Ditto Urges Senate To Retain Direct Pay Energy Tax Credit Provisions

December 1, 2021

by Paul Ciampoli
APPA News Director
December 1, 2021

The U.S. Senate should keep the provisions of the Build Back Better Act that will ensure that all electric utilities and their customers benefit from tax incentives encouraging investments to transition to cleaner energy technologies, investments that are needed to reduce greenhouse gas emissions, Joy Ditto, President and CEO of the American Public Power Association (APPA) said in a Nov. 30 letter to Sen. Ron Wyden, D-Ore.

“Similar to the direct pay provisions of your Clean Energy for America Act (S. 2118), enactment would mean that all utilities, not just for-profit utilities, can directly benefit from these energy tax credits,” wrote Ditto in her letter. “This will make these incentives fairer and more effective.”

Wyden is Chairman of the Senate Committee on Finance.

Ditto noted that federal tax expenditures are the primary tools that 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, not-for-profit utilities serving nearly 30 percent of utility customers in the U.S. are effectively locked out of owning facilities being incentivized by such credits – wind, solar, energy storage, etc. This explains why 80 percent of the nation’s (non-hydropower) renewable energy generating capacity is owned by merchant, for-profit, generators,” Ditto said.

The Build Back Better Act (H.R. 5376) 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, she went on to say in the letter.

“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,” wrote Ditto.

“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.”

The House passed the Build Back Better Act in November, sending it to the Senate for consideration. Senate Majority Leader Charles Schumer, D-N.Y., has indicated that he would like the Senate to take up the reconciliation bill in December.

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