The Senate on Tuesday passed a corporate tax bill which included energy measures then valued at about $13 billion to $14 billion. Tax credits would be extended to companies that produce electricity from wind, solar and other renewable energy sources.
The Senate bill would also encourage building new nuclear power plants and provide federal financial support for a proposed Alaska pipeline to ship natural gas to the Midwest.
An aide with the Senate Finance Committee said that the 1.8 cent per kilowatt-hour clean energy credit extended to wind, biomass, farm waste, geothermal and solar was estimated to cost about $3 billion in the original 10-year energy package.
Committee staff expected the cost to go down to about $2.8 billion in the latest version of the bill, because two years of benefits were cut.
However, the cost of the credits is now estimated at about $4.4 billion, although the amount has not yet been verified by the joint congressional tax committee.
"We thought we were going to go down, but instead we had a huge increase, based on the fact that we're getting more renewable electricity," said the committee aide, who spoke on condition of anonymity.
Wind credits account for about two-thirds of the increase, with other renewable energy sources claiming the rest, the aide said. "It's a good use of taxpayer dollars," the aide said.
Republican sponsors said the new, higher $18 billion cost of the package is fully offset by revenue raising measures related to ethanol excise taxes and prohibitions on fuel fraud and certain tax-exempt leasing arrangements.
However, the cost is likely to creep upward once the Senate enters negotiations with the House of Representatives to develop a final bill, said Keith Ashdown at Taxpayers for Common Sense, a federal spending watchdog.
"Congress plays all these smoke and mirror games to make things look smaller than they appear," Ashdown said.
Amendments to the tariff bill, including one to decrease the depreciation period for new transmission lines, have not been weighed by the Joint Taxation Committee. That measure is expected to cost less than $1 billion over eight years, the Senate source said.
For their part, U.S. wind producers say Congress' failure to extend tax credits that expired at the end of 2003 will mean fewer new wind farms built this year.
Less than 500 megawatts of new capacity will be built in 2004, after near-record growth of 1,687 megawatts in 2003, the American Wind Energy Association said.
The energy tax language was stripped from a broad-ranging energy bill that stalled in the Senate last year.
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