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Summary:

Utilities, tech vendors and trade groups like the Grid Wise Alliance have openly been complaining that it’s taking too long for the billions of dollars in smart grid grants, which the Department of Energy promised back in October, to reach the projects, and ultimately create jobs. […]

Utilities, tech vendors and trade groups like the Grid Wise Alliance have openly been complaining that it’s taking too long for the billions of dollars in smart grid grants, which the Department of Energy promised back in October, to reach the projects, and ultimately create jobs. Well, it looks like the dam has been broken, albeit for a small project. Municipal utility Glendale Water and Power announced Thursday that it has signed a contract to start the flow of $20 million in DOE smart grid grants and according to Craig Kuennen, Glendale’s smart grid program sponsor, it’s the first such contract signed in the country. “That’s what DOE told us,” Kuennen said to us Thursday.

Earlier in the day, we cited Florida Power & Light CEO, Lewis Hay III, saying that the utility hadn’t “seen a dime” of its $200 million smart grid grant — a complaint that’s been echoed by other smart grid industry insiders we’ve spoken to in the past weeks. Trade group the Grid Wise Alliance sent letters to Secretary of the Treasury Timothy Geithner and DOE General Counsel Scott Harris last month that said “[A] significant amount of time has passed without substantive progress being made towards the start of projects and the intended creation of jobs.”

Given that the first round of smart grid stimulus funds were announced at the end of October, and the second round was announced in late November, utilities are, perhaps rightfully, getting impatient to get the money to start paying vendors and hiring workers.

But Kuennen couldn’t help answer one key question behind this delay in getting funds to utilities, which is whether or not DOE has resolved a disagreement with the IRS over whether or not the grants will be treated as taxable income. That’s because Glendale, as a municipal utility, doesn’t pay taxes, Kuennen explained.

“I don’t know if they resolved the tax issue for IOUs (investor-owned utilities), but we don’t have that problem,” he said. SmartGridNews first reported on the dispute over grant taxation last month, and reported that the National Association of Regulatory Utility Commissioners, which represents state utility commissions, has weighed in against taxing the grants. On the smart grid industry side, eMeter Chief Regulatory Officer Chris King said in a blog post that the stimulus funds are not taxable, citing a regulatory ruling from Maine.

DOE hasn’t yet responded to our request for comment made earlier in the week on the issue of taxing smart grid grants and how this issue might be affecting the lack of movement on getting contracts signed with investor-owned utilities. The GridWise Alliance said in its letters to Geithner and the DOE that making the grants taxable could force utility commissions to recalibrate the project rate cases that assumed a 50-50 split between the federal money and utility spending — and could cause some projects to be canceled.

Glendale W&P will apply the $20 million grant to its $51 million program to roll out smart electricity and water meters from Itron to its customers by September 2011, starting with a 1000-home pilot that will also include 300 in-home displays. Other plans include a distribution grid automation system, thermal energy storage, demand response systems, and the data storage systems to manage all that new smart grid data — as well as an expanded Wi-Fi backhaul system for the smart meters.

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By Jeff St. John

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