Cohocton Wind Watch: Electric Industry testimony on Tax Reform
Cohocton Wind Watch is a community citizen organization dedicated to preserve the public safety, property values, economic viability, environmental integrity and quality of life in Cohocton, NY and in surrounding townships. Neighbors committed to public service in order to achieve a reasonable vision for a Finger Lakes region worthy of future generations.


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Wednesday, October 05, 2011

Electric Industry testimony on Tax Reform

Those of you who have wondered about the vagaries of accelerated depreciation and its impact on wind energy investments -- at least for investor-owned utilities -- may want to read the first part of the attached statement by Edison Electric Institute (EEI). It's one of the clearest statements I've seen on the subject.

You will want to hold your nose when you get to page 6 and see the false claim that tax breaks for renewables helps reduce energy import dependence and footnote 10 that cites an AWEA claim. I suspect that both these were inserted at the insistence of such EEI members such as NextERA (formerly FPL Group and parent of Florida Power & Light), Duke, and a few others.

You might want to groan a bit (as a taxpayer) if you work through the implications of the accelerated depreciation discussion. Specifically, consider the impact of accelerated depreciation on Exelon's late 2010 purchase of John Deere's wind business for $900+ million, That deal closed during the period (September something 2010 through December 2011) when most capital investments qualify for 100% first year accelerated depreciation deduction.

Therefore, it appears that Exelon could get the deduction for the entire $900 million spent for operating "wind farms," book it as a deferred tax liability and, in effect, benefit from a $900 million interest free loan.

As the statement explains, however, the utility could not include the $900 million in its "rate base" that is used to calculate its allowed return on its capital investments -- so its only the taxpayers (who pick up the burden escaped by Exelon) who take the hit for the depreciation deduction, not Exelon's customers.

Glenn Schleede
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