Winston & Strawn partner Jerry Bloom, who is based in the L.A. office and serves as chair of the firm's energy practice, was quoted in an article titled "Utilities Build End Of Tax Credits Into New Contracts," that appeared in Dow Jones Newsletters on July 28, 2008.
The article discusses state-specific renewable power mandates that require utility companies to seek out solar and wind power even though they would likely have to pay higher prices for this energy. Federal tax credit support for renewable energy is scheduled to run out December 31, 2008. According to the article, if utility companies have to start paying for these energy sources, customers will have to incur the increased costs.
"If they have to meet the renewable portfolio requirement by 2010, they'll have to buy [the renewable power] regardless" of whether the tax credits are available, said Jerry Bloom.
California appears to be the most hard-pressed as it must generate 20 percent of its electricity from renewables by 2010, according to the U.S. Environmental Protection Agency. Other states with longer timelines may be able to wait out a possibly temporary discontinuation of federal tax credits.
Given the higher prices utilities will be forced to pay should the tax credits expire, "the ultimate issue is will the ratepayers be actually able to absorb the cost of the renewables?" said Bloom. "It is an issue that's being looked at by regulators, especially because multiple-price deals are coming to the attention of utility commissions that decree whether utilities can pass the costs down to the ratepayers."