Utilities and the "taxes" they collect

Submitted by Jenni on July 11, 2006 - 1:36pm

Each year, utility companies charge ratepayers for taxes they supposedly have to pay to local and state governments. They are even specifically listed on your bill. However, as we've found out, these taxes are often times not paid. Of the hundreds of millions in taxes collected, only $10 is paid. At the same time, a family of three making less than $28,000 a year pays almost $800.

Thanks to Senate Bill 408, which was passed by the legislature last year, taxes collected from utility customers in rates have to either be paid to government authorities or refunded to ratepayers. Before they were kept and added to the profits of the company.

Down at the bottom of an AP story on Warren Buffett visiting Oregon is this:

The law could potentially force PacifiCorp and its new owners to make tens of millions of dollars in rate adjustments each year.

The only rate adjustments I can think of would be to credit ratepayers for the taxes it doesn't pay (or, heaven forbid, they could just pay the taxes).

Of course, I'm sure PacifiCorp is thinking about raising rates, after all their profits will be hundreds of millions lower-- because they either have to pay their taxes or refund them.

Jenni's blog

Investor owned utilities gear up to repeal SB 408

Submitted by elizat8 on July 22, 2006 - 8:37am.

OPB News

State Regulators Prepare To Enforce New Utility Tax Law
By Ley Garnett
SALEM, OR (2006-07-17) The Oregon Public Utility Commission has released its interpretation of a new law designed to prevent utilities from charging ratepayers for taxes the companies don't actually pay.

Sponsors of Senate Bill 408 drafted the legislation after it was revealed that Enron wrote off more than 800 million dollars in taxes charged by Portland General since 1997. But with recent ownership changes, Pacificorp now stands as the utility to be most affected by the new law, as Ley Garnett reports.

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The Public Utility Commission surprised utility watchers when it proposed what it calls an "apportionment method" to enforce Senate Bill 408.

It's an accounting measure used by the Oregon Department of Revenue when it levies taxes against corporations with holding companies.

Pacificorp was recently purchased by Berkshire-Hathaway, which owns more than 500 other firms. Spokeswoman Jan Mitchell says Pacificorp is disappointed and does not believe the new rules are fair.

Jan Mitchell: "Even if Pacificorp's taxes paid precisely equaled the utility taxes collected the proposed rules would require an increase or decrease in rates depending on the losses and tax credits that Berkshire-Hathaway affiliates and they have nothing to do with the regulated utility operations in Oregon."

The Utility Commission's interpretation of the new law is open for comment and it could be changed before it is made final in about five weeks. Mitchell says Pacificorp will try to convince the PUC to modify it.

Jan Mitchell: "We're hoping that the final outcome will be something that fulfills the legislative intent of Senate Bill 408. And that is that a dollar collected in taxes should be a dollar paid in taxes."

But the law's co-sponsor, Senator Rick Metsger is pleased with the PUC's action.

Rick Metsger: "I think it represents a good faith effort to follow the intent of the legislature, which is that utilities should not be allowed to collect taxes for liabilities they don't incur."

But a lawyer, who helped disclose Enron's use of deductions to avoid paying taxes collected by PGE, is concerned whether the new law will work as interpreted by the PUC.

Dan Meek of the Utility Reform Project says the proposed tax formula is unnecessarily complicated.

Dan Meek: "The method they proposed relies on having access to a lot of information on the world-wide operations of global entities like Berkshire-Hathaway that we really have no good way of verifying."

Senate Bill 408 went on the books this tax year and PUC chairman Lee Beyer says it won't actually change utility rates for more than a year.

Lee Beyer: "We're just setting the rules in place as to how to do this. The affect of this really won't be known until probably 2007. If there is an adjustment it would take place on January first, 2008."

The PUC hopes to finalize its implementation rules for Senate Bill 408 next month. But even after that Bob Jenks of the Citizens Utility Board says opponents of the law will try to get the legislature to change it again next year.

Bob Jenks: "I don't think this stops this fight. Pacificorp has by all manner seems to be gearing up for a legislative fight. They've been meeting with legislators, hiring lobbyists. It seems their position from the beginning has been they want to go repeal 408. So this isn't going to end it."

Pacificorp has spent hundreds of thousands of dollars on lawyers and lobbyists to influence the outcome of Senate Bill 408.

Just this month it hired former House Speaker Larry Campbell who's now regarded as one of the most powerful lobbyists in Salem.

On the other hand the new law will not affect PGE because it is separating from Enron and will file a simple one company tax return from now on.