LEGISLATIVE FISCAL ESTIMATE
ASSEMBLY, No. 5651
STATE OF NEW JERSEY
220th LEGISLATURE
DATED: JUNE 29, 2023
SUMMARY
Synopsis: Concerns treatment of federal tax benefits for certain qualified
offshore wind projects.
Type of Impact: Annual fiscal impact on the State and local entities.
Agencies Affected: Board of Public Utilities.
New Jersey Economic Development Authority.
Local governments.
Office of Legislative Services Estimate
Fiscal Impact FY 2024 & Thereafter
State and Local Entities Indeterminate
 The Office of Legislative Services (OLS) notes that the bill will have an indeterminate impact
on State and local finances. A precise estimate cannot be provided due to a lack of certain
information regarding the Ocean Wind 1 project under development by Ørsted. Ocean Wind
1 is the only qualified offshore wind project to which the bill applies.
 The bill would allow Ørsted to retain certain incremental federal tax benefits without passing
the value of those benefits to ratepayers or adjusting the offshore wind renewable energy
certificate (OREC) pricing schedule for Ocean Wind 1. This may cause utility rates to be
higher than otherwise, thereby resulting in higher costs incurred by the State and local
government entities.
 Under certain conditions laid out in the bill, the Board of Public Utilities (BPU) may draw
upon performance securities provided by an eligible qualified offshore wind project for certain
purposes, such as the completion of a qualified offshore wind project’s investments in qualified
wind energy facilities or to support infrastructure necessary to support the offshore wind
industry. The board may also elect to return the funds to ratepayers.
Office of Legislative Services Legislative Budget and Finance Office
State House Annex Phone (609) 847-3105
P.O. Box 068 Fax (609) 777-2442
Trenton, New Jersey 08625 www.njleg.state.nj.us
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BILL DESCRIPTION
This bill permits a qualified offshore wind project approved prior to July 1, 2019 to elect to
retain certain incremental federal tax benefits. The bill defines “incremental federal tax benefit”
to mean a federal tax credit, subsidy, grant, or other funding source that was established or
increased after a qualified offshore wind project’s approval, and therefore, was not previously
identified in the project’s award solicitation agreement. These incremental federal tax benefits
primarily include tax benefits established pursuant to the federal Taxpayer Certainty and Disaster
Tax Relief Act of 2020, the federal Inflation Reduction of 2022, and the research and development
tax credit established by section 41 of the Internal Revenue Code of 1986.
For the calculation of each incremental federal tax benefit, the project’s total approved eligible
costs are multiplied by the difference between the incremental federal tax benefit applicable to the
project and the corresponding benefit identified in each qualified offshore wind project’s approved
OREC pricing proposal. Additionally, each qualified offshore wind project is permitted to retain
a portion of the federal tax credits received by the project, calculated by multiplying: (1) the tax
credit rate identified in the project’s approved pricing proposal by (2) the difference between the
project’s total approved eligible costs and the project’s estimated costs at bid.
The bill also requires a qualified offshore wind project to file a compliance filing with the BPU
within 180 days of enactment of this bill if the project wishes to elect to retain federal tax benefits.
The compliance filing will include an affidavit affirming that the qualified offshore wind project
will proceed with construction, a schedule by which the qualified offshore wind project will make
all of its material investments in qualified wind energy facilities, a pledge to post a $200 million
performance security for investments in qualified wind energy facilities, and a pledge to post a
$100 million performance security for the completion of the qualified offshore wind project.
Failure to comply with portions of this compliance filing will permit the BPU to reduce the amount
of the performance securities up to the point of total forfeiture of the securities by the project.
FISCAL ANALYSIS
EXECUTIVE BRANCH
None received.
OFFICE OF LEGISLATIVE SERVICES
The OLS notes that the bill will have an indeterminate impact on State and local finances. The
OLS cannot provide a precise estimate of the bill’s fiscal impact due to a lack of certain
information regarding the Ocean Wind 1 Project under development by Ørsted. Ocean Wind 1 is
the only qualified offshore wind project awarded prior to July 1, 2019, and therefore, the only
qualified offshore wind project to which the bill applies. The OLS does not have sufficient data
to determine how the retention of certain incremental federal tax benefits would impact OREC
pricing for the Ocean Wind 1 project. Information on the total value of IRS-approved project costs
and how changes to federal law will impact the total value of various tax credits for which a
qualified offshore wind project may qualify is currently unavailable.
Applications from developers seeking ORECs in connection with an offshore wind project are
reviewed and approved by BPU. Current State regulations require the application to include cash
flow projections for the proposed OREC period and a description and estimate of any State or
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federal tax benefits that may be associated with the project. The applicant must also demonstrate
a commitment to pass along tax credits or other governmental benefits to ratepayers that are greater
than projected. The OLS notes that this information is redacted from the public copy of Ørsted’s
Ocean Wind 1 OREC application, hindering an accounting of the federal tax benefits that might
have been available to the project at the time of submission (December 2018).
The submission is also required to include a proposed OREC pricing method and schedule.
The OREC pricing method represents the calculation of the price based on the total revenue
requirements over a 20-year period, including the cost of equipment, financing, taxes, construction,
operation, and maintenance, offset by any federal tax or production credits and other subsidies or
grants. The OLS notes that the bill would allow a qualified offshore wind project to retain the
value of any incremental federal tax benefits instead of passing those benefits to ratepayers.
Additionally, the bill does not require any readjustment to the OREC pricing schedule to reflect
any additional tax benefits that may accrue to Ørsted due to changes to federal tax law enacted in
2020 and 2022. This may cause utility rates to be higher than otherwise, thereby resulting in higher
costs incurred by the State and local government entities.
The bill requires a qualified offshore wind project to make a compliance filing with the BPU
within 180 days of enactment of this bill if the project wishes to elect to retain federal tax benefits.
The compliance filing is required to include a performance security of $200 million for the
qualified wind project’s investments in qualified wind energy facilities and a performance security
of $100 million for the completion of the qualified offshore wind project. Under certain
conditions, such as a failure to meet certain project deadlines, the BPU may draw upon the
performance security for select purposes, such as the completion of a qualified offshore wind
project’s investments in qualified wind energy facilities or to support infrastructure necessary to
support the offshore wind industry. The board may also elect to return the funds to ratepayers.
Section: Revenue, Finance, and Appropriations
Analyst: Scott A. Brodsky
Staff Fiscal and Budget Analyst
Approved: Thomas Koenig
Legislative Budget and Finance Officer
This legislative fiscal estimate has been produced by the Office of Legislative Services due to the
failure of the Executive Branch to respond to our request for a fiscal note.
This fiscal estimate has been prepared pursuant to P.L.1980, c.67 (C.52:13B-6 et seq.).