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Commission Upholds PacifiCorp Tax Rate Decision  
July 11, 2006 (2006 - 009) (UE 170/UM 1229)
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 upheld its decision to apply a new utility tax law when it set rates for PacifiCorp in late 2005, but it modified the tax adjustment, based on new and better information, to slightly reduce the amount that was not allowed to be included in customer rates for income taxes.
The order reaffirms the Commission’s original decision that Senate Bill 408 requires a going-forward adjustment to PacifiCorp’s base rates to reflect taxes that are paid to units of government to ensure that customer rates are fair, just, and reasonable and does not result in confiscatory rates.
In the initial rate case the Commission granted an overall increase of 3.17% effective October 4, 2005.  PacifiCorp had asked for a 12.5% increase.
Upon reconsideration, the Commission’s order reduces the $16.07 million initially removed for taxes down to $12.4 million. The adjustment will result in an additional overall rate increase of 0.74% or about 50 cents a month for an average residential customer who uses 1000 kWh per month.
SB 408 requires utility income taxes paid by PacifiCorp, Portland General Electric, NW Natural Gas, and Avista Natural Gas to match payments collected in rates beginning January 1, 2006.  As a result, the effect of this decision will be limited to the period of October 4, 2005 through December 31, 2005.
“After careful consideration, and with the modification, I believe we have taken a fair and reasonable approach to implement the intent of the new utility tax law that weighs the interests of both the utility and its customers,” Commission Chairman Lee Beyer said.  “This is extremely complex but in the end we are confident it results in a balanced approach.”
Customer rates include projected utility income tax expenses.  The Commission’s initial decision in the general rate case reduced the amount to be collected from customers based upon a reduction in what was likely to be the PacifiCorp’s actual tax expense.
In the request for reconsideration, PacifiCorp argued the Commission’s application of SB 408 in the rate order was overly broad, premature and unlawful.
However, the Citizens’ Utility Board, Industrial Customers of Northwest Utilities and Utility Reform Project agreed with the Commission’s original decision and argued that the tax law established a new legislative standard for setting the tax expense in rates on a going-forward basis.
In 2005, Oregon lawmakers enacted SB 408 to address growing concerns that energy companies were collecting income tax expenses in rates that are not ultimately paid to taxing authorities.
Link to Commission order: