Facilities for the Local Furnishing of Electric Energy or Gas (I.R.C. 142(f))

General Overview

As described in section 142(e), the local furnishing of electric energy or gas from a facility includes only furnishing within the area consisting of either (1) a city and one contiguous county, or (2) two contiguous counties.  There are special rules for treatment of electric energy that is transmitted outside of a local area, when required pursuant to an order of the FERC.

Local furnishing bonds may no longer be issued unless:

  1. the facility will (a) be used by a person who is engaged in the local furnishing of that energy source on January 1, 1997 and (b) be used to provide service within the area served by that person on January 1, 1997 (or within a county or city any portion of which is within such area); or
  2. the facility will be used by a successor in interest to such person for the same use and within the same service area as described in 1 above.


PLR 9635010 (May 22, 1996): Holds that the “two-county rule” of Internal Revenue Code section 142(f)(1) is not violated by reason of a gas company’s emergency transfers of gas outside of the permitted city and contiguous county service area or by reason of gas brokerage arrangements outside of the service area.  The ruling notes that no tax-exempt bond proceeds have been spent for distribution or storage facilities relating to gas supplied outside of the service area.

PLR 20034007 (June 27, 2003):  Ruling that a reorganized company is the successor in interest to an historic local furnisher of electricity under I.R.C. 142(f)(3)(B) and that its facilities would serve or be available on a regular basis for general public use.

PLR 200942002 (dated July 7, 2009, released October 16, 2009): Describes facts and special accommodations and rules for a utility that generates more than it needs for its two serviced counties.

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