US Inflation Reduction Act could incentivize clean energy, tax utilities: Exelon execs

Exelon executives said Aug. 3 they were closely watching the US Inflation Reduction Act moving through Congress, as it extends tax incentives for renewables and clean energy technology but also includes a corporate minimum tax that could undermine those incentives.

"We appreciate those who have been working to position the United States as a leader in a cleaner energy future and combating climate change," Chris Crane, Exelon's president, and CEO, said during the investor-owned utility's second-quarter 2022 earnings conference call.

The bill extends tax benefits for "familiar renewable technologies" like solar and wind and creates new ones for clean energy sources like nuclear and hydrogen and focuses on energy efficiency, electrification, and equity, Crane added. These aspects of the bill will enable this transformation for customers while building a domestic clean energy sector, he said.

"However, the bill also proposes a corporate minimum tax that could undermine the benefits of those incentives and slow the investment needed to make this transformation," Crane told investors and analysts.

The lower costs of clean energy technology and efficiency investments will be offset by taxes on companies making investments and with this language currently proposed "we and other utilities could face an increase in cash tax," he said.

The bill "would represent the single biggest climate investment in US history" and put the country on track to cut carbon dioxide emissions 40% by 2030, according to a summary of the bill's energy provisions.

The Senate will vote on the legislation during the week of Aug. 1 after the chamber parliamentarian completes work on the proposal, the office of Senate Majority Leader Chuck Schumer, Democrat-New York, has said.

While the bill has yet to pass and the specifics could change, as currently drafted "we [Exelon] could see the impact of an incremental cash tax of approximately$300 million per year starting in 2023," with the higher tax ultimately limiting Exelon's ability to invest in infrastructure needed to accommodate the clean energy customers want and our jurisdictions are pursuing, Crane said.

But the "situation remains very fluid, and we continue to monitor the bill closely as it moves toward a vote in the Senate and beyond and we continue working to advocate for language that better aligns the incentives to achieve what we all want, which is a cleaner, resilient, reliable and affordable grid," he said.

Bill activity, timing

Exelon's senior vice president of federal government and regulatory affairs and public policy, Melissa Lavinson, said that as lawmakers work to understand the bill her team continues to inform them about potential unintended consequences.

"It [the bill] came quick and came from out of the closet," Crane said, adding that Exelon has done a significant amount of outreach to make sure the message is heard regarding adjusting the corporate tax language.

CFO Joe Nigro said it was unclear how these taxes would flow through to customers. "It's a very fluid situation and we still have to get to the goal line and see where it plays out," he said.

It is possible that there could be movement on the bill by the end of the week or maybe over the weekend, Crane said.

Exelon's GAAP net income from continuing operations for the second quarter of 2022 increased to.47 cents/share from 33 cents/share in the year-ago quarter.