July 22, 2019
By Sue Kelly and John Di Stasio
The power grid is changing across the U.S. More distributed energy resources are being added every day. That brings challenges for power utilities, but also opportunities.
The scope of tax policy in the U.S. is huge, touching every aspect of our economy. It is not surprising, then, that tax policy is also huge in Washington. In fact, tax is the single most lobbied issued on Capitol Hill, according to OpenSecrets.org.
The utility sector is just a small part of that world; electric utilities are a smaller part still. While public power plays a significant role in the electric utility sector, it can be challenging to be heard in the maelstrom of tax policy debates.
However, public power has several advantages in this environment. We have utility leaders and locally elected officials who are passionate about public power and who routinely work with their congressional delegations. Likewise, there is a broad array of national associations representing state and local governments with whom we work both individually and collectively (including through such coalitions as the Public Finance Network and the Municipal Bonds for America Coalition).
We are strongest when we speak with a unified voice in support of public power. Doing so reinforces our message and allows us to collectively bring our unique strengths to bear. The American Public Power Association represents the interests of nearly 2,000 public power utilities operating throughout the U.S. These utilities operate in the states of 98 out of 100 senators and in the congressional districts of 335 out of 435 representatives. The Large Public Power Council comprises 27 of the largest community-owned utilities in the U.S., all of which are Association members. LPPC members operate in some of the nation’s largest cities and provide reliable, low-cost power to more than 30 million people — more than 10% of the U.S. population.
Our collective strength is not just political. Together, we also bring a wealth of experience and technical expertise. Our combined tax policy teams have decades of experience on Capitol Hill and working with the Treasury Department and Internal Revenue Service.
This teamwork has resulted in proven successes. In 2012, when the attention of the state and local community was largely focused elsewhere, there were growing signs of a desire to tax municipal bonds as part of a “grand bargain.” The Association and LPPC worked to raise awareness of the threat and to educate lawmakers on the costs such an unprecedented tax would have imposed. Eventually, PFN and the Municipal Bonds for America Coalition would take up the charge, but public power’s work was — and remains — foundational in the defense.
In the wake of tax reform in 2017, the Association and LPPC have again joined forces to develop a legislative and regulatory bond “modernization” agenda. This agenda includes reinstatement of advance refunding bonds, repeal of private use rules that punitively single out public power, prevention of further sequestration of payments to issuers of Build America Bonds and New Clean Renewable Energy Bonds, and an increase in the small issuer exception from $10 million to $30 million. While this last item is likely not of much use to LPPC member utilities, it is important to smaller public power utilities as well as many other municipal issuers. By working together, we have seen the PFN take up this bond modernization agenda, substantially increasing the likelihood that some or all of it will eventually be adopted.
Likewise, together we have pushed lawmakers to provide public power with comparable treatment for energy-related tax incentives. As a result, we’ve already seen enactment of legislation allowing public power utilities to transfer the advanced nuclear tax credit to project partners. Plus, additional measures introduced in the 116th Congress would expand transferability to other energy-related tax credits or allow the issuance of special purpose municipal bonds for clean energy investments.
The Association and LPPC are also working together to seek relief from regulations that make it increasingly difficult for public power utilities to negotiate customized contracts for large commercial customers. This issue most directly affects larger public power utilities, but, again, by raising our collective voices with Treasury and the IRS, we believe our chances for relief are better.
The saying goes, “If you want to go fast, go alone — if you want to go far, go together.” By going together on tax policy, we hope all public power utilities will benefit from our work.