UPDATE – Congress extends production tax credit, bond programs

Although the 109th Congress left much work unfinished at adjournment Dec. 9, lawmakers did approve a benefit for hydropower operators with the extension of production tax credit and clean renewable energy bond programs.

Congress extended the programs by one year, and authorized $400 million for the energy bond program during that additional year.

The provisions were included in a larger bill that extends several popular tax credits and opens 8.3 million acres in the Gulf of Mexico to drilling for oil and natural gas. President Bush is expected to sign the legislation, which includes $3.4 billion in energy tax breaks over ten years.

The extended production tax credit moves the in-service date for qualifying renewable energy to Jan. 1, 2009. Qualifying hydropower — which includes incremental hydropower generation from efficiency improvements or additions of capacity at existing facilities — will continue to receive a tax credit of 0.9 cent per kilowatt-hour. (HNN 11/21/06)

An additional $400 million will be made available to the clean renewable energy bond program, which now is authorized for an additional year, to Dec. 31, 2008. The Energy Policy Act of 2005 created the bond program as an incentive to cooperatives and other not-for-profit utilities that are exempt from taxation and, therefore, cannot use the production tax credit offered to tax-paying project owners.

NHA to pursue longer extensions

The National Hydropower Association called the extensions good news, but added its work on hydro incentives is not complete.

�A one-year extension is a step in the right direction, and we are glad to see that the Congress did not wait until the credit expired to pass it,� NHA Regulatory Affairs Manager Jeff Leahey said. �However, NHA continues to advocate for a long-term extension of the PTC and CREBs programs, along with substantive revisions of the language such as inclusion of the new hydropower technologies �- ocean, tidal, and hydrokinetic.�

Leahey said NHA’s Legislative Committee would continue to monitor developments and would play an active role on the issue in the next Congress, which convenes in January.

Chelan County PUD authorized to issue renewable energy bonds

Chelan County, Wash., Public Utility District was in the first group of successful applicants for the clean renewable energy bond program.

In November, the Internal Revenue Service announced 14 hydropower projects were among 610 projects granted authority to issue $800 million in the bonds. (HNN 11/22/06) While the U.S. Treasury does not disclose individual taxpayer information, Chelan County PUD said it had requested authorization to issue about $18 million in bonds.

Of its request, Chelan received authorization for $1.25 million in bonds for work proposed for its 200-kW Stehekin hydroelectric project. Chelan is still developing its plans for Stehekin, a small hydro plant with diesel-powered backup units. An engineering study has recommended replacing the 1968-vintage hydro turbine.

It did not receive authorization for additional bonding authority, which would have gone to capital efficiency enhancements at its 1,236.6-MW Rocky Reach (No. 2145) (HNN 8/8/06), 623.2-MW Rock Island (No. 943) (HNN 7/20/06), and 48-MW Lake Chelan (No. 637) (HNN 11/8/06) projects.

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