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Oregon House Votes To Stop Energy Utilities From Charging Taxpayers Phoney Income Taxes

Today, the Oregon House of Representatives voted 54-6 for SB 408, which will stop the current practice of the Oregon Public Utility Commission (PUC) of allowing utilities to charge ratepayers for "state income taxes" and "federal income taxes" that in fact the utilities do not pay to any government.
"The Oregon PUC has allowed PGE and Pacificorp alone over the past 8 years to charge Oregon ratepayers over $1 billion for supposed income taxes they have never paid and never will pay," said Dan Meek, attorney for the Utility Reform Project (URP). "I have been filing complaints and lawsuits over this for almost 3 years. Finally, the legislators have listened to the thousands of letters, emails, and phone calls they have been getting about this."

The bill now returns to the Oregon Senate, which is expected to concur with the version passed today by the House. Then it will proceed to the Governor for approval.

The bill would end the enormous utility tax scam in Oregon. Senator Vicki Walker (D Eugene), the carrier of the bill on the Senate side, stated on the Senate floor:
"For several years, the large electricity and gas utilities regulated by the Oregon Public Utility Commission have been charging to Oregon ratepayers hundreds of millions of dollars for "state income taxes" and "federal income taxes" that in fact have not been paid to any government. Currently, the best available estimate of these charges to Oregon ratepayers is $150 million per year."

SB 408 allows the PUC to take until the middle of June 2006 to implement the income tax automatic adjustment clauses. "It should not take that long at all," said Meek." "The PUC will have all the needed information by October 15, 2005, and should make the automatic adjustment clauses effective as soon as possible. Section 4 specifically envisions that ratepayers should be under the protection of the automatic adjustment clauses for taxes collected from ratepayers on or after January 1, 2006."

Background

"Since 1997, PGE has charged Oregon ratepayers over $750 million for so-called `state and federal income taxes' that in fact neither PGE nor Enron has paid to either the state or federal government," said Dan Meek, attorney for the Utility Reform Project (URP). Meek discovered this scam in late 2002 and filed a formal complaint with the OPUC. In April 2003, the OPUC refused to even consider the complaint. URP appealed and obtained a court order requiring the OPUC to pay attention. Yet, the OPUC has done nothing to stop the scam, and PGE continues to charge Oregon ratepayers $93 million per year for "income taxes" that in fact will never be paid to government.

The other regulated energy utilities, such as PacifiCorp, are engaged in similar practices, although on a smaller scale. Senator Walker concluded that "Oregon ratepayers over the past 8 years have paid these utilities over $1 billion for federal income taxes and state income taxes that have not been paid to any government." She pointed out that regulatory commissions in 19 other states have taken actions to stop utilities from charging ratepayers for income taxes that the utilities actually do not pay.

SB 408 requires each regulated utility (except water utilities) to file an annual tax report with the OPUC, stating the amount of income taxes actually paid to government by the utility or by its consolidated group and properly attributed to the utility. If the Commission finds that the amount of income taxes actually paid is different from the amount of income taxes charged to ratepayers, then it shall create an automatic adjustment clause in the utility's rate structure, so that the charges to ratepayers for income taxes are no more and no less than the income taxes actually paid to governments by the utility (with appropriate interest to account for the time value of money).

SB 408 is endorsed by the Oregonian, the Statesman-Journal, and the Albany Democrat-Herald, all joining the earlier statement of outrage by the Daily Astorian. It has been opposed by no editorials. It is supported by all of the major customer groups and business groups, including the largest ones, such as Associated Oregon Industries (AOI) and the Building Owners and Managers Association (BOMA).

The House committee hearing this bill had earlier adopted a version that would have allowed the utilities to continue this practice. In fact, it would have prohibited the Oregon PUC from using even its existing statutory authority to correct this scam at any time before 2010. "Adopting that version would be worse than doing nothing," said attorney Dan Meek, "because it actually immunized the utilities against any change to the current situation of charging ratepayers for income taxes they never pay until at least 2010."

But the House committee on July 26 changed course and adopted a version of SB 408 very similar to the Senate-passed version.

Utility Reform Project

Daniel Meek, attorney

10949 S.W. 4th Avenue

Portland, OR 97219

(503) 293-9021

 dan@meek.net