Power Switches

[October 26th, 2005] Some of the same Oregon legislators who recently voted to make utilities pay the taxes they collect from ratepayers are now trying to weaken that law.

Senate Bill 408, one of the 2005 Legislature's biggest achievements, was built on a reasonable premise: When Oregon utilities legally collect hundreds of millions in taxes from ratepayers, they ought to actually pay those taxes to the proper authorities.

But as utility-watchdog lawyer Dan Meek proved, Enron pocketed nearly $800 million in taxes that its subsidiary, Portland General Electric, collected from Oregonians over the past eight years.

So state Sens. Vicki Walker (D-Eugene) and Rick Metsger (D-Welches) proposed a bill last session that would require utilities to pay the taxes they collect. And 80 of 90 legislators voted for it.

But now, correspondence from several once-supportive lawmakers, including Senate Minority Leader Ted Ferrioli (R-John Day), House Majority Leader Wayne Scott (R-Canby) and House Majority Whip Derrick Kitts (R-Hillsboro), shows them leaning on the state Public Utility Commission to weaken the law.

They don't want the PUC to examine the books of utilities' unregulated affiliates, which regulators say is needed to get a true picture of tax liabilities. In an Oct. 15 letter to commission chairman Lee Beyer, for instance, Kitts warned that the PUC's planned implementation could have "serious negative impact." Kitts was unavailable for comment, but Ferrioli says it's become clear the PUC is exceeding the law's intent with "rules that may artificially lower rates."

"We've never seen legislators get involved at the PUC this way before," says Bob Jenks of the Citizens' Utility Board of Oregon, which represents individual ratepayers.

Although not identical, the messages from at least 10 legislators to the PUC parrot the message that Oregon's second-largest utility, PacifiCorp, issued on Sept. 29—urging business and community leaders to contact lawmakers, the governor and the PUC with concerns.

While other affected utilities are taking a low-key approach, customer groups say PacifiCorp and the company that wants to acquire it, investor Warren Buffett's MidAmerican Energy Holdings, are conducting a "scorched earth" campaign to weaken or kill SB 408.

"They are approaching our members in ways we've never seen before, going straight to the highest levels," says Melinda Davison, a lawyer for Industrial Customers of Northwest Utilities, a trade association that represents many of Oregon's largest electricity buyers.

Both MidAmerican and PacifiCorp representatives are buttonholing legislators, local industries and editorial boards with the message that SB 408 is anti-business and bad for Oregon.

ICNU, CUB and the Oregon chapter of the National Federation of Independent Business disagree. The NFIB, which represents 12,000 Oregon businesses, is happy with the law, says the federation's J.L. Wilson, adding, "To say it's anti-business is just a laugh."

Why might PacifiCorp care so much? The utility is solidly profitable and operates in growing markets. That means it collects a lot of taxes from ratepayers—and until SB 408, those taxes provided a tasty incentive to a parent company that could, as Enron did, find ways to offset the utility's obligations and pocket the money.

"I think MidAmerican was counting on it," Jenks says. "They'd overcharge customers for taxes and use that to pay off the premium [they're paying to buy PacifiCorp]."

Gov. Ted Kulongoski remains officially neutral. But when he signed the bill into law, he wrote in an attached letter that it "does not address many of the concerns raised by various stakeholders." Of the 854 bills Kulongoski signed, he attached a letter only to that one.

Final comments on implementation are due to the PUC on Friday, and the rules will be finalized in January.