue Measures.

“The act as drafted will ensure that all utilities and their customers benefit from incentives encouraging investments to transition to cleaner energy technologies: investments needed to reduce greenhouse gas emissions,” wrote Ditto. “Enactment would mean that all utilities, not just for-profit utilities, can directly benefit from energy tax incentives. This will make these incentives fairer and more effective,” she said.

In the letter, Ditto also notes that federal tax expenditures are the primary tool Congress uses to incentivize energy-related investments. However, tax-exempt entities — including public power utilities, rural electric cooperatives, and other not-for-profit entities — cannot directly claim such incentives.

“In effect, utilities serving nearly 30 percent of utility customers in the U.S. are effectively locked out of owning such facilities. This explains why 80 percent of the nation’s (non-hydropower) renewable energy generating capacity is owned by merchant generators,” wrote Ditto.

The Build Back Better Act “addresses this inequity by allowing the direct payment of energy tax credits — including production, investment, and carbon capture tax credits — to any entity that owns the project. This would remove the financial disincentive for public power utilities to own such facilities, which are needed to transition to cleaner energy technologies needed to address climate change.”

It would also allow the full value of these credits to pay for additional clean energy investments that will benefit the more than 90 million Americans nationwide served by tax-exempt, not-for-profit electric utilities, she said in the letter.

“We strongly encourage Congress to take the steps needed to make these tax credits both more effective and more equitable for public power utilities and the communities they serve,” Ditto said.

The House could vote as early as Saturday, Nov. 20, on the Build Back Better Act. The vote hinges on formal estimates of the legislation’s costs by the Congressional Budget Office and Joint Committee on Taxation, which could be available as early as Nov. 19.

If approved by the House, the Build Back Better Act would next head to the Senate for consideration, possibly during the second or third week of December.