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Electric Restructuring Legislation: Handicapping the 106th Congress

Fortnightly Magazine - February 1 1999

to pay income tax on revenues.

Not everyone agrees with Nipper.

"We think the Gorton bill is the extreme," says Ron Clements, government affairs director at the Edison Electric Institute. "The Gorton bill basically takes care of private use for them and does nothing for anybody else. It is a public power only bill."

The English bill also leans in favor of public power in dealing with generation and new transmission beyond the "fence," Clements says.

"The purpose of tax-exempt debt is to aid the people who live within the municipality," he says. "If you go outside to engage in a commercial marketing activity, that doesn't aid the people within the municipality. We're saying that's not a legitimate function. ¼ If they're not engaged in a legitimate government function, then they shouldn't be tax exempt."

The Matsui-Neal solution goes beyond the English bill. It says there should be no new tax-exempt debt for new generation or new transmission Clements says he thinks there is a compromise between public and private power. "We're not as hard line as, for example, the Murkowski bill on the bond recall stuff," he says. "We can live without bond recalls. With the right incentives, we could live with private use."

But that doesn't mean agreeing that tax-exempt bonds should have no private use restrictions applicable to them. "That is a major, major fix for the munis," he says. "That's what the Gorton bill does.

"What we're saying is you've got to give us some income tax relief. We can't go out and compete with somebody that doesn't pay taxes and be a competitor."

Nipper says over the past year, there has been more debate on private use and EEI has come to see, if not agree, that it is a legitimate problem.

"They still don't want it fixed the same way we do," he says. "But they're not as hard a line now as a year ago."

He said he is encouraged to see that IOUs' only complaints, though not minor, are related to transmission and income tax. "We have no intention of supporting a proposal that would tax municipal revenues," he insists. "But I think the fact that they've narrowed their complaints ¼ signals that they've moved in our direction."

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