Dive Brief:

• Representatives from rural electric cooperatives are lobbying federal lawmakers this week for debt finance reform they say could save consumers more than $10 billion, as well as for changes to how clean energy incentives are structured.
• The National Rural Electric Cooperative Association (NRECA) says more than 1,500 co-op representatives have scheduled virtual meetings with more than half of the 535 members of Congress as part of the group's policy efforts and annual legislative conference.
• With or without debt reform and clean energy incentives, NRECA CEO Jim Matheson said he doubts that President Joe Biden's goal of a carbon-free electricity system by 2035 can be achieved. "We think that's an overly ambitious goal," he told members of the press on Monday.

Dive Insight:

As Congress gears up to tackle infrastructure and energy issues, municipal and consumer-owned electric utilities want to make sure any new policies also include their customers — which consume about 30% of the country's generation, said Matheson.

"The tax code is often used to provide incentives. And something that has always been a challenge for us, and quite frankly the municipal utilities as well, is we don't pay federal taxes," said Matheson.

The result is that municipally-owned and cooperative utilities cannot directly access federal tax incentives to develop wind and solar, and as a result often do not own their own generation.

"So we sign a power purchase agreement with a third party. Which is fine, but the third party takes the tax incentive and makes a profit. It's not as efficient a way, as if we could do it directly," said Matheson.

NRECA members are telling Congress that if tax incentives continue to be the mechanism for incentivizing renewable energy, "we want some type of parity where we're at the table as well," said Matheson. That could come through the addition of direct-pay mechanisms for renewable energy that public utilities could access.

The idea has strong bipartisan support, said Matheson. And NRECA has been working with the American Public Power Association (APPA), to lobby on the issue. 

The federal government wants to push towards a carbon-free energy sector but "excluding 30% of the market is not the best way to get there," said John Godfrey, APPA senior government relations director.

The groups are supporting HR 848, the Growing Renewable Energy and Efficiency Now Act, which includes direct pay or "refundable" credits for renewable energy that municipal and cooperative utilities could access. That measure was introduced by Rep. Mike Thompson, D-Calif., though currently there is no companion bill in the Senate, said Godfrey.

Godfrey said Sen. Ron Wyden, D-Ore., has in the past introduced the Clean Energy for America Act, which "recognized the importance of comparable tax incentives," but took a different approach using clean energy bonds to approach parity. That bill has not yet been reintroduced this session, he said.

Direct pay incentives could be included in the infrastructure bill Congress is now developing, said Godfrey. House Speaker Nancy Pelosi, D-Calif., has targeted July 4 to pass an infrastructure bill. 

Debt relief needed for cooperatives 

NRECA members are also advocating for the Flexible Financing for Rural America Act (HR 2244/S 978), which would allow electric cooperatives to refinance U.S. Department of Agriculture Rural Utilities Service loans without paying a penalty.

Co-op member-owners could save $10 billion across the life of those loans, said Matheson. "To us, that's a lot of money. It would go to lower the cost of capital in the communities served," he said. "It's a big deal. And every member of Congress, from either party, that I've talked to, they all get it."

The pre-payment penalty blocks NRECA members from refinancing the debt, even during times of historically low interest rates. "This is an anachronism from several decades ago, when lots of financing instruments had pre-payment penalties," he said. "The financial services sector has evolved and those don't exist as much as they used to. But in our case, we need an act of Congress to change it."

Like a potential change to renewables incentives, Matheson said the bipartisan debt refinancing measure could also be added to the infrastructure package now in development.

Doubts about Biden's decarbonization goals 

While NRECA will press for changes to renewables incentives and debt refinancing rules, Matheson said the organization is also concerned that lawmakers may adopt a clean electricity standard without understanding what is necessary to achieve total decarbonization.

Biden has called for eliminating emissions from the power sector by 2035, and is reportedly mulling a 50% cut by 2030. That would double Obama-era interim targets, and the new goal could be announced at a climate summit on Thursday with other world leaders.

"What are going to be the commercially-viable, always-available-and-affordable, carbon-free technologies to provide electricity?" asked Matheson. "People can set goals ... but in our business, we think about that person on the other end of the line, and are the lights going to go on and can they afford it?"

Many utilities have set decarbonization goals of 50% or 80%, but Matheson said it is still "unknown" how to eliminate the final tranche of emissions. "It's really important we have that conversation," he said.