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Washington Week: FERC gets more time on grid rule; Congress hurries on taxes

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Washington Week: FERC gets more time on grid rule; Congress hurries on taxes

With the holidays fast approaching, Congress is moving quickly to tie up tax reform legislation and figure out funding for the federal government after a short-term continuing resolution expires Dec. 22.

But the Federal Energy Regulatory Commission has more time than expected to weigh its next steps on the U.S. Department of Energy's request for a rule to prop up financially struggling coal and nuclear plants.

On the same day he was sworn in at FERC, Chairman Kevin McIntyre asked Energy Secretary Rick Perry for another 30 days to decide how to respond to the DOE's September proposal. The DOE previously set a deadline for FERC to take action by Dec. 11.

Perry agreed to give FERC until Jan. 10, 2018, to take final action but added that the "security of our nation's electric grid will continue to be at risk" if the commission does not adopt the DOE's proposal within the original deadline.

McIntyre's arrival at FERC could shift the agency's direction on the DOE proposal and other issues. Trump administration appointee Neil Chatterjee, who had temporarily chaired FERC from Aug. 10 until McIntyre's swearing-in, has been vocal about seeking interim support for coal and nuclear plants pending completion of the rulemaking and indicated a willingness to move quickly on the DOE's request.

Congress gears up for tax conference

While FERC pursues more breathing room on the DOE proposal, Congress is getting down to crunch time on tax reform.

Republicans hope to get a tax bill to President Donald Trump's desk before Christmas, but lawmakers still need to resolve certain sticking points, including with respect to some energy-related items. A bicameral conference to reconcile the U.S. House of Representatives' and U.S. Senate's bills is expected to take place this week.

Renewable power groups are pushing for a fix to the Senate bill's base erosion anti-abuse tax, or BEAT, language. The BEAT provisions were designed to prevent U.S. multinational companies from cutting their tax bills by making payments to foreign affiliates and deducting them from their U.S. tax obligations. But those provisions could harm renewable power project developers, if inadvertently.

Under the Senate bill's BEAT proposal, the government would include in a corporation's taxable income cross-border payments to foreign affiliates and a percentage of tax losses carried over from a previous year. If 10% of that expanded income exceeds the company's regular tax liability, after subtracting all tax credits other than those for research and development, then the company would have to pay the U.S. government the difference — effectively penalizing ownership of tax credits, including for new wind and solar projects.

Critics of the BEAT language managed to engineer a trade shortly before the Senate voted on its tax bill early Dec. 2, said Keith Martin, a partner with law firm Norton Rose Fulbright. As a result, the tax rate for banks and securities dealers subject to the BEAT provisions was raised to 11%, although it would stay at 10% for all other affected companies. In exchange, banks and securities dealers would not have to add back to their income some cross-border derivatives payments to foreign affiliates.

But renewable energy advocates still are on edge about the BEAT proposal, as well as the House's call in its tax bill to weaken the federal wind production tax credit. The House also proposed ending the solar investment tax credit after 2027, although the credit would be down to 10% by that point.

In addition, some energy companies are upset with the Senate's surprise preservation of the alternative minimum tax in its legislation, a move businesses fear could prevent them from claiming certain tax credits.

Spending bills

In addition to tax reform, Congress soon must consider spending legislation for the rest of the 2018 fiscal year.

On Dec. 7, the House and Senate approved a continuing resolution to extend funding for the federal government through Dec. 22. The stop-gap measure is designed to give lawmakers time to reach a top-line spending level for the 2018 fiscal year that will allow for consideration of regular appropriations bills for the various federal agencies.

Those bills could include a range of policy riders, including ones to roll back environmental regulations and hinder renewable energy development.

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U.S. Sen. Sheldon Whitehouse on Dec. 6, 2017, at the S&P Global Market Intelligence 2017 Utility Regulation Conference in Washington, D.C.

Source: S&P Global Market Intelligence

A "whole array of anti-renewable riders" will be proposed in upcoming spending measures, U.S. Sen. Sheldon Whitehouse, D-R.I., said Dec. 6 at S&P Global Market Intelligence's 2017 Utility Regulation Conference in Washington, D.C.

Congress managed to keep controversial policy riders out of a prior omnibus bill that Trump signed into law in May. But Whitehouse said Congress faces "a much more complicated mess" at the end of 2017 as Democrats seek fixes on immigration and healthcare policy that many GOP lawmakers oppose.

"That opens up a very big window for the Republicans to say, 'OK, we want the stuff you hate [in a spending bill] because you have stuff that I hate and the stuff that you hate is that we're going to attack the renewables industry,'" Whitehouse said. "So, close watching of that is going to be very important and it's coming on too many fronts for me to count. There are probably 40 different measures that are being tracked and we're still finding new ones."

Also this week, the House will vote on bills from the Energy and Commerce Committee to promote development of hydropower at existing non-powered dams and closed-loop pumped storage.

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