Enron's Tax Holiday

[January 19th, 2005] Over the past seven years, Portland General Electric has collected nearly $7 million in local taxes from Multnomah County customers-and put the money right into Enron's pockets rather than county coffers.

While PGE is in the news these days because of its proposed sale to an out-of-state buyout firm, it's still owned by Enron, the bankrupt Texas energy giant.

The information about PGE's tax collections recently surfaced in a battle between the Utility Reform Project, a consumer advocacy group, and PGE.

The Reform Project previously documented that PGE collected more than $700 million from Oregon ratepayers to pay state and federal income taxes since being acquired by Enron in 1997. Enron kept virtually all of that money.

New documents PGE recently turned over to Dan Meek, the Reform Project's attorney, show Enron also stiffed Multnomah County.

Power companies are allowed to pass their tax bills on to ratepayers. (In this case, PGE's tax to the county is 1.45 percent of net income.) Many residential ratepayers probably never noticed they were paying a tax on their electric bill, as the average monthly cost is less than a buck a month. But those charges add up.

Between 1997 and 2004, PGE charged county ratepayers $6.7 million-using a separate line item on monthly bills that specified a charge for county taxes. The documents Meek obtained show Enron paid less than $4,000 of that money to the county.

"Since PGE must have known that Enron was not paying the Multnomah County tax, PGE should have stopped collecting it in 1997," Meek says. "And should have repaid with interest all such charges that did not go to Multnomah County."

City Commissioner Randy Leonard, who until recently oversaw the city bureau that collects business income taxes for both the city and Multnomah County, was unaware that local taxes were going into Enron's pocket. "That's outrageous," Leonard says. "I can think of no justification beyond some illegal intent on Enron's part for them not to pay the taxes they owe."

PGE spokesman Kregg Arntson says PGE did collect the local taxes and paid them to Enron. Arnston explains that Enron and PGE filed a consolidated tax return and that Enron's taxable losses and other tax credits more than offset PGE's profits. He insists that PGE has complied with all state regulations and done nothing wrong.

Ed Busch oversees electric utilities for the Oregon Public Utility Commission, which regulates power companies. He says PGE is treated as if it were a stand-alone entity rather than part of Enron. Since the utility itself is profitable, he explains, regulators allow it to collect the county tax. What happens after that, Busch says, is out of the PUC's hands.

Meek argues that is exactly the problem and why Oregonians should be nervous about seeing Enron sell the state's largest utility to a financial speculator, the Texas Pacific Group, whose bid for PGE is pending before the Public Utility Commission (see page 7). "The PUC can barely keep track of the basics and is not capable of effectively regulating PGE as part of an energy giant, such as Enron, or a financial conglomerate such as Texas Pacific," says Meek.