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PacifiCorp Court Fight Over Taxes Alive; PGE Settlement Hearing, Enron Questions Loom

March 27, 2006
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Plaintiff attorneys were anticipating a judge's preliminary approval late last Friday of a $10 million settlement with Portland General Electric (PGE) over past rate collections for a county tax. The pending decision followed by just two days another Multnomah County (OR) Circuit Court judge's decision in a similar case to reject PacifiCorp's motion to dismiss a class action lawsuit seeking to recover millions of dollars that PacifiCorp's Oregon utility allegedly collected for tax payments but never paid.

And as a backdrop to both cases, local news media reported last week that PGE last year sent $88 million to its soon-to-be-estranged parent company, Enron Corp., to fulfill income tax liabilities that were never paid by Enron. Last January, PGE sent another $25 million to Enron, and in April another payment is due, according to a report in the Portland Oregonian.

"Just as in past years, the payments will not reach taxing authorities because bankrupt Enron's overwhelming losses will offset any tax obligations," the Oregonian reported, noting that as a result the tax money from Oregon utility customers is destined for Enron's creditors, the largest of which are becoming the owners of a newly independent PGE utility.

In a circuit court ruling similar to Wednesday's PacifiCorp action, another circuit court judge made a similar ruling late last year regarding PGE's county tax collections in rates, and earlier this year the utility settled out of court, agreeing to pay Multnomah County retail utility customers about $10 million this year and prompting Friday's hearing before Circuit Court Judge John Wittmayer to review the settlement agreement.

"If it is preliminarily approved, processes will begin for notifying members of the class," said Portland-based consumer attorney Daniel Meek, who noted that this means the plaintiffs' attorneys will have to pay about $150,000 to meet the class action suit requirements for notifying all current and former PGE customers throughout the West Coast through newspaper advertising. "This is a little known aspect of class action litigation."

Meek noted that the plaintiffs' attorneys are also expected to fund about $250,000 for ensuring that all the administrative costs of paying claims are covered. He estimated that in the $10 million settlement, industrial customers on average would get refunds of about $19,000 each; commercial customers would each get about $108, and residential customers are looking at receiving an average of $16.

Meek characterized the latest circuit court decision by Judge Janice Wilson as a victory for the plaintiffs in the class action lawsuit, although there was no decision on the merits of the claims. Judge Wilson rejected PacifiCorp's dismissal motions on seven of the eight plaintiff claims, each of which would require the utility to at least pay back the amount of money it has charged Multnomah County utility ratepayers for the county business income taxes, Meek said.

In addition, Judge Wilson granted all of the plaintiffs' 18 motions to compel PacifiCorp to answer discovery requests from the plaintiffs that began its filing last October.

"PacifiCorp had refused to answer any of the discovery requests, which sought information on the amount of money that the utility has charged ratepayers for the [county taxes] and how much the company has actually paid to county government," Meek said. "In granting the motions to compel discovery against PacifiCorp, Judge Wilson commented on the record that PacifiCorp has been engaging in 'some stonewalling and sandbagging,'" and the judge also expressed "shock" at the utility's behavior.

The judge has also ordered PacifiCorp to produce a copy of an audit by the Securities and Exchange Commission two years ago. Meek alleges that the report found the PacifiCorp holding company had "unlawfully appropriated over 2000 through 2003 at least $225.7 million" in money that should have been allocated to the utility in the form of tax savings that presumably would flow back to the utility retail customers.

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