The Oregon Department of Energy on Friday issued a new proposed “pass-through” rate for its Business Energy Tax Credit program that cut the rate of return on an investment significantly.
The pass-through option allows owners of an energy project to transfer the tax credit to a partner in exchange for cash.
The new rules propose to align the pass-through rate to the five-year U.S. Treasury Note and the urban Consumer Price Index for the West region. If enacted, the new formula would mean the annualized rate of return for a pass-through partner taking a 5-year 50 percent renewable energy BETC will drop from 9.85 percent to 3.42 percent.
The rules would create a standardized formula for pass-throughs that would be reviewed quarterly.
Mark Long, the energy department’s director, said the new proposed pass-through is one that “reflects current economic conditions.”
“Depending on the final outcome of rulemaking, the rate change could result in more money going to the actual energy project and a rate of return more in line with other government sponsored projects,” Long said in a news release.
The amended pass-through rate follows a more comprehensive overhaul of the BETC program unveiled earlier this month.
Effective immediately for new tax credit applications, the rules address issues such as project cost overruns and eliminate the ability of a single project to receive multiple tax credits.
It also established new criteria for project eligibility and gives the Department of Energy the authorization to suspend and place conditions on applications. It also provides new criteria for project performance, giving the department authority to revoke a permit if it believes an applicant misrepresented the project.
This summer, as state legislators grappled with a massive budget shortfall, critics argued that the BETC program — which paid out $68.8 million in credits over the past two years — would rise to $143.8 million in the next biennium if left unchecked.
Legislators passed a bill that would have reduced that payout by $20 million, principally by cutting back credits for wind energy projects.
Gov. Ted Kulongoski vetoed the bill, but in recognition of legislators’ concerns he signed another bill directing the energy department to conduct an economic analysis of the BETC program.
Portland Business Journal – http://portland.bizjournals.com/portland/stories/2009/11/09/daily56.html