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News Release
Commission Issues Interim Utility Tax Decision
July 14, 2006 (2006-011) (AR 499)
Contacts:  Lee Beyer, Chairman, 503 378-6611; Ray Baum, Commissioner, 503 378-6611; John Savage, Commissioner, 503 378-6611; Bob Valdez, Public Affairs Specialist, 503 378-8962
Salem, OR –Today the Oregon Public Utility Commission issued an interim decision to implement Senate Bill 408.  The intent of that bill is to ensure that the amount collected from customers for taxes in energy bills matches the amount paid to taxing authorities. When the amounts vary the Commission will adjust customer rates annually beginning with the 2006 tax year.    
The Commission’s interim decision adopts a widely established method, used by Oregon since 1965, to apportion a parent company’s income for multistate tax liability. The Commission will apply this same methodology to identify taxes paid by an energy utility. This “apportionment method” establishes a formula to determine the ratio of the utility’s business to the parent’s business.  This ratio is then multiplied by the amount of total taxes paid by the parent company to determine what amount should be “properly attributed” to the utility. 
“Establishing what amounts are ‘properly attributed’ to the regulated utility is complex when the utility’s parent owns many other businesses and also operates in other states,” Commission Chairman Lee Beyer said.          
“We adopted a method sanctioned by the Legislature and used in some form by most states for income tax purposes,” Beyer added.  “We believe that this apportionment method provides a sound basis for calculating taxes ’properly attributed’ to the utility and is consistent with the intent of the new utility tax law.  In addition, this will provide a degree of certainty to the utilities, and to customers that it will be consistent from year to year.”
From the perspective of a customer, the law is designed to address potential discrepancies between taxes collected and taxes paid by utilities.  SB 408 was the Legislature’s response to citizen frustrations that Oregon energy utilities were collecting taxes in rates that were not ultimately paid to taxing authorities.  The concern first arose from Enron’s ownership of Portland General Electric (PGE).  In that case, rates were set based on the assumption that the utility would pay taxes.  However, because of Enron’s losses in other businesses, almost none of the taxes collected from customers were ever paid.
SB 408 requires utilities to file annual reports to determine the difference between taxes collected in rates, and taxes actually paid by the utility’s parent and that are “properly attributed” to the utility.  The method to determine what portion of taxes paid are “properly attributed” to the utility has been very controversial. 
The Commission still must develop additional rules to implement SB 408. Public comment may be made on any issue in this order, until August 21, 2006, the date of the hearing.  After that date, the Commission will issue final rules.
This rule affects four utilities serving more than 50,000 customers. They include PGE, PacifiCorp, NW Natural Gas Company, and Avista Natural Gas utilities.
Link to order on PUC website: