It’s Official: No Taxes on DOE’s Smart Grid Stimulus Grants

Utilities don’t have to worry anymore about whether or not they will have to pay taxes on their Department of Energy smart grid grants. The IRS will provide a “safe harbor” for utilities that are in line for a piece of the $3.4 billion in stimulus backing for smart grid projects, the DOE announced Wednesday. That, in turn, should open the gates for the DOE to start sending out contracts for stimulus grants like the one it gave Glendale Water & Power last week. Katherine Hamilton, president of industry group GridWise Alliance, said Wednesday that most of the contracts for the $3.4 billion stimulus package could be in utility’s hands by the end of this month.
Last week, FPL Group CEO Lewis Hay III told a conference that his utility hadn’t “seen a dime” of the $200 million DOE smart grid grant it had been promised. His complaints echoed others in the industry about how long utilities have been waiting to get grants awarded back in October.

Previously industry observers had pointed to a DOE-Treasury Department dispute over taxing those grants as the likely culprit for the delay. The problem with taxing grants, according to GridWise Alliance and other utility backers such as the National Association of Regulatory Utility Commissioners, is that most utility commissions have already assumed a 50-50 split between the federal money and utility spending. Reducing the federal share by taxing part of it could have forced those plans to go back to the drawing board, Hamilton noted.
Now that the tax issue has been resolved, expect the contracts to start flowing, Hamilton said. Of course, getting contracts in the hands of utility project managers is just the first of many steps to getting dollars into the hands of vendors and workers, but it’s a good start.
Image courtesy of horizontal.integration’s photostream Flickr Creative Commons.