WASHINGTON (June 8, 1999) -- Edison Electric Institute today applauded introduction of legislation that would bring tax treatment of nuclear decommissioning trust funds nationwide in sync with restructuring of the electric utility industry. The bill, the Nuclear Decommissioning Clarification Act, was introduced in Congress today by Reps. Jerry Weller (R-Ill.) and Ben Cardin (D-MD) and is co-sponsored by eight other members of the House Committee on Ways and Means, on both sides of the aisle.

Joining Weller and Cardin in cosponsoring this legislation are Reps. Crane (R-IL), Johnson (R-CT), McCrery (R-LA), Collins (R-GA), English (R-PA), Foley (R-FL), Jefferson (D-LA) and Thurman (D-FL).

"Representatives Weller and Cardin are to be congratulated for introducing this legislation," said Thomas R. Kuhn, president of Edison Electric Institute. "They are helping Congress to recognize," Kuhn said, "that as deregulation progresses in the states, appropriate tax clarification is needed to ensure that public health and safety is protected by assuring that nuclear decommissioning trusts are fully funded."

Current law requires that tax-deductible electric utility contributions to nuclear decommissioning funds are based on cost-of-service ratemaking. As states restructure their electric industries, they turn to market-based or competitive rates.

The Internal Revenue Service rules in Code section 468A, which govern the tax treatment of nuclear decommissioning funds, make no provision for cost calculations based on anything other than cost-of-service rates. While these rules worked well within the structure of a traditionally regulated electric utility industry, in newly competitive markets operators of nuclear power plants are left in a federal tax dilemma.

"Without this legislation," Kuhn said, "nuclear electric utilities may be unable to continue to make deductible contributions to nuclear decommissioning trusts, or transfer these funds to a new owner." Kuhn noted that as deregulation proceeds, market forces are resulting in ownership changes at electric generating units of all kinds. "Without this legislative fix to the tax problem, prospective owners are likely to shy away from purchasing nuclear units, and existing owners could be forced into early shutdowns of these facilities."

In addition to eliminating the cost-of-service provision of current tax law, the Weller-Cardin legislation would:

• Define "nuclear decommissioning costs" and acknowledge that all such costs are currently deductible when paid or incurred;
• Make an exception in the IRS "level funding requirement" if regulators allow higher decommissioning charges, or if accelerated funding is required in connection with an ownership change;
• Allow tax-paying nuclear operators to utilize a qualified decommissioning fund irrespective of the age of the plant; and,
• Discontinue the requirement that taxpayers file for an IRS ruling before making qualified fund contributions.

"We are confident," Kuhn said, "that Congress will see the wisdom in this legislation and will move promptly to protect consumers and assist businesses and the states to more efficiently transition nuclear operations in a restructured electric utility industry."

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Edison Electric Institute is the association of investor-owned electric utilities, international affiliates and associates, whose domestic members produce more than three-quarters of the nation's electricity.

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