School Districts' Wind Energy and the Clean Renewable Energy Bonds Program

Monday, February 4, 2008
Contributed by: Patrick S. Weir

Clean Renewable Energy Bonds ("CREBs") are a new form of tax credit bonds in which interest on the bonds is paid in the form of federal tax credits by the United States Government. Unlike typical bonds, the issuer does not have to pay any interest to the bondholder. Thus, CREBs provide the issuer an opportunity to borrow money at a 0% interest rate. Repayment of the principal occurs in equal payments each year of the bond term commencing in year one.

Recent changes to Texas law, including House Bill 3693/Senate Bill 12, require the adoption of energy conservation plans and require for entities, including school districts, to become more energy efficient. Effective September 1, 2007, the board of trustees of a school district is required to establish a goal to reduce the annual electric consumption by 5% each fiscal year for six years. Wind generators for schools are a new method that an increasing number of school districts are using to attempt to offset the ever increasing energy costs. CREBs may provide the financing tool needed to fund a wind generation project.

School districts fall within the scope of a "Qualified Issuer" eligible to receive financing through CREBs under section 54 of the Internal Revenue Code. The CREBs program provides school officials with an interesting opportunity to start energy producing wind turbine projects on district land. The energy cost savings from wind turbine projects can be re-allocated and used to support other projects. The wind turbine projects should also reduce a district's annual electrical consumption in accordance with the energy conservation plans.

Similar projects have already been developed in Dawson, Shallowater, Morton, and Crosbyton school districts. CREBs financing now makes these energy cost-reducing projects easier and more economical for school districts.

If you have any questions regarding development of a wind energy project financed through Clean Renewable Energy Bonds, please contact any of Underwood's Public Education Law Section attorneys.

This column is published for informational purposes only. It should not be construed as legal advice and is not intended to create an attorney client relationship. The views expressed are those of the author and do not necessarily reflect the views of the author's law firm or its individual partners.