As Congress strives to find agreement on a massive tax and budget bill, NRECA lobbyists are working to ensure that electric cooperatives continue to have direct access to tax credits for innovative energy technologies.

Although the legislative process is far from over, the elective-pay tax credits that NRECA fought for and won as part of the Inflation Reduction Act in 2022 have so far remained intact, even as lawmakers make changes to other tax provisions.

Elective-pay credits provide direct federal payments to co-ops when they deploy new energy technologies, including carbon capture, nuclear, energy storage, renewables and more. It puts co-ops on a level playing field with investor-owned utilities, which have long enjoyed access to tax breaks for deploying wind, solar and other renewable energy.

The House-passed version of the budget reconciliation bill did not touch elective-pay credits after NRECA lobbyists and electric co-op leaders advocated for preserving them. The Senate is working on its own version of the legislation now.

“While I think elective pay is as secure as it can be, we still need to make sure we remind Congress why it's important to us and why it has value for rural communities," said Hill Thomas, NRECA vice president of legislative affairs.

What are the main messages that NRECA lobbyists bring to Congress to convince lawmakers to preserve elective-pay tax credits?

Thomas: The first and most compelling argument is one of fairness. Co-ops should have equivalent treatment on par with what any other electric utility gets.

Second, we remind them of the challenges we face as rural utility providers serving the hardest-to-reach communities. That makes access to these credits even more important.

Third, looking down the road, as data centers and other growth increases demand for electricity, we need to be able to develop new technologies to keep up.

Elective-pay incentives allow co-ops to tap into whatever federal energy tax credits are available. But will those underlying tax credits for wind, solar, battery energy storage and more survive as Congress seeks agreement on the huge budget reconciliation bill?

Thomas: For starters, let's not forget that the value of elective pay is tied directly to the value of the credits. So, we really have to advocate for both the underlying credits even as we're talking about the elective pay. While we're cautiously optimistic about the fate of elective pay, the president and many in the Congress want to wind down the underlying tax credits.

The story we're telling policymakers is that co-ops want equity and certainty.

Equity means we want to be treated the same as other electric utilities. Certainty means that we want to be able to make a long-term plan. Whatever you do to the underlying tax credits, don't disrupt our long-term plans that we've spent time, money and resources to implement over the last few years.

What do those advocacy efforts look like on elective pay and the tax credits themselves?

Thomas: An interesting dynamic that we have to contend with as we plan our advocacy is that, for elective pay, we are the primary voice advocating in Washington. Our members have done a great job carrying the message to Congress at Legislative Conference about the importance of elective pay.

There are many, many other stakeholders advocating for the broader tax credits, so we have to be strategic about how our voice can resonate in a much busier atmosphere. That means working in collaboration with a broad coalition of industry partners with similar goals.

Our talented lobbyists have spent countless hours talking to hundreds of lawmakers. We also leverage our members' powerful stories about how changes to the tax credits could disrupt long-standing plans for affordability and reliability.

With all the budget and program cutting that is going on in Washington, what do you think will motivate Congress to preserve elective-pay credits?

Thomas: I think lawmakers value the work that electric co-ops do, and elective pay is a tool they know we're going to use responsibly to meet our consumer-members' expectations. Also, they know that public policy that's good for co-ops is good for rural America.

And elective pay does not cost anything to give us, nor does it save any money to take it away from us. Elective pay simply allows us to tap directly into the tax credits. Either way, the credit is going to be taken.

There is also a rising awareness that reliability is important, that demand for electricity is rising, and that we need a wide range of solutions. We're part of the solution, and we need all the tools we can get to meet the challenges and the opportunities ahead.