Giving Credit Where It’s Due

Deck: 

Utilities will gain from new regs for research tax credits.

Fortnightly Magazine - April 2005
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The 1990s ushered in the era of deregulation, bringing the disposition of generation assets by utilities, the decline or end of rate cases, and the reluctance of state commissions to approve large capital expenditures for transmission and distribution (T&D). Unfortunately, time has shown that this reduced level of spending was not enough to maintain existing T&D assets, let alone add new capacity.

To make up for this, capital spending has increased dramatically in the last few years: between 2002 and 2004, investor-owned utilities averaged $5.4 billion a year on new distribution, and another $3.5 billion annually on new transmission construction expenditures, according to Edison Electric Institute (EEI) estimates.1

Now the federal government is stepping in to help utilities prime the pump: To partially mitigate these cash outlays and or to help utilities make additional funds available for this construction, the government created several opportunities for tax relief. EEI President Tom Kuhn acknowledged the importance of these tax savings presentation to Wall Street analysts in January.

The final regulations, issued in early 2004 by the U.S. Department of the Treasury, should make it a little easier for utilities, as well as other taxpayers, to use research and development (R&D) expenditures to help lower their effective tax rates.

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