![](media/image1.png){width="1.3104166666666666in" height="0.46875in"}
American Public Power Association

2301 M Street, N.W.

Washington, D.C. 20037

202-467-2900; fax: 202-467-2910

www.APPAnet.org

July 25, 2006

APPA's Comments to the Department of Energy's Proposed Rulemaking on the
Renewable Energy Production Incentive Program

"REPI NOPR, RIN 1904-AB62"

The American Public Power Association (APPA) is writing to express
support for the U.S. Department of Energy, Office of Energy Efficiency
and Renewable Energy, Renewable Energy Production Incentive (REPI)
program. APPA represents the interests of more than 2,000 publicly owned
electric utilities across the country, serving approximately 43 million
citizens. APPA member utilities include state public power agencies and
municipal electric utilities that serve some of the nation's largest
cities as well as many of its smallest towns in every state but Hawaii.
The Energy Policy Act of 2005 (EPAct05), signed into law on August 8,
2005, includes a reauthorization of the Renewable Energy Production
Incentive (REPI) through September 30, 2026. This reauthorization
ensures that the REPI program remains an important tool in helping to
fulfill public power utilities' commitment to renewable energy
development.

More specifically, the REPI program was created by the Energy Policy Act
of 1992 to authorize DOE to make direct payments to publicly- and
cooperatively-owned electric utilities at the rate of 1.5 cent/kWh
(indexed for inflation) for electricity generated from solar, wind,
landfill-gas, and other eligible renewable energy resources. Congress
implemented this program with two goals in mind: 1) to assist public
power utilities in overcoming economic barriers to greater renewable
energy use; and 2) to ensure equity between investor-owned utilities
that receive energy production credits and not-for-profit utilities that
are unable to do so. REPI remains an important and visible incentive for
public power and other eligible entities. Eligible project owners and
operators from across the country have come to rely on REPI funds to
bring down project costs that in turn can determine the viability of a
given project to go forward. Funding uncertainties surrounding the
program still exist, however. While EPAct05 includes a new bond program
(the Clean Renewable Energy Bond program) to fund the capital costs of
building renewable projects, it does not apply to existing renewable
energy projects. REPI will continue to fill that gap as the CREB program
is implemented.

Since the program's inception, nearly \$35.2 million in incentive
payments have been made to the owners of qualifying facilities. In 1994,
qualifying facilities producing 43 million kWh of electricity were
eligible for REPI payments. This number increased to projects producing
over 1 billion kWh of electricity in 2004. Due to inadequate
appropriations, full payments for all eligible projects were last made
in 1995. For example, in 2004, 69% of "Tier 1" projects (i.e. wind and
solar) were paid and no "Tier 2" projects (i.e. landfill-gas,
open-looped biomass, and livestock methane) received funding.

Despite this shortcoming, REPI continues to be a significant, necessary
incentive available to locally owned, not-for-profit electric utilities
to make new investments in renewable energy projects. These projects
provide important economic and environmental benefits to the communities
served by the municipal utility. Along with significant air quality
benefits resulting from the accelerated use of emissions-free energy
sources, new jobs are created each time these technologies are deployed.

An important and unique feature of the REPI program is its potential to
assist municipalities, and the communities they serve, in reducing
significant levels of greenhouse gas (GHG) emissions through landfill
gas-to-energy projects. Landfill gas is about 50 percent methane and
methane is over 20 times more potent as a GHG than carbon dioxide. There
is potential to reduce over 2.3 million metric tons of carbon equivalent
of by deploying these projects on existing untapped landfills. The
comparative economics of landfill-gas projects makes this resource one
of the most promising in the near-term.

DOE proposed several amendments in the Notice of Proposed Rulemaking to
implement the changes established by EPAct05. In particular, DOE
proposes that available funds for REPI will be divided in a 60/40
percentage split between two categories of eligible renewable energy
facility types when applications exceed available appropriations. The
composition of the 60 percent category corresponds to "Tier 1" under the
existing regulations except for the addition of ocean energy as a
qualifying technology. The 40 percent category will be identical to the
prior "Tier 2". DOE also proposes to amend the provisions addressing
incentive payments when there are insufficient funds to make payments
for all qualifying facilities. Specifically, DOE proposes to amend the
process for partial payment calculations. After funds have been
determined to be insufficient and the 60/40 allocations have been made
to the respective categories, the amended rule would require DOE to
calculate potential payments on a pro rata basis based on the prior
year's energy production. These changes are consistent with the statute,
and APPA supports them.

Finally, it is important to mention that although REPI is authorized to
receive "such sums as are necessary" to fund the program, the annual
appropriations allocated have been insufficient to meet the demand
generated by not-for-profit electric utilities interested in producing
renewable energy. In the FY 2006 appropriations cycle, REPI received
\$4.95 million, and the Administration's budget request for the program
for FY 2007 is \$4.94 million. With the demand for affordable renewable
projects continuing to grow, we hope that the Administration will fund
the REPI program at a significantly higher level than the Administration
requested for FY 2007. It is also important to note that APPA recognizes
that there will be some public power systems negatively impacted by the
change in the allocations to Tier 1 and Tier 2 projects in funding
shortfall years, which is why APPA believes it is imperative that DOE
increase its request to Congress for funding of the REPI program.

In conclusion, a fully funded and reformed REPI program will assist the
not-for-profit sector of the electric power industry make important
contributions to air quality and renewable energy supply goals. A
serious commitment to addressing environmental, energy supply and
national security concerns must include continued and increased federal
investment in incentive programs such as REPI to promote sustainable
energy resources. REPI offers the potential for locally-owned electric
utilities to assist the communities they serve in providing air quality
benefits from the accelerated use of emissions-free energy sources and
the creation of new jobs as these technologies are deployed.

APPA looks forward to working with DOE and Congress to ensure that
important programs such as REPI continue and are fully funded.