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News Release
 
Commission Issues Final Utility Tax Rules
 
September 15, 2006 (2006-017) (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 its final order to implement a law designed to ensure that the amount collected for taxes in customer rates matches the amount paid by utilities to taxing authorities.  When the amounts vary, customer rates will be adjusted each year, beginning with the 2006 tax year.
 
“The bottom line: if taxes aren’t paid, customers get the money back,” Commission Chairman Lee Beyer said. “We have taken an approach we believe closely captures the intent of the law passed by the legislature in 2005. Will everyone agree with the path we are taking, probably not?”
 
 The legislature passed SB 408 in response to citizen frustrations arising from Enron’s ownership of PGE.  In that case, the PUC set rates based on the assumption that the utility would pay taxes to units of government.  However, because of Enron’s losses in other businesses to offset their tax liability, almost none of the taxes collected from customers were ever paid.    
 
“Customers need to know the law is designed to address potential discrepancies between taxes collected in rates and taxes paid by utilities to federal, state and local governments,” Beyer added.
 
Senate Bill 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 Commission chose to adopt the “Apportionment Method” to determine the amount of taxes that are properly attributed to the utility, specifically, the Oregon portion of the utility.
 
The Commission’s decision adopts a widely established method, used by Oregon since 1965, to apportion a parent company’s income for multi state tax liability. 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. 
 
The utilities covered by the law include Portland General Electric (PGE), PacifiCorp, NW Natural Gas, and Avista Utilities.  The affected utilities will provide the Commission with their 2006 tax filings in late 2007 and the Commission will have 180 days to review the filings and determine how rates should be adjusted.
 
Active participants in this docket include the affected utilities, the Citizens’ Utility Board (CUB), Industrial Customers of Northwest Utilities (ICNU), Utility Reform Project (URP), and the City of Portland.
 
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Link to final order: