Tax Code Reform Needed To Help Fund Grid Improvements

by Mike Godfrey, Tax-News.com, Washington

21 August 2003

The massive investment needed to update and modernize the electricity grid system in the United States following the biggest ever blackout in the nation's history last week can only be achieved through sensible changes to the tax code designed to encourage generators and suppliers to invest the huge sums that are going to be required, a UPI report has indicated.

According to Energy Secretary Spencer Abraham, speaking in a CBS television interview last weekend, the price tag for bringing the country's grid system up to scratch could be as much as $50 billion over the coming years. Abraham indicated that consumers will inevitably have to bear some of these costs as "they are the ones who benefit."

However, the Edison Electric Institute sees tax reform as one of the most crucial components to an energy bill designed to increase the level of investment in the power supply network. "While there is clearly no single magic bullet to achieve this, we believe strongly that House and Senate lawmakers have an unparalleled opportunity to craft a final (bill) that contains critically important steps to help ensure electric system reliability and bolster transmission capacity," Thomas Kuhn, president of the EEI observed.

It has also been noted by the EEI that the electricity transmission infrastructure currently recieves "less favorable tax treatment than other critical infrastructure and technologies."

Meanwhile, Richard Rudden, CEO of R.J. Rudden Associates, an economic and management consulting firm specializing in energy and utility matters, has downplayed the cost of infrastructure improvements which he contends can be easily absorbed in the years ahead.

"While the total absolute dollars of investment necessary to bring the grid up to 21st century standards is very high - perhaps in the order of between $30 billion and $50 billion on the outside - the impact that we have estimated on customer bills seems manageable, and less than implied by many in the industry," he told UPI, adding that this would equate to an extra $50 to $125 extra on utility bills over the next five years.

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