CUB’s Work on Tax Fairness Issue Makes News
Posted on May 22, 2006 by oregoncub
Tags, Utility Regulation
On Friday we completed and submitted our Response Comments in the Public Utility Commission Rulemaking case on utility tax reform. We were slightly hot under the collar, having just spent months in workshops and other meetings, and having already written one round of Comments regarding said tax reform. This work was in addition to a battle CUB and others led in the Oregon Legislature last year over phantom taxes, a battle that resulted in the passage of SB 408, which was intended to address the gap that often exists between taxes paid to utilities and taxes paid to government.
It was beginning to seem like all this was wasted time, in light of the PUC Staff’s decision to embrace a system that looks suspiciously like the one we are trying to move away from—you know the one, where customers pay taxes to the utility and the utility gets to keep a big chunk of that money for its shareholders. We do note, however, that we were critical of the PUC Staff, not the Commissioners. The Commissioners themselves have the final say on tax rules, and we are hopeful that after reading the comments from all the parties, they will decide that a plan that replicates the status quo is just not acceptable.
The Oregonian was taking note of the process and wrote the following article (slightly abbreviated) on Saturday. We appreciate their taking time to follow this important issue, and hope you enjoy reading up on it.
Citizens’ Utility Board blasts PUC in filing: Tax rules - The watchdog group accuses the Public Utility Commission of taking the easy way out
Saturday, May 20, 2006
TED SICKINGER
The Oregonian
The Citizens’ Utility Board flayed staff of the Oregon Public Utility Commission on Friday, accusing them of taking the easy way out in a debate over a new utility tax law and siding with utilities at the expense of ratepayers and the law.
The citizens’ board made its comments in a filing with the PUC on proposed rules to implement Senate Bill 408. The controversial bill, passed last year by the Legislature, was aimed at forcing utilities to match the taxes they collect from their customers in rates with what they ultimately pay to taxing authorities…
Ratepayer advocates, the utilities and staff at the commission have been wrestling with how to apply the law for more than a year. PUC commissioners are slated to adopt permanent rules this fall, which could mean the difference between hundreds of millions of dollars in rate cuts or utility profits over time.
The citizens board complained in its filing Friday that the rulemaking around the new law has failed because PUC “staff and utilities failed to participate meaningfully, while the customer groups made a one-sided attempt at exploring reasonable middle ground proposals.”
The Citizens’ Utility Board’s reaction was fueled by the PUC staff’s backing of a tax accounting proposal submitted by PacifiCorp, which has led the utility industry’s fight against the new law.
At its heart, the debate boils down to whether the commission should calculate utilities’ tax liabilities as if they were stand-alone companies—as it has done traditionally—or take account of their holding company structures and give ratepayers a share of the tax benefits that those entities generate.
Under proposals favored by utilities, and now endorsed by the PUC staff, the commission would essentially stick with the status quo, calculating utilities’ tax collections as if they were stand-alone entities. That means they would make refunds to ratepayers only if a utility’s holding company pays less in taxes than it collects from ratepayers or the utility enables some additional savings at the holding company.
That would address the problem PGE ratepayers experienced with Enron—at least partially. But customer groups maintain that SB 408 contemplated a bigger change, not one that could potentially leave ratepayers on the hook for 100 percent of the consolidated tax liability.
In the opinion of the citizens board and the Industrial Customers of Northwest Utilities, ratepayers should only be liable for their fair share of the holding company’s tax liability. Since that liability is based on its consolidated net income, they think ratepayers should only have to pay taxes based on their contribution to that consolidated net income.
The debate has been stuck at those poles since last fall, when an administrative law judge asked all parties to participate in a series of workshops and come up with a set of middle ground proposals that the commission could consider.
The board says PUC staff and utilities failed to participate in good faith. PUC staff submitted no proposal. And PacifiCorp’s proposal was simply a reworked version of standalone attribution, the board said…
The commission will hold a hearing on the new proposals May 31, and customer groups are likely to set off some fireworks.
“We have before us an opportunity to create a better system,” the citizens board wrote in its filing. “Unfortunately, staff and the utilities appear to be quite comfortable dragging the stand-alone attribution methodology out of the La Brea tar pits, hosing it off, and pretending it is something new.”
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03/10/17 | 0 Comments | CUB’s Work on Tax Fairness Issue Makes News