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House committee passes tax break for wind power

By John Miller

Associated Press

Published: Wednesday, March 30 2011 1:55 p.m. MDT

Idaho House Minority Leader John Rusche, D-Lewiston, chats with Rep. Vito Barbieri, R-Dalton Gardens, before a meeting of the House Revenue and Taxation Committee at the Capitol in Boise, Idaho, Wednesday, March 30, 2011. The panel is considering competing bills, one of which would extend a sales tax rebate for wind and other alternative energy developers, while another would exclude wind and solar power developers from continuing to receive the tax break.

John Miller, Associated Press

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BOISE, Idaho — Wind energy developers with projects nearing completion are closer to winning tens of millions of dollars in tax breaks after a legislative committee voted Wednesday to send a bill backed by Idaho Power Co. and other utilities to the House floor.

The measure was approved on a 12-5 vote in the House Revenue Taxation Committee. It includes extending the rebate for geothermal, manure digesters and other alternative energy projects until 2014.

There had been competing bills, with House Majority Caucus Chairman Ken Roberts favoring removing wind from the rebate deal. He argued the industry has firmly established itself in the state, with hundreds of megawatts of projects either on line or due to be built in coming months, potentially boosting costs for ratepayers.

But the advocacy of House Assistant Majority Leader Scott Bedke helped sway the final vote. He spent recent weeks acting as a diplomat between the utilities and wind developers who started on opposite sides but wound up supporting the bill.

The compromise was backed by utilities only because it includes provisions that force all future wind and solar projects to negotiate prices with power companies, rather than demand an attractive, state-mandated rate.

"This is not a pell-mell extension of the wind rebate," Bedke said. "From now on, solar and wind in the state of Idaho is going to be negotiated. It's not going to be forced into someone's portfolio."

The original sales tax rebate was passed in 2005 and will likely result in well over $50 million in tax breaks, mostly for big wind farms.

With the extension, alternative energy developers that buy equipment to directly generate electricity would get their 6 percent sales tax payments back from Idaho, provided their projects are operating by Dec. 31, 2014.

But wind developers must win contracts for their power by this Oct. 31, meaning projects that aren't nearing completion won't qualify. Wind industry lobbyists told lawmakers that some projects nearing the finish line have been counting on the sales tax rebate — and could be scuttled if the four-month extension isn't approved.

"The projects that are in the queue are projects that calculated their financial and their construction costs based upon both the federal subsidy but also in particular the sales tax rebate," said Roy Eiguren, lobbyist for Exergy Development Group. "It's all back to the calculations that were made at the time the projects were conceived."

In exchange for giving ground on this, utilities demanded limits on the size of future wind and solar projects that could take advantage of a 1978 federal law meant to promote alternative energy by guaranteeing them a state-mandated rate for their electricity. If this bill passes, they could be no larger than 100 kilowatts, or 100 times smaller than the previous standard, to qualify.

Larger projects will have to negotiate with utilities if they want them to buy their electrons.

Here's why: Idaho Power Co. contends big wind developers like Exergy and its financial partner, General Electric Co., carved up enormous turbine farms into separate-but-interconnected 10 megawatt projects southern Idaho to force their way onto the grid, rather than having to negotiate agreements. Rich Hahn, the Boise-based utility's lobbyist, says this is raising costs for customers.

"We believe this is a better fit," Hahn said, of Wednesday's measure. "It will take into consideration the unique characteristics of the projects. Hopefully, pricing will come out of the process that is beneficial to our customers."

Solar power was included in the new limits due to utilities' fear that that industry's developers could mimic wind farms and divide up their big projects, too.

"They can disaggregate so they can get the (state-mandated) rate, which is really gaming the system." Rep. George Eskridge, R-Dover, the sponsor of the bill.

Wednesday's vote marked just the latest development what's become one of the most controversial issues of the 2011 session.

House lawmakers already rejected a proposed 2-year moratorium on wind farms sought by residents of eastern Idaho whose homes are dwarfed by towering white turbines. At separate hearings, those homeowners expressed concern about their property values and fears Idaho regulators haven't had adequate opportunity to assess impacts on rates, public health or the environment.

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