While in Washington, members of the APGA Board of Directors and the Regulatory Subcommittee met with members of the Federal Energy Regulatory Commission (FERC). The APGA representatives that participated in the meeting included: Rich Worsinger, APGA’s Chairman and Director of Utilities for the City of Rocky Mount, N.C; Jim Hodges, APGA’s First Vice-Chair and Executive Vice President and Chief Executive Officer for Middle Tennessee Natural Gas Utility District; Kathy Garcia, Director of Federal and State Relations for CPS Energy, Texas; Donnie Sharp, Natural Gas Supply Coordinator for Huntsville Utilities; Chris Latch, Gas & Water System Manager for the Corinth Gas & Water Department; Owen Reeves, Gas System Director for the City of Henderson; Bud Miller, APGA’s General Counsel; John Gregg, Partner at McCarter & English; Bert Kalisch, APGA’s President and CEO; and, Dave Schryver, APGA’s Executive Vice President.
The issues that were raised in the meeting included pipeline over-collections and natural gas direct-use. APGA also updated the commissioners regarding involvement in an initiative undertaken by the North American Energy Standards Board Gas-Electric Harmonization Forum to explore the potential for faster computerized scheduling.
Recently, the Internal Revenue Service (IRS) released a proposed regulation that would establish a new definition of the term “political subdivision” for tax-exempt purposes. This regulation is significant as an entity that is not a political subdivision cannot issue tax-exempt bonds and many public natural gas systems have utilized tax-exempt financing for investments in infrastructure as well as for natural gas prepays, which are the long-term purchase of natural gas.
The current political subdivision test requires that an entity possess at least one of the three sovereign powers, which are the powers of eminent domain, to tax, or to regulate. The proposed regulation would add two new tests in the determination of whether an entity is a political subdivision and all three tests (the two new tests and the original one) must be met for an entity to qualify as a political subdivision. The two new tests are a governmental or public purpose test and a governmental control test.
Under the governmental or public purpose test, an entity must be set up for a public purpose and continually operate “in a manner that provides a significant public benefit with no more than an incidental private benefit.” The term “incidental private benefit” is not defined in the regulation. If the IRS makes a determination that the entity provides more than an incidental private benefit, the entity is no longer considered a political subdivision and its bonds become taxable. The second new test is governmental control and under this test control must be exercised either by a state or local governmental unit or by an electorate. In addition, to meet this test, a state or local governmental unit must have all three of the sovereign powers identified above and act either through its governing body or through its duly authorized elected or appointed officials.
Comments on the regulation are due on May 23 and APGA plans to submit comments. In addition, a public hearing on the regulation, which APGA plans to participate in, has been scheduled for June 6.
On April 20, the Senate passed comprehensive energy legislation, titled the Energy Policy Modernization Act of 2015. The bill contains several provisions supported by APGA, including language that delays DOE’s implementation of the furnace rule to allow stakeholders the opportunity to negotiate and reach agreement on a rule that makes sense.
Specifically, the furnace language in the bill would prohibit DOE from prescribing a final natural gas furnace rule until:
1. DOE convenes a representative advisory group of interested stakeholders, including, among others, manufacturers, distributors, contractors, home builders, energy efficiency advocates, natural gas utilities, electric utilities, and consumer groups;
2. That advisory group completes an analysis of a nationwide requirement of a condensing furnace efficiency standard within one year including a complete analysis of current market trends regarding the transition of sales from non-condensing furnaces to condensing furnaces, the projected net loss in the industry of the present value of original equipment manufactured after adoption of the standard, the projected consumer payback period and lifecycle cost savings, a determination of whether the standard is economically justified, and other common economic principles; and,
3. The advisory group makes a determination as to whether a nationwide requirement of a condensing furnace efficiency standard is technically feasible and economically justified and that determination would be published in the Federal Register.
Should the advisory group determine that a nationwide requirement of a condensing furnace efficiency standard is not technically feasible and economically justified, DOE is required to, within 180 days from the date the determination is published in the Federal Register, establish amended standards through a negotiated rulemaking process.
By contrast, the furnace language in the House-passed energy bill delays DOE’s furnace rule until July 2016 to allow stakeholders the opportunity to continue negotiations.
The bill also contains language supported by APGA that repeals Section 433 of the Energy Independence and Security Act of 2007. Section 433 mandates the elimination of all fossil fuel-generated energy use in federal buildings by the year 2030. The mandate covers new buildings and major renovations of at least $2,500,000 (in 2007 dollars). Repeal of this provision has long been an APGA priority. Lastly, during debate on the legislation Senators Isakson (R-Ga.) and Bennett (D-Colo.) offered an amendment, titled the SAVE Act. The SAVE Act, which APGA supports would reform mortgage underwriting practices to account for the energy costs of homeownership. Specifically, the SAVE Act would allow prospective borrowers and lenders to factor in quantifiable energy savings and easily compare the efficiency of homes. Such reforms would increase consumer awareness of home energy use, spur demand for energy efficient and cost-effective appliances including those fueled by natural gas.
The next step will be the formation of a conference committee to resolve differences between the comprehensive energy bills passed by the House and Senate. Chairman Murkowski (R-Alaska) has communicated her intent to get a bill to the President prior to Congress departing for its month-long August recess.
For questions on APGA’s advocacy efforts, please contact Dave Schryver of APGA staff by phone at 202-464-2742 or by email at email@example.com.