United States

United States

Tax credit savings shown on bills -- Federal windfall made visible

From next month, customers of Puget Sound Energy (PSE) in the United States' Northwest will see increasing evidence of the financial benefits of wind's federal production tax credit (PTC) visibly apparent on their monthly electricity bills. PSE's two large wind farms have performed better than expected this year and the Seattle-based utility is seeking to pass back to its 1.1 million customers the value of the extra reduction on its tax bills the PTC is providing.

The better than budgeted wind power generation was provided by the Wild Horse and Hopkins Ridge wind farms, which have a combined capacity of 386 MW. As long as the Washington Utilities and Transportation Commission approves PSE's request, consumers using 1000 kWh a month will see the value of the PTC on that amount of electricity increase by 28 cents, bringing the monthly total reduction on their bills thanks to wind's federal tax credit to $1.68. The money is marginal, but demonstrates to consumers what they gain from the federal government's subsidy of wind power.

"We own and operate those wind facilities whereas other utilities are just starting to do that on their own so they haven't had the credit to pass through, so there's a bit of a novelty here," says PSE's Dorothy Bracken. "Our ratepayers are actually paying for those wind facilities, and we simply pass the credit on through to them. The credit gets adjusted yearly based on the production output from the facilities."

A novelty

Showing the PTC as an item on monthly bills seems to be unique to PSE, says Kevin Pearson, an attorney at Stoel-Rives, a law firm specialising in energy. "It's something that I've not heard of, and none of our clients have asked about it," But, Pearson adds, the PTC flows through the rates at other utilities, just not necessarily as a line item on bills.

Tom Gauntt of Oregon-based PacifiCorp, another Pacific Northwest utility that owns wind plant, agrees. "The PTC is passed along," he says. "But it's submerged in the overall costs -- costs that would have been a lot more." He adds that it might be easier for PSE than for others to show the savings on its bills because all of its customers are in one state. PacifiCorp customers are in six states.

PSE was among the first US utilities to own and operate wind facilities. Hopkins Ridge, at 157 MW, went online in eastern Washington in 2005 followed by Wild Horse, at 229 MW, in central Washington, in 2006. The two projects cost a total of $557 million, which was folded into the rates of PSE residential and business customers. Both projects use Vestas 1.8 MW turbines.

The company's customers may soon be in line for even more PTC savings. PSE recently announced a $100 million, 40 MW expansion of Wild Horse using Vestas units, due for completion late next year.

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