July 29, 2005
Friday

You won't feel it when you fill up at the pump or when you pay the power bill for air-conditioning, but after five years' work, Congress has cleared an energy policy that tucks consumer incentives in between big energy-industry write-offs.

The biggest consumer impact may be the provision that adds a month to daylight-saving time starting in 2007. Sponsors say extending daylight time from the second Sunday in March to the first Sunday in November will make people feel "sunnier" and save 1 percent on household energy bills. But airlines warn that travelers will pay through higher ticket prices and schedule problems.

The bill's $14.5 billion in energy tax breaks go overwhelmingly to oil and gas companies, electric utilities and other energy firms, but homeowners should see almost $800 million in home-energy tax breaks the next two calendar years, with another $874 million earmarked for drivers who buy alternate-fuel vehicles over the decade.

Analysts say the energy bill won't do much to cut imported oil or slake Americans' thirst for it. U.S. demand was up 2.7 million barrels a day in 2004 alone.

Even White House press secretary Scott McClellan concedes the public won't see much immediate impact: "We didn't get into this overnight and we're not going to get out of it overnight," he said.

But here's what the typical taxpayer could see from the energy bill:

Energy-Efficient Homes

- Taxpayers can claim tax credits totaling $500 in 2006 and 2007 for money spent on existing homes to upgrade heating systems, insulation, windows, doors and thermostats, caulk leaks, install pigmented metal roofs and otherwise cut energy waste. Write-offs for replacement windows are capped at $200, however, while the credit for high-efficiency central air-conditioning, heat pumps and water heaters is capped at $300.

- Contractors who build new energy-efficient houses can claim a new tax credit worth up to $2,000 for homes that are substantially complete starting the day President Bush signs the bill into law.

- Appliance tax credits worth $100 or more are available for manufacturers of energy-efficient dishwashers, refrigerators and clothes washers that meet 2007 Energy Star energy-efficiency standards. Taxpayers benefit indirectly through lower energy bills.

- Homeowners who install solar energy systems can claim a tax credit of up to $2,000 so long as the system isn't used to heat swimming pools and hot tubs. Smaller credits are available for fuel cell and photovoltaic power sources.

Alternative Car-and-Driver

- Taxpayers considering an alternate-fuel car, SUV or truck stand to reap tax credits worth thousands of dollars, depending on vehicle weight, fuel source and efficiency. The dollar-for-dollar credits are more generous than the current tax deduction allowed only for hybrid vehicles that are certified by the Internal Revenue Service.

- Fuel-cell-powered vehicles weighing less than 8,500 pounds qualify for a base credit of $8,000, with heavier vehicles getting larger credits. Fuel-cell credits are available for vehicles bought through 2014.

- Hybrid vehicles bought through 2010 that use both gasoline and electricity qualify for tax credits worth between $400 and $2,400, based on a sliding scale geared to energy efficiency for cars and light trucks weighing less than 8,500 pounds.

- Alternative-fuel vehicles powered by compressed or liquefied natural gas, hydrogen or any liquid fuel that's at least 85 percent methanol qualify for a tax credit based on a complex formula pegged to cost, weight, emissions and fuel efficiency. Qualifying cars and trucks cannot operate on gasoline or diesel, and the credit is available through 2010.

- The current tax credit for electric cars and vehicles powered by rechargeable batteries, worth up to $4,000, is extended past 2006, when it was scheduled to expire.

- Separately, alternative fuels are entitled to a 50-cents-a-gallon tax credit, effective Sept. 30, under the compromise highway bill Congress has readied for Bush. This tax break is expected to cost $44 million over 10 years and is in addition to the energy bill's hybrid-car tax breaks.

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