The revised energy bill introduced in the Senate last week may be leaner than the previous version, but details released yesterday show it would reinstate a provision that would make renewable- energy production tax credits available to public power utilities and allow them to sell the credits to a private entity for cash.

Senate leaders had dropped the provision from the earlier and much larger $31 billion version of the energy bill in November. But the provision is included in the scaled-down, $14 billion revised energy bill that was introduced Thursday by Senate Energy and Natural Resources chairman Pete Domenici, R-N.M., in an attempt to jumpstart the stalled legislation.

A Senate energy panel spokeswoman said the provision was restored when Domenici included the same tax section in the bill that was originally approved by the Senate Finance Committee in May 2003. That version included the tradable tax credit.

The American Public Power Association, which represents 2,000 municipal utilities and 1,000 cooperatives, had lobbied strenuously for the tradable tax credit provision and APPA officials were pleasantly surprised to see the revised bill.

Under current law, electricity production tax credits apply only to private facilities and developers who use them to offset their federal tax liability. Municipal utilities do not have any federal tax liability to offset but under the tradable tax credit provision would be able to sell the tax credits to a private entity in exchange for cash. The utilities would use the cash from the credits to help finance renewable energy projects, which are more expensive than traditional facilities, and could also finance the facilities with tax-exempt bonds.

The House energy bill, which was approved in November, does not contain a similar provision.

The revised Senate energy bill also includes a provision that would prevent the financing of waste-to-energy facilities with tax- exempt bonds if the facilities also use a tax credit. The bill would allow for a five-year, 1.8 cent per-kilowatt tax credit for new facilities and expansion units placed in service between Sept. 30, 2004, and Jan. 1, 2007. To prevent double-dipping, the facilities could not also be financed with tax-exempt private-activity bonds. The House version of the bill includes the same provision.

"It reflects for us more of a reality," said Maria Zannes, president of the Integrated Waste Services Association, because it has been difficult to get sufficient bond volume allocations in most states to finance waste-to-energy projects.

Waste-to-energy facilities have been subject to state private- activity bond volume caps since 1986, which has limited their ability to use tax-exempt bonds, Zannes said.

The revised Senate energy bill, S.2095, includes the tax package passed by the Senate Finance Committee in May 2003. The package costs under $14 billion, less than half of the estimated $31 billion cost of the previous bill. Most provisions in the bill will not be implemented until later this year.

Unlike the House version, the revised Senate bill does not include a provision would have allowed a demonstration project under Section 142 of the tax code that would permit the one-time issuance of $2 billion of exempt facility bonds to aid the construction of energy-efficient buildings on brownfield sites. However, the bill still would protect the ability of municipal utilities and state agencies to use tax-exempt bonds to pre-pay long-term contracts for natural gas by easing existing regulations to make clear that a utility may base the volume of a gas prepayment contract on gas usage over the previous five years.

It also would create an ethanol tax credit that would ultimately generate $2 billion in highway construction funding. The bill also keeps intact a provision that would provide loan guarantees to help finance a natural gas pipeline from Alaska through Canada.