Don't Mess with Taxes

[March 23rd, 2005] Fresh from helping to defeat Texas Pacific Group's bid for Portland General Electric, the City of Portland is joining with a PGE nemesis to wrestle back millions of local tax dollars from PGE.

PGE has previously acknowledged having collected about $7 million from Multnomah County ratepayers since 1997 to cover the utility's county income-tax bill. But rather than passing those taxes along, it gave the money to its now-bankrupt parent company, Enron, which pocketed all but $4,000 (see "Enron's Tax Holiday," WW, Jan. 19, 2005).

PGE's rationale: It files a joint tax return with Enron, and Enron has consistently reported large losses more than enough to offset PGE's profits. Thus, it is OK for the Texas energy giant to siphon the local dollars. "PGE and other utilities are following Oregon tax rules and a PUC directive," says Kregg Arntson, a PGE spokesman.

Dan Meek and Linda Williams, lawyers with the Utility Reform Project who have long battled PGE, disagree. In January, they filed an initial $7 million lawsuit seeking to halt PGE's collection of the tax; in late February, they amended their lawsuit to seek class-action status for Multnomah County residents, which could allow the collection of triple damages.

PGE then sought a ruling from the state Public Utility Commission seeking a clarification of the utility's ability to collect and not pay the tax. "This is an issue that has been capturing the interest of the public," Arntson says. "We're asking the commission for direction."

Meek says the issue turns on a PUC rule that says a utility is allowed to collect any taxes from ratepayers that it is required to pay. But he argues PGE's conduct is inconsistent.

"If they are 'required to pay' the tax, they can collect it," he says. "I have no problem with that. But since they didn't pay the tax-and they admit that-they must not be required to."

That's where the city comes in. Under a longstanding agreement with Multnomah County, the City's Bureau of Licenses collects the county's Business Income Tax-the local tax that PGE is collecting but not paying.

Commissioner Randy Leonard, who ran Licenses until Mayor Tom Potter took all the bureaus in for budgeting, is pushing for PGE to fork over the $7 million it gave to Enron.

So on March 9, the day before the PUC sent Texas Pacific packing, deputy city attorney Ben Walters filed a motion with the PUC asking to intervene in the dispute.

Aside from getting stiffed as a tax collector, the city has two reasons for intervening: It is also one of PGE's largest customers, with an annual bill of about $8.5 million, and therefore is paying a lot of taxes into the utility's pocket. "The outcome of this proceeding will have a significant impact on the City's fiscal interests," Walters wrote.