The much loved (just kidding) Internal Revenue Service issued a notice last week indicating that utilities are now able to benefit from production tax credits for renewable energy. The change to the code allows utilities who directly invest in or develop renewable power projects to be granted the 1.9 cent per kilowatt hour production tax credit for energy generated by wind, solar and geothermal projects.

According to a press release from Puget Sound Energy, “Prior to the revision, federal regulations (interpreting section 45 of the Internal Revenue Code) restricted federal tax credits for renewable energy production in a way that barred their use by utilities that were partnering with investors to generate renewable energy.”

Many larger utilities will sell their generated power to an affiliate company which then brokers the power on the open market. In order to qualify for the credit the final sale of the energy generated by the facility must be sold to a party unrelated to the utility. This allows the utility to sell the power to an affiliated intermediate party who can then broker the energy and complete the sale.