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News Release
Commission Denies Request to Investigate PGE Tax Issue; Lacks Jurisdiction
March 31, 2003 (2003 - 007)
Contacts:  Roy Hemmingway, Chairman, 503 378-6611; Joan H. Smith, Commissioner, 503 378-6611; Lee Beyer, Commissioner, 503 378-6611; Bob Valdez, Public Information Officer, 503 378-8962
Salem, OR - The Oregon Public Utility Commission today denied a request by the Utility Reform Project (URP) to begin an investigation to determine whether ratepayers should receive a refund for income taxes Portland General Electric (PGE) paid to its parent since 1997.
URP’s petition raised two main issues. First, did PGE make "false or misleading representations" regarding the amount of income taxes that should be included in customers’ rates? Second, did PGE collect funds from its customers that were not used for that purpose?
On the first issue, Commission staff concluded there is no evidence in the petition that PGE made false representations in calculating the amount of income taxes that should be included in customer rates. As for the second issue, the Commission concluded it does not have jurisdiction over whether PGE’s parent (Enron) appropriately paid its income taxes.
Federal and state taxing authorities are responsible for ensuring corporations pay income taxes they owe. Any underpayments would be owed to those taxing authorities and their constituents, not to ratepayers.
The Commission can obtain the tax information; however, by law it cannot divulge the tax information to the public.
When PGE was sold in 1997, the Commission made the decision to "wall off" PGE from the new owner for the purpose of setting customer rates. The Commission’s decision insulated PGE from its parent, so the parent’s expenses would not be considered when setting customer rates.
"The reason we don’t look at income taxes of the parent company is because if we did ratepayers would also be responsible for the parent’s expenses," Commission Chairman Roy Hemmingway said. "Fortunately, the Commission previously had the foresight to erect firewalls around PGE. Otherwise PGE could have been facing bankruptcy along with Enron and PGE customers could be facing increased cost."
Commissioner Joan Smith said, "Unfortunately, the Utility Reform Project brought its issues to the wrong forum. The tax issues that URP wants to explore are not within the PUC’s jurisdiction."
Calculating PGE’s costs, including income taxes, for ratemaking on a stand-alone basis protects PGE’s customers from the financial difficulties experienced by Enron’s subsidiaries.
Money PGE paid in taxes flowed to its parent, which consolidated them for tax purposes. Consolidation allows the parent corporation to offset tax liabilities with expenses.
Commission staff further concluded that PGE’s income taxes were accurately calculated in the company’s 1996 rate case using PGE’s expected revenues, expenses, and rate base. The company’s actual tax liability is based on its actual financial results and may be different from what was forecast and included in customer rates. In fact, the Commission staff found that PGE paid more income tax in 1997-2001 than was included in customers’ rates.