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Utilities optimistic on tax reform but 'not safe until all the shooting is done'

Legislation to overhaul the U.S. tax code could be good for electric utilities, but the industry hopes lawmakers will avoid other tax policy changes that could raise their investment costs.

The Trump administration and Republicans in Congress are pushing to complete the first major update to the U.S. tax code in more than 30 years. Despite the complexity of that task, White House Legislative Director Marc Short said he thought tax reform could be finished by the end of 2017.

One of the GOP's key goals for the tax plan is a large cut to the corporate tax rate, which is currently set at 35% — one of the highest among developed countries. Utility industry leaders would welcome such a cut, particularly as the sector experiences a boom in investment as generation shifts to lower-emitting energy sources, driving a related uptick in construction of new transmission lines.

"Basic lower rates ... will be good for investment in our communities," Edison Electric Institute President Tom Kuhn said on an Aug. 2 call to discuss a new industry-backed study on the power sector's economic contributions.

But the utility sector is guarding against other possible tax code changes that lawmakers and the White House could seek to offset the corporate rate reduction. Kuhn said EEI, which represents investor-owned utilities, wants to maintain tax deductions on interest payments rather than expensing those payments, as called for in an earlier proposal from the U.S. House of Representatives.

Kuhn said the industry has done a good job of educating policymakers on the issue, but "I don't think there is ever a situation ... where you get assurances until the final bill is signed."

For public power utilities, the number one priority is preserving the tax-exempt status of municipal bonds used to fund infrastructure and other projects. Sue Kelly, president and CEO of the American Public Power Association, said she was optimistic in achieving that goal but that supporters of the exemption are "not safe until all the shooting is done."

Other priorities for the electric power sector include an extension to the nuclear energy production tax credit. The House passed a bill in June to extend that credit, but the U.S. Senate has yet to vote on the legislation. The National Rural Electric Cooperative Association also supports a tax credit extension for geothermal heat pumps, which can lower residential heating and cooling bills.