The House of Representatives on Friday passed the Inflation Reduction Act, sending the bill to President Joe Biden, who said he plans to sign it this week.
The bill contains tax, healthcare and climate provisions, including about $369 billion in spending over 10 years on energy and climate measures. In a measure expected to affect some utility companies, the legislation is partly funded by a 15% alternative minimum tax for corporations with a 3-year average adjusted book income above $1 billion.
The bill contains a range of incentives and tax credits to spur emissions-free energy, electric vehicles, nuclear power and carbon capture, among other things. For example, the bill allows tax credits to be transferred from an entity that is unable to use them to one that can, according to a summary of the bill’s provisions prepared by the Princeton University-led REPEAT Project.
“The clean energy tax credits included in the Inflation Reduction Act are the right policies,” said Tom Kuhn, president of the Edison Electric Institute, a trade group representing investor-owned utilities. “This legislation firmly places the United States at the forefront of global efforts to drive down carbon emissions, especially when paired with the historic [research, development, demonstration and deployment] funding included in the bipartisan infrastructure law.”
The Senate approved the bill on Aug. 7, following negotiations between Senate Majority Leader Chuck Schumer, D-N.Y., and Sen. Joe Manchin, D-W.Va., who had opposed a more expansive version of the bill known as the Build Back Better Act.
Here’s a look at what utility leaders are saying about the landmark legislation.
Provisions allowing tax credits to be transferred could help “unlock additional value” as Allete’s businesses develop clean energy projects, according to Bethany Owen, the company’s chair, president and CEO.
“The stand-alone storage investment tax credit, [or ITC], optionality for both investment and production tax credits, [or PTC], for solar, advanced manufacturing credits and domestic content incentives for wind, solar, batteries and critical minerals are all in the latest version of the bill with batteries and minerals being a major new addition,” Owen said Aug. 3 during an earnings conference call.
Also, the bill could improve Allete’s credit metrics, Steve Morris, Allete CFO and senior vice president, said, noting the Duluth, Minnesota-based company would be unaffected by the bill’s 15% minimum corporate tax.
The bill’s tax credits for wind, solar, storage, nuclear, carbon capture utilization and storage and hydrogen will “align very well” with Ameren’s proposed investments in the Missouri integrated resource plan filed in June, according to Marty Lyons, president and CEO.
“We're excited about the potential tax credits in the legislation, especially the wind and the solar, given the 4,700 MW of renewables that we looked at in Missouri,” Lyons said Aug. 5 during an earnings call.
“The PTC for solar is a positive versus the prior ITC [as are] and transferability provisions, which are things that we really think could help us to pass the value associated with some of these tax credits to our customers more swiftly,” Lyons said.
Duke Energy Corp.
The bill’s clean energy tax credits will lower Duke Energy’s cost of service, reducing the cost to customers during the utility company’s energy transition, according to Lynn Good, Duke chair, president and CEO.
“The transferability provisions can help direct the intended value of these credits to our customers more efficiently,” Good said Aug. 4 during an earnings call, noting the Charlotte, North Carolina-based company will be affected by the minimum corporate tax. “The bill also recognizes the important role that existing nuclear plays with nuclear PTCs awarded to operators of highly efficient nuclear stations.”
Chris Crane, Exelon Corp. president and CEO, told analysts Aug. 3 there are pros and cons to the bill’s tax provisions.
“The bill extends tax benefits for familiar renewable technologies like solar and wind. It creates new ones for clean energy sources like nuclear and hydrogen. It also focuses on energy efficiencies, electrification and, very importantly, equity,” Crane said.
However, the minimum corporate tax will undermine the benefits of the clean energy tax credits and slow investments in clean resources, according to Crane.
Pinnacle West Capital Corp.
The bill’s clean energy tax provisions will help reduce customer costs, whether through utility-owned projects or power purchase agreements with third parties, according to Jeffrey Guldner, Pinnacle West Capital Corp. chairman, president and CEO.
“We view generally the IRA process as being helpful from a customer affordability perspective because it would really help reduce the cost for us to continue to move ahead with the deployment of the clean technology and take advantage of some of the different tax credits,” Guldner said on an Aug. 3 earnings call.
The ability to make use of the PTC instead of the solar ITC will improve the economics of PPL’s self-build options as the company looks at renewables as a potential source of replacement generation for its Kentucky utilities, according to Vince Sorgi, PPL president and CEO.
“That will be good for not only our [request for proposals] process in Kentucky, but also our customers in Rhode Island as we procure clean energy to meet the 100% renewable energy by 2033 requirement that was just enacted into law,” Sorgi said Aug. 3 in an earnings call. “The transferability provisions around tax credits also makes it more likely that renewables will be built. And that will also be good in general for the industry and for accelerating our clean energy transition. [It] simplifies the structure of the deals significantly.”
Public Service Enterprise Group
Public Service Enterprise Group will likely benefit from the bill’s nuclear and offshore wind tax provisions, according to Daniel Cregg, CFO for PSEG, a utility company based in Newark, New Jersey.
“If I think about both the flexibility on the offshore wind as well as the PTC for nuclear, I think both of them are value additive,” Clegg said in an Aug. 2 earnings call.
Provisions supporting the electric vehicle market and carbon capture and sequestration stand out for Sempra, according to Jeffrey Martin, chairman and CEO of the San Diego-based company.
Also, Martin told analysts Aug. 4, Sempra supports an agreement among Biden, Schumer, House Speaker Nancy Pelosi, D-Calif., and Manchin for permitting reform legislation by Sept. 30. “We think that makes all the sense in the world,” Martin said.
Tri-State Generation and Transmission Association
The legislation has two key provisions that benefit cooperative and nonprofit utilities, according to Lee Boughey, a spokesman for Tri-State, which has 42 utility members in Colorado, Nebraska, New Mexico and Wyoming.
The bill offers direct pay tax incentives so nonprofit utilities can invest directly in wind, solar and other eligible resources like taxable utilities do, Boughey said Monday. Also, the bill includes $9.7 billion to help cooperative utilities add renewable energy, energy storage and transmission lines to facilitate a transition away from traditional power supplies, Boughey noted.
“It’s an important step forward for Tri-State, our members and cooperatives in general,” he said.